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##### Index to Financial Statements





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended: December 31, 2009

or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
                     to

Commission File Number: 001-33573

LOUISIANA BANCORP, INC.

(Exact name of Registrant as specified in its
charter)



|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|Louisiana                                                     |  | 20-8715162                            
|(State or Other Jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentification Number)
|                                                              | 
|1600 Veterans Memorial Boulevard, Metairie, Louisiana         |  | 70005                                 
|(Address of Principal Executive Offices)                      |  | (Zip Code)                            

Registrants telephone number, including area code: (504) 834-1190

Securities registered pursuant to
Section 12(b) of the Act:



|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Title of each class                    |  | Name of each exchange on which registered
|Common Stock, $.01 par value per share |  | The Nasdaq Stock Market, LLC             

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES   ̈    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.    YES   ̈    NO  x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    YES   ̈    NO   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    YES   ̈    NO  x

The aggregate market value of the 4,337,466 shares of the Registrants common stock held by non-affiliates, based upon the closing price
of $13.35 for the common stock on June 30, 2009, as reported by the Nasdaq Stock Market, was approximately $57.9 million. Shares of common stock held by executive officers, directors, the Companys Employee Stock Ownership Plan and the
2007 Recognition and Retention Plan have been excluded since such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares of common stock outstanding as of March 23, 2010: 4,572,329

DOCUMENTS INCORPORATED BY REFERENCE

Set forth below
are the documents incorporated by reference and the part of the Form 10-K into which the document is incorporated:

Portions of
the definitive Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by reference into Part III, Items 10-14 of this Form 10-K.









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LOUISIANA BANCORP, INC.

2009 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS



|            |  |                                                                                                                   |  |     
|----------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ----
|            |  |                                                                                                                   |  | Page
|PART I     
|            |  |                                                                                                                  
|Item 1.     |  | Business                                                                                                          |  | 2   
|            |  |                                                                                                                  
|Item 1A.    |  | Risk Factors                                                                                                      |  | 31  
|            |  |                                                                                                                  
|Item 1B.    |  | Unresolved Staff Comments                                                                                         |  | 33  
|            |  |                                                                                                                  
|Item 2.     |  | Properties                                                                                                        |  | 34  
|            |  |                                                                                                                  
|Item 3.     |  | Legal Proceedings                                                                                                 |  | 34  
|            |  |                                                                                                                  
|Item 4.     |  | (Reserved)                                                                                                        |  | 34  
|           
|PART II    
|            |  |                                                                                                                  
|Item 5.     |  | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
 Securities |  | 35  
|            |  |                                                                                                                  
|Item 6.     |  | Selected Financial Data                                                                                           |  | 36  
|            |  |                                                                                                                  
|Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                             |  | 38  
|            |  |                                                                                                                  
|Item 7A.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                        |  | 52  
|            |  |                                                                                                                  
|Item 8.     |  | Financial Statements and Supplementary Data                                                                       |  | 53  
|            |  |                                                                                                                  
|Item 9.     |  | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure                              |  | 90  
|            |  |                                                                                                                  
|Item 9A(T). |  | Controls and Procedures                                                                                           |  | 90  
|            |  |                                                                                                                  
|Item 9B.    |  | Other Information                                                                                                 |  | 90  
|           
|PART III   
|            |  |                                                                                                                  
|Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                            |  | 91  
|            |  |                                                                                                                  
|Item 11.    |  | Executive Compensation                                                                                            |  | 91  
|            |  |                                                                                                                  
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters                    |  | 91  
|            |  |                                                                                                                  
|Item 13.    |  | Certain Relationships and Related Transactions, and Director Independence                                         |  | 91  
|            |  |                                                                                                                  
|Item 14.    |  | Principal Accounting Fees and Services                                                                            |  | 91  
|           
|PART IV    
|            |  |                                                                                                                  
|Item 15.    |  | Exhibits and Financial Statement Schedules                                                                        |  | 92  
|            | 
|SIGNATURES  |  | 94                                                                                                               



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Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward looking statements (as defined in the Securities Exchange Act of 1934 and the
regulations thereunder). Forward looking statements are not historical facts but instead represent only the beliefs, expectations or opinions of Louisiana Bancorp, Inc. and its management regarding future events, many of which, by their nature, are
inherently uncertain. Forward looking statements may be identified by the use of such words as: believe, expect, anticipate, intend, plan, estimate, or words of similar meaning,
or future or conditional terms such as will, would, should, could, may, likely, probably, or possibly. Forward looking statements include, but are not
limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such
statements are subject to certain risks, uncertainties and assumptions, many of which are difficult to predict and generally are beyond the control of Louisiana Bancorp, Inc. and its management, that could cause actual results to differ materially
from those expressed in, or implied or projected by, forward looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward looking
statements: (1) economic and competitive conditions which could affect the volume of loan originations, deposit flows and real estate values; (2) the levels of non-interest income and expense and the amount of loan losses;
(3) competitive pressure among depository institutions increasing significantly; (4) changes in the interest rate environment causing reduced interest margins; (5) general economic conditions, either nationally or in the markets in
which Louisiana Bancorp, Inc. is or will be doing business, being less favorable than expected;(6) political and social unrest, including acts of war or terrorism; or (7) legislation or changes in regulatory requirements adversely affecting the
business in which Louisiana Bancorp, Inc. is engaged. Louisiana Bancorp, Inc. undertakes no obligation to update these forward looking statements to reflect events or circumstances that occur after the date on which such statements were made.

As used in this report, unless the context otherwise requires, the terms we, us, or the
Company refer to Louisiana Bancorp, Inc., a Louisiana corporation, and the term the Bank refers to Bank of New Orleans, a federally chartered savings bank and wholly owned subsidiary of the Company. In addition, unless the
context otherwise requires, references to the operations of the Company include the operations of the Bank.



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PART I



|Item 1. | Business.
|------- | ---------

General

Louisiana Bancorp, Inc. is a Louisiana corporation that became the holding company for Bank of New Orleans following the
conversion of the Bank in July 2007 from a federally chartered mutual savings bank to a federally chartered stock savings bank. The Bank currently operates out of three traditional bank branches located in the New Orleans, Louisiana metropolitan
area. A fourth branch location, which was significantly damaged in 2005 by Hurricane Katrina, remains closed and our ability to operate from this location in the future is uncertain. During 2009, the Bank closed its loan production office located in
Hammond, Louisiana in order to centralize our origination staff and focus our lending efforts in other markets. At December 31, 2009, the Bank had 64 full-time employees and four part-time employees. At December 31, 2009, 2008 and 2007,
the Company had total assets of $329.8 million, $327.4 million, and $270.9 million, respectively. Net interest income during these periods was $10.6 million, $9.9 million and $7.9 million, and net income was $2.5 million, $2.7 million, and $2.6
million, respectively.

Since Hurricane Katrina made landfall on August 29, 2005, we, like every other business in
metropolitan New Orleans, have expended considerable amounts of our time and resources in responding to the effects of Hurricane Katrina. The rebuilding and recovery efforts in metropolitan New Orleans are underway and are anticipated to continue
for a considerable period of time. The effects of the national recession on our market have been tempered by these post-Katrina recovery projects, however, during 2009 the activity associated with the redevelopment of our residential areas peaked,
and regional employment levels began to decline, as they have done nationally. The downturn in the national economy has led to job losses in both tourism and the petrochemical industries that form a significant part of our regional economy. Although
the pace our recovery in our region has slowed due to local and national factors, the Bank believes there will continue to be significant long-term opportunities for it to participate in the rebuilding efforts in southern Louisiana through lending
and other banking services.

We are primarily engaged in attracting deposits from the general public and using those funds to
invest in loans and securities. Our principal sources of funds are deposits, repayments of loans and mortgage-backed securities, maturities of investments and interest-bearing deposits, other funds provided from operations and funds borrowed from
outside sources such as the Federal Home Loan Bank of Dallas, the Federal Reserve, and commercial banks. These funds are primarily used for the origination of various loan types including single-family residential mortgage loans, multi-family
residential and commercial real estate mortgage loans, home equity loans and lines of credit and other consumer loans. The Bank derives its income principally from interest earned on loans, mortgage-backed and other securities and, to a lesser
extent, from fees received in connection with the origination of loans and for other services. Bank of New Orleans primary expenses are interest expense on deposits and borrowings, and general operating expenses.

We are an active originator of residential home mortgage loans and commercial real estate loans in our market area. Our commercial real
estate loans are primarily secured by multi-family residential collateral, non-residential collateral and vacant land. Our business plan is focused on developing a portfolio of residential home loans and commercial real estate loans that will
benefit the residents and small to mid-sized businesses of the New Orleans metropolitan area. Our total real estate loan portfolio has grown from $88.3 million at December 31, 2005, to $158.5 million at December 31, 2009. At
December 31, 2009, our one-to four-family residential loans comprised 53.4% or $85.7 million of the total loan portfolio, while multi-family residential, commercial real estate and land loans comprised 36.5% or $58.4 million of total loans.
Home equity loans and lines of credit were $14.4 million, or 9.0% of the total loan portfolio at December 31, 2009.

Deposits with the Bank are insured to the maximum extent provided by law through the Deposit Insurance Fund administered by the Federal Deposit Insurance Corporation. The Bank is subject to examination and comprehensive regulation by the
Office of Thrift Supervision and the FDIC. The Company is a savings and loan



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##### Index to Financial Statements

holding company subject to examination and regulation by the Office of Thrift Supervision. The Bank is also a member of the Federal Home Loan Bank of Dallas, which is one of the 12 regional banks
comprising the Federal Home Loan Bank System. The Bank is also subject to regulations of the Board of Governors of the Federal Reserve System governing reserves required to be maintained against deposits and certain other matters.

Our headquarters office is located at 1600 Veterans Memorial Boulevard, Metairie, Louisiana, and our telephone number is
(504) 834-1190. We maintain a website at www.bankofneworleans.com, and we provide our customers with on-line banking and telephone banking services.

Market Area and Competition

Bank of New Orleans primary market area
is southeastern Louisiana, in general and, more specifically, Jefferson Parish and neighboring Orleans Parish. Jefferson and Orleans Parishes are the two largest parishes in the seven parish New Orleans Metropolitan Statistical Area
(MSA). The Banks market area was severely impacted by the devastation of Hurricane Katrina in August 2005. Floodwaters swept across 80% of Orleans Parish, and a significant portion of Jefferson Parish, causing property damage
estimated to be excess of $125 billion. The damage to housing and commercial real estate in our market area, in addition to the roads and public utilities, contributed to a dramatic decline in the population of our primary market. Estimates from the
U.S. Census Bureau indicate the combined population of Jefferson and Orleans Parishes was 905,894 in July 2005, and 632,990 in July 2006, reflecting a population decrease of 30.1% in the year following the storm. The latest data available from the
U.S. Census bureau indicates a combined population of 748,034 as of July 2008, which reflects a population decrease of 17.4% from the pre-Katrina estimate.

The local economy in southern Louisiana is reliant on a variety of sectors. Traditionally, the oil industry, the Port of New Orleans and tourism were the bellwethers of the local economy. The local
economy has diversified, although oil, shipping and tourism remain important sectors of the economy. Government is a large employer in Orleans Parish due to substantial presence of U.S. Navy installations and other military operations. In addition,
shipbuilding has been important to the economy of New Orleans. Service jobs represent the largest employment sector in both Jefferson and Orleans Parish. According to the Louisiana Department of Labor, the preliminary seasonally adjusted
unemployment rate at December 31, 2009 for the state was 7.5%, an increase of 2.0% from December 31, 2008, while the national unemployment rate was 10.0%, reflecting an increase of 2.6% during the year. For the parishes of Jefferson and
Orleans, the respective unemployment rates were 6.2% and 9.5% at December 31, 2009, and 4.9% and 7.7% at December 31, 2008. Employment levels in the state rose in the periods immediately following Hurricane Katrina due to the repopulation
of the area, and the demand for labor created by the rebuilding efforts, and then leveled off in 2007 and 2008. In April of 2009, employment levels began to decline due to job losses in the petrochemical industries, tourism and construction.

The average price per square foot of single family residences sold in Orleans Parish during 2009 dropped by 9% from 2008, and
prices in Jefferson Parish fell 4% during this same period. However, the average price per square foot of homes sold in the metropolitan area in 2009 remains higher than pre-Katrina levels, primarily due to the appreciation in price following the
storm of the housing inventory that was quickly rebuilt or sustained minimal damage.

During 2009, there were 11,750
foreclosure actions filed in the state, reflecting an increase of 64.8% from 2008. In Orleans Parish there were 2,290 foreclosures filed in 2009 reflecting an increase of 20.6% from 2008, and 2,111 filings in Jefferson Parish reflecting an increase
of 34.6% from 2008. On the nation level, there were 2.8 million foreclosure filings during 2009, an increase of 21.2% percent from 2008, and 119.0% from 2007.

We face significant competition in originating loans and attracting deposits. This competition stems primarily from commercial banks, other savings banks and savings associations and mortgage-banking
companies. Within our market area, more than 50 other banks, savings institutions and credit unions are operating. Many of the financial service providers operating in our market area are significantly larger, and have



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##### Index to Financial Statements

greater financial resources, than us. Based on the most recent data available through the FDIC, the Banks $179.0 million in deposits at June 30, 2009 represented a deposit market share
of 0.90% for the parishes of Jefferson and Orleans, and a 0.67% market share for the seven parish New Orleans MSA. Of the 26 institutions operating in Jefferson and Orleans parishes, we rank 16th in terms of deposit market share. We face additional
competition for deposits from short-term money market funds and other corporate and government securities funds, mutual funds and from other non-depository financial institutions such as brokerage firms and insurance companies. The presence of a
local executive management team experienced with the challenges associated with the regions rebuilding efforts provides the Bank with an advantage over the national banks in our market area, particularly as it relates to the credit approval
process.

Lending Activities

General. At December 31, 2009, our net loan portfolio totaled $158.4 million or 48.1% of total assets. Our principal lending activity is the origination of first mortgage loans collateralized
by one- to four-family, also known as single-family, residential real estate loans located in our market area. In addition, the Bank originates home equity loans and lines of credits secured by residential real estate. Over the past
several years, we have increased our emphasis on originating multi-family (over four units) residential, commercial real estate and land loans. We also originate consumer loans, consisting of loans secured by deposits, auto loans, and unsecured home
improvement loans, in addition to commercial and personal loans. We do not originate sub-prime, alt-a, no-interest, or no-doc loans, nor do we hold any such loans in our loan portfolio.

The types of loans that we may originate are subject to federal and state law and regulations. Interest rates charged by us on loans are
affected principally by the demand for such loans and the supply of money available for lending purposes and the rates offered by our competitors. These factors are, in turn, affected by general and economic conditions, the monetary policy of the
federal government, including the Federal Reserve Board, legislative tax policies and governmental budgetary matters.



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##### Index to Financial Statements

Loan Portfolio Composition. The following table shows the composition of our loan
portfolio by type of loan at the dates indicated.



|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|---------------------------------- |  | -------------- | ------- | - | ----- | - | ------ | ---- | ------- |  | ----- | ------ |  | ---- | ------ |  | ------ | - | - | - | ------ | ------ | ----- | - |  | - | ------ |  | ----- | -
|                                   |  | December 31,   |        
|                                   |  | 2009           |         |   | 2008  |   |        | 2007 |         |  | 2006  |        |  | 2005 |       
|                                   |  | Amount         |         | % |       |   | Amount |      | %       |  |       | Amount |  | %    |        |  | Amount |   | % |   |        | Amount |       | % | 
|                                   |  | (In Thousands) |        
|Real estate loans:                 |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|One- to four-family residential(1) |  | $              | 85,726  |   | 53.4  | % |        | $    | 51,547  |  | 45.4  | %      |  | $    | 46,437 |  | 46.8   | % |   | $ | 45,594 |        | 49.5  | % |  | $ | 44,178 |  | 46.2  | %
|Home equity loans and lines        |  |                | 14,389  |   | 9.0   |   |        |      | 10,297  |  | 9.1   |        |  |      | 8,702  |  | 8.8    |   |   |   | 8,511  |        | 9.2   |   |  |   | 9,164  |  | 9.6   |  
|Multi-family residential           |  |                | 9,423   |   | 5.9   |   |        |      | 7,859   |  | 6.9   |        |  |      | 7,435  |  | 7.5    |   |   |   | 6,759  |        | 7.3   |   |  |   | 6,939  |  | 7.3   |  
|Commercial real estate             |  |                | 47,798  |   | 29.8  |   |        |      | 39,700  |  | 35.0  |        |  |      | 32,234 |  | 32.5   |   |   |   | 26,802 |        | 29.1  |   |  |   | 27,386 |  | 28.7  |  
|Land loans                         |  |                | 1,213   |   | 0.8   |   |        |      | 1,095   |  | 1.0   |        |  |      | 546    |  | 0.5    |   |   |   | 434    |        | 0.5   |   |  |   | 584    |  | 0.6   |  
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Total real estate loans            |  |                | 158,549 |   | 98.9  |   |        |      | 110,498 |  | 97.4  |        |  |      | 95,354 |  | 96.1   |   |   |   | 88,100 |        | 95.6  |   |  |   | 88,251 |  | 92.4  |  
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Consumer and other loans:          |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Student loans                      |  |                | 485     |   | 0.3   |   |        |      | 1,398   |  | 1.2   |        |  |      | 2,133  |  | 2.1    |   |   |   | 2,654  |        | 2.9   |   |  |   | 5,682  |  | 5.9   |  
|Loans secured by deposits          |  |                | 478     |   | 0.3   |   |        |      | 283     |  | 0.2   |        |  |      | 530    |  | 0.5    |   |   |   | 520    |        | 0.6   |   |  |   | 428    |  | 0.5   |  
|Other                              |  |                | 835     |   | 0.5   |   |        |      | 1,368   |  | 1.2   |        |  |      | 1,260  |  | 1.3    |   |   |   | 832    |        | 0.9   |   |  |   | 1,189  |  | 1.2   |  
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Total consumer loans               |  |                | 1,798   |   | 1.1   |   |        |      | 3,049   |  | 2.6   |        |  |      | 3,923  |  | 3.9    |   |   |   | 4,006  |        | 4.4   |   |  |   | 7,299  |  | 7.6   |  
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Total loans                        |  | $              | 160,347 |   | 100.0 | % |        | $    | 113,547 |  | 100.0 | %      |  |      | 99,277 |  | 100.0  | % |   |   | 92,106 |        | 100.0 | % |  |   | 95,550 |  | 100.0 | %
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Less:                              |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Deferred loan fees                 |  |                | 240     |   |       |   |        |      | 359     |  |       |        |  |      | 376    |  |        |   |   |   | 390    |        |       |   |  |   | 341    |  |       |  
|Allowance for loan losses          |  |                | 1,661   |   |       |   |        |      | 1,952   |  |       |        |  |      | 1,999  |  |        |   |   |   | 2,292  |        |       |   |  |   | 2,760  |  |       |  
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  
|Net loans                          |  | $              | 158,446 |   |       |   |        | $    | 111,236 |  |       |        |  | $    | 96,902 |  |        |   |   | $ | 89,424 |        |       |   |  | $ | 92,449 |  |       |  
|                                   |  |                |         |   |       |   |        |      |         |  |       |        |  |      |        |  |        |   |   |   |        |        |       |   |  |   |        |  |       |  



|(1) | For purposes of this report on Form 10-K, the one- to four-family residential category consists of single-family residential mortgage loans secured by first mortgages.
We typically have second mortgages on home equity loans and lines of credit.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Contractual Terms to Final
Maturities.The following table shows the scheduled contractual maturities of our loans as of December 31, 2009, before giving effect to net items. Demand loans, loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due in one year or less. The amounts shown below do not take into account anticipated loan prepayments.



|                                        |  |                               |        |                         |   |                         |  |                       |       |  |   |       
|--------------------------------------- |  | ----------------------------- | ------ | ----------------------- | - | ----------------------- |  | --------------------- | ----- |  | - | ------
|                                        |  | One- toFour-FamilyResidential |        | Home EquityLoans &Lines |   | Multi-familyResidential |  | CommercialReal
Estate
|                                        |  | (In Thousands)               
|Amounts due after December 31, 2009 in: |  |                               |        |                         |   |                         |  |                       |       |  |   |       
|One year or less                        |  | $                             | 1,217  |                         | $ | 46                      |  | $                     | 1,904 |  | $ | 1,954 
|After one year through two years        |  |                               | 162    |                         |   | 102                     |  |                       |      |  |   | 563   
|After two years through three years     |  |                               | 1,687  |                         |   | 634                     |  |                       | 329   |  |   |      
|After three years through five years    |  |                               | 4,271  |                         |   | 1,359                   |  |                       | 312   |  |   | 3,874 
|After five years through ten years      |  |                               | 9,087  |                         |   | 8,750                   |  |                       | 1,352 |  |   | 15,347
|After ten years through 15 years        |  |                               | 18,091 |                         |   | 3,498                   |  |                       | 5,526 |  |   | 26,060
|After 15 years                          |  |                               | 51,211 |                         |   |                        |  |                       |      |  |   |      
|                                        |  |                               |        |                         |   |                         |  |                       |       |  |   |       
|Total                                   |  | $                             | 85,726 |                         | $ | 14,389                  |  | $                     | 9,423 |  | $ | 47,798
|                                        |  |                               |        |                         |   |                         |  |                       |       |  |   |       



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##### Table of Contents

##### Index to Financial Statements

|                                        |  |                |       |                   |   |             |  |   |        
|--------------------------------------- |  | -------------- | ----- | ----------------- | - | ----------- |  | - | -------
|                                        |  | Land Loans     |       | Consumerand Other |   | Total Loans
|                                        |  | (In Thousands)
|Amounts due after December 31, 2009 in: |  |                |       |                   |   |             |  |   |        
|One year or less                        |  | $              | 271   |                   | $ | 363         |  | $ | 5,755  
|After one year through two years        |  |                |      |                   |   | 525         |  |   | 1,352  
|After two years through three years     |  |                | 292   |                   |   | 293         |  |   | 3,235  
|After three years through five years    |  |                |      |                   |   | 129         |  |   | 9,945  
|After five years through ten years      |  |                | 516   |                   |   | 488         |  |   | 35,540 
|After ten years through 15 years        |  |                | 134   |                   |   |            |  |   | 53,309 
|After 15 years                          |  |                |      |                   |   |            |  |   | 51,211 
|                                        |  |                |       |                   |   |             |  |   |        
|Total                                   |  | $              | 1,213 |                   | $ | 1,798       |  | $ | 160,347
|                                        |  |                |       |                   |   |             |  |   |        

The following table shows the dollar amount of our
loans at December 31, 2009 due after December 31, 2010 as shown in the preceding table, which have fixed interest rates or which have floating or adjustable interest rates.



|                                |  |                |         |                            |   |        |  |   |        
|------------------------------- |  | -------------- | ------- | -------------------------- | - | ------ |  | - | -------
|                                |  | Fixed-Rate     |         | Floating orAdjustable-Rate |   | Total 
|                                |  | (In Thousands)
|Real Estate Loans:              |  |                |        
|One- to four-family residential |  | $              | 60,887  |                            | $ | 23,622 |  | $ | 84,509 
|Home equity loans & lines       |  |                | 5,510   |                            |   | 8,833  |  |   | 14,343 
|Multi-family residential        |  |                | 7,519   |                            |   |       |  |   | 7,519  
|Commercial real estate          |  |                | 45,844  |                            |   |       |  |   | 45,844 
|Land loans                      |  |                | 942     |                            |   |       |  |   | 942    
|Consumer and other              |  |                | 872     |                            |   | 563    |  |   | 1,435  
|                                |  |                |         |                            |   |        |  |   |        
|Total                           |  | $              | 121,574 |                            | $ | 33,018 |  | $ | 154,592
|                                |  |                |         |                            |   |        |  |   |        

Loan Originations. Our lending activities are
subject to underwriting standards and loan origination procedures established by our board of directors and management. Loan originations are obtained through a variety of sources, primarily existing customers as well as new customers obtained from
referrals and local advertising and promotional efforts. Single-family residential mortgage loan applications and consumer loan applications are taken at any Bank of New Orleans branch office. Applications for other loans typically are taken
personally by our commercial loan officer or consumer loan officer, although they may be received by a branch office initially and then referred to our commercial loan officer or consumer loan officer. All loan applications are processed and
underwritten centrally at our main office.

Our single-family residential mortgage loans are written on standardized documents
used by the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) and Federal National Mortgage Association (FNMA or Fannie Mae). We also utilize an automated loan processing and underwriting
software system for our new single-family residential mortgage loans. Property valuations of loans secured by real estate are undertaken by an independent third-party appraiser approved by our board of directors.

In addition to originating loans, we occasionally purchase participation interests in larger balance loans, typically commercial real estate
and multi-family residential mortgage loans and construction loans, from other financial institutions in our market area or other markets in Louisiana. Such participations are reviewed for compliance with our underwriting criteria before they are
purchased. Generally, we have purchased such loans without any recourse to the seller. However, we actively monitor the performance of such loans through the receipt of regular reports from the lead lender regarding the loans performance,
physically inspecting the loan security property on a periodic basis, discussing the loan with the lead lender on a regular basis and receiving



6



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##### Table of Contents

##### Index to Financial Statements

copies of updated financial statements from the borrower. Bank of New Orleans largest potential exposure on a purchased participation interest at December 31, 2009 was an $864,000
participation interest in a $3.8 million loan secured by commercial real estate in the French Quarter of New Orleans. At December 31, 2009, our total purchased interest in participation loans was $2.5 million, all of which were performing in
accordance with their contractual terms.

In addition, Bank of New Orleans also occasionally sells participation interests in
loans it originates. We generally have sold participation interests when a loan would exceed our internal limitations for concentrations of credit, or exceeds our statutory loans-to-one borrower limit. Our loans-to-one borrower limit, with certain
exceptions, generally is 15% of our unimpaired capital and surplus or $8.9 million at December 31, 2009. At December 31, 2009, the Banks five largest borrowers, and their related entities, have loan balances of $4.0 million, $3.0
million, $2.6 million, $2.6 million and $2.5 million, respectively, and all of such loans were performing in accordance with their terms.

The following table shows our total loans originated, purchased, sold and repaid during the periods indicated.



|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                          |  | Year Ended December 31, |        
|                                          |  | 2009                    |         |   | 2008 |   |         | 2007 | 
|                                          |  | (In thousands)          |        
|Loan originations:                        |  |                         |         |  
|Real Estate Loans:                        |  |                         |         |   |      |   |         |      |  |   |         |  
|One- to four-family residential           |  | $                       | 59,089  |   |      | $ | 13,473  |      |  | $ | 8,981   |  
|Home equity loans and lines               |  |                         | 8,666   |   |      |   | 4,737   |      |  |   | 4,399   |  
|Multi-family residential                  |  |                         | 2,546   |   |      |   | 2,811   |      |  |   | 2,217   |  
|Commercial real estate                    |  |                         | 14,660  |   |      |   | 12,199  |      |  |   | 12,554  |  
|Land loans                                |  |                         | 304     |   |      |   | 944     |      |  |   | 460     |  
|Consumer and other                        |  |                         | 724     |   |      |   | 1,394   |      |  |   | 2,799   |  
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Total loan originations                   |  |                         | 85,989  |   |      |   | 35,558  |      |  |   | 31,410  |  
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Loans purchased(1)                        |  |                         |        |   |      |   | 2,133   |      |  |   | 8,357   |  
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Loans sold                                |  |                         | (12,508 | ) |      |   | (1,281  | )    |  |   | (1,377  | )
|Loan principal repayments                 |  |                         | (25,108 | ) |      |   | (22,140 | )    |  |   | (31,219 | )
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Total loans sold and principal repayments |  |                         | (37,616 | ) |      |   | (23,421 | )    |  |   | (32,596 | )
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Transfer to Other real estate owned       |  |                         | (1,573  | ) |      |   |        |      |  |   |        |  
|Increase due to other items, net(2)       |  |                         | 410     |   |      |   | 64      |      |  |   | 307     |  
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Net increase in total loans               |  | $                       | 47,210  |   |      | $ | 14,334  |      |  | $ | 7,478   |  
|                                          |  |                         |         |   |      |   |         |      |  |   |         |  



|(1) | Includes purchases of participation interests in loans.
|--- | -------------------------------------------------------

|(2) | Other items consist of deferred fees and the allowance for loan losses.
|--- | -----------------------------------------------------------------------

One-to Four-Family Residential Mortgage Lending. One of our primary lending activities continues to be the origination of loans secured by first mortgages on one- to four-family residences in our
market area. At December 31, 2009, $85.7 million of our total loan portfolio consisted of single-family residential mortgage loans, an increase of $41.5 million from December 31, 2005. Originations of one- to four-family loans were $59.1
million, $13.5 million, and $9.0 million, respectively, for the years ended December, 31, 2009, 2008 and 2007. During this three year period, our single-family residential real estate loans as a percentage of total loans increased from 46.8% at
December 31, 2007, to 53.4% at December 31, 2009. The growth in our originations during 2009 was primarily due to increased refinancing activity due to a decline in mortgage rates, the Banks hiring of experienced mortgage loan
originators during the third quarter of 2008, and the exodus of several national secondary market originators following the mortgage crisis of 2008. Another significant factor contributing to the growth of our single-family originations is the
continued repopulation of our market area associated with the Hurricane Katrina recovery.



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##### Index to Financial Statements

Our single-family residential mortgage loan originations include loans that are underwritten
on terms and documentation conforming to guidelines issued by Freddie Mac and Fannie Mae, and non-conforming jumbo loans, which have principal balances in excess of the Fannie Mae limit of $417,000. Applications for one-to four-family
residential mortgage loans are accepted at any of our banking offices and are then referred to the Residential Lending Department at our main office in order to underwrite the creditworthiness of the loan. Once our underwriting process is completed,
the loan package is submitted to our mortgage loan committee for approval. We currently originate fixed-rate, fully amortizing mortgage loans with maturities of 10, 15, 20 or 30 years. With the exception of those 30-year mortgage loans that are
secondary market eligible, we generally retain a substantial portion of the single-family residential mortgage loans that we originate. During the current year, we have focused our origination efforts on increasing our production of adjustable rate
mortgage (ARM) loans, where the interest rate either adjusts on an annual basis or is fixed for an initial period of three, five, or seven years and then adjusts annually. The retention of ARM loans helps management mitigate the risk
that future interest rate increases may have on our portfolio. We do not originate ARM loans that would be considered sub-prime, interest-only, or those that provide for the negative amortization of principal. At December 31, 2009,
$23.6 million, or 27.9%, of our one- to four-family residential loan portfolio maturing after December 31, 2010 consisted of ARM loans. In addition to traditional mortgage loan products offered by the Bank, we also offer reverse mortgages on an
agency basis where we sell the origination to a third party that closes and funds the loan.

We underwrite one- to four-family
residential mortgage loans with loan-to-value ratios of up to 90%, provided that the borrower obtains private mortgage insurance on loans that exceed 80% of the appraised value or sales price, whichever is less, of the secured property. We also
require that title insurance, hazard insurance and, if appropriate, flood insurance be maintained on all properties securing real estate loans. We require that a licensed appraiser from our list of approved appraisers perform and submit to us an
appraisal on all properties securing one- to four-family first mortgage loans. Our mortgage loans generally include due-on-sale clauses which provide us with the contractual right to deem the loan immediately due and payable in the event the
borrower transfers ownership of the property. Due-on-sale clauses are an important means of adjusting the yields of fixed-rate mortgage loans in portfolio and we generally exercise our rights under these clauses.

Home Equity Loans and Lines of Credit.In addition to the origination of first mortgage loans secured by single-family residences,
the Bank also originates home equity loans and lines of credit, typically secured by second mortgages. At December 31, 2009, our total home equity loans and lines of credit were $14.4 million, an increase of $4.1 million from December 31,
2008. Our home equity loans have fixed rates of interest and final maturities of 5, 10 or 15 years. Our home equity lines of credit generally have floating interest rates tied to the Wall Street Journal prime index. In some cases, a fixed credit
spread may be added to the index based on the creditworthiness of the borrower, as determined by our underwriting policies and procedures. At December 31, 2009, the unused portion of our home equity lines of credit was $8.1 million. In addition
to the traditional equity loans offered by the Bank with maximum LTV limits of 80%, the Bank offers equity loans through the FHA Title 1 program that may exceed 100% of the propertys market value. These FHA Title 1 loans are limited to loans
of $25,000 or less, and provide the lender with a guarantee of 90% of the loans outstanding balance.

Multi-Family
Residential, Commercial Real Estate and Land Loans.At December 31, 2009, our multi-family residential, commercial real estate and land loans amounted to an aggregate of $58.4 million or 36.5% of our total loan portfolio. Our aggregate
multi-family residential, commercial real estate and land loans increased by $9.8 million, from December 31, 2008 to December 31, 2009, and by $23.5 million from December 31, 2005 to December 31, 2009.

Our commercial real estate and multi-family residential real estate loan portfolio consists primarily of loans secured by office buildings,
retail and industrial use buildings, strip shopping centers, residential properties with five or more units and other properties used for commercial and multi-family purposes located in our market area. At December 31, 2009, our multi-family
residential real estate loans were $9.4 million or 5.9% of our total loan portfolio, and consist primarily of loans secured by properties with 20 or fewer rental units. The average



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##### Table of Contents

##### Index to Financial Statements

outstanding balance of our multi-family residential loans was $410,000, with our largest multi-family residential loan having a balance of $2.3 million at December 31, 2009. Our commercial
real estate loans comprised 29.8% of our total loan portfolio, and had an aggregate balance of $47.8 million at December 31, 2009. The five largest commercial real estate loans outstanding at year end 2009 were $2.6 million, $2.4 million, $2.3
million, $2.0 million and $1.3 million, and all of such loans were performing in accordance with all their terms.

Although
terms for multi-family residential, commercial real estate and land loans vary, our underwriting standards generally allow for terms up to 15 years with monthly amortization over the life of the loan and loan-to-value ratios of not more than 80%.
Interest rates are either fixed or, on occasion, adjustable, based upon designated market indices such as the prime rate or LIBOR, and fees of up to 2.0% are charged to the borrower at the origination of the loan. In light of local market demands,
substantially all of our multi-family residential, commercial real estate and land loans originated in recent years have been fixed-rate loans with terms to maturity of 10 to 15 years. However, the actual lives of such loans generally are less due
to prepayments and re-financings. In originating multi-family residential, commercial real estate and land loans we estimate what we expect will be the actual life of the loan to maturity and generally seek to originate loans which we expect will
have an average maturity of 6-7 years. Generally, we obtain personal guarantees of the principals as additional collateral for multi-family residential, commercial real estate and land loans.

Multi-family residential, commercial real estate and land lending involves different risks than single-family residential lending. These
risks include larger loans to individual borrowers and loan payments that are dependent upon the successful operation of the project or the borrowers business. These risks can be affected by supply and demand conditions in the projects
market area of rental housing units, office and retail space, warehouses, and other commercial space. We attempt to minimize these risks for loans we originate by limiting loans to businesses with existing operating performance which can be analyzed
or to borrowers with whom we are familiar and who have historical results that we can analyze. We also use conservative debt coverage ratios in our underwriting, and periodically monitor the operation of the business or project and the physical
condition of the property.

Various aspects of multi-family residential and commercial real estate loan transactions are
evaluated in an effort to mitigate the additional risk in these types of loans. In our underwriting procedures, consideration is given to the stability of the propertys cash flow history, future operating projections, current and projected
occupancy levels, location and physical condition. Generally, we impose a debt service ratio (the ratio of net cash flows from operations before the payment of debt service to debt service) of not less than 125% in the case of multi-family
residential, commercial real estate and land loans. We also evaluate the credit and financial condition of the borrower, and if applicable, the guarantor. Appraisal reports prepared by independent appraisers are obtained on each loan to substantiate
the propertys market value, and are reviewed by us prior to the closing of the loan.

Construction financing is
generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. At December 31, 2009, the Bank did not have any outstanding loans for the construction of multi-family residential
properties or commercial properties. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the propertys value at completion of construction compared to the estimated costs, including interest, of
construction and other assumptions. Additionally, if the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value less than the loan amount. We have attempted to minimize these risks by generally
concentrating on loans in our market area to borrowers who have established reputations and/or with whom we have established relationships.

Consumer and Other Lending Activities.In our efforts to provide a full range of financial services to our customers, we offer various types of consumer loans. Our consumer and other loans amounted
to $1.8 million or 1.1% of our total loan portfolio at December 31, 2009. Our consumer loans include student loans, loans secured by deposit accounts, automobile loans, home improvement loans, and unsecured personal loans. Consumer loans



9



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##### Table of Contents

##### Index to Financial Statements

are originated primarily through existing and walk-in customers and direct advertising. In addition to consumer loans, the Bank offers secured and unsecured commercial loans and lines of credit.
Our commercial loans and lines of credit at December 31, 2009 amounted to $463,000.

Consumer loans generally have higher
interest rates and shorter terms than residential loans; however, they have additional credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. During 2009 we charged-off $10,000 in consumer loans,
compared to $2,000 in 2008.

Loan Approval Procedures and Authority.Our Board of Directors establishes the Banks
lending policies and procedures. Our Lending Policy Manual is reviewed on at least an annual basis by our management team in order to propose modifications as a result of market conditions, regulatory changes and other factors. All modifications
must be approved by our Board of Directors.

Various officers or combinations of officers of Bank of New Orleans have the
authority within specifically identified limits to approve new loans. Our Commercial Lending Committee (comprised of our President, Chief Financial Officer, Commercial Loan Manager and two outside directors) has authority to approve multi-family
residential, commercial real estate and land loans in amounts up to $750,000. Our Loan Committee (comprised of our President, Chief Financial Officer, Residential Loan Manager and Consumer Loan Manager) has authority to approve single-family
residential mortgage loans which conform to Fannie Mae or Freddie Mac guidelines and consumer loans up to $100,000. All other loans must be approved by the Board of Directors of Bank of New Orleans.

Asset Quality

General. One of our key objectives has been, and continues to be, maintaining a high level of asset quality. In addition to maintaining credit standards for new originations which we believe are sound, we are proactive in our loan
monitoring, collection and workout processes in dealing with delinquent or problem loans.

When a borrower fails to make a
scheduled payment, we attempt to cure the deficiency by making personal contact with the borrower. Initial contacts are generally made within 10 to 15 days after the date the payment is due. In most cases, deficiencies are promptly resolved. If the
delinquency continues, late charges are assessed and additional efforts are made to collect the deficiency. All loans with an outstanding balance of more than $100,000 which are delinquent 30 days or more are reported to the Board of Directors of
Bank of New Orleans.

On loans where the collection of principal or interest payments is doubtful, the accrual of interest
income ceases (non-accrual loans). It is our policy, with certain limited exceptions, to discontinue accruing additional interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action
may be taken earlier if the financial condition of the borrower raises significant concern with regard to his/her ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these loans until the
borrowers financial condition and payment record demonstrate an ability to service the debt.

Real estate which is
acquired as a result of foreclosure is classified as real estate owned until sold. Real estate owned is recorded at the lower of cost or fair value less estimated selling costs. Costs associated with acquiring and improving a foreclosed property are
usually capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs. Holding costs are charged to expense. Gains and losses on the sale of real estate owned are charged to operations, as incurred.

We account for our impaired loans under generally accepted accounting principles. An impaired loan generally is one for which
it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Loans
collectively evaluated for impairment include smaller balance



10



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##### Table of Contents

##### Index to Financial Statements

commercial real estate loans, residential real estate loans and consumer loans. These loans are evaluated as a group because they have similar characteristics and performance experience. Larger
multi-family residential, commercial real estate and construction loans are individually evaluated for impairment. As of December 31, 2009 and 2008, our recorded investment in impaired loans was $1.0 million and $520,000, respectively.

Federal regulations and our policies require that we utilize an internal asset classification system as a means of reporting
problem and potential problem assets. We have incorporated an internal asset classification system, substantially consistent with Federal banking regulations, as a part of our credit monitoring system. Federal banking regulations set forth a
classification scheme for problem and potential problem assets as substandard, doubtful or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and
paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the
deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation
in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. We typically have not classified assets as doubtful, but have been more aggressive in classifying assets as
loss. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do
not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated special mention.

A savings institutions determination as to the classification of its assets and the amount of its valuation allowances is subject to
review by Federal bank regulators which can order the establishment of additional general or specific loss allowances. The Federal banking agencies, have adopted an interagency policy statement on the allowance for loan and lease losses. The policy
statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation
guidelines. Generally, the policy statement recommends that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management analyze all significant factors that affect the collectibility of
the portfolio in a reasonable manner; and that management establish acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. Our management believes that, based on information currently available, its
allowance for loan losses is maintained at a level which covers all known and inherent losses that are both probable and reasonably estimable at each reporting date. However, actual losses are dependent upon future events and, as such, further
additions to the level of allowances for loan losses may become necessary.

We review and classify assets on a monthly basis
and the Board of Directors is provided with monthly reports on our classified assets. We classify assets in accordance with the management guidelines described above. At December 31, 2009 and 2008, our recorded investment in assets classified
as substandard was $580,000 and $71,000 respectively. At December 31, 2009, we had loss allowances of $90,000 established against these loans, compared to no allowances at December 31, 2008. We had $130,000 in assets designated
as special mention at December 31, 2009, compared to $1.1 million in assets designated as special mention at December 31, 2008.

Delinquent Loans. At December 31, 2009, we had $379,000 in delinquent loans, compared to $2.2 million at December 31, 2008. Included in the $2.2 million of delinquent loans at
December 31, 2008 were two loans to a single borrower with a combined balance of $1.2 million, which were transferred to other real estate owned during 2009 at a fair market value of $1.0 million. In addition, at December 31, 2008, we had
one delinquent commercial real estate construction loan with a total funded balance of $950,000, which was classified as an in-substance foreclosure during 2009, and was included in other real estate owned at December 31, 2009 at a
fair market value of $553,000. This loan represents our participation interest in a $170 million mixed-use property development in Baton Rouge, Louisiana.



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##### Index to Financial Statements

The following table shows the delinquencies in our loan portfolio as of the dates indicated.



|                                    |                   |                        |                  |                        |                   |                |                   |                  |  |                        |                |   |                  |   |  |                |       |                  |  |   |  |   |   |  
|----------------------------------- | ----------------- | ---------------------- | ---------------- | ---------------------- | ----------------- | -------------- | ----------------- | ---------------- |  | ---------------------- | -------------- | - | ---------------- | - |  | -------------- | ----- | ---------------- |  | - |  | - | - | -
|                                    |                   | December 31, 2009      |                  |                        | December 31, 2008 |               
|                                    | 30-89Days Overdue |                        |                  | 90 or More DaysOverdue |                   |                | 30-89Days Overdue |                  |  | 90 or More DaysOverdue |               
|                                    | Numberof Loans    |                        | PrincipalBalance |                        |                   | Numberof Loans |                   | PrincipalBalance |  |                        | Numberof Loans |   | PrincipalBalance |   |  | Numberof Loans |       | PrincipalBalance | 
|                                    |                   | (Dollars in Thousands) |                 
|Real Estate Loans:                  |                   |                        |                  |                        |                   |                |                   |                  |  |                        |                |   |                  |   |  |                |       |                  |  |   |  |   |   |  
|One- to four-family residential     |                   | 1                      |                  | $                      | 228               |                |                   |                 |  | $                      |               |   |                  | 2 |  | $              | 1,062 |                  |  |  |  | $ |  |  
|Home equity loans and lines         |                   | 6                      |                  |                        | 151               |                |                   |                  |  |                        |                |   |                  | 1 |  |                | 189   |                  |  |   |  |   |   |  
|Multi-family residential            |                   |                       |                  |                        |                  |                |                   |                 |  |                        |               |   |                  |  |  |                |      |                  |  |  |  |   |  |  
|Commercial real estate              |                   |                       |                  |                        |                  |                |                   |                  |  |                        |                |   |                  | 1 |  |                | 950   |                  |  |   |  |   |   |  
|Land                                |                   |                       |                  |                        |                  |                |                   |                  |  |                        |                |   |                  |  |  |                |      |                  |  |   |  |   |   |  
|Consumer and other                  |                   |                       |                  |                        |                  |                |                   |                 |  |                        |               |   |                  | 1 |  |                | 1     |                  |  |  |  |   |  |  
|                                    |                   |                        |                  |                        |                   |                |                   |                  |  |                        |                |   |                  |   |  |                |       |                  |  |   |  |   |   |  
|Total delinquent loans              |                   | 7                      |                  | $                      | 379               |                |                   |                 |  | $                      |               |   |                  | 5 |  | $              | 2,202 |                  |  |  |  | $ |  |  
|                                    |                   |                        |                  |                        |                   |                |                   |                  |  |                        |                |   |                  |   |  |                |       |                  |  |   |  |   |   |  
|Delinquent loans to total net loans |                   |                        |                  |                        | 0.24              | %              |                   |                  |  |                        |               | % |                  |   |  |                | 1.98  | %                |  |   |  |   |  | %
|                                    |                   |                        |                  |                        |                   |                |                   |                  |  |                        |                |   |                  |   |  |                |       |                  |  |   |  |   |   |  
|Delinquent loans to total loans     |                   |                        |                  |                        | 0.24              | %              |                   |                  |  |                        |               | % |                  |   |  |                | 1.94  | %                |  |   |  |   |  | %
|                                    |                   |                        |                  |                        |                   |                |                   |                  |  |                        |                |   |                  |   |  |                |       |                  |  |   |  |   |   |  

Non-Performing Loans and Real Estate Owned. Our general policy is to cease accruing interest on loans
which are 90 days or more past due and to charge-off all accrued interest. At December 31, 2009, the largest components of our non-performing loans were a single multi-family residential loan of $515,000, against which a $90,000 loss allowance
was established, and an aggregate principal balance of $357,000 in sixteen loans that were placed in non-accrual status following Hurricane Katrina. These sixteen loans are primarily composed of home equity loans and lines of credit. At
December 31, 2009, all sixteen of these accounts were current with respect to their contractual obligations; however, uncertainty remains with respect to the borrowers ability to repay all amounts due over the life of the loan. Therefore,
as per Bank policy, these loans remain in non-accrual status.

For the years ended December 31, 2009 and 2008, the amount
of additional interest income that would have been recognized on non-accrual loans if such loans had continued to perform in accordance with their contractual terms was $12,000 and $4,500, respectively.



12



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##### Index to Financial Statements

The following table shows the amounts of our non-performing assets (defined as
non-accruing loans, accruing loans 90 days or more past due and real estate owned) at the dates indicated.



|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|----------------------------------------------------------- |  | ---------------------- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - |  | - | ----- | -
|                                                            |  | December 31,           |      
|                                                            |  | 2009                   |       |   | 2008 |   |      | 2007 |  |   | 2006 |   |  | 2005 |     
|                                                            |  | (Dollars in Thousands) |      
|Non-accruing loans:                                         |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Real Estate loans:                                          |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|One- to four-family residential                             |  | $                      | 36    |   |      | $ | 52   |      |  | $ | 46   |   |  | $    | 302  |   |  | $ | 1,481 |  
|Home equity loans and lines                                 |  |                        | 378   |   |      |   | 389  |      |  |   | 353  |   |  |      | 542  |   |  |   | 579   |  
|Multi-family residential                                    |  |                        | 515   |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   |      |  
|Commercial real estate                                      |  |                        |      |   |      |   |     |      |  |   | 299  |   |  |      | 12   |   |  |   |      |  
|Land loans                                                  |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   |      |  
|Consumer and other                                          |  |                        | 74    |   |      |   | 79   |      |  |   | 144  |   |  |      | 19   |   |  |   | 53    |  
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Total non-accruing loans                                    |  |                        | 1,003 |   |      |   | 520  |      |  |   | 842  |   |  |      | 875  |   |  |   | 2,113 |  
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Accruing loans 90 days or more past due:                    |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Real Estate loans:                                          |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|One- to four-family residential                             |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   | 908   |  
|Home equity loans and lines                                 |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   | 614   |  
|Multi-family residential                                    |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   |      |  
|Commercial real estate                                      |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   | 660   |  
|Land loans                                                  |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   |      |  
|Consumer and other                                          |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   | 193   |  
|Total accruing loans 90 days or more past due               |  |                        |      |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   | 2,375 |  
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Total non-performing loans(1)                               |  |                        | 1,003 |   |      |   | 520  |      |  |   | 842  |   |  |      | 875  |   |  |   | 4,488 |  
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Real estate owned, net                                      |  |                        | 1,573 |   |      |   |     |      |  |   |     |   |  |      |     |   |  |   |      |  
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Total non-performing assets                                 |  | $                      | 2,576 |   |      | $ | 520  |      |  | $ | 842  |   |  | $    | 875  |   |  | $ | 4,488 |  
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Total non-performing loans as a percentage of loans, net    |  |                        | 0.63  | % |      |   | 0.47 | %    |  |   | 0.87 | % |  |      | 0.98 | % |  |   | 4.85  | %
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Total non-performing loans as a percentage of total assets  |  |                        | 0.30  | % |      |   | 0.16 | %    |  |   | 0.31 | % |  |      | 0.40 | % |  |   | 1.86  | %
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  
|Total non-performing assets as a percentage of total assets |  |                        | 0.78  | % |      |   | 0.16 | %    |  |   | 0.31 | % |  |      | 0.40 | % |  |   | 1.86  | %
|                                                            |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |       |  



|(1) | Non-performing loans consist of non-accruing loans plus accruing loans 90 days or more past due.
|--- | ------------------------------------------------------------------------------------------------

Allowance for Loan Losses.The allowance for loan losses is established through a provision for loan losses. We maintain the
allowance at a level believed, to the best of managements knowledge, to cover all known and inherent losses in the portfolio that are both probable and reasonable to estimate at each reporting date. Management reviews the allowance for loan
losses on a monthly basis in order to identify those inherent losses and to assess the overall collection probability for the loan portfolio. Our evaluation process includes, among other things, an analysis of delinquency trends, non-performing loan
trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of our loans, the value of collateral securing the loan, the
borrowers ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience. Such risk ratings are periodically reviewed by management and revised as
deemed appropriate. The establishment of the allowance for loan losses is significantly affected by management judgment and uncertainties and there is a likelihood that different amounts would be reported under different conditions or assumptions.
Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require it to make additional provisions for estimated loan losses based upon judgments different
from those of management.

During the year ended December 31, 2005, we made a substantial provision for loan losses due
to the unprecedented damage caused by Hurricane Katrina. This provision was based on managements assessment of



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##### Index to Financial Statements

the estimated level of losses in our loan portfolio. Given the significant uncertainties regarding the performance of the loan portfolio, $1.2 million of the provision was applied to the general
allowance for loan losses and was not allocated to any identified type or class of loans. In the years ended December 31, 2008, 2007, and 2006, we recorded an aggregate of $769,000 in recoveries to our allowance for loan losses. These
recoveries were due to loans on which we had made a provision in 2005 which subsequently have been repaid in full, in most cases upon the receipt of insurance proceeds.

The bank recorded charge-offs of $628,000 during 2009 compared to $4,000 during 2008. This increase is primarily attributed to two loan relationships that were transferred to other real estate owned
during the year. The first of these relationships consists of a first mortgage loan and a home equity line secured by a single-family residence located in our market area. During 2009, $232,000 was charged off against our allowance for loan loss
with respect to these loans. The second significant loan charge-off during 2009 pertains to our participation interest in a $170.0 million real estate construction loan secured by a mixed-use commercial and residential project located in Baton
Rouge, Louisiana. We are participated in this loan as part of the Shared National Credit Program. This loan represents our only shared national credit. During the third quarter of 2009, this loan was determined to be an in-substance
foreclosure and our investment was classified as other real estate owned with a fair market value of $553,000. At the time of reclassification, the Bank charged-off $396,000 against the allowance for loan losses allocated to this loan.

We will continue to monitor and modify our allowances for loan losses as conditions dictate. No assurances can be given that our level of
allowance for loan losses will cover all of the inherent losses on our loans or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other
conditions used by management to determine the current level of the allowance for loan losses.

The following table shows
changes in our allowance for loan losses during the periods presented.



|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                                          |  | At or For the Year Ended December 31, |        
|                                                                                          |  | 2009                                  |         |   | 2008 |   |         | 2007 |  |   | 2006   |   |  | 2005 |       
|                                                                                          |  | (Dollars in Thousands)                |        
|Total loans outstanding at end of period                                                  |  | $                                     | 160,347 |   |      | $ | 113,547 |      |  | $ | 99,277 |   |  | $    | 92,106 |   |  | $ | 95,550 |  
|Allowance for loan losses, beginning of period                                            |  |                                       | 1,952   |   |      |   | 1,999   |      |  |   | 2,292  |   |  |      | 2,760  |   |  |   | 515    |  
|Provision (recovery) for loan losses                                                      |  |                                       | 337     |   |      |   | (43     | )    |  |   | (268   | ) |  |      | (458   | ) |  |   | 2,250  |  
|Charge-offs:                                                                              |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Real Estate loans:                                                                        |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|One- to four-family residential                                                           |  |                                       | 31      |   |      |   |        |      |  |   | 38     |   |  |      |       |   |  |   |       |  
|Home equity loans and lines                                                               |  |                                       | 191     |   |      |   | 2       |      |  |   | 4      |   |  |      | 7      |   |  |   | 4      |  
|Multi-family residential                                                                  |  |                                       |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Commercial real estate                                                                    |  |                                       | 396     |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Land loans                                                                                |  |                                       |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Consumer and other                                                                        |  |                                       | 10      |   |      |   | 2       |      |  |   |       |   |  |      | 4      |   |  |   | 5      |  
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total charge-offs                                                                         |  |                                       | 628     |   |      |   | 4       |      |  |   | 42     |   |  |      | 11     |   |  |   | 9      |  
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Recoveries on loans previously charged off                                                |  |                                       |        |   |      |   |        |      |  |   | 17     |   |  |      | 1      |   |  |   | 4      |  
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Allowance for loan losses, end of period                                                  |  | $                                     | 1,661   |   |      | $ | 1,952   |      |  | $ | 1,999  |   |  | $    | 2,292  |   |  | $ | 2,760  |  
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Allowance for loan losses as a percent of non-performing loans                            |  |                                       | 165.60  | % |      |   | 375.38  | %    |  |   | 237.41 | % |  |      | 261.94 | % |  |   | 61.50  | %
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Allowance for loan losses as a percent of total loans                                     |  |                                       | 1.04    | % |      |   | 1.72    | %    |  |   | 2.01   | % |  |      | 2.49   | % |  |   | 2.89   | %
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Ratio of net charge-offs during the period to average loans outstanding during the period |  |                                       | 0.47    | % |      |   |        | %    |  |   |       | % |  |      |       | % |  |   |       | %
|                                                                                          |  |                                       |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  



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##### Index to Financial Statements

The following table shows how our allowance for loan losses is allocated by type of loan at
each of the dates indicated.



|                               |  |                        |       |                                 |       |   |                   |      |                                 |  |       |                   |  |                                 |       |  |                   |   |                                 |   |       |                   |       |                                 |  |   |       |  |       |  
|------------------------------ |  | ---------------------- | ----- | ------------------------------- | ----- | - | ----------------- | ---- | ------------------------------- |  | ----- | ----------------- |  | ------------------------------- | ----- |  | ----------------- | - | ------------------------------- | - | ----- | ----------------- | ----- | ------------------------------- |  | - | ----- |  | ----- | -
|                               |  | December 31,           |      
|                               |  | 2009                   |       |                                 | 2008  |   |                   | 2007 |                                 |  | 2006  |                   |  | 2005                            |      
|                               |  | AmountofAllowance      |       | LoanCategoryas a %of TotalLoans |       |   | AmountofAllowance |      | LoanCategoryas a %of TotalLoans |  |       | AmountofAllowance |  | LoanCategoryas a %of TotalLoans |       |  | AmountofAllowance |   | LoanCategoryas a %of TotalLoans |   |       | AmountofAllowance |       | LoanCategoryas a %of TotalLoans | 
|                               |  | (Dollars in Thousands) |      
|Real estate loans:             |  |                        |       |                                 |       |   |                   |      |                                 |  |       |                   |  |                                 |       |  |                   |   |                                 |   |       |                   |       |                                 |  |   |       |  |       |  
|One-to four-family residential |  | $                      | 726   |                                 | 53.4  | % |                   | $    | 91                              |  | 45.4  | %                 |  | $                               | 106   |  | 46.8              | % |                                 | $ | 282   |                   | 49.5  | %                               |  | $ | 736   |  | 46.3  | %
|Home equity loans and lines    |  |                        | 273   |                                 | 9.0   |   |                   |      | 210                             |  | 9.1   |                   |  |                                 | 238   |  | 8.8               |   |                                 |   | 428   |                   | 9.2   |                                 |  |   | 370   |  | 9.6   |  
|Multi-family residential       |  |                        | 167   |                                 | 5.9   |   |                   |      | 2                               |  | 6.9   |                   |  |                                 | 1     |  | 7.5               |   |                                 |   | 1     |                   | 7.3   |                                 |  |   | 1     |  | 7.3   |  
|Commercial real estate         |  |                        | 397   |                                 | 29.8  |   |                   |      | 49                              |  | 35.0  |                   |  |                                 | 57    |  | 32.5              |   |                                 |   | 44    |                   | 29.1  |                                 |  |   | 64    |  | 28.7  |  
|Land loans                     |  |                        | 10    |                                 | 0.8   |   |                   |      | 2                               |  | 1.0   |                   |  |                                 | 1     |  | 0.5               |   |                                 |   | 1     |                   | 0.5   |                                 |  |   | 1     |  | 0.5   |  
|Consumer and other             |  |                        | 88    |                                 | 1.1   |   |                   |      | 98                              |  | 2.6   |                   |  |                                 | 96    |  | 3.9               |   |                                 |   | 36    |                   | 4.4   |                                 |  |   | 88    |  | 7.6   |  
|Unallocated                    |  |                        |      |                                 |      |   |                   |      | 1,500                           |  |      |                   |  |                                 | 1,500 |  |                  |   |                                 |   | 1,500 |                   |      |                                 |  |   | 1,500 |  |      |  
|                               |  |                        |       |                                 |       |   |                   |      |                                 |  |       |                   |  |                                 |       |  |                   |   |                                 |   |       |                   |       |                                 |  |   |       |  |       |  
|Total                          |  | $                      | 1,661 |                                 | 100.0 | % |                   | $    | 1,952                           |  | 100.0 | %                 |  | $                               | 1,999 |  | 100.0             | % |                                 | $ | 2,292 |                   | 100.0 | %                               |  | $ | 2,760 |  | 100.0 | %
|                               |  |                        |       |                                 |       |   |                   |      |                                 |  |       |                   |  |                                 |       |  |                   |   |                                 |   |       |                   |       |                                 |  |   |       |  |       |  

Investment Activities

General. We invest in securities pursuant to our Investment Policy, which has been approved by our board of directors. The Boards ALCO/Investment Committee monitors our investment activity
and ensures that the Banks investments are consistent with the Investment Policy. The respective Boards of Directors of the Bank and Company review all investment activity at their regular scheduled meetings.

Our investment policy is designed primarily to manage the interest rate sensitivity of our assets and liabilities, to generate a favorable
return without incurring undue interest rate and credit risk, to complement our lending activities and to provide and maintain liquidity. On occasion, we also have used a leveraged investment strategy for the purpose of enhancing returns. Pursuant
to this strategy, we have utilized borrowings from the Federal Home Loan Bank (FHLB) of Dallas as well as other sources to purchase additional investment securities. We attempt to match the advances with the securities purchased in order
to obtain a favorable difference, or spread, between the interest paid on the advance against the yield received on the security purchased.

At December 31, 2009, our investment and mortgage-backed securities amounted to $157.1 million in the aggregate or 47.6% of total assets at such date. The largest component of our securities
portfolio in recent periods has been mortgage-backed securities, which amounted to $117.3 million or 74.7% of the securities portfolio at December 31, 2009. In addition, we invest in U.S. government and agency obligations, municipal securities,
corporate debt obligations and other securities. Our agency debt securities often have call provisions which provide the agency with the ability to call the securities at specified dates.

At December 31, 2009, we had an aggregate of $188,000 in gross unrealized losses on our investment and mortgage-backed securities
portfolio. Such unrealized losses reflect a decline in market value of securities as a result of changes in market rates of interest. Because the decline in market value is not attributable to credit



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##### Index to Financial Statements

quality and because we have the ability and intent to hold these investments until a recovery of fair value occurs, which may be at maturity, we did not consider these investments to be
other-than-temporarily impaired at December 31, 2009.

Pursuant to FASB ASC 320-10, our securities are classified as
available for sale, held to maturity, or trading, at the time of acquisition. Securities classified as held to maturity must be purchased with the intent and ability to hold that security until its final maturity, and can be sold prior to maturity
only under rare circumstances. Held to maturity securities are accounted for based upon the historical cost of the security. Available for sale securities can be sold at any time based upon needs or market conditions. Available for sale securities
are accounted for at fair value, with unrealized gains and losses on these securities, net of income tax provisions, reflected in retained earnings as accumulated other comprehensive income. At December 31, 2009, we had $62.5 million of
securities classified as available for sale, $94.5 million of securities classified as held to maturity and no securities classified as trading account. During the year ended December 31, 2009, we sold an aggregate of $13.4 million of
available-for-sale securities at a gain of $406,000.

We do not purchase mortgage-backed derivative instruments that would be
characterized high-risk under Federal banking regulations at the time of purchase, nor do we purchase corporate obligations which are not rated investment grade or better.

Our mortgage-backed securities consist primarily of mortgage pass-through certificates issued by the Government National Mortgage
Association (GNMA or Ginnie Mae), Fannie Mae or Freddie Mac. Our mortgage-backed securities also include collateralized mortgage obligations (CMOs) issued by such agencies. At December 31, 2009, $77,000 of
our mortgage-backed securities were CMOs. At such date, all of our mortgage-backed securities were issued by the GNMA, FNMA or FHLMC and we held no mortgage-backed securities from private issuers.

Investments in mortgage-backed securities involve a risk that actual prepayments will be greater than estimated prepayments over the life of
the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby changing the net yield on such securities. There is also reinvestment risk associated with the cash
flows from such securities or in the event such securities are redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates.

Ginnie Mae is a government agency within the Department of Housing and Urban Development which is intended to help finance
government-assisted housing programs. Ginnie Mae securities are backed by loans insured by the Federal Housing Administration, or guaranteed by the Veterans Administration. The timely payment of principal and interest on Ginnie Mae securities is
guaranteed by Ginnie Mae and backed by the full faith and credit of the U.S. Government. Freddie Mac is a private corporation chartered by the U.S. Government. Freddie Mac issues participation certificates backed principally by conventional mortgage
loans. Freddie Mac guarantees the timely payment of interest and the ultimate return of principal on participation certificates. Fannie Mae is a private corporation chartered by the U.S. Congress with a mandate to establish a secondary market for
mortgage loans. Fannie Mae guarantees the timely payment of principal and interest on Fannie Mae securities. Freddie Mac and Fannie Mae securities are not backed by the full faith and credit of the U.S. Government, but because Freddie Mac and Fannie
Mae are U.S. Government-sponsored enterprises, these securities are considered to be among the highest quality investments with minimal credit risks.

Collateralized mortgage obligations are typically issued by a special-purpose entity, in our case, by government agencies, which may be organized in a variety of legal forms, such as a trust, a
corporation, or a partnership. Substantially all of the collateralized mortgage obligations held in our portfolio consist of senior sequential tranches. By purchasing senior sequential tranches, management attempts to ensure the cash flow associated
with such an investment.



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##### Index to Financial Statements

The following table sets forth certain information relating to our investment and
mortgage-backed securities portfolios at the dates indicated.



|                                                |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|----------------------------------------------- |  | -------------- | ------- | ----------- | - | ------------- |  | ----------- | ------- | ------------- | - | ----------- |  | - | ------- |  | - | -------
|                                                |  | December 31,  
|                                                |  | 2009           |         | 2008        |   | 2007         
|                                                |  | AmortizedCost  |         | MarketValue |   | AmortizedCost |  | MarketValue |         | AmortizedCost |   | MarketValue
|                                                |  | (In Thousands)
|Securities Available-for-Sale:                  |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|Mortgage-backed securities                      |  | $              | 25,864  |             | $ | 27,079        |  | $           | 52,660  |               | $ | 54,159      |  | $ | 32,040  |  | $ | 32,168 
|U.S. government and agency obligations          |  |                | 35,267  |             |   | 35,445        |  |             | 25,405  |               |   | 25,932      |  |   | 40,138  |  |   | 40,468 
|                                                |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|Total Securities AFS                            |  |                | 61,131  |             |   | 62,524        |  |             | 78,065  |               |   | 80,091      |  |   | 72,178  |  |   | 72,636 
|                                                |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|Securities Held to Maturity:                    |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|Mortgage-backed securities                      |  |                | 90,194  |             |   | 94,430        |  |             | 117,322 |               |   | 121,050     |  |   | 74,693  |  |   | 75,516 
|U.S. government and agency obligations          |  |                | 3,000   |             |   | 2,985         |  |             | 3,000   |               |   | 3,001       |  |   | 3,500   |  |   | 3,534  
|Municipal obligations                           |  |                | 1,352   |             |   | 1,384         |  |             | 3,107   |               |   | 3,204       |  |   | 3,450   |  |   | 3,572  
|                                                |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|Total Securities HTM                            |  |                | 94,546  |             |   | 98,799        |  |             | 123,429 |               |   | 127,255     |  |   | 81,643  |  |   | 82,622 
|                                                |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        
|Total Mortgage-Backed and Investment Securities |  | $              | 155,677 |             | $ | 161,323       |  | $           | 201,494 |               | $ | 207,346     |  | $ | 153,821 |  | $ | 155,258
|                                                |  |                |         |             |   |               |  |             |         |               |   |             |  |   |         |  |   |        

The following table sets forth the amount of
investment and mortgage-backed securities which mature during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2009. No tax-exempt yields have been adjusted to a tax-equivalent basis.



|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|------------------------------------------------ |  | -------------------------------------------- | ---- | - | ----------------------------- | - | ------ | ------------------------------ |  | - | ----------------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                                 |  | Amounts at December 31, 2009 Which Mature In |      |   |                               |  
|                                                 |  | One Yearor Less                              |      |   | More thanOne Yearto FiveYears |   |        | More thanFive Yearsto TenYears |  |   | MoreThan TenYears |   |  | Total |       
|                                                 |  | (In Thousands)                               |     
|Available-for-Sale:                              |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Mortgage-backed securities                       |  | $                                            |     |   |                               | $ | 7,270  |                                |  | $ | 5,339             |   |  | $     | 14,470 |   |  | $ | 27,079  |  
|U.S. government and agency obligations           |  |                                              |     |   |                               |   | 35,445 |                                |  |   |                  |   |  |       |       |   |  |   | 35,445  |  
|Municipal obligations                            |  |                                              |     |   |                               |   |       |                                |  |   |                  |   |  |       |       |   |  |   |        |  
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Total                                            |  | $                                            |     |   |                               | $ | 42,715 |                                |  | $ | 5,339             |   |  | $     | 14,470 |   |  | $ | 62,524  |  
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Weighted Average Yield                           |  |                                              |     | % |                               |   | 2.54   | %                              |  |   | 5.18              | % |  |       | 5.09   | % |  |   | 3.36    | %
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Held to Maturity:                                |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Mortgage-backed securities                       |  | $                                            | 10   |   |                               | $ | 3,897  |                                |  | $ | 12,875            |   |  | $     | 73,412 |   |  | $ | 90,194  |  
|U.S. government and agency obligations           |  |                                              |     |   |                               |   | 3,000  |                                |  |   |                  |   |  |       |       |   |  |   | 3,000   |  
|Municipal obligations                            |  |                                              |     |   |                               |   | 1,352  |                                |  |   |                  |   |  |       |       |   |  |   | 1,352   |  
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Total                                            |  | $                                            | 10   |   |                               | $ | 8,249  |                                |  | $ | 12,875            |   |  | $     | 73,412 |   |  | $ | 94,546  |  
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Weighted Average Yield                           |  |                                              | 7.03 | % |                               |   | 3.86   | %                              |  |   | 4.98              | % |  |       | 4.97   | % |  |   | 4.88    | %
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Total Mortgage-Backed and Investment Securities: |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Mortgage-backed securities                       |  | $                                            | 10   |   |                               | $ | 11,167 |                                |  | $ | 18,214            |   |  | $     | 87,882 |   |  | $ | 117,273 |  
|U.S. government and agency obligations           |  |                                              |     |   |                               |   | 38,445 |                                |  |   |                  |   |  |       |       |   |  |   | 38,445  |  
|Municipal obligations                            |  |                                              |     |   |                               |   | 1,352  |                                |  |   |                  |   |  |       |       |   |  |   | 1,352   |  
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Total                                            |  | $                                            | 10   |   |                               | $ | 50,964 |                                |  | $ | 18,214            |   |  | $     | 87,882 |   |  | $ | 157,070 |  
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  
|Weighted Average Yield                           |  |                                              | 7.03 | % |                               |   | 2.75   | %                              |  |   | 5.04              | % |  |       | 4.99   | % |  |   | 4.27    | %
|                                                 |  |                                              |      |   |                               |   |        |                                |  |   |                   |   |  |       |        |   |  |   |         |  



17



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##### Table of Contents

##### Index to Financial Statements

The following table sets forth the composition of our mortgage-backed securities portfolio
at each of the dates indicated.



|                                 |  |                |         |      |   |         |  |   |        
|-------------------------------- |  | -------------- | ------- | ---- | - | ------- |  | - | -------
|                                 |  | December 31,  
|                                 |  | 2009           |         | 2008 |   | 2007   
|                                 |  | (In Thousands)
|Fixed-rate:                      |  |                |         |      |   |         |  |   |        
|Available for sale               |  | $              | 27,079  |      | $ | 54,159  |  | $ | 32,168 
|Held to maturity                 |  |                | 74,446  |      |   | 100,555 |  |   | 66,139 
|                                 |  |                |         |      |   |         |  |   |        
|Total fixed-rate                 |  |                | 101,525 |      |   | 154,714 |  |   | 98,307 
|                                 |  |                |         |      |   |         |  |   |        
|Adjustable-rate:                 |  |                |         |      |   |         |  |   |        
|Available for sale               |  |                |        |      |   |        |  |   |       
|Held to maturity                 |  |                | 15,748  |      |   | 16,767  |  |   | 8,554  
|                                 |  |                |         |      |   |         |  |   |        
|Total adjustable-rate            |  |                | 15,748  |      |   | 16,767  |  |   | 8,554  
|                                 |  |                |         |      |   |         |  |   |        
|Total mortgage-backed securities |  | $              | 117,273 |      | $ | 171,481 |  | $ | 106,861
|                                 |  |                |         |      |   |         |  |   |        

Information regarding the contractual maturities and
weighted average yield of our mortgage-backed securities portfolio at December 31, 2009 is presented below. Due to repayments of the underlying loans, the actual maturities of mortgage-backed securities generally are substantially less than the
scheduled maturities.



|                      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|--------------------- |  | -------------------------------------------- | -- | -------------------- | ---- | - | ---------------------------- | - | -------------------- |  | ---- | ----------------------------- |  | -------------------- | ------ |  | ---------------- | - | -------------------- | - | ------ |  | ---- | -
|                      |  | Amounts at December 31, 2009 Which Mature in |   
|                      |  | One Yearor Less                              |    | WeightedAverageYield |      |   | MoreThan OneYear toFiveYears |   | WeightedAverageYield |  |      | MoreThan FiveYears toTenYears |  | WeightedAverageYield |        |  | Morethan 10Years |   | WeightedAverageYield |  
|                      |  | (Dollars in Thousands)                       |   
|Fixed-rate:           |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|Available for sale    |  | $                                            |   |                      | 0.00 | % |                              | $ | 7,270                |  | 4.59 | %                             |  | $                    | 5,339  |  | 5.18             | % |                      | $ | 14,470 |  | 5.09 | %
|Held to maturity      |  |                                              | 10 |                      | 7.03 | % |                              |   | 3,897                |  | 4.92 | %                             |  |                      | 12,651 |  | 5.01             | % |                      |   | 57,888 |  | 5.20 | %
|                      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|Total fixed-rate      |  |                                              | 10 |                      | 7.03 | % |                              |   | 11,167               |  | 4.71 | %                             |  |                      | 17,990 |  | 5.06             | % |                      |   | 72,358 |  | 5.18 | %
|                      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|Adjustable-rate:      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|Available for sale    |  |                                              |   |                      |      |   |                              |   |                     |  |      |                               |  |                      |       |  |                 |   |                      |   |       |  |      |  
|Held to maturity      |  |                                              |   |                      |      |   |                              |   |                     |  |      |                               |  |                      | 224    |  | 3.21             | % |                      |   | 15,524 |  | 4.14 | %
|                      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|Total adjustable-rate |  |                                              |   |                      |      |   |                              |   |                     |  |      |                               |  |                      | 224    |  | 3.21             | % |                      |   | 15,524 |  | 4.14 | %
|                      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  
|Total                 |  | $                                            | 10 |                      | 7.03 | % |                              | $ | 11,167               |  | 4.71 | %                             |  | $                    | 18,214 |  | 5.04             | % |                      | $ | 87,882 |  | 4.99 | %
|                      |  |                                              |    |                      |      |   |                              |   |                      |  |      |                               |  |                      |        |  |                  |   |                      |   |        |  |      |  

Sources of Funds

General. Deposits, loan repayments and prepayments, proceeds from sales of loans, cash flows generated from operations and FHLB advances are the primary sources of our funds for use in lending,
investing and for other general purposes.

Deposits. We offer a variety of deposit accounts with a range of interest
rates and terms. Our deposits consist of checking, both interest-bearing and non-interest-bearing, money market, savings and certificate of deposit accounts. At December 31, 2009, 28.1% of the funds deposited with Bank of New Orleans were in
non-maturity deposits, which are commonly referred to as core deposits. Total certificates of deposit at December 31, 2009 were $135.6 million, an increase of $22.3 million, from December 31, 2008.



18



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##### Table of Contents

##### Index to Financial Statements

The flow of deposits is influenced significantly by general economic conditions, changes in
money market rates, prevailing interest rates and competition. Our deposits are obtained predominantly from the areas where our branch offices are located. We have historically relied primarily on customer service and long-standing relationships
with customers to attract and retain these deposits; however, market interest rates and rates offered by competing financial institutions significantly affect our ability to attract and retain deposits.

Bank of New Orleans uses traditional means of advertising its deposit products, including broadcast and print media and we generally do not
solicit deposits from outside our market area. In recent years, we have emphasized the origination of core deposits.

We do
not actively solicit certificate accounts in excess of $100,000, known as jumbo CDs, or use brokers to obtain deposits. At December 31, 2009, our jumbo CDs amounted to $43.0 million, of which $31.0 million are scheduled to mature
within twelve months. During 2009, jumbo CDs increased by $13.7 million which we attribute to the FDIC temporarily raising their basic coverage limit to $250,000 through December 31, 2013.

The following table shows the distribution of, and certain other information relating to, our deposits by type of deposit, as of the dates
indicated.



|                                       |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|-------------------------------------- |  | ---------------------- | ------- | - | ------ | - | ------ | ---- | ------- |  | ------ | ------ |  | - | ------- |  | ------ | -
|                                       |  | December 31,           |        
|                                       |  | 2009                   |         |   | 2008   |   |        | 2007 |        
|                                       |  | Amount                 |         | % |        |   | Amount |      | %       |  |        | Amount |  | % |        
|                                       |  | (Dollars in Thousands) |        
|Certificate accounts:                  |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|Less than 1.00%                        |  | $                      | 1,111   |   | 0.6    | % |        |      |        |  |       |        |  |   |         |  |        |  
|1.00%  1.99%                          |  |                        | 55,776  |   | 29.6   |   |        | $    | 2,720   |  | 1.7    | %      |  | $ | 2,061   |  | 1.4    | %
|2.00%  2.99%                          |  |                        | 32,870  |   | 17.4   |   |        |      | 38,311  |  | 23.9   |        |  |   | 746     |  | 0.5    |  
|3.00%  3.99%                          |  |                        | 28,363  |   | 15.0   |   |        |      | 42,934  |  | 26.7   |        |  |   | 16,261  |  | 11.3   |  
|4.00%  4.99%                          |  |                        | 17,273  |   | 9.2    |   |        |      | 29,014  |  | 18.1   |        |  |   | 64,834  |  | 45.1   |  
|5.00%  5.99%                          |  |                        | 222     |   | 0.1    |   |        |      | 386     |  | 0.2    |        |  |   | 9,639   |  | 6.7    |  
|                                       |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|Total certificate accounts             |  |                        | 135,615 |   | 71.9   |   |        |      | 113,365 |  | 70.6   |        |  |   | 93,541  |  | 65.0   |  
|                                       |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|Savings accounts                       |  |                        | 18,328  |   | 9.7    |   |        |      | 18,017  |  | 11.2   |        |  |   | 20,052  |  | 14.0   |  
|Checking:                              |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|Interest bearing                       |  |                        | 19,789  |   | 10.5   |   |        |      | 19,755  |  | 12.3   |        |  |   | 21,487  |  | 15.0   |  
|Non-interest bearing                   |  |                        | 7,893   |   | 4.2    |   |        |      | 4,219   |  | 2.6    |        |  |   | 3,099   |  | 2.2    |  
|Money market                           |  |                        | 6,997   |   | 3.7    |   |        |      | 5,233   |  | 3.3    |        |  |   | 5,450   |  | 3.8    |  
|                                       |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|Total savings and transaction accounts |  |                        | 53,007  |   | 28.1   |   |        |      | 47,224  |  | 29.4   |        |  |   | 50,088  |  | 35.0   |  
|                                       |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  
|Total deposits                         |  | $                      | 188,622 |   | 100.00 | % |        | $    | 160,589 |  | 100.00 | %      |  | $ | 143,629 |  | 100.00 | %
|                                       |  |                        |         |   |        |   |        |      |         |  |        |        |  |   |         |  |        |  



19



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##### Table of Contents

##### Index to Financial Statements

The following table shows the average balance of each type of deposit and the average rate
paid on each type of deposit for the periods indicated.



|                                |  |                         |         |                 |      |                 |  |      |                |  |                 |         |                 |   |       |                |      |                 |  |                 |         |  |   |       |  |      |  
|------------------------------- |  | ----------------------- | ------- | --------------- | ---- | --------------- |  | ---- | -------------- |  | --------------- | ------- | --------------- | - | ----- | -------------- | ---- | --------------- |  | --------------- | ------- |  | - | ----- |  | ---- | -
|                                |  | Year Ended December 31, |        
|                                |  | 2009                    |         |                 | 2008 |                 |  | 2007 |               
|                                |  | AverageBalance          |         | InterestExpense |      | AverageRatePaid |  |      | AverageBalance |  | InterestExpense |         | AverageRatePaid |   |       | AverageBalance |      | InterestExpense |  | AverageRatePaid |        
|                                |  | (Dollars in Thousands)  |        
|Passbook Savings Account        |  | $                       | 18,513  |                 | $    | 93              |  | 0.50 | %              |  | $               | 18,373  |                 | $ | 92    |                | 0.50 | %               |  | $               | 24,349  |  | $ | 123   |  | 0.51 | %
|Checking                        |  |                         | 19,417  |                 |      | 53              |  | 0.27 |                |  |                 | 20,413  |                 |   | 56    |                | 0.27 |                 |  |                 | 20,799  |  |   | 57    |  | 0.27 |  
|Money market                    |  |                         | 5,512   |                 |      | 31              |  | 0.56 |                |  |                 | 5,249   |                 |   | 30    |                | 0.57 |                 |  |                 | 5,830   |  |   | 33    |  | 0.57 |  
|Certificates of deposit         |  |                         | 125,862 |                 |      | 3,537           |  | 2.81 |                |  |                 | 100,478 |                 |   | 3,751 |                | 3.73 |                 |  |                 | 95,611  |  |   | 3,953 |  | 4.13 |  
|                                |  |                         |         |                 |      |                 |  |      |                |  |                 |         |                 |   |       |                |      |                 |  |                 |         |  |   |       |  |      |  
|Total interest-bearing Deposits |  | $                       | 169,304 |                 | $    | 3,714           |  | 2.19 | %              |  | $               | 144,513 |                 | $ | 3,929 |                | 2.72 | %               |  | $               | 146,589 |  | $ | 4,166 |  | 2.84 | %
|                                |  |                         |         |                 |      |                 |  |      |                |  |                 |         |                 |   |       |                |      |                 |  |                 |         |  |   |       |  |      |  

The following table shows our savings flows during the periods indicated.



|                                                 |  |                         |         |      |   |         |  |   |         |  
|------------------------------------------------ |  | ----------------------- | ------- | ---- | - | ------- |  | - | ------- | -
|                                                 |  | Year Ended December 31, |        
|                                                 |  | 2009                    |         | 2008 |   | 2007    | 
|                                                 |  | (In Thousands)          |        
|Beginning balance                                |  | $                       | 160,589 |      | $ | 143,629 |  | $ | 150,335 |  
|                                                 |  |                         |         |      |   |         |  |   |         |  
|Net increase (decrease) before interest credited |  |                         | 25,092  |      |   | 13,934  |  |   | (9,935  | )
|Interest credited                                |  |                         | 2,941   |      |   | 3,026   |  |   | 3,229   |  
|                                                 |  |                         |         |      |   |         |  |   |         |  
|Net increase (decrease) in deposits              |  |                         | 28,033  |      |   | 16,960  |  |   | (6,706  | )
|                                                 |  |                         |         |      |   |         |  |   |         |  
|Ending balance                                   |  | $                       | 188,622 |      | $ | 160,589 |  | $ | 143,629 |  
|                                                 |  |                         |         |      |   |         |  |   |         |  

The following table presents, by various interest rate categories and maturities, the amount of certificates
of deposit at December 31, 2009.



|                           |  |                                                                           |        |      |   |        |  |            |        |       |   |        |  |   |        
|-------------------------- |  | ------------------------------------------------------------------------- | ------ | ---- | - | ------ |  | ---------- | ------ | ----- | - | ------ |  | - | -------
|                           |  | Balance at December 31, 2009Maturing in the 12 Months Ending December 31,
|Certificates of Deposit    |  | 2010                                                                      |        | 2011 |   | 2012   |  | Thereafter |        | Total
|                           |  | (In Thousands)                                                           
|Less than 1.00%            |  | $                                                                         | 1,111  |      | $ |       |  | $          |       |       | $ |       |  | $ | 1,111  
|1.00%  1.99%              |  |                                                                           | 55,040 |      |   | 736    |  |            |       |       |   |       |  |   | 55,776 
|2.00%  2.99%              |  |                                                                           | 22,982 |      |   | 6,915  |  |            | 2,954  |       |   | 19     |  |   | 32,870 
|3.00%  3.99%              |  |                                                                           | 3,894  |      |   | 6,016  |  |            | 267    |       |   | 18,186 |  |   | 28,363 
|4.00%  4.99%              |  |                                                                           | 5,829  |      |   | 3,631  |  |            | 7,297  |       |   | 516    |  |   | 17,273 
|5.00%  5.99%              |  |                                                                           | 214    |      |   | 8      |  |            |       |       |   |       |  |   | 222    
|                           |  |                                                                           |        |      |   |        |  |            |        |       |   |        |  |   |        
|Total certificate accounts |  | $                                                                         | 89,070 |      | $ | 17,306 |  | $          | 10,518 |       | $ | 18,721 |  | $ | 135,615
|                           |  |                                                                           |        |      |   |        |  |            |        |       |   |        |  |   |        



20



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##### Table of Contents

##### Index to Financial Statements

The following table shows the maturities of our certificates of deposit of $100,000 or more
at December 31, 2009 by time remaining to maturity.



|                                                                |  |                        |        |                      |      |  
|--------------------------------------------------------------- |  | ---------------------- | ------ | -------------------- | ---- | -
|Quarter Ending:                                                 |  | Amount                 |        | WeightedAverage Rate |     
|                                                                |  | (Dollars in Thousands) |       
|March 31, 2010                                                  |  | $                      | 23,771 |                      | 1.69 | %
|June 30, 2010                                                   |  |                        | 4,905  |                      | 1.80 |  
|September 30, 2010                                              |  |                        | 4,185  |                      | 1.95 |  
|December 31, 2010                                               |  |                        | 2,320  |                      | 2.27 |  
|After December 31, 2010                                         |  |                        | 14,728 |                      | 3.54 |  
|                                                                |  |                        |        |                      |      |  
|Total certificates of deposit with balances of $100,000 or more |  | $                      | 49,909 |                      | 2.30 | %
|                                                                |  |                        |        |                      |      |  

Borrowings. We utilize advances from the Federal Home Loan Bank of Dallas as an alternative to retail
deposits to fund our operations as part of our operating strategy. These FHLB advances are collateralized primarily by certain mortgage loans and mortgage-backed securities and other investment securities held in safekeeping at the Federal Home Loan
Bank. FHLB advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the Federal Home Loan Bank of Dallas will advance to member institutions, including
Bank of New Orleans, fluctuates from time to time in accordance with the policies of the Federal Home Loan Bank. At December 31, 2009, we had $37.8 million in outstanding FHLB advances and $151.1 million of additional FHLB advances available.
At such date, $2.6 million of our FHLB advances mature within one year. In addition, the Bank periodically accesses other borrowing sources as a source of liquidity and term funding. These sources include regional or national commercial banks that
structure the borrowings as reverse repurchase agreements with terms ranging from 30 days to 5 years. These borrowings are secured by the pledge of US Government or US Agency debt instruments. At December 31, 2009, the Bank had other borrowings
of $26.0 million. Finally, as a member bank, we have access to borrowings from the Federal Reserve Bank. At December 31, 2009, we had no borrowings from the Federal Reserve Bank.

The following table shows certain information regarding our borrowings at or for the dates indicated:



|                                                              |  |                                       |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                              |  | At or For the Year Ended December 31, |       
|                                                              |  | 2009                                  |        |   | 2008 |   |        | 2007 | 
|                                                              |  | (Dollars in Thousands)                |       
|FHLB advances and other borrowings:                           |  |                                       |        |   |      |   |        |      |  |   |        |  
|Average balance outstanding                                   |  | $                                     | 65,061 |   |      | $ | 51,790 |      |  | $ | 31,218 |  
|Maximum amount outstanding at any month-end during the period |  |                                       | 70,049 |   |      |   | 77,171 |      |  |   | 35,443 |  
|Balance outstanding at end of period                          |  |                                       | 63,810 |   |      |   | 76,660 |      |  |   | 34,416 |  
|Average interest rate during the period                       |  |                                       | 3.94   | % |      |   | 3.93   | %    |  |   | 4.45   | %
|Weighted average interest rate at end of period               |  |                                       | 3.85   | % |      |   | 3.40   | %    |  |   | 4.55   | %

Subsidiaries

Bank of New Orleans has one subsidiary, First Louisiana Mortgage, LLC, a Louisiana limited liability corporation, which has been inactive
since its inception.

Employees

At December 31, 2009, we had 64 full-time and 4 part-time employees. None of such employees are represented by a collective bargaining group, and we believe that our relationship with our employees
is excellent.



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##### Index to Financial Statements

REGULATION

Set forth below is a brief description of certain laws relating to the regulation of Louisiana Bancorp and Bank of New Orleans. This description does not purport to be complete and is qualified in its
entirety by reference to applicable laws and regulations.

General

Louisiana Bancorp is a savings and loan holding company registered under the Home Owners Loan Act, as amended. Bank of New Orleans is a
federally chartered savings bank subject to federal regulation and oversight by the Office of Thrift Supervision extending to all aspects of its operations. Bank of New Orleans also is subject to regulation and examination by the Federal Deposit
Insurance Corporation, which insures the deposits of Bank of New Orleans to the maximum extent permitted by law, and requirements established by the Federal Reserve Board. Federally chartered savings institutions are required to file periodic
reports with the Office of Thrift Supervision and are subject to periodic examinations by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. The investment and lending authority of savings institutions are prescribed by
federal laws and regulations, and such institutions are prohibited from engaging in any activities not permitted by such laws and regulations. Such regulation and supervision primarily is intended for the protection of depositors and not for the
purpose of protecting shareholders.

Federal law provides the federal banking regulators, including the Office of Thrift
Supervision and Federal Deposit Insurance Corporation, with substantial enforcement powers. The Office of Thrift Supervisions enforcement authority over all savings institutions and their holding companies includes, among other things, the
ability to assess civil money penalties, to issue cease and desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.
Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the Office of Thrift Supervision. Any change in such regulations, whether by the Federal Deposit Insurance Corporation,
Office of Thrift Supervision or Congress, could have a material adverse impact on Louisiana Bancorp and Bank of New Orleans and their operations.

Regulation of Louisiana Bancorp, Inc.

Holding Company Acquisitions. Federal law generally prohibits a
savings and loan holding company, without prior Office of Thrift Supervision approval, from acquiring the ownership or control of any other savings institution or savings and loan holding company, or all, or substantially all, of the assets or more
than 5% of the voting shares of the savings institution or savings and loan holding company. These provisions also prohibit, among other things, any director or officer of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring control of any savings institution not a subsidiary of such savings and loan holding company, unless the acquisition is approved by the Office of Thrift Supervision.

The Office of Thrift Supervision may not approve any acquisition that would result in a multiple savings and loan holding
company controlling savings institutions in more than one state, subject to two exceptions: (1) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (2) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Holding Company Activities. Louisiana Bancorp operates as a unitary savings and loan holding company and is permitted to engage only
in the activities permitted for financial holding companies under Federal Reserve Board regulations or for multiple savings and loan holding companies. Multiple savings and loan holding companies are permitted to engage in the following activities:
(i) activities permitted for a bank holding company



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##### Index to Financial Statements

under section 4(c) of the Bank Holding Company Act (unless the Director of the OTS prohibits or limits such 4(c) activities); (ii) furnishing or performing management services for a
subsidiary savings association; (iii) conducting any insurance agency or escrow business; (iv) holding, managing, or liquidating assets owned by or acquired from a subsidiary savings association; (v) holding or managing properties
used or occupied by a subsidiary savings association; (vi) acting as trustee under deeds of trust; or (vii) activities authorized by regulation as of March 5, 1987, to be engaged in by multiple savings and loan holding companies.
Although savings and loan holding companies are not subject to specific capital requirements or specific restrictions on the payment of dividends or other capital distributions, federal regulations do prescribe such restrictions on subsidiary
savings institutions, as described below. Bank of New Orleans is required to notify the Office of Thrift Supervision 30 days before declaring any dividend to the Company. In addition, the financial impact of a holding company on its subsidiary
institution is a matter that is evaluated by the Office of Thrift Supervision and the agency has authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

Federal Securities Laws. Our common stock is registered with the Securities and Exchange Commission under
Section 12(b) of the Securities Exchange Act of 1934. We are subject to the proxy and tender offer rules, insider trading reporting requirements and restrictions, and certain other requirements under the Securities Exchange Act of 1934.
Pursuant to Office of Thrift Supervision regulations and the Banks plan of conversion, we have agreed to maintain such registration for a minimum of three years following our conversion to stock form.

The Sarbanes-Oxley Act of 2002. As a public company, Louisiana Bancorp is subject to the Sarbanes-Oxley Act of 2002, which implements
a broad range of corporate governance and accounting measures for public companies designed to promote honesty and transparency in corporate America and better protect investors from corporate wrongdoing. The Sarbanes-Oxley Acts principal
legislation and the derivative regulation and rule-making promulgated by the SEC includes:



| |  |  | the creation of an independent accounting oversight board;
| | - |  | ----------------------------------------------------------



| |  |  | auditor independence provisions that restrict non-audit services that accountants may provide to their audit clients;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | additional corporate governance and responsibility measures, including the requirement that the chief executive officer and chief financial officer
certify financial statements;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a requirement that companies establish and maintain a system of internal control over financial reporting and that a companys management provide
an annual report regarding its assessment of the effectiveness of such internal control over financial reporting to the companys independent accountants and that such accountants provide an attestation report with respect to managements
assessment of the effectiveness of the companys internal control over financial reporting;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuers securities by directors and senior
officers in the twelve month period following initial publication of any financial statements that later require restatement;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in the oversight of, and enhancement of certain requirements relating to audit committees of public companies and how they interact with
the companys independent auditors;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the requirement that audit committee members must be independent and are absolutely barred from accepting consulting, advisory or other compensatory
fees from the issuer;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the requirement that companies disclose whether at least one member of the committee is a financial expert (as such term is defined by the
SEC) and if not, why not;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expanded disclosure requirements for corporate insiders, including accelerated reporting of stock transactions by insiders and a prohibition on insider
trading during pension blackout periods;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

| |  |  | a prohibition on personal loans to directors and officers, except certain loans made by insured financial institutions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | disclosure of a code of ethics and the requirement of filing a Form 8-K for a change or waiver of such code;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | mandatory disclosure by analysts of potential conflicts of interest; and
| | - |  | ------------------------------------------------------------------------



| |  |  | a range of enhanced penalties for fraud and other violations.
| | - |  | -------------------------------------------------------------

Bank of New Orleans

General. Bank of New Orleans is a federally
chartered stock savings bank subject to examination and regulation by the Office of Thrift Supervision which has extensive authority over the operations of federally-chartered savings institutions. As part of this authority, Bank of New Orleans is
required to file periodic reports with the Office of Thrift Supervision and is subject to periodic examinations by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. The investment and lending authority of savings
institutions are prescribed by federal laws and regulations, and such institutions are prohibited from engaging in any activities not permitted by such laws and regulations. Such regulation and supervision is primarily intended for the protection of
depositors and the Deposit Insurance Fund (DIF) administered by the Federal Deposit Insurance Corporation.

Emergency Economic Stabilization Act of 2008. The U.S. Congress adopted, and on October 3, 2008, President George W. Bush signed, the Emergency Economic Stabilization Act of 2008 (EESA) which authorizes the United
States Department of the Treasury, to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities
issued by financial institutions and their holding companies in a troubled asset relief program. Under the capital purchase program, the Treasury Department will purchase debt or equity securities from participating institutions. We have elected not
to participate in the capital purchase program.

In addition, the ESSA provided for a temporary increase in the Federal
Deposit Insurance Corporations coverage limits on most accounts from $100,000 to $250,000, until the end of 2009. On May 20, 2009, this temporary increase was extended by President Barack Obama through December 31, 2013. In addition,
pursuant to Section 13(c)(4)(G) of the Federal Deposit Insurance Act, the Federal Deposit Insurance Corporation has implemented two temporary programs to provide deposit insurance for the full amount of most non-interest bearing transaction
deposit accounts through the June 30, 2010, and to guarantee certain unsecured debt of financial institutions and their holding companies through December 31, 2012. The Transaction Account Guarantee Program (TAGP) provides
unlimited coverage for non-interest bearing transaction deposit accounts, including accounts swept from a non-interest bearing transaction account into a non-interest bearing savings deposit account, a 15 basis point annual rate surcharge will be
applied to deposit amounts in excess of $250,000. The Bank has opted to participate in the TAGP. The Debt Guarantee Program (DGP) temporarily guarantees certain newly issued unsecured debt through June 30, 2012. The Bank does not
participate in the DGP.

Insurance of Accounts. The deposits of Bank of New Orleans are insured to the maximum extent
permitted by the DIF and are backed by the full faith and credit of the U.S. Government. As insurer, the Federal Deposit Insurance Corporation is authorized to conduct examinations of, and to require reporting by, insured institutions. It also may
prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious threat to the Federal Deposit Insurance Corporation. The Federal Deposit Insurance Corporation also has the authority to initiate
enforcement actions against savings institutions, after giving the Office of Thrift Supervision an opportunity to take such action.



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##### Index to Financial Statements

The FDIC has implemented a risk-based premium system that provides for quarterly assessments
based on an insured institutions ranking in one of four risk categories based upon supervisory and capital evaluations. The assessment rate for an individual institution is determined according to a formula based on a weighted of the
institutions individual CAMELS component rating plus either five financial ratios or, in the case of an institution with assets of $10.0 billion of more, the average ratings of its long-term debt. In February 2009, the FDIC adopted a final
regulation that provided for the replenishment of the Deposit Insurance Fund over a period of seven years. The restoration plan changed the FDICs base assessment rates and the risk based assessment system. Well capitalized institutions
(generally those with CAMELS composite ratings of 1 or 2) are grouped in Risk Category I and assessed for deposit insurance at an annual rate of between 12 and 14 basis points. Institutions in Risk Categories II, III, and IV are assessed at annual
rates of 17, 35 and 50 basis points, respectively. Changes to the risk based assessment system include higher premiums for institutions that rely significantly on excessive amounts of brokered deposits, including CDARS, higher premiums for excessive
use of secured liabilities, including Federal Home Loan Bank advances, lower premiums for smaller institutions with very high capital levels, and adding financial ratios and debt issuer ratings to the premium calculations for banks with over $10
billion in assets, while providing a reduction for their unsecured debt.

In addition, all institutions with deposits insured
by the Federal Deposit Insurance Corporation are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation (FICO), a mixed-ownership government corporation established to recapitalize a
predecessor to the DIF. The FICO assessment rate for the fourth quarter of 2009 was 0.00265% of insured deposits and is adjusted quarterly. These assessments will continue until the FICO bonds mature in 2019.

The Federal Deposit Insurance Corporation may terminate the deposit insurance of any insured depository institution, including Bank of New
Orleans, if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any
condition imposed by an agreement with the Federal Deposit Insurance Corporation. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If
insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the Federal Deposit Insurance
Corporation. Management is aware of no existing circumstances which would result in termination of Bank of New Orleans deposit insurance.

On May 22, 2009, the FDIC adopted a final rule imposing a five basis point special assessment on each insured depositorys total assets less Tier 1 capital, as of June 30, 2009. The FDIC
collected this special assessment on September 30, 2009. Based on our assets and Tier 1 capital at June 30, 2009, the impact of the special assessment was $126,000, which was expensed in the third quarter of fiscal 2009.

On November 12, 2009, the FDIC adopted regulations that required insured depository institutions to prepay on December 30, 2009
their estimated assessments for the fourth calendar quarter of 2009 through the fourth quarter of 2012. The new regulations base the assessment rate for the fourth quarter of 2009 and for 2010 on each institutions total base assessment rate
for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 on the modified third quarter assessment base,
adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. Under the prepaid assessment rule, we made a payment of $646,000 to the FDIC on December 30, 2009, of which $37,000 was expensed as our
fourth quarter 2009 deposit insurance premium, and the remaining $609,000 was recorded as a prepaid expense, which will be amortized over the next three years.

Regulatory Capital Requirements. OTS regulated savings associations are required to maintain minimum levels of regulatory capital. The Office of Thrift Supervision has established capital standards
consisting of a tangible capital requirement, a leverage capital requirement and a risk-based capital requirement. The Office of Thrift Supervision also is authorized to impose capital requirements in excess of
these standards on individual institutions on a case-by-case basis.



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##### Index to Financial Statements

Current Office of Thrift Supervision capital standards require savings institutions to
satisfy the following capital requirements:



| |  |  | tangible capital requirementtangible capital equal to at least 1.5% of adjusted total assets;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | leverage capital requirementcore capital equal to at least 3.0% of adjusted total assets; and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | risk-based capital requirementtotal capital (a combination of core and supplementary capital) equal to at least 8.0% of
risk-weighted assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

Core capital generally consists of common stockholders equity
(including retained earnings). Tangible capital generally equals core capital minus intangible assets, with only a limited exception for purchased mortgage servicing rights. Bank of New Orleans had no intangible assets at December 31, 2009.
Both core and tangible capital are further reduced by an amount equal to a savings institutions debt and equity investments in subsidiaries engaged in activities not permissible to national banks (other than subsidiaries engaged in activities
undertaken as agent for customers or in mortgage banking activities and subsidiary depository institutions or their holding companies). These adjustments do not affect Bank of New Orleans regulatory capital.

In determining compliance with the risk-based capital requirement, a savings institution is allowed to include both core capital and
supplementary capital in its total capital, provided that the amount of supplementary capital included does not exceed the savings institutions core capital. Supplementary capital generally consists of general allowances for loan losses up to
a maximum of 1.25% of risk-weighted assets, together with certain other items. In determining the required amount of risk-based capital, total assets, including certain off-balance sheet items, are multiplied by a risk weight based on the risks
inherent in the type of assets. The risk weights range from 0% for cash and securities issued by the U.S. Government or unconditionally backed by the full faith and credit of the U.S. Government to 100% for loans (other than qualifying residential
loans weighted at 50%) and repossessed assets.

Savings institutions must value securities available for sale at amortized
cost for regulatory capital purposes. This means that in computing regulatory capital, savings institutions should add back any unrealized losses and deduct any unrealized gains, net of income taxes, on debt securities reported as a separate
component of GAAP capital.

At December 31, 2009, Bank of New Orleans exceeded all of its regulatory capital
requirements, with tangible, core and risk-based capital ratios of 18.2%, 18.2% and 41.5%, respectively.

Any savings
institution that fails any of the capital requirements is subject to possible enforcement actions by the Office of Thrift Supervision or the Federal Deposit Insurance Corporation. Such actions could include a capital directive, a cease and desist
order, civil money penalties, the establishment of restrictions on the institutions operations, termination of federal deposit insurance and the appointment of a conservator or receiver. The Office of Thrift Supervisions capital
regulation provides that such actions, through enforcement proceedings or otherwise, could require one or more of a variety of corrective actions.

Prompt Corrective Action.In addition to the regulatory capital requirements for OTS-regulated savings associations discussed above, each federal banking agency has implemented a system of prompt
corrective action. The following table shows the amount of capital associated with the different capital categories set forth in the prompt corrective action regulations of the Office of Thrift Supervision.



|                               |  |                         |  |                          |  |                       
|------------------------------ |  | ----------------------- |  | ------------------------ |  | ----------------------
|Capital Category               |  | Total Risk-BasedCapital |  | Tier 1 Risk-BasedCapital |  | Tier 1 LeverageCapital
|Well capitalized               |  | 10% or more             |  | 6% or more               |  | 5% or more            
|Adequately capitalized         |  | 8% or more              |  | 4% or more               |  | 4% or more            
|Undercapitalized               |  | Less than 8%            |  | Less than 4%             |  | Less than 4%          
|Significantly undercapitalized |  | Less than 6%            |  | Less than 3%             |  | Less than 3%          



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##### Index to Financial Statements

In addition, an institution is critically undercapitalized if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. Under specified circumstances, a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution
or an undercapitalized institution to comply with supervisory actions as if it were in the next lower category (except that the Federal Deposit Insurance Corporation may not reclassify a significantly undercapitalized institution as critically
undercapitalized).

An institution generally must file a written capital restoration plan which meets specified requirements
within 45 days of the date that the institution receives notice or is deemed to have notice that it is undercapitalized, significantly undercapitalized or critically undercapitalized. A federal banking agency must provide the institution with
written notice of approval or disapproval within 60 days after receiving a capital restoration plan, subject to extensions by the agency. An institution which is required to submit a capital restoration plan must concurrently submit a performance
guaranty by each company that controls the institution. In addition, undercapitalized institutions are subject to various regulatory restrictions, and the appropriate federal banking agency also may take any number of discretionary supervisory
actions.

At December 31, 2009, Bank of New Orleans was deemed a well capitalized institution for purposes of the prompt
corrective regulations and as such is not subject to the above mentioned restrictions.

The table below sets forth Bank of New
Orleans capital position relative to its regulatory capital requirements at December 31, 2009.



|                          |  |                        |        |       |                                       |   |        |                                                               |        |  |                                        |        |  |       |        |  |        |   |       |   |        |  |       |  
|------------------------- |  | ---------------------- | ------ | ----- | ------------------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | -------------------------------------- | ------ |  | ----- | ------ |  | ------ | - | ----- | - | ------ |  | ----- | -
|                          |  | Actual                 |        |       | Required for CapitalAdequacy Purposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |        |  | Excess Over Well-CapitalizedProvisions |       
|                          |  | Amount                 |        | Ratio |                                       |   | Amount |                                                               | Ratio  |  |                                        | Amount |  | Ratio |        |  | Amount |   | Ratio |  
|                          |  | (Dollars in Thousands) |       
|Total risk-based capital  |  | $                      | 59,589 |       | 41.47                                 | % |        | $                                                             | 11,495 |  | 8.00                                   | %      |  | $     | 14,369 |  | 10.00  | % |       | $ | 45,220 |  | 31.47 | %
|Tier 1 risk-based capital |  |                        | 58,261 |       | 40.55                                 |   |        |                                                               | 5,748  |  | 4.00                                   |        |  |       | 8,622  |  | 6.00   |   |       |   | 49,639 |  | 34.55 |  
|Tier 1 leverage Capital   |  |                        | 58,322 |       | 18.20                                 |   |        |                                                               | 9,615  |  | 3.00                                   |        |  |       | 16,026 |  | 5.00   |   |       |   | 42,296 |  | 13.20 |  

Capital Distributions.Office of Thrift Supervision regulations govern capital distributions by savings institutions, which include cash dividends, stock repurchases and other transactions charged to the capital account of a savings
institution to make capital distributions. A savings institution must file an application for Office of Thrift Supervision approval of the capital distribution if (1) the total capital distributions for the applicable calendar year exceed the
sum of the institutions net income for that year to date plus the institutions retained net income for the preceding two years, (2) the institution would not be at least adequately capitalized following the distribution,
(3) the distribution would violate any applicable statute, regulation, agreement or Office of Thrift Supervision-imposed condition, or (4) the institution is not eligible for expedited treatment of its filings. If an application is not
required to be filed, savings institutions which are a subsidiary of a savings and loan holding company (as well as certain other institutions) must still file a notice with the Office of Thrift Supervision at least 30 days before the board of
directors declares a dividend or approves a capital distribution.

Qualified Thrift Lender Test. All savings
institutions are required to meet a qualified thrift lender, or QTL, test to avoid certain restrictions on their operations. A savings institution can comply with the QTL test by either qualifying as a domestic building and loan association as
defined in the Internal Revenue Code or meeting the Office of Thrift Supervision QTL test.

Currently, the Office of Thrift
Supervision QTL test requires that 65% of an institutions portfolio assets (as defined) consist of certain housing and consumer-related assets on a monthly average basis in nine out of every 12 months. To be a qualified thrift
lender under the IRS test, the savings institution must meet a business operations test and a 60 percent assets test, each defined in the Internal Revenue Code.



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##### Index to Financial Statements

If the savings institution fails to maintain its QTL status, the holding companys
activities are restricted. In addition, it must discontinue any non-permissible business, although the Office of Thrift Supervision may grant a grace period up to two years for good cause. Nonetheless, any company that controls a savings institution
that is not a qualified thrift lender must register as a bank holding company within one year of the savings institutions failure to meet the QTL test.

Statutory penalty provisions require an institution that fails to remain a QTL to either become a national bank or be prohibited from the following:



| |  |  | Making any new investments or engaging in any new activity not allowed for both a national bank and a savings association;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Establishing any new branch office unless allowable for a national bank; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | Paying dividends unless allowable for a national bank.
| | - |  | ------------------------------------------------------

Three years from the date a savings association should have become or ceases to be a QTL, by failing to meet either QTL test, the institution must comply with the following restriction:



| |  |  | Dispose of any investment or not engage in any activity unless the investment or activity is allowed for both a national bank and a savings
association.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

At December 31, 2009, Bank of New Orleans met the QTL test.

Limitations on Transactions with Affiliates. Transactions between savings institutions and any affiliate are governed by Sections 23A
and 23B of the Federal Reserve Act. An affiliate of a savings institution is any company or entity which controls, is controlled by or is under common control with the savings institution. In a holding company context, the parent holding company of
a savings institution (such as Louisiana Bancorp) and any companies which are controlled by such parent holding company are affiliates of the savings institution. Generally, Section 23A limits the extent to which the savings institution or its
subsidiaries may engage in covered transactions with any one affiliate to an amount equal to 10% of such institutions capital stock and surplus, and contain an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus. Section 23B applies to covered transactions as well as certain other transactions and requires that all transactions be on terms substantially the same, or at least as
favorable, to the savings institution as those provided to a non-affiliate. The term covered transaction includes the making of loans to, purchase of assets from and issuance of a guarantee to an affiliate and similar transactions.
Section 23B transactions also include the provision of services and the sale of assets by a savings institution to an affiliate. In addition to the restrictions imposed by Sections 23A and 23B, a savings institution is prohibited from
(i) making a loan or other extension of credit to an affiliate, except for any affiliate which engages only in certain activities which are permissible for bank holding companies, or (ii) purchasing or investing in any stocks, bonds,
debentures, notes or similar obligations of any affiliate, except for affiliates which are subsidiaries of the savings institution.

In addition, Sections 22(g) and (h) of the Federal Reserve Act place restrictions on loans to executive officers, directors and principal stockholders. Under Section 22(h), loans to a director, an executive officer and to a
greater than 10% stockholder of a savings institution, and certain affiliated interests of either, may not exceed, together with all other outstanding loans to such person and affiliated interests, the savings institutions loans to one
borrower limit (generally equal to 15% of the institutions unimpaired capital and surplus). Section 22(h) also requires that loans to directors, executive officers and principal stockholders be made on terms substantially the same as
offered in comparable transactions to other persons unless the loans are made pursuant to a benefit or compensation program that (i) is widely available to employees of the institution and (ii) does not give preference to any director,
executive officer or principal stockholder, or certain affiliated interests of either, over other employees of the savings institution. Section 22(h) also requires prior board approval for certain loans. In addition, the aggregate amount of
extensions of credit by a savings institution to all insiders cannot exceed the institutions unimpaired capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers. At December 31,
2009, Bank of New Orleans was in compliance with the above restrictions.



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##### Index to Financial Statements

Anti-Money Laundering. On October 26, 2001, in response to the events of
September 11, 2001, the President of the United States signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the USA PATRIOT Act). The USA
PATRIOT Act significantly expands the responsibilities of financial institutions, including savings and loan associations, in preventing the use of the U.S. financial system to fund terrorist activities. Title III of the USA PATRIOT Act provides for
a significant overhaul of the U.S. anti-money laundering regime. Among other provisions, it requires financial institutions operating in the United States to develop new anti-money laundering compliance programs, due diligence policies and controls
to ensure the detection and reporting of money laundering. Such compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets
Control Regulations. We have established policies and procedures to ensure compliance with the USA PATRIOT Acts provisions, and the impact of the USA PATRIOT Act on our operations has not been material.

Federal Home Loan Bank System.Bank of New Orleans is a member of the Federal Home Loan Bank of Dallas, which is one of 12 regional
Federal Home Loan Banks that administers the home financing credit function of savings institutions. Each Federal Home Loan Bank serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the Federal Home Loan Bank System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the Federal Home Loan Bank.
At December 31, 2009, Bank of New Orleans had $37.8 million of Federal Home Loan Bank advances.

As a member, Bank of New
Orleans is required to purchase and maintain stock in the Federal Home Loan Bank of Dallas in an amount equal to at least 1% of its aggregate unpaid residential mortgage loans or similar obligations at the beginning of each year. At
December 31, 2009, Bank of New Orleans had $2.0 million in Federal Home Loan Bank stock, which was in compliance with this requirement.

The Federal Home Loan Banks are required to provide funds for the resolution of troubled savings institutions and to contribute to affordable housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing projects. These contributions have adversely affected the level of Federal Home Loan Bank dividends paid in the past and could do so in the future. These contributions
also could have an adverse effect on the value of Federal Home Loan Bank stock in the future.

Federal Reserve System.
The Federal Reserve Board requires all depository institutions to maintain reserves against their transaction accounts (primarily NOW and Super NOW checking accounts) and non-personal time deposits. Because required reserves must be maintained in
the form of vault cash or a noninterest-bearing account at a Federal Reserve Bank, the effect of this reserve requirement is to reduce an institutions earning assets. At December 31, 2009, Bank of New Orleans met its reserve requirement.

TAXATION

Federal
Taxation

General.Louisiana Bancorp and Bank of New Orleans are subject to federal income taxation in the same
general manner as other corporations with some exceptions listed below. The following discussion of federal, state and local income taxation is only intended to summarize certain pertinent income tax matters and is not a comprehensive description of
the applicable tax rules. Bank of New Orleans federal and state income tax returns for taxable years through December 31, 2005 have been closed for purposes of examination by the Internal Revenue Service. As a result, all tax returns
through that date may no longer be audited by either tax authority.

Louisiana Bancorp will file consolidated federal income
tax returns with Bank of New Orleans. Accordingly, it is anticipated that any cash distributions made by Louisiana Bancorp to its shareholders would be treated as cash dividends and not as a non-taxable return of capital to shareholders for federal
and state tax purposes.



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##### Index to Financial Statements

Method of Accounting.For federal income tax purposes, Louisiana Bancorp and Bank of
New Orleans report income and expenses on the accrual method of accounting and use a December 31 tax year for filing its federal income tax return.

Bad Debt Reserves.The Small Business Job Protection Act of 1996 eliminated the use of the unique reserve method of accounting for bad debt reserves by savings associations, effective for taxable
years beginning after 1995. Prior to that time, Bank of New Orleans was permitted to establish a reserve for bad debts and to make additions to the reserve. These additions could, within specified formula limits, be deducted in arriving at taxable
income. As a result of the Small Business Job Protection Act of 1996, savings associations must use the same service method as banks in computing their bad debt deduction beginning with their 1996 federal tax return. In addition, federal legislation
required the recapture over a six year period of the excess of tax bad debt reserves at December 31, 1995 over those established as of December 31, 1987.

Taxable Distributions and Recapture.Prior to the Small Business Job Protection Act of 1996, bad debt reserves created prior to January 1, 1988 were subject to recapture into taxable income if
Bank of New Orleans failed to meet certain thrift asset and definitional tests. New federal legislation eliminated these savings association related recapture rules. However, under current law, pre-1988 reserves remain subject to recapture should
Bank of New Orleans make certain non-dividend distributions or cease to maintain a bank charter.

At December 31, 2009,
the total federal pre-1988 reserve was approximately $1.4 million. The reserve reflects the cumulative effects of federal tax deductions by Bank of New Orleans for which no federal income tax provisions have been made.

Alternative Minimum Tax.The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable
income plus certain tax preferences. The alternative minimum tax is payable to the extent such alternative minimum tax income is in excess of the regular income tax. Net operating losses, of which Bank of New Orleans has none, can offset no more
than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. Bank of New Orleans has not been subject to the alternative minimum tax or any such
amounts available as credits for carryover.

Net Operating Loss Carryovers. For net operating losses in years beginning
after August 5, 1997, net operating losses can be carried back to the two years preceding the loss year and forward to the 20 years following the loss year. At December 31, 2009, Bank of New Orleans had no net operating loss carry forwards
for federal income tax purposes.

Corporate Dividends-Received Deduction.Louisiana Bancorp is able to exclude from its
income 100% of dividends received from Bank of New Orleans as a member of the same affiliated group of corporations. The corporate dividends received deduction is 80% in the case of dividends received from corporations which a corporate recipient
owns less than 80%, but at least 20% of the distribution corporation. Corporations which own less than 20% of the stock of a corporation distributing a dividend may deduct only 70% of dividends received.

State Taxation

Louisiana
Bancorp is subject to the Louisiana Corporation Income Tax based on our Louisiana taxable income. The Corporation Income Tax applies at graduated rates from 4% upon the first $25,000 of Louisiana taxable income to 8% on all Louisiana taxable income
in excess of $200,000. For these purposes, Louisiana taxable income means net income which is earned by us within or derived from sources within the State of Louisiana, after adjustments permitted under Louisiana law, including a federal
income tax deduction. In addition, Bank of New Orleans will be subject to the Louisiana Shares Tax which is imposed on the assessed value of a companys stock. The formula for deriving the assessed value is to calculate 15% of the sum of:



| | (a) | 20% of our capitalized earnings, plus
| | --- | -------------------------------------



| | (b) | 80% of our taxable stockholders equity, minus
| | --- | ----------------------------------------------



| | (c) | 50% of our real and personal property assessment.
| | --- | -------------------------------------------------



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##### Index to Financial Statements

Various items may also be subtracted in calculating a companys capitalized earnings. For the fiscal
year 2009, the Companys Louisiana Shares Tax expense was $211,000.



|Item 1A. | Risk Factors.
|-------- | -------------

In analyzing whether to make or to continue an investment in our securities, investors should consider, among other factors, the following risk factors.

There are increased risks involved with commercial real estate and construction lending activities.

Our lending activities include loans secured by commercial real estate and multi-family residential mortgage loans. In addition, we originate loans for the construction of residential and commercial use
properties, although at December 31, 2009 there were no construction loans in our loan portfolio. Commercial real estate, multi-family residential and construction lending generally is considered to involve a higher degree of risk than
single-family residential lending due to a variety of factors, including generally larger loan balances, the dependency on successful completion or operation of the project for repayment, the difficulties in estimating construction costs and loan
terms which often do not require full amortization of the loan over its term and, instead, provide for a balloon payment at stated maturity. As a result of the larger loan balances typically involved in these loans, an adverse development with
respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. As of December 31, 2009, our 10 largest commercial real
estate, multi-family residential and land loans had an aggregate outstanding balance of $17.8 million, or 30.5% of total commercial real estate, multi-family residential and land loans and 11.1% of our total loan portfolio at such date. In addition,
our portfolio of these loans is significantly weighted with loans which have been originated relatively recently and are not well seasoned, and thus, are generally perceived to be more susceptible to adverse economic conditions than older loans.
Construction loans generally have a higher risk of loss than single-family residential mortgage loans due primarily to the critical nature of the initial estimates of a propertys value upon completion of construction compared to the estimated
costs, including interest, of construction as well as other assumptions. If the estimates upon which construction loans are made prove to be inaccurate, we may be confronted with projects that, upon completion, have values which are below the loan
amounts. During 2009, we had a $1.0 million participation interest in a $170.0 million construction loan for a mixed-use development located in Baton Rouge, Louisiana that was deemed to be an in substance foreclosure and transferred to
other real estate owned. At the time of transfer the Bank recorded a $396,000 charge-off against its recorded investment in the asset. See Item 1, BusinessAsset QualityDelinquent Loans, for additional information.

The loss of our President and Chief Executive Officer or Chief Financial Officer could hurt our operations.

We rely heavily on our President and Chief Executive Officer, Lawrence J. LeBon, III, and our Chief Financial Officer, John LeBlanc. The loss
of either of these executive officers could have an adverse effect on us. Mr. LeBon is central to virtually all aspects of our business operations and management. Mr. LeBlanc is critical to our financial reporting function, and he also
works closely with Mr. LeBon on virtually all other aspects of our operations. In addition, as a small community bank, we have fewer management-level personnel who are in position to succeed and assume the responsibilities of either Messrs.
LeBon or LeBlanc. However, we have entered into three-year employment agreements with Messrs. LeBon and LeBlanc. We do not maintain key man life insurance on either Mr. LeBon or Mr. LeBlanc.

Our business is geographically concentrated in southern Louisiana, which makes us vulnerable to downturns in the local economy.

Most of our loans are to individuals and businesses located generally in southern Louisiana and, more particularly, metropolitan New Orleans.
Regional economic conditions affect the demand for our products and services as well as the ability of our customers to repay loans. The concentration of our business operations in



31



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##### Index to Financial Statements

southern Louisiana makes us vulnerable to downturns in the local economy. Declines in local real estate values could adversely affect the value of property used as collateral for the loans we
make. The regional economic outlook remains uncertain after Hurricane Katrina and no assurance can be given that, given the geographic concentration of our business, we will not suffer from future adverse developments in the region. The region is
susceptible to hurricanes and tropical storms. Any new hurricanes or storms could severely test the infrastructure of the markets we operate in, negatively affect the local economy or disrupt our operations, which would have an adverse effect on our
business and results of operations.

Changes in interest rates could have a material adverse effect on our operations.

The operations of financial institutions such as us are dependent to a large extent on net interest income, which is the difference between
the interest income earned on interest-earning assets such as loans and investment securities and the interest expense paid on interest-bearing liabilities such as deposits and borrowings. Changes in the general level of interest rates can affect
our net interest income by affecting the difference between the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our interest-bearing liabilities, or interest rate spread, and the average life of our
interest-earning assets and interest-bearing liabilities. Our net interest spread was 2.62% for the year ended December 31, 2009 compared to 2.50% for the year ended December 31, 2008. During 2009, the rate at which our weighted average
rate paid on interest-bearing liabilities declined outpaced the decrease in the weighted average yield of our interest-earning assets resulting in an increase in the net interest spread. We may not be able to further decrease the weighted average
rate paid on interest-bearing liabilities in a rising rate environment. Changes in interest rates also can affect our ability to originate loans; the value of our interest-earning assets and our ability to realize gains from the sale of such assets;
our ability to obtain and retain deposits in competition with other available investment alternatives; and the ability of our borrowers to repay adjustable or variable rate loans. Interest rates are highly sensitive to many factors, including
governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control.

Our
results of operations are significantly dependent on economic conditions and related uncertainties.

The operations of
savings associations are affected, directly and indirectly, by domestic and international economic and political conditions and by governmental monetary and fiscal policies. Conditions such as inflation, recession, unemployment, volatile interest
rates, real estate values, government monetary policy, international conflicts, the actions of terrorists and other factors beyond our control may adversely affect our results of operations. Changes in interest rates, in particular, could adversely
affect our net interest income and have a number of other adverse effects on our operations. Adverse economic conditions also could result in an increase in loan delinquencies, foreclosures and nonperforming assets and a decrease in the value of the
property or other collateral which secures our loans, all of which could adversely affect our results of operations. We are particularly sensitive to changes in economic conditions and related uncertainties in the metropolitan New Orleans area
because we derive the vast majority of our loans, deposits and other business from this area. Accordingly, we remain subject to the risks associated with prolonged declines in our local economy.

Our allowance for losses on loans may not be adequate to cover probable losses.

We have established an allowance for loan losses which we believe is adequate to offset probable losses on our existing loans. There can be
no assurance that any future declines in real estate market conditions, general economic conditions or changes in regulatory policies will not require us to increase our allowance for loan losses, which would adversely affect our results of
operations.

We are subject to extensive regulation which could adversely affect our business and operations.

We are subject to extensive federal governmental supervision and regulation, which are intended primarily for the protection of depositors.
In addition, we are subject to changes in federal and state laws, as well as changes in regulations, governmental policies and accounting principles. The effects of any such potential changes cannot be predicted but could adversely affect the
business and our operations in the future.



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##### Index to Financial Statements

We face strong competition which may adversely affect our profitability.

We are subject to vigorous competition in all aspects and areas of our business from banks and other financial institutions, including
savings and loan associations, savings banks, finance companies, credit unions and other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. We also compete with
non-financial institutions, including retail stores that maintain their own credit programs and governmental agencies that make available low cost or guaranteed loans to certain borrowers. Certain of our competitors are larger financial institutions
with substantially greater resources, lending limits, larger branch systems and a wider array of commercial banking services. Competition from both bank and non-bank organizations will continue.

Any future Federal Deposit Insurance Corporation insurance premiums or special assessments will adversely impact our earnings.

On May 22, 2009, the Federal Deposit Insurance Corporation adopted a final rule levying a five basis point special assessment on each
insured depository institutions assets minus Tier 1 capital as of June 30, 2009. We recorded an expense of $126,000 during the year ended December 31, 2009, to reflect the special assessment. Any further special assessments that the
Federal Deposit Insurance Corporation levies will be recorded as an expense during the appropriate period. In addition, the Federal Deposit Insurance Corporation increased the general assessment rate and, therefore, our Federal Deposit Insurance
Corporation general insurance premium expense will increase compared to prior periods.

On November 12, 2009, the FDIC
adopted regulations that require insured depository institutions to prepay on December 31, 2009 their estimated assessments for the fourth calendar quarter of 2009, and for all of 2010, 2011 and 2012. The new regulations base the assessment
rate for the fourth quarter of 2009 and for 2010 on each institutions total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire
third quarter, and the assessment rate for 2011 and 2012 on the modified third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. Under the prepaid assessment rule, we
made a payment of $646,000 to the FDIC on December 30, 2009, of which $37,000 was expensed as our fourth quarter 2009 deposit insurance premium, and the remaining $609,000 was recorded as a prepaid expense, which will be amortized over the next
three years.



|Item 1B. | Unresolved Staff Comments.
|-------- | --------------------------

Not applicable.



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##### Index to Financial Statements

|Item 2. | Properties.
|------- | -----------

As of December 31, 2009, we conducted business from our main office and two full-service banking offices. Our fourth banking office, located on Robert E. Lee Boulevard in New Orleans, remains closed
due to flood damage incurred during Hurricane Katrina, and it is uncertain whether we will re-open this office. The following table sets forth the net book value of the land, building and leasehold improvements and certain other information with
respect to the our offices at December 31, 2009. We maintain automated teller machines (ATMs) at each of our branch offices.



|                             |  |              |     |  |                        |  |                          |       |                   |   |         |    
|---------------------------- |  | ------------ | --- |  | ---------------------- |  | ------------------------ | ----- | ----------------- | - | ------- | ---
|Description/Address          |  | Leased/Owned |     |  | Date ofLeaseExpiration |  | Net BookValue ofProperty |       | Amount ofDeposits |  
|                             |  |              |     |  |                        |  | (Dollars In Thousands)   |      
|Main Office:                 |  |              |     |  |                        |  |                          |       |                  
|1600 Veterans Boulevard      |  |              |     |  |                        |  |                          |       |                   |   |         |    
|Metairie, Louisiana 70005    |  | Owned        |     |  | n/a                    |  | $                        | 1,276 |                   | $ | 110,979 | (1)
|                             |  |              |     | 
|Branch Offices:              |  |              |     |  |                        |  |                          |       |                   |   |         |    
|4401 Transcontinental Drive  |  |              |     |  |                        |  |                          |       |                   |   |         |    
|Metairie, Louisiana 70006    |  | Owned        | (2) |  | 3/31/2016              |  |                          | 201   |                   |   | 39,815  |    
|                             |  |              |     | 
|5435 Magazine Street         |  |              |     |  |                        |  |                          |       |                   |   |         |    
|New Orleans, Louisiana 70115 |  | Owned        |     |  | n/a                    |  |                          | 226   |                   |   | 23,411  |    
|                             |  |              |     | 
|1522 Robert E. Lee Boulevard |  |              |     |  |                        |  |                          |       |                   |   |         |    
|New Orleans, Louisiana 70122 |  | Leased       |     |  | 6/30/2009              |  |                          |      |                   |   | 14,417  | (3)
|                             |  |              |     | 
|1510 Robert E. Lee Boulevard |  |              |     |  |                        |  |                          |       |                   |   |         |    
|New Orleans, Louisiana       |  | Owned        | (4) |  | n/a                    |  |                          | 94    |                   |   |        |    
|                             |  |              |     |  |                        |  |                          |       |                   |   |         |    
|Total                        |  |              |     |  |                        |  | $                        | 1,797 |                   | $ | 188,622 |    
|                             |  |              |     |  |                        |  |                          |       |                   |   |         |    



|(1) | All IRA deposits are assigned to the Main office.
|--- | -------------------------------------------------

|(2) | The branch site is located on three lots. The Bank owns two of the lots. The third lot (parking lot) is leased.
|--- | ---------------------------------------------------------------------------------------------------------------

|(3) | The deposits for the Robert E. Lee office have been temporarily re-assigned to the main office for regulatory reporting purposes as the Robert E. Lee office has been
temporarily closed since August 2005 due to flood damage from Hurricane Katrina.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | During 2009, we acquired the property adjacent to our branch office in order to provide additional parking.
|--- | -----------------------------------------------------------------------------------------------------------



|Item 3. | Legal Proceedings.
|------- | ------------------

We are not presently involved in any legal proceedings of a material nature. From time to time, we are a party to legal proceedings incidental to our business to enforce our security interest in
collateral pledged to secure loans made by Bank of New Orleans.



|Item 4. | (Reserved)
|------- | ----------



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##### Index to Financial Statements

PART II



|Item 5. | Market for the Registrants Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities.
|------- | ----------------------------------------------------------------------------------------------------------------

(a) Louisiana Bancorp, Inc.s common stock is listed on the NASDAQ Global Market under the symbol
LABC. The common stock was issued at a price of $10.00 per share in connection with the Companys initial public offering and the Banks conversion from mutual to stock form. The common stock commenced trading on the NASDAQ
Stock Market on July 10, 2007. As of the close of business on December 31, 2009, there were 4,764,322 shares of common stock outstanding, held by approximately 280 stockholders of record, not including the number of persons or entities
whose stock is held in nominee or street name through various brokerage firms and banks.

The following table sets
forth the high and low prices of the Companys common stock as reported by the Nasdaq Stock Market and cash dividends declared per share for the periods indicated.



|                      |  |      |       |     |       |                        |   |  
|--------------------- |  | ---- | ----- | --- | ----- | ---------------------- | - | -
|For The Quarter Ended |  | High |       | Low |       | Cash DividendsDeclared
|December 31, 2009     |  | $    | 14.95 |     | 14.00 |                        | $ | 
|September 30, 2009    |  |      | 14.25 |     | 13.25 |                        |   | 
|June 30, 2009         |  |      | 14.25 |     | 12.75 |                        |   | 
|March 31, 2009        |  |      | 12.93 |     | 12.05 |                        |   | 
|December 31, 2008     |  |      | 12.88 |     | 11.61 |                        |   | 
|September 30, 2008    |  |      | 13.06 |     | 12.15 |                        |   | 
|June 30, 2008         |  |      | 13.15 |     | 11.45 |                        |   | 
|March 31, 2008        |  |      | 11.73 |     | 9.98  |                        |   | 

The
Company did not sell any of its equity securities during 2009 that were not registered under the Securities Act of 1933. For information regarding the Companys equity compensation plans, see Item 12, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.

(b) Not applicable.

(c) The Companys repurchases of its common stock made during the quarter ended December 31, 2009 are set forth in the table
below:



|                                     |  |                               |  |                            |       |                                                                             |         |                                                                                     |        
|------------------------------------ |  | ----------------------------- |  | -------------------------- | ----- | --------------------------------------------------------------------------- | ------- | ----------------------------------------------------------------------------------- | -------
|Period                               |  | TotalNumber ofSharesPurchased |  | AveragePrice Paidper Share |       | Total Number ofSharesPurchased asPart of PubliclyAnnounced Plansor
Programs |         | MaximumNumber of Sharesthat May Yet BePurchased Underthe Plans orPrograms (1)(2)(3)
|October 1, 2009  October 31, 2009   |  | 23,478                        |  | $                          | 14.23 |                                                                             | 23,478  |                                                                                     | 8,147  
|November 1, 2009  November 30, 2009 |  | 228,621                       |  |                            | 14.19 |                                                                             | 228,621 |                                                                                     | 37,934 
|December 1, 2009  December 31, 2009 |  | 183,369                       |  |                            | 14.41 |                                                                             | 183,369 |                                                                                     | 100,052
|                                     |  |                               |  |                            |       |                                                                             |         |                                                                                     |        
|Total                                |  | 435,468                       |  | $                          | 14.28 |                                                                             | 435,468 |                                                                                     |        
|                                     |  |                               |  |                            |       |                                                                             |         |                                                                                     |        



Notes to table above:



|(1) | On March 17, 2009, the Company announced a stock repurchase program to acquire 5%, or 272,008 shares of its common stock over a six month period. On
September 16, 2009, the Company announced it would extend the duration of repurchase program by three months to December 17, 2009. The repurchase program was completed on November 9, 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On October 29, 2009, the Company announced a fifth stock repurchase program to acquire 258,408 shares, or 5% of its outstanding common stock over a six-month
period, commencing with the conclusion of the Companys previously announced fourth repurchase program.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On December 8, 2009, the Company announced a sixth stock repurchase program to acquire 245,487 shares, or 5% of its outstanding common stock over a six-month
period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

|Item 6. | Selected Financial Data.
|------- | ------------------------

Set forth below is selected financial and other data of Louisiana Bancorp, Inc. You should read the financial statements and related notes contained in Item 8 hereof which provide more detailed information.



|                                                                            |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                            |  | At December 31,                               |        
|                                                                            |  | 2009                                          |         |   | 2008 |   |         | 2007 |  |   | 2006    |   |  | 2005 |        
|                                                                            |  | (Dollars in thousands)                        |        
|Selected Financial and Other Data:                                          |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total assets                                                                |  | $                                             | 329,779 |   |      | $ | 327,449 |      |  | $ | 270,944 |   |  | $    | 219,726 |   |  | $ | 240,904 |  
|Cash and cash equivalents                                                   |  |                                               | 4,735   |   |      |   | 4,974   |      |  |   | 11,648  |   |  |      | 3,825   |   |  |   | 17,967  |  
|Investment securities:                                                      |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Available-for-sale                                                          |  |                                               | 35,445  |   |      |   | 25,932  |      |  |   | 40,468  |   |  |      | 21,676  |   |  |   | 19,753  |  
|Held-to-maturity                                                            |  |                                               | 4,352   |   |      |   | 6,107   |      |  |   | 6,950   |   |  |      | 3,744   |   |  |   | 3,946   |  
|Mortgage-backed securities:                                                 |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Available-for-sale                                                          |  |                                               | 27,079  |   |      |   | 54,159  |      |  |   | 32,168  |   |  |      | 34,015  |   |  |   | 43,568  |  
|Held-to-maturity                                                            |  |                                               | 90,194  |   |      |   | 117,322 |      |  |   | 74,693  |   |  |      | 57,545  |   |  |   | 55,243  |  
|Loans receivable, net                                                       |  |                                               | 158,446 |   |      |   | 111,236 |      |  |   | 96,902  |   |  |      | 89,424  |   |  |   | 92,449  |  
|Deposits                                                                    |  |                                               | 188,622 |   |      |   | 160,589 |      |  |   | 143,629 |   |  |      | 150,335 |   |  |   | 157,245 |  
|Borrowings                                                                  |  |                                               | 63,810  |   |      |   | 76,660  |      |  |   | 34,416  |   |  |      | 35,242  |   |  |   | 50,313  |  
|Shareholders equity                                                        |  |                                               | 73,348  |   |      |   | 85,727  |      |  |   | 89,870  |   |  |      | 29,198  |   |  |   | 26,912  |  
|Banking offices(1)                                                          |  |                                               | 4       |   |      |   | 5       |      |  |   | 4       |   |  |      | 4       |   |  |   | 4       |  
|                                                                            | 
|                                                                            |  | For the Year Ended December 31,               |        
|                                                                            |  | 2009                                          |         |   | 2008 |   |         | 2007 |  |   | 2006    |   |  | 2005 |        
|                                                                            |  | (Dollars in thousands, except per share data) |        
|Selected Operating Data:                                                    |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total interest income                                                       |  | $                                             | 16,832  |   |      | $ | 15,837  |      |  | $ | 13,423  |   |  | $    | 12,249  |   |  | $ | 11,215  |  
|Total interest expense                                                      |  |                                               | 6,277   |   |      |   | 5,963   |      |  |   | 5,556   |   |  |      | 5,334   |   |  |   | 4,915   |  
|                                                                            |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income                                                         |  |                                               | 10,555  |   |      |   | 9,874   |      |  |   | 7,867   |   |  |      | 6,915   |   |  |   | 6,300   |  
|Provision (recovery) for loan losses                                        |  |                                               | 337     |   |      |   | (43     | )    |  |   | (268    | ) |  |      | (458    | ) |  |   | 2,250   |  
|                                                                            |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income after provision (recovery) for loan losses              |  |                                               | 10,218  |   |      |   | 9,917   |      |  |   | 8,135   |   |  |      | 7,373   |   |  |   | 4,050   |  
|Total non-interest income                                                   |  |                                               | 836     |   |      |   | 526     |      |  |   | 501     |   |  |      | 513     |   |  |   | 611     |  
|Total non-interest expense                                                  |  |                                               | 7,090   |   |      |   | 6,402   |      |  |   | 4,867   |   |  |      | 4,887   |   |  |   | 4,423   |  
|                                                                            |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before income taxes                                                  |  |                                               | 3,964   |   |      |   | 4,041   |      |  |   | 3,769   |   |  |      | 2,999   |   |  |   | 238     |  
|Income taxes                                                                |  |                                               | 1,430   |   |      |   | 1,297   |      |  |   | 1,128   |   |  |      | 976     |   |  |   | 36      |  
|                                                                            |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                                  |  | $                                             | 2,534   |   |      | $ | 2,744   |      |  | $ | 2,641   |   |  | $    | 2,023   |   |  | $ | 202     |  
|                                                                            |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Earnings per share (basic)(2)                                               |  | $                                             | 0.54    |   |      | $ | 0.49    |      |  | $ | 0.94    |   |  |      | N/A     |   |  |   | N/A     |  
|Earnings per share (diluted)(2)                                             |  | $                                             | 0.54    |   |      | $ | 0.49    |      |  | $ | 0.94    |   |  |      | N/A     |   |  |   | N/A     |  
|                                                                            |  |                                               |         |   |     
|Selected Operating Ratios(3):                                               |  |                                               |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Average yield on interest-earning assets                                    |  |                                               | 5.30    | % |      |   | 5.53    | %    |  |   | 5.69    | % |  |      | 5.44    | % |  |   | 4.97    | %
|Average rate on interest-bearing liabilities                                |  |                                               | 2.68    |   |      |   | 3.04    |      |  |   | 3.12    |   |  |      | 2.74    |   |  |   | 2.46    |  
|Average interest rate spread(4)                                             |  |                                               | 2.62    |   |      |   | 2.50    |      |  |   | 2.56    |   |  |      | 2.70    |   |  |   | 2.51    |  
|Net interest margin(4)                                                      |  |                                               | 3.32    |   |      |   | 3.43    |      |  |   | 3.33    |   |  |      | 3.07    |   |  |   | 2.79    |  
|Average interest-earning assets to average interest-bearing liabilities     |  |                                               | 135.63  |   |      |   | 145.81  |      |  |   | 132.71  |   |  |      | 115.83  |   |  |   | 112.84  |  
|Net interest income after provision for loan losses to non-interest expense |  |                                               | 144.12  |   |      |   | 154.90  |      |  |   | 167.84  |   |  |      | 153.76  |   |  |   | 91.57   |  
|Total non-interest expense to average assets                                |  |                                               | 2.18    |   |      |   | 2.19    |      |  |   | 2.00    |   |  |      | 2.06    |   |  |   | 1.90    |  
|Efficiency ratio(5)                                                         |  |                                               | 62.24   |   |      |   | 61.56   |      |  |   | 58.06   |   |  |      | 65.36   |   |  |   | 64.00   |  
|Return on average assets                                                    |  |                                               | 0.78    |   |      |   | 0.94    |      |  |   | 1.09    |   |  |      | 0.87    |   |  |   | 0.09    |  
|Return on average equity                                                    |  |                                               | 3.16    |   |      |   | 3.09    |      |  |   | 4.65    |   |  |      | 7.21    |   |  |   | 0.73    |  
|Average equity to average assets                                            |  |                                               | 24.71   | % |      |   | 30.27   | %    |  |   | 23.40   | % |  |      | 12.04   | % |  |   | 11.82   | %

(Footnotes on next page)



36



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##### Index to Financial Statements

|                                                                                       |  |                                       |   |  |        |   |  |        |   |  |        |   |  |       |  
|-------------------------------------------------------------------------------------- |  | ------------------------------------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ----- | -
|                                                                                       |  | At or For the Year Ended December 31, |  
|                                                                                       |  | 2009                                  |   |  | 2008   |   |  | 2007   |   |  | 2006   |   |  | 2005  |  
|Asset Quality Ratios(6):                                                               |  |                                       |   |  |        |   |  |        |   |  |        |   |  |       |  
|Non-performing loans as a percent of total loans receivable(7)                         |  | 0.63                                  | % |  | 0.47   | % |  | 0.87   | % |  | 0.98   | % |  | 4.85  | %
|Non-performing assets as a percent of total assets(7)                                  |  | 0.78                                  |   |  | 0.16   |   |  | 0.31   |   |  | 0.40   |   |  | 1.86  |  
|Non-performing assets and troubled debt restructurings as a percent of total assets(7) |  | 0.78                                  |   |  | 0.16   |   |  | 0.31   |   |  | 0.40   |   |  | 1.86  |  
|Allowance for loan losses as a percent of non-performing loans                         |  | 165.60                                |   |  | 375.38 |   |  | 237.41 |   |  | 261.94 |   |  | 61.50 |  
|Allowance for loan losses as a percent of total loans                                  |  | 1.04                                  |   |  | 1.72   |   |  | 2.01   |   |  | 2.49   |   |  | 2.89  |  
|Net charge-offs to average loans receivable                                            |  | 0.47                                  |   |  |       |   |  |       |   |  |       |   |  |      |  
|                                                                                       |  |                                       |   |  |       
|Capital Ratios(6):                                                                     |  |                                       |   |  |        |   |  |        |   |  |        |   |  |       |  
|Tier 1 leverage ratio                                                                  |  | 18.20                                 |   |  | 18.35  |   |  | 23.52  |   |  | 13.51  |   |  | 11.47 |  
|Tier 1 risk-based capital ratio                                                        |  | 40.55                                 |   |  | 47.99  |   |  | 57.72  |   |  | 32.80  |   |  | 28.86 |  
|Total risk-based capital ratio                                                         |  | 41.47                                 | % |  | 49.24  | % |  | 58.97  | % |  | 34.06  | % |  | 30.12 | %



|(1) | Our branch on Robert E. Lee Boulevard in New Orleans has been temporarily closed since Hurricane Katrina hit on August 29, 2005. At December 31, 2008, total
banking offices includes a loan production office in Hammond, Louisiana which was closed in 2009.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Earnings per share data for 2007 is elevated because the denominator was reduced due to the abbreviated period.
|--- | ---------------------------------------------------------------------------------------------------------------

|(3) | With the exception of end of period ratios, all ratios are based on average monthly balances during the indicated periods.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(4) | Average interest rate spread represents the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities,
and net interest margin represents net interest income as a percentage of average interest-earning assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The efficiency ratio represents the ratio of non-interest expense divided by the sum of net interest income and non-interest income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(6) | Asset quality ratios and capital ratios are end of period ratios, except for net charge-offs to average loans receivable. Capital ratios are for the Bank only.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Non-performing assets consist of non-performing loans and other real estate owned. Non-performing loans consist of all loans 90 days or more past due. It is our policy
to cease accruing interest on all loans 90 days or more past due.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

Overview

Louisiana Bancorp,
Inc. is a Louisiana corporation that became the holding company for Bank of New Orleans in connection with the conversion of the Bank in July 2007 from a federally chartered mutual savings bank to a federally chartered stock savings bank. Bank of
New Orleans is a community oriented savings bank headquartered in Metairie, Louisiana. We currently operate three banking offices in Jefferson and Orleans Parishes. Our fourth banking office has been closed since Hurricane Katrina in August 2005,
and it is uncertain whether we will re-open this office in the future. During 2009, our loan production office located in Hammond, Louisiana was closed. Our primary business consists of attracting deposits from the general public and using those
funds together with funds we borrow to originate loans to our customers and invest in mortgage-backed and other securities. At December 31, 2009, we had total assets of $329.8 million, including $158.4 million in net loans and $157.1 million of
mortgage-backed and other investment securities, total deposits of $188.6 million and shareholders equity of $73.3 million.

Historically, we have operated as a traditional thrift relying primarily on long-term, fixed rate single-family residential mortgage loans to generate interest income. During 2009, 2008 and 2007, our originations of single-family
residential mortgage loans totaled $59.1 million, $13.5 million, and $9.0 million, respectively. The growth in our originations during 2009 was due primarily to increased refinancing activity due to a decline in mortgage rates, the Banks
hiring of experienced mortgage loan originators during the third quarter of 2008, and the exodus of several national secondary market originators following the mortgage crisis of 2008. Another significant factor contributing to the growth of our
single-family originations is the continued repopulation of our market area associated with the Hurricane Katrina recovery.

Approximately six years ago, we determined to revise our lending strategy in order to increase our originations of multi-family residential, commercial real estate and land loans. In the aggregate, our originations of these types of loans
were $17.5 million, $16.0 million, and $15.2 million, respectively, for the periods ended December 31, 2009, 2008 and 2007. Multi-family residential, commercial real estate and land loans generate higher levels of interest income than
single-family residential loans, but are subject to higher levels of risk.

As of December 31, 2009, we had seven loans
with an aggregate principal balance of $379,000 that were 30 to 89 days delinquent, compared to five loans with an aggregate principal balance of $2.2 million at December 31, 2008. During 2009, the three largest delinquent loans at
December 31, 2008, in the amount of $2.2 million, were transferred to other real estate owned. We anticipate that the current national economic crisis will lead to additional job losses in our market area in the next twelve months, and will
likely create additional delinquencies. Our non-performing loans were $1.0 million, $520,000 and $842,000, respectively, at December 31, 2009, 2008 and 2007. Total non-performing assets were $2.6 million, $520,000 and $842,000, respectively, at
such dates. The increase in non-performing assets between December 31, 2009 and December 31, 2008 was due solely to the additions to other real estate owned referenced earlier in this paragraph.

Our total mortgage-backed securities and investment securities portfolio was $157.1 million or 47.6% of our total assets at
December 31, 2009. These securities are comprised of US agency issued obligations and do not include private label securities. Our mortgage-backed securities are collateralized by conventional mortgage loans and do not include
Alt-A, sub-prime, or other non-conforming collateral. The market value of our securities may decline in the future due to an increase in the level of interest rates. However, our securities are generally purchased as
long-term investments, therefore changes in market value during the holding period due to fluctuations in interest rates is expected. We do not purchase securities for speculative or trading purposes.

At December 31, 2009, our total deposits were $188.6 million, an increase of $28.0 million from December 31, 2008, and $45.0
million from December 31, 2007. We attribute these increases to our advertising efforts which have emphasized the strength of our institution, as measured in terms of total capital, and the FDICs temporary increase in their maximum
deposit insurance coverage limits to $250,000 through December 2013. The Bank does participate in the FDICs Transaction Account Guarantee Program which provides



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##### Index to Financial Statements

unlimited coverage to non-interest bearing demand deposits through June 30, 2010. We do not believe the expiration of this program will have a material negative effect on our total deposits.
We have elected to not participate in the FDICs Debt Guarantee Program, which temporarily guarantees certain newly issued unsecured debt through June 30, 2012, due to the liquidity available to us through the deposit market.

Our total equity capital at December 31, 2009, was $73.3 million. Our average equity to average assets ratio was 24.7% for the
period ended December 31, 2009. The Banks capital ratios exceed all regulatory guidelines, and the Bank was deemed to be well-capitalized as of December 31, 2009. Due to the level of capital supporting our balance sheet,
the Bank elected to not participate in the US Treasurys Troubled Asset Relief Program.

Our results of operations
depend, to a large extent, on net interest income, which is the difference between the income earned on our loan and investment portfolios and interest expense on deposits and borrowings. Our net interest income is largely determined by our net
interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities.
Results of operations are also affected by our provisions for loan losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation and employee benefits, office occupancy and
equipment expense, data processing, advertising and business promotion and other expense. We expect that our non-interest expenses will increase as we continue to grow and expand our operations. In addition, our salaries and benefits expense have
increased in recent years due to the stock benefit plans that we implemented following the Banks conversion to the stock form. For the years ended December 31, 2009, 2008 and 2007, the cost of our Employee Stock Ownership Plan was
$343,000, $307,000, and $136,000, respectively. The ESOP did not exist in periods prior to July 2007. Compensation expense related to our stock option plan and recognition and retention awards were $751,000 and $626,000, during 2009 and 2008. These
equity compensation plans were approved by our shareholders in February 2008. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and
actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact our financial conditions and results of operations.

Business Strategy

Our business strategy is focused on operating a growing
and profitable community-oriented financial institution. Below are certain highlights of our business strategy:



| |  |  | Growing Our Loan Portfolio. We intend to grow our loan portfolio by increasing our originations of residential and commercial mortgage loans
through referrals from our branch network and existing customers, increased use of media advertising, and recruiting highly qualified, experienced loan originators. We may consider the purchase of additional participation interests in loans that
meet our underwriting standards. In addition to facilitating loan growth, such purchases may lessen the geographic concentration of our loans.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding our Market Area. We intend to pursue opportunities to expand our market area by opening additional banking offices, including loan
production offices. We may consider acquisitions of other financial institutions (although we have no current plans, understandings or agreements with respect to any specific acquisitions). We expect to focus our expansion efforts on contiguous
markets to the west of Jefferson Parish and on the north shore of Lake Pontchartrain.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintaining Asset Quality. Despite the negative effects of Hurricane Katrina, and more recently, the national recession, we remain committed to
our prudent and conservative underwriting practices, and we intend to vigorously review our portfolio for potential problem assets in order to mitigate potential losses. While the ratio of our non-performing assets to total assets increased during
2009, it was only 0.78% at December 31, 2009.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

| |  |  | Continuing to Provide Exceptional Customer Service. As a community oriented savings bank, we take pride in providing exceptional customer
service as a means to attract and retain customers. We deliver personalized service to our customers that distinguishes us from the large regional banks operating in our market area. Our management team has strong ties to, and deep roots in, the
community. We believe that we know our customers banking needs and can respond quickly to address them.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The information contained in this section should be read in conjunction with our financial statements and the accompanying notes to the financial statements and other sections contained in this report.

Critical Accounting Policies

In reviewing and understanding financial information for Louisiana Bancorp, you are encouraged to read and understand the significant accounting policies used in preparing our financial statements. These policies are described in Note A of
the notes to our financial statements, which are included in Item 8 of this Annual Report on Form 10-K. The accounting and financial reporting policies of Louisiana Bancorp conform to accounting principles generally accepted in the United
States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These
estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. The following accounting policies comprise those
that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations
which may significantly affect our reported results and financial condition for the period or in future periods.

Allowance
for Loan Losses. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is
unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that represents the amount of probable and reasonably estimable known and inherent losses in the loan portfolio, based on evaluations of the collectibility of
loans. The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrowers ability to repay, estimated value of
any underlying collateral, estimated losses relating to specifically identified loans, and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the
amount and timing of expected future cash flows on impacted loans, value of collateral, estimated losses on our commercial and residential loan portfolios and general amounts for historical loss experience. All of these estimates may be susceptible
to significant change.

While management uses the best information available to make loan loss allowance evaluations,
adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. Historically, our estimates of the allowance for loan loss have not required significant adjustments from
managements initial estimates. In addition, the Office of Thrift Supervision, as an integral part of its examination processes, periodically reviews our allowance for loan losses. The Office of Thrift Supervision may require the recognition of
adjustments to the allowance for loan losses based on their judgment of information available to them at the time of their examinations. To the extent that actual outcomes differ from managements estimates, additional provisions to the
allowance for loan losses may be required that would adversely impact earnings in future periods.

Income Taxes. We
make estimates and judgments to calculate some of our tax liabilities and determine the recoverability of some of our deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenues and
expenses. We also estimate a reserve for deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. These estimates and
judgments are inherently subjective. Historically, our estimates and judgments to calculate our deferred tax accounts have not required significant revision to our initial estimates.



40



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##### Index to Financial Statements

In evaluating our ability to recover deferred tax assets, we consider all available positive
and negative evidence, including our past operating results, recent cumulative losses and our forecast of future taxable income. In determining future taxable income, we make assumptions for the amount of taxable income, the reversal of temporary
differences and the implementation of feasible and prudent tax planning strategies. These assumptions require us to make judgments about our future taxable income and are consistent with the plans and estimates we use to manage our business. Any
reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a
significant impact on our future earnings.

How We Manage Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from the interest rate risk
which is inherent in our lending and deposit taking activities. To that end, management actively monitors and manages interest rate risk exposure. In addition to market risk, our primary risk is credit risk on our loan portfolio. We attempt to
manage credit risk through our loan underwriting and oversight policies.

The principal objective of our interest rate risk
management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given our business strategy, operating environment, capital and liquidity requirements and performance
objectives, and manage the risk consistent with approved guidelines. We seek to manage our exposure to risks from changes in interest rates while at the same time trying to improve our net interest spread. We monitor interest rate risk as such risk
relates to our operating strategies. We have established an Asset Liability Committee (ALCO)/Investment Committee, which is comprised of our President and Chief Executive Officer, Chief Financial Officer, Controller and two outside
directors, and which is responsible for reviewing our asset/liability and investment policies and interest rate risk position. The ALCO/Investment Committee meets on a regular basis. The extent of the movement of interest rates is an uncertainty
that could have a negative impact on future earnings.

In recent years, we primarily have utilized the following strategies in
our efforts to manage interest rate risk:



| |  |  | we have increased our originations of shorter term loans particularly multi-family residential, commercial real estate and land loans;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we have attempted to match fund a portion of our loan portfolio with borrowings having similar expected lives;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | on occasion, we have sold long-term (30-year) fixed-rate mortgage loans which had been classified as held-for-sale;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | we have attempted, where possible, to extend the maturities of our deposits and borrowings; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | we have invested in securities with relatively short anticipated lives, generally three to five years, and we hold significant amounts of liquid
assets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

Gap Analysis. The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are interest rate sensitive and by monitoring a banks interest rate sensitivity gap. An asset and liability is said to be interest rate sensitive within a specific time period if it
will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to affect adversely net interest income while a positive gap would tend to result in an
increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to affect adversely net interest income. Our one-year
cumulative gap was a positive 1.05% at December 31, 2009.



41



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##### Index to Financial Statements

The following table sets forth the amounts of the Banks interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2009, which we expect, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the GAP Table). Except as stated below, the amount of
assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the
projected repricing of assets and liabilities of the Bank at December 31, 2009, on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals.
The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and anticipated prepayments of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate
adjustments on adjustable-rate loans.



|                                                                                                                   |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | ------- | -- | ---------------------------- | - | ------- | -------------------------- |  | - | ------------------------- | - |  | -------------------------- | ------ | - | ---------------- | - | ------ | ----------- |  | - | ------ | - |  | - | -------
|                                                                                                                   |  | 3 Monthsor Less        |         |    | More than3
Monthsto 6 Months |   |         | More than6
Monthsto 1 Year |  |   | More than1
Yearto 3 Years |   |  | More than3
Yearsto 5 Years |        |   | More than5
Years |   |        | TotalAmount
|                                                                                                                   |  | (Dollars in Thousands)
|Interest-earning assets(1):                                                                                        |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Loans receivable(2)                                                                                                |  | $                      | 20,951  |    |                              | $ | 7,920   |                            |  | $ | 15,619                    |   |  | $                          | 44,952 |   |                  | $ | 34,315 |             |  | $ | 36,552 |   |  | $ | 160,309
|Investment securities                                                                                              |  |                        | 2,846   |    |                              |   | 10,496  |                            |  |   | 7,725                     |   |  |                            | 13,245 |   |                  |   | 1,909  |             |  |   |       |   |  |   | 36,221 
|Mortgage-backed securities                                                                                         |  |                        | 8,137   |    |                              |   | 10,087  |                            |  |   | 14,676                    |   |  |                            | 40,438 |   |                  |   | 19,685 |             |  |   | 19,118 |   |  |   | 112,141
|Other interest-earning assets                                                                                      |  |                        | 4,512   |    |                              |   | 198     |                            |  |   | 99                        |   |  |                            | 198    |   |                  |   |       |             |  |   |       |   |  |   | 5,007  
|                                                                                                                   |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Total interest-earning assets                                                                                      |  |                        | 36,446  |    |                              |   | 28,701  |                            |  |   | 38,119                    |   |  |                            | 98,833 |   |                  |   | 55,909 |             |  |   | 55,670 |   |  |   | 313,678
|                                                                                                                   |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Interest-bearing liabilities:                                                                                      |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Passbook accounts                                                                                                  |  | $                      |        |    |                              | $ |        |                            |  | $ |                          |   |  | $                          |       |   |                  | $ |       |             |  | $ | 18,328 |   |  | $ | 18,328 
|Checking accounts                                                                                                  |  |                        |        |    |                              |   |        |                            |  |   |                          |   |  |                            |       |   |                  |   |       |             |  |   | 19,789 |   |  |   | 19,789 
|Money market accounts                                                                                              |  |                        | 6,997   |    |                              |   |        |                            |  |   |                          |   |  |                            |       |   |                  |   |       |             |  |   |       |   |  |   | 6,997  
|Certificate accounts                                                                                               |  |                        | 48,113  |    |                              |   | 21,616  |                            |  |   | 19,341                    |   |  |                            | 27,822 |   |                  |   | 18,723 |             |  |   |       |   |  |   | 135,615
|Borrowings                                                                                                         |  |                        | 2,384   |    |                              |   | 386     |                            |  |   | 1,049                     |   |  |                            | 32,100 |   |                  |   | 20,546 |             |  |   | 12,135 |   |  |   | 68,600 
|                                                                                                                   |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Total interest-bearing Liabilities                                                                                 |  |                        | 57,494  |    |                              |   | 22,002  |                            |  |   | 20,390                    |   |  |                            | 59,922 |   |                  |   | 39,269 |             |  |   | 50,252 |   |  |   | 249,329
|                                                                                                                   |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Interest-earning assets less interest-bearing liabilities                                                          |  | $                      | (21,048 | )  |                              | $ | 6,699   |                            |  | $ | 17,729                    |   |  | $                          | 38,911 |   |                  | $ | 16,640 |             |  | $ | 5,418  |   |  | $ | 64,349 
|                                                                                                                   |  |                        |         |    |                              |   |         |                            |  |   |                           |   |  |                            |        |   |                  |   |        |             |  |   |        |   |  |   |        
|Cumulative interest-rate sensitivity gap(3)                                                                        |  | $                      | (21,048 | )  |                              | $ | (14,349 | )                          |  | $ | 3,380                     |   |  | $                          | 42,291 |   |                  | $ | 58,931 |             |  | $ | 64,349 |   |  |   |        
|                                                                                                                   |  |                        |         |    |                              |   |        
|Cumulative interest-rate gap as a percentage of total assets at December 31, 2009                                  |  |                        | (6.55   | )% |                              |   | (4.47   | )%                         |  |   | 1.05                      | % |  |                            | 13.17  | % |                  |   | 18,35  | %           |  |   | 20.03  | % |  |   |        
|                                                                                                                   |  |                        |         |    |                              |   |        
|Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at December 31,
2009 |  |                        | 63.39   | %  |                              |   | 81.95   | %                          |  |   | 103.38                    | % |  |                            | 126.46 | % |                  |   | 129.60 | %           |  |   | 125.81 | % |  |   |        



|(1) | Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled
rate adjustments and contractual maturities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | For purposes of the gap analysis, loans receivable includes non-performing loans gross of the allowance for loan losses, undisbursed loan funds, unamortized discounts
and deferred loan fees.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Interest-rate sensitivity gap represents the difference between net interest-earning assets and interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------



42



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##### Table of Contents

##### Index to Financial Statements

Certain shortcomings are inherent in the method of analysis presented in the foregoing
table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes
in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table.
Finally, the ability of many borrowers to service their adjustable-rate loans may decrease in the event of an interest rate increase.

Net Portfolio Value and Net Interest Income Analysis. Our interest rate sensitivity also is monitored by management through the use of models which generate estimates of the change in its net portfolio value (NPV) and net
interest income (NII) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is defined as the
NPV in that scenario divided by the market value of assets in the same scenario. We prepare these models in collaboration with a third party Asset/Liability Management consultant, and present them to the Board of Directors on a quarterly basis. In
addition to our internal NPV calculation, the Office of Thrift Supervision (OTS) prepares a quarterly calculation based on certain repricing and prepayments assumptions that may differ from our internal expectations. Therefore, the
results of the OTS NPV calculation, and our internal calculation, may differ with respect to the magnitude of the change in NPV for a given interest rate scenario. The following table sets forth the NPV as of December 31, 2009, as calculated by
the OTS model, which reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.



|                                                     |        |                        |          |  |                                      |          |   |  |           |    |  |        |   |  |       |   
|---------------------------------------------------- | ------ | ---------------------- | -------- |  | ------------------------------------ | -------- | - |  | --------- | -- |  | ------ | - |  | ----- | --
|Change in Interest Rates InBasis Points (Rate Shock) |        | Net Portfolio Value    |          |  | NPV as % of PortfolioValue of Assets |         
|                                                     | Amount |                        | $ Change |  |                                      | % Change |   |  | NPV Ratio |    |  | Change |  
|                                                     |        | (Dollars in Thousands) |         
|300bp                                                |        | $                      | 52,204   |  | $                                    | (21,612  | ) |  | (29       | )% |  | 16.78  | % |  | (5.00 | )%
|200                                                  |        |                        | 60,525   |  |                                      | (13,291  | ) |  | (18       | )  |  | 18.86  |   |  | (2.92 | ) 
|100                                                  |        |                        | 67,843   |  |                                      | (5,973   | ) |  | (8        | )  |  | 20.53  |   |  | (1.26 | ) 
|Static                                               |        |                        | 73,816   |  |                                      |         |   |  |           |    |  | 21.78  |   |  |      |   
|(100)                                                |        |                        | 77,707   |  |                                      | 3,891    |   |  | 5         |    |  | 22.52  |   |  | 0.74  |   

Based on
the guidelines found in OTS Thrift Bulletin 13a (TB-13a), the interest rate risk sensitivity measure for the Bank was 292 basis points at December 31, 2009. This sensitivity measure is considered in conjunction with the Banks
post-shock capital ratio of 18.86%, in arriving at a minimal level of interest rate risk as per TB13a. In addition to modeling changes in NPV, we also analyze potential changes to NII for a twelve-month period under rising and falling interest rate
scenarios. The following table shows our NII model as of December 31, 2009.



|                                                     |  |                        |       |          |   |      |          |  |       |   
|---------------------------------------------------- |  | ---------------------- | ----- | -------- | - | ---- | -------- |  | ----- | --
|Change in Interest Rates inBasis Points (Rate Shock) |  | Net Interest Income    |       | $ Change |   |      | % Change | 
|                                                     |  | (Dollars in Thousands) |      
|200bp                                                |  | $                      | 9,512 |          | $ | (52  | )        |  | (0.54 | )%
|Static                                               |  |                        | 9,564 |          |   |      |          |  |       |   
|(100)                                                |  |                        | 9,406 |          |   | (158 | )        |  | (1.65 | ) 

The above
table indicates that as of December 31, 2009, in the event of an immediate and sustained 200 basis point increase in interest rates, our net interest income for the 12 months ending December 31, 2010 would be expected to decrease by
$52,000 or 0.54% to $9.5 million.

As is the case with the GAP Table, certain shortcomings are inherent in the methodology
used in the above interest rate risk measurements. Modeling changes in NPV and NII require the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In
this regard, the models presented assume that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes



43



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##### Table of Contents

##### Index to Financial Statements

that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly,
although the NPV measurements and net interest income models provide an indication of interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in
market interest rates on net interest income and will differ from actual results.

Average Balances, Net Interest Income,
and Yields Earned and Rates Paid.The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net interest margin. Tax-exempt income and yields have not been adjusted to a tax-equivalent basis. All average balances are based on monthly balances. Management does not believe that the
monthly averages differ significantly from what the daily averages would be.



|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|----------------------------------------------------------------------- |  | ----------------------- | ------- | -------- | ---- | -------------------- |  | ------ | -------------- |  | -------- | ------- | ----------------- | - | ------ | -------------- | ------ | -------- |  | ----------------- | ------- |  | - | ------ |  | ------ | -
|                                                                        |  | Year Ended December 31, |        
|                                                                        |  | 2009                    |         |          | 2008 |                      |  | 2007   |               
|                                                                        |  | AverageBalance          |         | Interest |      | AverageYield/Rate(1) |  |        | AverageBalance |  | Interest |         | AverageYield/Rate |   |        | AverageBalance |        | Interest |  | AverageYield/Rate |        
|                                                                        |  | (Dollars in Thousands)  |        
|Interest-earning assets:                                                |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Loans receivable(1)                                                     |  | $                       | 133,498 |          | $    | 8,400                |  | 6.29   | %              |  | $        | 103,512 |                   | $ | 7,010  |                | 6.77   | %        |  | $                 | 93,098  |  | $ | 6,421  |  | 6.90   | %
|Mortgage-backed securities                                              |  |                         | 146,962 |          |      | 7,637                |  | 5.20   |                |  |          | 129,669 |                   |   | 6,591  |                | 5.08   |          |  |                   | 91,478  |  |   | 4,376  |  | 4.78   |  
|Investment securities                                                   |  |                         | 26,384  |          |      | 723                  |  | 2.74   |                |  |          | 42,436  |                   |   | 1,924  |                | 4.53   |          |  |                   | 33,745  |  |   | 1,689  |  | 5.01   |  
|Other interest-earning assets                                           |  |                         | 11,033  |          |      | 72                   |  | 0.65   |                |  |          | 10,619  |                   |   | 312    |                | 2.94   |          |  |                   | 17,647  |  |   | 937    |  | 5.31   |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total interest-earning assets                                           |  |                         | 317,877 |          |      | 16,832               |  | 5.30   | %              |  |          | 286,236 |                   |   | 15,837 |                | 5.53   | %        |  |                   | 235,968 |  |   | 13,423 |  | 5.69   | %
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Non-interest-earning assets                                             |  |                         | 6,636   |          |      |                      |  |        |                |  |          | 6,715   |                   |   |        |                |        |          |  |                   | 6,843   |  |   |        |  |        |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total assets                                                            |  | $                       | 324,513 |          |      |                      |  |        |                |  | $        | 292,951 |                   |   |        |                |        |          |  | $                 | 242,811 |  |   |        |  |        |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Interest-bearing liabilities:                                           |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Passbook, checking and money market accounts                            |  |                         | 43,442  |          |      | 177                  |  | 0.41   |                |  |          | 44,035  |                   |   | 178    |                | 0.40   |          |  |                   | 50,978  |  |   | 213    |  | 0.42   |  
|Certificate accounts                                                    |  |                         | 125,862 |          |      | 3,537                |  | 2.81   |                |  |          | 100,478 |                   |   | 3,751  |                | 3.73   |          |  |                   | 95,611  |  |   | 3,953  |  | 4.13   |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total deposits                                                          |  |                         | 169,304 |          |      | 3,714                |  | 2.19   |                |  |          | 144,513 |                   |   | 3,929  |                | 2.72   |          |  |                   | 146,589 |  |   | 4,166  |  | 2.84   |  
|Borrowings                                                              |  |                         | 65,061  |          |      | 2,563                |  | 3.94   |                |  |          | 51,790  |                   |   | 2,034  |                | 3.93   |          |  |                   | 31,218  |  |   | 1,390  |  | 4.45   |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total interest-bearing liabilities                                      |  |                         | 234,365 |          |      | 6,277                |  | 2.68   | %              |  |          | 196,303 |                   |   | 5,963  |                | 3.04   | %        |  |                   | 177,807 |  |   | 5,556  |  | 3.12   | %
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Non-interest-bearing liabilities                                        |  |                         | 9,954   |          |      |                      |  |        |                |  |          | 7,972   |                   |   |        |                |        |          |  |                   | 8,178   |  |   |        |  |        |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total liabilities                                                       |  |                         | 244,319 |          |      |                      |  |        |                |  |          | 204,275 |                   |   |        |                |        |          |  |                   | 185,985 |  |   |        |  |        |  
|Stockholders Equity                                                    |  |                         | 80,194  |          |      |                      |  |        |                |  |          | 88,676  |                   |   |        |                |        |          |  |                   | 56,826  |  |   |        |  |        |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total liabilities and Stockholders Equity                              |  | $                       | 324,513 |          |      |                      |  |        |                |  | $        | 292,951 |                   |   |        |                |        |          |  | $                 | 242,811 |  |   |        |  |        |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Net interest-earning assets                                             |  | $                       | 83,512  |          |      |                      |  |        |                |  | $        | 89,933  |                   |   |        |                |        |          |  | $                 | 58,161  |  |   |        |  |        |  
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Net interest income; average interest rate spread                       |  |                         |         |          | $    | 10,555               |  | 2.62   | %              |  |          |         |                   | $ | 9,874  |                | 2.50   | %        |  |                   |         |  | $ | 7,867  |  | 2.56   | %
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Net interest margin(2)                                                  |  |                         |         |          |      |                      |  | 3.32   | %              |  |          |         |                   |   |        |                | 3.45   | %        |  |                   |         |  |   |        |  | 3.33   | %
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Average interest-earning assets to average interest-bearing liabilities |  |                         |         |          |      |                      |  | 135.63 | %              |  |          |         |                   |   |        |                | 145.81 | %        |  |                   |         |  |   |        |  | 132.71 | %
|                                                                        |  |                         |         |          |      |                      |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  



|(1) | Includes nonaccrual loans during the respective periods. Calculated net of deferred fees and discounts and allowance for loan losses.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(2) | Equals net interest income divided by average interest-earning assets.
|--- | ----------------------------------------------------------------------



44



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##### Table of Contents

##### Index to Financial Statements

Rate/Volume Analysis. The following table shows the extent to which changes in
interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate, which is the change in rate multiplied by prior year volume, and (2) changes in volume, which is the change in volume multiplied by prior year rate. The combined
effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.



|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|------------------------------------------ |  | -------------------------- | ------ | - | -------------------------- | - | ----- | ----------------------- |  | - | ------ | - |  | ------ | ---- | - | ----------------------- | - | ----- | - |  | - | ----- | -
|                                           |  | 2009 vs. 2008              |        |   | 2008 vs. 2007              |  
|                                           |  | Increase (Decrease) Due to |        |   | Increase (Decrease) Due to |  
|                                           |  | Rate                       |        |   | Volume                     |   |       | TotalIncrease(Decrease) |  |   | Rate   |   |  | Volume |      |   | TotalIncrease(Decrease) |  
|                                           |  | (In Thousands)             |        |   | (In Thousands)             |  
|Interest income:                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|Loans receivable                           |  | $                          | (641   | ) |                            | $ | 2,031 |                         |  | $ | 1,390  |   |  | $      | (129 | ) |                         | $ | 718   |   |  | $ | 589   |  
|Mortgage-backed securities                 |  |                            | 167    |   |                            |   | 879   |                         |  |   | 1,046  |   |  |        | 388  |   |                         |   | 1,827 |   |  |   | 2,215 |  
|Investment securities                      |  |                            | (473   | ) |                            |   | (728  | )                       |  |   | (1,201 | ) |  |        | (200 | ) |                         |   | 435   |   |  |   | 235   |  
|Other interest-earning assets              |  |                            | (252   | ) |                            |   | 12    |                         |  |   | (240   | ) |  |        | (252 | ) |                         |   | (373  | ) |  |   | (625  | )
|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|Total interest income                      |  |                            | (1,199 | ) |                            |   | 2,194 |                         |  |   | 995    |   |  |        | (193 | ) |                         |   | 2,607 |   |  |   | 2,414 |  
|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|Interest expense:                          |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |  
|Passbook, NOW and money market accounts    |  |                            | 1      |   |                            |   | (2    | )                       |  |   | (1     | ) |  |        | (6   | ) |                         |   | (29   | ) |  |   | (35   | )
|Certificate accounts                       |  |                            | (1,162 | ) |                            |   | 948   |                         |  |   | (214   | ) |  |        | (403 | ) |                         |   | 201   |   |  |   | (202  | )
|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|Total deposits                             |  |                            | (1,161 | ) |                            |   | 946   |                         |  |   | (215   | ) |  |        | (409 | ) |                         |   | 172   |   |  |   | (237  | )
|Borrowings                                 |  |                            | 8      |   |                            |   | 521   |                         |  |   | 529    |   |  |        | (272 | ) |                         |   | 916   |   |  |   | 644   |  
|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|Total interest expense                     |  |                            | (1,153 | ) |                            |   | 1,467 |                         |  |   | 314    |   |  |        | (681 | ) |                         |   | 1,088 |   |  |   | 407   |  
|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  
|Increase (decrease) in net interest income |  | $                          | (46    | ) |                            | $ | 727   |                         |  | $ | 681    |   |  | $      | 488  |   |                         | $ | 1,519 |   |  | $ | 2,007 |  
|                                           |  |                            |        |   |                            |   |       |                         |  |   |        |   |  |        |      |   |                         |   |       |   |  |   |       |  

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

Total assets were $329.8 million at December 31, 2009, an increase of $2.3 million from December 31, 2008. Cash and cash
equivalents were $4.7 million and $5.0 million, respectively at December 31, 2009 and December 31, 2008. In the aggregate, our available-for-sale and held-to-maturity investment securities were $39.8 million at December 31, 2009, an
increase of $7.8 million from December 31, 2008. During the year ended December 31, 2009, our available-for-sale and held-to-maturity mortgage-backed securities decreased by an aggregate of $54.2 million, to $117.3 million. This decrease
was due to increased prepayments on our mortgage-backed securities portfolio, and the sale during the year of $6.6 million of mortgage-backed securities secured by 30-year mortgage loans. Total loans receivable were $158.4 million at
December 31, 2009, an increase of $47.2 million, or 42.4%, from December 31, 2008. The growth in our loans receivable was due primarily to a $34.2 million increase in our portfolio of first mortgage loans secured by one-to-four family
residences, a $9.7 million increase in loans secured by multifamily and non-residential real estate, and a $4.1 million increase in our home equity loans and lines of credit.

Total deposits were $188.6 million at December 31, 2009, an increase of $28.0 million from December 31, 2008. During 2009,
non-interest bearing checking accounts increased by $3.7 million, interest bearing checking and money market accounts increased by an aggregate $1.8 million, and our certificates of deposit increased by $22.3 million. Total borrowings were $63.8
million at December 31, 2009, a decrease of $12.9 million from December 31, 2008. This decrease in total borrowings was primarily due to the repayment of $15.5 million in short-term FHLB advances in 2009 that were used to fund the purchase
of mortgage-backed securities during the fourth quarter of 2008.



45



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##### Index to Financial Statements

Total shareholders equity was $73.3 million at December 31, 2009, a decrease of
$12.4 million from December 31, 2008. This decrease was primarily due to the Companys acquisition of shares pursuant to its publicly announced stock repurchase plans. During 2009, the Company repurchased a total of 1,167,170 shares at an
aggregate cost of $15.6 million. In addition, 25,382 shares held by the ESOP trust, with a cost basis of $254,000, were released for allocation to Plan participants, and 44,741 shares held by the Companys Recognition and Retention Plan Trust,
with a cost basis of $564,000, became vested and were released to participants. Net income of $2.5 million increased retained earnings to $37.7 million at December 31, 2009. Accumulated other comprehensive income was $920,000 at
December 31, 2009, a decrease of $417,000 from December 31, 2008.

Comparison of Operating Results for the Years Ended
December 31, 2009 and December 31, 2008

For the year ended December 31, 2009, net interest income was $10.6
million, an increase of $681,000 from the year ended December 31, 2008. The net interest rate spread between our interest-earning assets and our interest-bearing liabilities was 2.62% for 2009, an increase of 12 basis points from 2008. Our net
interest margin for the years ended December 31, 2009 and December 31, 2008 were 3.32% and 3.45%, respectively. Total interest income increased by $1.0 million, to $16.8 million, for the year ended December 31, 2009 compared to the
year ended December 31, 2008. During 2009, our average interest-earning assets increased by $31.6 million due primarily to growth in our loans receivable and mortgage-backed securities portfolio. The average yield of our interest-earning assets
was 5.30% for the year ended December 31, 2009, a decrease of 23 basis points from the year ended December 31, 2008.

Total interest expense for the year ended December 31, 2009 was $6.3 million, an increase of $314,000 from the year ended December 31, 2008. The average balance of our total interest-bearing deposits increased by $24.8 million
during 2009, however, the interest expense associated with these deposits decreased by $215,000 due to a 53 basis point decrease in the average rate paid on interest-bearing deposits. The growth in our average interest-bearing deposits in 2009 was
due to a $25.4 million increase in the average balance of our certificates of deposit. Interest expense on borrowings was $2.6 million for the year ended December 31, 2009, an increase of $529,000 from the year ended December 31, 2008.
This increase in interest expense was due to an increase in the average balance of our total borrowings of $13.3 million during 2009.

During the year ended December 31, 2009, the Bank recorded provisions for loan losses of $337,000 compared to net recoveries of $43,000 for the year ended December 31, 2008. The recoveries recorded in the 2008 period were
primarily attributed to reductions in the allowance for loan losses due to reversals of provisions previously established in 2005 with respect to loans secured by properties damaged by Hurricane Katrina. During the fourth quarter of 2009, the Bank
charged-off $232,000 of its allowance for loan losses previously established against a first mortgage loan and home equity line of credit secured by a single family residence. In the third quarter of 2009, the Bank charged-off $396,000 of its
allowance for loan losses established against its participation interest in a non-performing construction loan secured by mixed-use commercial real estate. Total charge-offs for the year-ended December 31, 2009 were $628,000. Our total
allowance for loan losses at December 31, 2009 was $1.7 million, or 165.60% of our non-performing loans. Expressed as a percentage of total loans receivable, our allowance for loan losses was 1.04% at December 31, 2009. At
December 31, 2009 our total non-performing loans and total non-performing assets amounted to $1.0 million and $2.6 million, respectively.

Non-interest income for the years ended December 31, 2009 and 2008 was $836,000 and $526,000, respectively. Customer service fees were $324,000 for 2009, a decrease of $72,000, or 18.2% from 2008.
Our customer service fees consist primarily of service charges on our deposits accounts and broker commissions earned in connection with the origination of reverse mortgage loans. During 2009, our reverse mortgage commissions declined by $82,000 due
to a reduction in the number of loans originated. During the year ended December 31, 2009, the Bank recorded $406,000 in gains from the sale $13.8 million of available-for-sale securities, compared to $3,000 in gains from the sale of $350,000
in available-for-sale securities recorded in 2008. Other non-interest income was $106,000 and $127,000, respectively, for 2009 and 2008.



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##### Index to Financial Statements

For the year ended December 31, 2009, non-interest expense was $7.1 million, an
increase of $688,000 from the year ended December 31, 2008. During 2009, our annual salaries and benefits expense increased by $360,000 or 8.9%. The average number of full-time equivalent employees for 2009 was 66, an increase of 4 full-time
equivalent employees from 2008. This increase in staffing combined with an increase in our health insurance premiums resulted in an increase of $182,000 in 2009 compensation expense compared to 2008. The cost of employee stock ownership plan
(ESOP) and our other equity based compensation plans increased by $161,000 during 2009. The $36,000 increase in the cost of our ESOP in 2009 compared to 2008 was due to an increase during the year in our stock price, and the $125,000
increase in the cost of our equity compensation plans was due to additional awards made during the year. Occupancy expenses for 2009 were $1.2 million, an increase of $92,000 from 2008, primarily due to a $47,000 increase in our data processing
cost, and $25,000 in non-routine maintenance at our main office. Other non-interest expense for the year ended December 31, 2009 was $1.5 million, an increase of $236,000 from the year ended December 31, 2008. During 2009, our FDIC
insurance expense increased by $212,000. This increase was due to an industry-wide second quarter 2009 special assessment, which in our case amounted to $126,000, and increases associated with our participation in the FDICs Temporary Liquidity
Guarantee Program and the FICO component of our FDIC assessment. In addition, a one-time FDIC assessment credit established in December of 2006 was depleted in the second quarter of 2009.

Income tax expense for the years ended December 31, 2009 and December 31, 2008, was $1.4 million and $1.3 million, respectively.
Although pre-tax income for 2009 was $77,000 less than pre-tax income for 2008, our income tax expense increased during the year due to the adjustment in our deferred tax items associated with our equity based compensation plans.

Comparison of Operating Results for the Years Ended December 31, 2008 and December 31, 2007

General.For the year ended December 31, 2008, the Company reported net income of $2.7 million, an increase of $103,000 from the
year ended December 31, 2007. The increase in net income for the year ended December 31, 2008 compared to the year ended December 31, 2007 was primarily attributable to an increase in net interest income of $2.0 million resulting
primarily from higher average balances of interest-earning assets following the Companys initial public offering in July 2007, and the wholesale leverage strategies implemented during 2008. The impact of the increase in net interest income was
partially offset by higher levels of non-interest expense related to our ESOP and our other equity-based compensation plans.

Interest Income. For the year ended December 31, 2008, interest income was $15.8 million, an increase of $2.4 million from the year ended December 31, 2007. During 2008, interest income on loans increased by $589,000
compared to 2007 due to an increase in the average balance of loans receivable of $10.4 million. Interest income on mortgage-backed securities increased by $2.2 million in 2008 compared to 2007 due to an increase in the average balance of
mortgage-backed securities of $38.2 million and an increase in average yield of 30 basis points. During 2008, interest income on investment securities increased by $235,000 over 2007 due to an increase in average balance of $8.7 million, despite a
decrease in average yield of 48 basis points. Interest on other interest earning assets declined by $625,000 during the year ended December 31, 2008 compared to the year ended December 31, 2007, due to a reduction in the average balance of
$7.0 million.

Interest Expense. For the year ended December 31, 2008, total interest expense increased by
$407,000 to $6.0 million, compared to $5.6 million for the year ended December 31, 2007. Total average interest-bearing deposits decreased by $2.1 million to $144.5 million for the year ended December 31, 2008 compared to $146.6 million
for the year ended December 31, 2007. Interest paid on deposits declined by $237,000 due to the decline in average deposit balance and a reduction in average interest paid of 0.12%. Interest expense on total borrowings was $2.0 million for the
year ended December 31, 2008, an increase of $644,000 from the year ended December 31, 2007. The average balance of our total borrowings increased by $20.6 million during 2008, as the Bank increased the leverage in its balance sheet to
acquire additional mortgage-backed securities. The average interest rate paid on our borrowings was 3.93% during 2008, a decline of 52 basis points from the prior year.



47



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##### Index to Financial Statements

Provision for Loan Losses. The Bank recorded net recoveries on its allowance for loan
losses of $43,000 and $268,000, respectively, for the years ended December 31, 2008 and 2007. The recoveries in both 2008 and 2007 are reversals of provisions for loan losses made in prior years on loans secured by properties damaged by
Hurricane Katrina in 2005 that were subsequently paid off by the borrowers in the respective periods during which the recoveries were recorded. These recoveries are net of the loan loss provisions established during the respective periods. Our
allowance for loan losses as a percentage of total loans receivable was 1.72% at December 31, 2008, a decline of 29 basis points from December 31, 2007.

Non-interest Income. Non-interest income for the years ended December 31, 2008 and 2007 was $526,000 and $501,000, respectively. Customer service fees were $396,000 for 2008, an increase of
$62,000 from the prior year. Included in customer service fees are commissions earned on reverse mortgage loan originations, which increased by $82,000 during 2008. Other non-interest income was $127,000 for 2008, a decrease of $40,000 from 2007.

Non-interest Expense. For the years ended December 31, 2008 and 2007, non-interest expense was $6.4 million and
$4.9 million, respectively. Salary and benefit expenses increased by $1.0 million and other non-interest expense increased by $465,000 during the year ending December 31, 2008, over 2007. The increased level of salaries and benefits expense for
2008 compared to 2007 was due to an increase of $256,000 in salaries and wages, a $140,000 increase in benefit plan expenses, and $625,000 in expense from our new equity-based compensation plans. Our equity-based compensation plans were approved by
our shareholders in February 2008, and therefore was a new component of non-interest expense in 2008. The increase in other noninterest expense during the year ended December 31, 2008 compared to the year ended December 31, 2007 was due
primarily to the Louisiana bank shares tax and the Louisiana corporate franchise tax, which were not applicable prior to our mutual-to-stock conversion and initial public offering. The Louisiana bank shares tax was $240,000 and the Louisiana
corporate franchise tax was $90,000 for the year ended December 31, 2008. The remaining increase in other non-interest expense in 2008 compared to 2007 was due to increased public reporting expenditures and higher levels of professional fees
due to our status as a publicly traded company for the entire year in 2008.

Income Tax Expense. Income tax expense for
the year ended December 31, 2008 amounted to $1.3 million compared to $1.1 million for the year ended December 31, 2007. The increase in income tax expense during the year ended December 31, 2008 compared to the year ended
December 31, 2007 was due to the $272,000 increase in pre-tax income between the periods, as well as an adjustment to our deferred tax liability of $110,000 in the fourth quarter of 2007, which lowered our 2007 effective tax rate.

Liquidity and Capital Resources

Our primary sources of funds are from deposits, amortization of loans, loan prepayments and the maturity of loans, mortgage-backed securities and other investments, and other funds provided from operations. While scheduled payments from the
amortization of loans and mortgage-backed securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan prepayments can be greatly influenced by general interest rates, economic conditions and
competition. We also maintain excess funds in short-term, interest-bearing assets that provide additional liquidity. At December 31, 2009, our cash and cash equivalents amounted to $4.7 million. In addition, at such date our available for sale
investment and mortgage-backed securities amounted to an aggregate of $62.5 million.

We use our liquidity to fund existing
and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, and to meet operating expenses. At December 31, 2009, we had certificates of deposit maturing
within the next 12 months amounting to $89.1 million. Based upon historical experience, we anticipate that a significant portion of the maturing certificates of deposit will be redeposited with us. For the year ended December 31, 2009, the
average balance of our outstanding FHLB advances and other borrowings was $65.1 million. At December 31, 2009, we had $37.8 million in outstanding FHLB advances and we had $151.1 million in additional FHLB advances available to us.



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##### Index to Financial Statements

In addition to cash flow from loan and securities payments and prepayments as well as from
sales of available for sale securities, we have significant borrowing capacity available to fund liquidity needs. In recent years we have utilized borrowings as a cost efficient addition to deposits as a source of funds. Our borrowings consist
primarily of advances from the Federal Home Loan Bank of Dallas, of which we are a member. Under terms of the collateral agreement with the Federal Home Loan Bank, we pledge residential mortgage loans and mortgage-backed securities as well as our
stock in the Federal Home Loan Bank as collateral for such advances. We also access funds through reverse repurchase agreements with commercial banks. These borrowings are typically used to fund purchases of mortgage-backed securities at terms more
favorable than those available through the Federal Home Loan Bank. Our borrowings from reverse repurchase agreements amounted to $26.0 million at December 31, 2009. Furthermore, we have the ability to borrow from the Federal Reserve Bank
discount window on an overnight or other short-term basis. Borrowings from the Federal Reserve discount window are typically collateralized U.S. government or agency issued investment or mortgage-backed securities.

Commitments

The following
table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at December 31, 2009.



|                                        |  |                       |            |                                            |                                 |       |                                   |   |                     |  |   |     |  |   |      
|--------------------------------------- |  | --------------------- | ---------- | ------------------------------------------ | ------------------------------- | ----- | --------------------------------- | - | ------------------- |  | - | --- |  | - | -----
|                                        |  | TotalAmountsCommitted |            | Amount of Commitment ExpirationPer Period
|                                        |  |                       | ToOne Year |                                            | More ThanOne Year toThree Years |       | More thanThree Years toFive Years |   | More ThanFive Years
|                                        |  | (In Thousands)       
|Letters of credit                       |  | $                     |           |                                            | $                               |      |                                   | $ |                    |  | $ |    |  | $ |     
|Lines of credit                         |  |                       | 8,384      |                                            |                                 | 215   |                                   |   | 602                 |  |   | 673 |  |   | 6,894
|Undisbursed portion of loans in process |  |                       | 24         |                                            |                                 |      |                                   |   |                    |  |   |    |  |   | 24   
|Commitments to originate loans          |  |                       | 2,321      |                                            |                                 | 2,083 |                                   |   | 238                 |  |   |    |  |   |     
|                                        |  |                       |            |                                            |                                 |       |                                   |   |                     |  |   |     |  |   |      
|Total commitments                       |  | $                     | 10,729     |                                            | $                               | 2,298 |                                   | $ | 840                 |  | $ | 673 |  | $ | 6,918
|                                        |  |                       |            |                                            |                                 |       |                                   |   |                     |  |   |     |  |   |      

Contractual Cash Obligations

The following table summarizes our contractual cash obligations at December 31, 2009.



|                                   |                |            |         |                                 |   |                                   |  |                     |        |  |   |        |  |   |      
|---------------------------------- | -------------- | ---------- | ------- | ------------------------------- | - | --------------------------------- |  | ------------------- | ------ |  | - | ------ |  | - | -----
|                                   |                | Total      |         | Payments Due By Period         
|                                   |                | ToOne Year |         | More ThanOne Year toThree Years |   | More thanThree Yearsto Five Years |  | More ThanFive Years
|                                   | (In Thousands)
|Certificates of deposit            |                | $          | 135,615 |                                 | $ | 89,070                            |  | $                   | 27,824 |  | $ | 18,721 |  | $ |     
|FHLB advances and other borrowings |                |            | 63,810  |                                 |   | 3,720                             |  |                     | 21,872 |  |   | 30,278 |  |   | 7,940
|                                   |                |            |         |                                 |   |                                   |  |                     |        |  |   |        |  |   |      
|Total long-term debt               |                |            | 199,425 |                                 |   | 92,790                            |  |                     | 49,696 |  |   | 48,999 |  |   | 7,940
|Operating lease obligations        |                |            | 195     |                                 |   | 32                                |  |                     | 62     |  |   | 62     |  |   | 39   
|                                   |                |            |         |                                 |   |                                   |  |                     |        |  |   |        |  |   |      
|Total contractual obligations      |                | $          | 199,620 |                                 | $ | 92,822                            |  | $                   | 49,758 |  | $ | 49,061 |  | $ | 7,979
|                                   |                |            |         |                                 |   |                                   |  |                     |        |  |   |        |  |   |      

We anticipate that we will continue to have sufficient
funds and alternative funding sources to meet our current commitments.



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##### Index to Financial Statements

Impact of Inflation and Changing Prices

The financial statements, accompanying notes, and related financial data of Louisiana Bancorp presented herein have been prepared in
accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in purchasing power of money over time due to
inflation. The impact of inflation is reflected in the increased cost of operations. Most of our assets and liabilities are monetary in nature; therefore, the impact of interest rates has a greater impact on its performance than the effects of
general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Recent Accounting Pronouncements

In June 2009, the FASB replaced The Hierarchy of
Generally Accepted Accounting Principles, with the FASB Accounting Standards CodificationTM(The Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with
GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification was effective for financial statements issued for
periods ending after September 15, 2009.

In December 2007, the FASB issued guidance that establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill
acquired in a business combination. The guidance is effective for fiscal years beginning on or after December 15, 2008. There was no impact from adoption of this guidance, as the Company did not have an acquisition during 2009.

On January 1, 2009, the Company adopted new guidance that related to accounting for noncontrolling interests in consolidated financial
statements. The new accounting guidance states for entities to provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners separately within the
consolidated statement of financial condition within equity, but separate from the parents equity and separately on the face of the consolidated statement of operations. Further, the new guidance states that changes in a parents
ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for consistently and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary
should be initially measured at fair value. The adoption of this guidance had no impact on the Company.

In March 2008, the
FASB issued guidance that amended and expanded the disclosure requirements for derivative instruments and hedging activities. The guidance requires qualitative disclosure about objectives and strategies for using derivative and hedging instruments,
quantitative disclosures about fair value amounts of the instruments and gains and losses on such instruments, as well as disclosures about credit-risk features in derivative agreements. The guidance was effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. The adoption of this guidance had no impact on the Company.

In June 2008, the FASB issued guidance which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, included in the earnings allocation in computing earnings
per common share (EPS) under the two-class method. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the
computation of EPS pursuant to the two-class method. This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented
were to be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform to the provisions of this guidance. Since the Companys unvested restricted stock awards do not contain
nonforfeitable rights to dividends, they are not included under the scope of this pronouncement, and therefore, the adoption of this guidance had no impact on the Company.



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##### Index to Financial Statements

In May 2009, FASB issued new guidance relating to subsequent events and established general
standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The new guidance sets forth:



| |  |  | the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.
| | - |  | -------------------------------------------------------------------------------------------------------------------

The Company has adopted the new guidance that was effective for financial statements issued for interim and annual periods ending after
June 15, 2009.

In April 2009, the FASB amended existing guidance for determining whether impairment is
other-than-temporary for debt securities. The guidance requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its
amortized cost basis. If either of these criteria are met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the amount of
impairment is split into two components as follows: 1) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income and 2) OTTI related to credit loss, which must be recognized in the
income statement. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Additionally, disclosures about other-than-temporary impairments for debt and equity
securities were expanded. This guidance was effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance had no impact on the Company.

In August 2009, the FASB issues Accounting Standards Update (ASU) 2009-05, Fair Value Measurements and Disclosures, which
updates ASC 820, Fair Value Measurements and Disclosures. The updated guidance affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction
and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. It also requires an entity to base its conclusion about whether
a transaction was not orderly on the weight of the evidence. This guidance was effective October 1, 2009. The adoption of the new guidance had no impact on the Company.

In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 166, Accounting for Transfers of
Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166). This statement is not yet included in the codification, but will impact ASC 860, Transfers and Servicing. This statement prescribes the information that
a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferors continuing involvement in transferred
financial assets. Specifically, among other aspects, SFAS 166 amends Statement of Financial Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the
concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FIN 46(R) to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in
SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009. This pronouncement is not expected to have an impact on our consolidated financial position and results of operations.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). This
statement is not yet included in the codification, but will impact ASC 810, Consolidation. This statement amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised



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December 2003)an interpretation of ARB No. 51, or FIN 46(R), to require an enterprise to determine whether its variable interest or interests give it a controlling financial
interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entitys
economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the
variable interest entity. SFAS 167 also amends FIN 46(R) to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS 167 is effective for fiscal years beginning after November 15,
2009. This pronouncement is not expected to have an impact on our consolidated financial position and results of operations.



|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk.
|-------- | -----------------------------------------------------------

The information contained in the section captioned Managements Discussion and Analysis of Financial Condition and Results of OperationsHow We Manage Market Risk in Item 7
hereof is incorporated herein by reference.



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##### Index to Financial Statements

|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

Contents



|                                                           |  |        
|---------------------------------------------------------- |  | -------
|Report of Independent Registered Public Accounting Firm    |  | 54     
|                                                           | 
|Basic Financial Statements                                 |  |        
|                                                           | 
|Consolidated Balance Sheets                                |  | 55     
|                                                           | 
|Consolidated Statements of Income                          |  | 56     
|                                                           | 
|Consolidated Statements of Comprehensive Income            |  | 57     
|                                                           | 
|Consolidated Statements of Changes in Shareholders Equity |  | 58     
|                                                           | 
|Consolidated Statements of Cash Flows                      |  | 59     
|                                                           | 
|Notes to Consolidated Financial Statements                 |  | 60  89



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LOGO

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Louisiana Bancorp, Inc.

Metairie, Louisiana

We have audited the accompanying consolidated balance sheets of Louisiana Bancorp, Inc. (the Company) and its wholly owned subsidiary, Bank of New Orleans (the Bank), as of December 31, 2009 and 2008, and the related consolidated
statements of income, comprehensive income, changes in shareholders equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these 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 audits to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Louisiana Bancorp, Inc. as of December 31, 2009 and 2008,
and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine managements assessment of the effectiveness of Louisiana Bancorp, Inc. and Subsidiarys internal
control over financial reporting as of December 31, 2009, included in the Companys 10-K filing with the Securities and Exchange Commission. Accordingly, we do not express an opinion thereon.

/s/ LaPorte, Sehrt, Romig and Hand

A Professional Accounting Corporation

Metairie, Louisiana

March 15, 2010

LOGO



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LOUISIANA BANCORP, INC.

Consolidated Balance Sheets

December 31, 2009 and 2008



|                                                                                                                                                               |  |                |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                               |  | 2009           |         |   | 2008 |  
|                                                                                                                                                               |  | (In Thousands) |        
|Assets                                                                                                                                                         |  |                |         |  
|Cash and Due from Banks                                                                                                                                        |  | $              | 2,317   |   |      | $ | 3,308   |  
|Short-Term Interest-Bearing Deposits                                                                                                                           |  |                | 2,418   |   |      |   | 1,666   |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Total Cash and Cash Equivalents                                                                                                                                |  |                | 4,735   |   |      |   | 4,974   |  
|                                                                                                                                                               |  |               
|Certificates of Deposit                                                                                                                                        |  |                | 1,525   |   |      |   | 1,425   |  
|Securities Available-for-Sale, at Fair Value (Amortized Cost of $61,131 in 2009 and $78,065 in 2008)                                                           |  |                | 62,524  |   |      |   | 80,091  |  
|Securities Held-to-Maturity, at Amortized Cost (Estimated Fair Value of $98,799 in 2009 and $127,255 in 2008)                                                  |  |                | 94,546  |   |      |   | 123,429 |  
|Loans, Net of Allowance for Loan Losses of $1,661 in 2009 and $1,952 in 2008                                                                                   |  |                | 158,446 |   |      |   | 111,236 |  
|Accrued Interest Receivable                                                                                                                                    |  |                | 1,326   |   |      |   | 1,649   |  
|Other Real Estate Owned                                                                                                                                        |  |                | 1,573   |   |      |   |        |  
|Stock in Federal Home Loan Bank                                                                                                                                |  |                | 1,995   |   |      |   | 2,293   |  
|Premises and Equipment, Net                                                                                                                                    |  |                | 1,797   |   |      |   | 1,804   |  
|Other Assets                                                                                                                                                   |  |                | 1,312   |   |      |   | 548     |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Total Assets                                                                                                                                                   |  | $              | 329,779 |   |      | $ | 327,449 |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Liabilities and Shareholders Equity                                                                                                                           |  |                |         |   |      |   |         |  
|Deposits                                                                                                                                                       |  |                |         |   |      |   |         |  
|Non-Interest-Bearing                                                                                                                                           |  | $              | 7,893   |   |      | $ | 4,219   |  
|Interest-Bearing                                                                                                                                               |  |                | 180,729 |   |      |   | 156,370 |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Total Deposits                                                                                                                                                 |  |                | 188,622 |   |      |   | 160,589 |  
|                                                                                                                                                               |  |               
|Borrowings                                                                                                                                                     |  |                | 63,810  |   |      |   | 76,660  |  
|Advance Payments by Borrowers for Taxes and Insurance                                                                                                          |  |                | 1,914   |   |      |   | 1,639   |  
|Accrued Interest Payable                                                                                                                                       |  |                | 597     |   |      |   | 664     |  
|Other Liabilities                                                                                                                                              |  |                | 1,488   |   |      |   | 2,170   |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Total Liabilities                                                                                                                                              |  |                | 256,431 |   |      |   | 241,722 |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Commitments and Contingencies                                                                                                                                  |  |                |        |   |      |   |        |  
|                                                                                                                                                               |  |               
|Shareholders Equity                                                                                                                                           |  |                |         |   |      |   |         |  
|Common Stock, $.01 Par Value, 40,000,000 Shares Authorized; 6,345,732 Shares Issued; 4,764,322 and 5,931,312 Shares Outstanding
in 2009 and 2008, Respectively |  |                | 63      |   |      |   | 63      |  
|Additional Paid-in-Capital                                                                                                                                     |  |                | 62,586  |   |      |   | 62,305  |  
|Unearned ESOP Shares                                                                                                                                           |  |                | (4,442  | ) |      |   | (4,696  | )
|Unearned Recognition and Retention Plan Shares                                                                                                                 |  |                | (2,636  | ) |      |   | (3,200  | )
|Treasury Stock, at Cost (1,581,410 and 414,420 Shares in 2009 and 2008, Respectively)                                                                          |  |                | (20,803 | ) |      |   | (5,208  | )
|Retained Earnings                                                                                                                                              |  |                | 37,660  |   |      |   | 35,126  |  
|Accumulated Other Comprehensive Income                                                                                                                         |  |                | 920     |   |      |   | 1,337   |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Total Shareholders Equity                                                                                                                                     |  |                | 73,348  |   |      |   | 85,727  |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  
|Total Liabilities and Shareholders Equity                                                                                                                     |  | $              | 329,779 |   |      | $ | 327,449 |  
|                                                                                                                                                               |  |                |         |   |      |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



55



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Consolidated Statements of Income

For the Years Ended December 31, 2009, 2008 and 2007



|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|-------------------------------------------------------------- |  | ------------------------------------- | ------ | ---- | - | ------ | ---- |  | - | ------ | -
|                                                               |  | 2009                                  |        | 2008 |   |        | 2007 | 
|                                                               |  | (In Thousands, Except per Share data) |       
|Interest and Dividend Income                                   |  |                                       |        |      |   |        |      |  |   |        |  
|Loans, Including Fees                                          |  | $                                     | 8,400  |      | $ | 7,010  |      |  | $ | 6,421  |  
|Mortgage Backed Securities                                     |  |                                       | 7,637  |      |   | 6,591  |      |  |   | 4,376  |  
|Investment Securities                                          |  |                                       | 723    |      |   | 1,924  |      |  |   | 1,689  |  
|Other Interest-Bearing Deposits                                |  |                                       | 72     |      |   | 312    |      |  |   | 937    |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Total Interest and Dividend Income                             |  |                                       | 16,832 |      |   | 15,837 |      |  |   | 13,423 |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Interest Expense                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Deposits                                                       |  |                                       | 3,714  |      |   | 3,929  |      |  |   | 4,166  |  
|Borrowings                                                     |  |                                       | 2,563  |      |   | 2,034  |      |  |   | 1,390  |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Total Interest Expense                                         |  |                                       | 6,277  |      |   | 5,963  |      |  |   | 5,556  |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Net Interest Income                                            |  |                                       | 10,555 |      |   | 9,874  |      |  |   | 7,867  |  
|Provision (Recovery) for Loan Losses                           |  |                                       | 337    |      |   | (43    | )    |  |   | (268   | )
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Net Interest Income after Provision (Recovery) for Loan Losses |  |                                       | 10,218 |      |   | 9,917  |      |  |   | 8,135  |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Non-Interest Income                                            |  |                                       |        |      |   |        |      |  |   |        |  
|Customer Service Fees                                          |  |                                       | 324    |      |   | 396    |      |  |   | 334    |  
|Gain on Sale of Securities                                     |  |                                       | 406    |      |   | 3      |      |  |   |       |  
|Other Income                                                   |  |                                       | 106    |      |   | 127    |      |  |   | 167    |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Total Non-Interest Income                                      |  |                                       | 836    |      |   | 526    |      |  |   | 501    |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Non-Interest Expense                                           |  |                                       |        |      |   |        |      |  |   |        |  
|Salaries and Employee Benefits                                 |  |                                       | 4,404  |      |   | 4,044  |      |  |   | 2,995  |  
|Occupancy Expense                                              |  |                                       | 1,155  |      |   | 1,063  |      |  |   | 1,022  |  
|Loss on Sale of Securities                                     |  |                                       |       |      |   |       |      |  |   | 20     |  
|Other Expenses                                                 |  |                                       | 1,531  |      |   | 1,295  |      |  |   | 830    |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Total Non-Interest Expense                                     |  |                                       | 7,090  |      |   | 6,402  |      |  |   | 4,867  |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Income Before Income Tax Expense                               |  |                                       | 3,964  |      |   | 4,041  |      |  |   | 3,769  |  
|Income Tax Expense                                             |  |                                       | 1,430  |      |   | 1,297  |      |  |   | 1,128  |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Net Income                                                     |  | $                                     | 2,534  |      | $ | 2,744  |      |  | $ | 2,641  |  
|                                                               |  |                                       |        |      |   |        |      |  |   |        |  
|Earnings Per Share                                             |  |                                       |        |      |   |        |      |  |   |        |  
|Basic                                                          |  | $                                     | 0.54   |      | $ | 0.49   |      |  | $ | 0.94   |  
|Diluted                                                        |  | $                                     | 0.54   |      | $ | 0.49   |      |  | $ | 0.94   |  

The accompanying
notes are an integral part of these consolidated financial statements.



56



---

##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2009, 2008 and 2007



|                                                                      |  |                |       |   |      |   |       |      |  |   |      
|--------------------------------------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | -----
|                                                                      |  | 2009           |       |   | 2008 |   |       | 2007
|                                                                      |  | (In Thousands)
|Net Income                                                            |  | $              | 2,534 |   |      | $ | 2,744 |      |  | $ | 2,641
|                                                                      |  |                |      
|Other Comprehensive (Loss) Income,                                    |  |                |       |   |      |   |       |      |  |   |      
|Net of Tax                                                            |  |                |       |   |      |   |       |      |  |   |      
|Unrealized Holding (Losses) Gains Arising During the Period           |  |                | (149  | ) |      |   | 1,037 |      |  |   | 832  
|Reclassification Adjustment for (Gains) Losses Included in Net Income |  |                | (268  | ) |      |   | (2    | )    |  |   | 13   
|                                                                      |  |                |       |   |      |   |       |      |  |   |      
|Total Other Comprehensive (Loss) Income                               |  |                | (417  | ) |      |   | 1,035 |      |  |   | 845  
|                                                                      |  |                |       |   |      |   |       |      |  |   |      
|Comprehensive Income                                                  |  | $              | 2,117 |   |      | $ | 3,779 |      |  | $ | 3,486
|                                                                      |  |                |       |   |      |   |       |      |  |   |      

The accompanying notes are an integral part of these
consolidated financial statements.



57



---

##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Consolidated Statements of Changes in Shareholders Equity

For the Years Ended December 31, 2009, 2008 and 2007



|                                                                                      |  |                |    |                          |   |        |                   |  |   |                  |   |  |               |        |   |                  |   |                                            |   |  |                          |        |  |   |       |   |  |   |         |  
|------------------------------------------------------------------------------------- |  | -------------- | -- | ------------------------ | - | ------ | ----------------- |  | - | ---------------- | - |  | ------------- | ------ | - | ---------------- | - | ------------------------------------------ | - |  | ------------------------ | ------ |  | - | ----- | - |  | - | ------- | -
|                                                                                      |  | CommonStock    |    | AdditionalPaid-inCapital |   |        | UnearnedESOPStock |  |   | UnearnedRRPStock |   |  | TreasuryStock |        |   | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TotalShareholdersEquity |       
|                                                                                      |  | (In Thousands) |   
|Balances at December 31, 2006                                                         |  | $              |   |                          | $ |       |                   |  | $ |                 |   |  | $             |       |   |                  | $ |                                           |   |  | $                        | 29,741 |  | $ | (543  | ) |  | $ | 29,198  |  
|Net IncomeYear Ended December 31, 2007                                               |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          | 2,641  |  |   |      |   |  |   | 2,641   |  
|Other Comprehensive Income, Net of Applicable Deferred Income Taxes                   |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   | 845   |   |  |   | 845     |  
|Issuance of Common Stock for Initial Public Offering, Net of $1.3 Million of Expenses |  |                | 63 |                          |   | 62,063 |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 62,126  |  
|Stock Purchased for ESOP                                                              |  |                |   |                          |   |       |                   |  |   | (5,077           | ) |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | (5,077  | )
|ESOP Shares Released for Allocation (12,691 Shares)                                   |  |                |   |                          |   | 10     |                   |  |   | 127              |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 137     |  
|                                                                                      |  |                |    |                          |   |        |                   |  |   |                  |   |  |               |        |   |                  |   |                                            |   |  |                          |        |  |   |       |   |  |   |         |  
|Balances at December 31, 2007                                                         |  |                | 63 |                          |   | 62,073 |                   |  |   | (4,950           | ) |  |               |       |   |                  |   |                                           |   |  |                          | 32,382 |  |   | 302   |   |  |   | 89,870  |  
|Net IncomeYear Ended December 31, 2008                                               |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          | 2,744  |  |   |      |   |  |   | 2,744   |  
|Other Comprehensive Income, Net of Applicable Deferred Income Taxes                   |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   | 1,035 |   |  |   | 1,035   |  
|Stock Purchased for Recognition and Retention Plan                                    |  |                |   |                          |   |       |                   |  |   |                 |   |  |               | (3,200 | ) |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | (3,200  | )
|Stock Purchased for Treasury                                                          |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   | (5,208                                     | ) |  |                          |       |  |   |      |   |  |   | (5,208  | )
|ESOP Shares Released for Allocation (25,382 Shares)                                   |  |                |   |                          |   | 53     |                   |  |   | 254              |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 307     |  
|Stock Option Expense                                                                  |  |                |   |                          |   | 179    |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 179     |  
|                                                                                      |  |                |    |                          |   |        |                   |  |   |                  |   |  |               |        |   |                  |   |                                            |   |  |                          |        |  |   |       |   |  |   |         |  
|Balances at December 31, 2008                                                         |  |                | 63 |                          |   | 62,305 |                   |  |   | (4,696           | ) |  |               | (3,200 | ) |                  |   | (5,208                                     | ) |  |                          | 35,126 |  |   | 1,337 |   |  |   | 85,727  |  
|Net IncomeYear Ended December 31, 2009                                               |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          | 2,534  |  |   |      |   |  |   | 2,534   |  
|Other Comprehensive Loss, Net of Applicable Deferred Income Taxes                     |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   | (417  | ) |  |   | (417    | )
|Stock Purchased for Treasury                                                          |  |                |   |                          |   |       |                   |  |   |                 |   |  |               |       |   |                  |   | (15,595                                    | ) |  |                          |       |  |   |      |   |  |   | (15,595 | )
|ESOP Shares Released for Allocation (25,382 Shares)                                   |  |                |   |                          |   | 89     |                   |  |   | 254              |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 343     |  
|RRP Shares Earned                                                                     |  |                |   |                          |   | (48    | )                 |  |   |                 |   |  |               | 564    |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 516     |  
|Stock Option Expense                                                                  |  |                |   |                          |   | 240    |                   |  |   |                 |   |  |               |       |   |                  |   |                                           |   |  |                          |       |  |   |      |   |  |   | 240     |  
|                                                                                      |  |                |    |                          |   |        |                   |  |   |                  |   |  |               |        |   |                  |   |                                            |   |  |                          |        |  |   |       |   |  |   |         |  
|Balances at December 31, 2009                                                         |  | $              | 63 |                          | $ | 62,586 |                   |  | $ | (4,442           | ) |  | $             | (2,636 | ) |                  | $ | (20,803                                    | ) |  | $                        | 37,660 |  | $ | 920   |   |  | $ | 73,348  |  
|                                                                                      |  |                |    |                          |   |        |                   |  |   |                  |   |  |               |        |   |                  |   |                                            |   |  |                          |        |  |   |       |   |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



58



---

##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2009, 2008 and 2007



|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | 2009           |         |   | 2008 |   |         | 2007 | 
|                                                                                  |  | (In Thousands) |        
|Cash Flows from Operating Activities                                              |  |                |         |   |      |   |         |      |  |   |         |  
|Net Income                                                                        |  | $              | 2,534   |   |      | $ | 2,744   |      |  | $ | 2,641   |  
|Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |  |                |         |   |      |   |         |      |  |   |         |  
|Depreciation                                                                      |  |                | 239     |   |      |   | 230     |      |  |   | 242     |  
|Provision (Recovery) for Loan Losses                                              |  |                | 337     |   |      |   | (43     | )    |  |   | (268    | )
|Net Increase in ESOP Shares Earned                                                |  |                | 343     |   |      |   | 307     |      |  |   | 137     |  
|Net Increase in RRP Shares Earned                                                 |  |                | 516     |   |      |   |        |      |  |   |        |  
|Stock Option Plan Expense                                                         |  |                | 240     |   |      |   | 179     |      |  |   |        |  
|Discount Accretion Net of Premium Amortization                                    |  |                | (319    | ) |      |   | (155    | )    |  |   | 93      |  
|Gain on Insurance Settlement                                                      |  |                | (2      | ) |      |   |        |      |  |   |        |  
|Deferred Income Tax (Benefit) Expense                                             |  |                | (133    | ) |      |   | 70      |      |  |   | (640    | )
|(Gain) Loss on Sale of Securities                                                 |  |                | (406    | ) |      |   | (3      | )    |  |   | 20      |  
|Gain on Sale of Loans                                                             |  |                | (36     | ) |      |   | (31     | )    |  |   | (37     | )
|Gain on Sale of Property and Equipment                                            |  |                | (4      | ) |      |   | (7      | )    |  |   |        |  
|Originations of Loans Held-for-Sale                                               |  |                | (12,509 | ) |      |   | (1,281  | )    |  |   | (1,377  | )
|Proceeds from Sales of Loans Held-for-Sale                                        |  |                | 12,478  |   |      |   | 1,269   |      |  |   | 1,397   |  
|Decrease (Increase) in Accrued Interest Receivable                                |  |                | 323     |   |      |   | 26      |      |  |   | (416    | )
|(Increase) Decrease in Other Assets                                               |  |                | (652    | ) |      |   | 164     |      |  |   | 481     |  
|(Decrease) Increase in Accrued Interest Payable                                   |  |                | (67     | ) |      |   | 89      |      |  |   | 102     |  
|(Decrease) Increase in Other Liabilities                                          |  |                | (446    | ) |      |   | 1,062   |      |  |   | (219    | )
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Net Cash Provided by Operating Activities                                         |  |                | 2,436   |   |      |   | 4,620   |      |  |   | 2,156   |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Cash Flows from Investing Activities                                              |  |                |         |   |      |   |         |      |  |   |         |  
|Investment in Certificates of Deposit                                             |  |                | (1,676  | ) |      |   | (1,811  | )    |  |   | (1,219  | )
|Purchase of Securities Available-for-Sale                                         |  |                | (37,455 | ) |      |   | (56,116 | )    |  |   | (31,555 | )
|Purchase of Securities Held-to-Maturity                                           |  |                | (8,601  | ) |      |   | (61,092 | )    |  |   | (35,491 | )
|Proceeds from Maturities of Certificates of Deposit                               |  |                | 1,576   |   |      |   | 2,496   |      |  |   | 1,733   |  
|Proceeds from Maturities of Securities Available-for-Sale                         |  |                | 42,772  |   |      |   | 50,154  |      |  |   | 13,693  |  
|Proceeds from Maturities of Securities Held-to-Maturity                           |  |                | 36,046  |   |      |   | 19,189  |      |  |   | 15,241  |  
|Proceeds from Sales of Securities Available-for-Sale                              |  |                | 13,781  |   |      |   | 350     |      |  |   | 1,980   |  
|Net Increase in Loans Receivable                                                  |  |                | (49,967 | ) |      |   | (15,632 | )    |  |   | (9,190  | )
|Proceeds from Sales of Loans Held for Investing                                   |  |                | 914     |   |      |   | 1,384   |      |  |   | 1,998   |  
|Insurance ProceedsProperty Damage                                                |  |                | 42      |   |      |   |        |      |  |   |        |  
|Purchase of Property and Equipment                                                |  |                | (272    | ) |      |   | (165    | )    |  |   | (181    | )
|Proceeds from Sale of Property and Equipment                                      |  |                | 4       |   |      |   | 15      |      |  |   |        |  
|Net Decrease (Increase) in Investment in Federal Home Loan Bank Stock             |  |                | 298     |   |      |   | (919    | )    |  |   | 828     |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Net Cash Used in Investing Activities                                             |  |                | (2,538  | ) |      |   | (62,147 | )    |  |   | (42,163 | )
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Cash Flows from Financing Activities                                              |  |                |         |   |      |   |         |      |  |   |         |  
|Increase (Decrease) in Deposits                                                   |  |                | 28,033  |   |      |   | 16,960  |      |  |   | (6,706  | )
|Increase (Decrease) in Advances by Borrowers for Taxes and Insurance              |  |                | 275     |   |      |   | 57      |      |  |   | (1,687  | )
|Proceeds from Stock Issuance                                                      |  |                |        |   |      |   |        |      |  |   | 62,126  |  
|(Decrease) Increase in Borrowings                                                 |  |                | (12,850 | ) |      |   | 42,244  |      |  |   | (826    | )
|Stock Purchased for ESOP                                                          |  |                |        |   |      |   |        |      |  |   | (5,077  | )
|Stock Purchased for RRP                                                           |  |                |        |   |      |   | (3,200  | )    |  |   |        |  
|Purchase of Treasury stock                                                        |  |                | (15,595 | ) |      |   | (5,208  | )    |  |   |        |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Net Cash (Used in) Provided by Financing Activities                               |  |                | (137    | ) |      |   | 50,853  |      |  |   | 47,830  |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Net (Decrease) Increase in Cash and Cash Equivalents                              |  |                | (239    | ) |      |   | (6,674  | )    |  |   | 7,823   |  
|Cash and Cash Equivalents, Beginning of Year                                      |  |                | 4,974   |   |      |   | 11,648  |      |  |   | 3,825   |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Cash and Cash Equivalents, End of Year                                            |  | $              | 4,735   |   |      | $ | 4,974   |      |  | $ | 11,648  |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Supplemental Disclosure of Cash Flow Information                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Cash Paid During the Year for:                                                    |  |                |         |   |      |   |         |      |  |   |         |  
|Interest                                                                          |  | $              | 6,344   |   |      | $ | 5,874   |      |  | $ | 5,454   |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Income Taxes                                                                      |  | $              | 2,498   |   |      | $ | 654     |      |  | $ | 1,044   |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|Loans Transferred to Other Real Estate Owned                                      |  | $              | 1,573   |   |      | $ |        |      |  | $ |        |  
|                                                                                  |  |                |         |   |      |   |         |      |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements



|Note 1. | Summary of Significant Accounting Policies
|------- | ------------------------------------------

Louisiana Bancorp, Inc. (the Company) was organized as a Louisiana corporation on March 16, 2007, for the purpose of becoming the holding company of Bank of New Orleans (the
Bank) in anticipation of converting the Bank from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association. In July 2007, the Company completed the conversion. The Bank
operates in the banking/savings and loan industry and, as such, attracts deposits from the general public and uses such deposits primarily to originate loans secured by first mortgages on owner-occupied, family residences and other properties.

The Bank is subject to competition from other financial institutions, and is also subject to the regulations of certain
Federal and State agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bank of New
Orleans. All significant inter-company balances and transactions have been eliminated in consolidation.

Significant Group Concentrations
of Credit Risk

Most of the Banks activities are with customers located within the greater New Orleans area in
Louisiana. Note 2 discusses the types of securities in which the Bank invests. Note 3 discusses the types of lending in which the Bank engages. The Bank does not have any significant concentrations in any one industry or to any one customer.

Cash and Cash Equivalents

For the purposes of the Statements of Cash Flows, cash and cash equivalents include cash and balances due from banks, federal funds sold and securities purchased under agreements to resell, all of which
mature within ninety days.

Investment Securities

Securities are being accounted for in accordance with FASB Accounting Standards Codification (ASC) 320, InvestmentsDebt and Equity Securities.ASC 320 requires the classification
of securities into one of three categories: Trading, Available-for-Sale, or Held-to-Maturity. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically.

Available-for-sale securities are stated at market value, with unrealized gains and losses, net of income taxes, reported as
a separate component of accumulated other comprehensive income until realized. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of
mortgage-backed securities, over the estimated life of the security.

Securities designated as held-to-maturity are stated at
cost adjusted for amortization of the related premiums and accretion of discounts, using the interest method. The Company has the positive intent and ability to hold these securities to maturity.

The Company held no trading securities as of December 31, 2009 or 2008.



60



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Amortization, accretion and accrued interest are included in interest income on
securities. Realized gains and losses, and declines in value judged to be other than temporary, are included in net securities gains or losses. Gains and losses on the sale of securities available-for-sale are determined using the
specific-identification method.

Loans

The Bank grants one-to four-family, multi-family residential, commercial, and land mortgage loans, and consumer and construction loans, and lines of credit to customers. Certain first mortgage loans are
originated and sold under loan sales agreements. A substantial portion of the loan portfolio is represented by mortgage loans throughout the greater New Orleans area. The ability of the Banks debtors to honor their contracts is dependent upon
the real estate and general economic conditions in this area.

Loans are reported at their outstanding unpaid principal
balance adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance.

When the payment of principal or interest on a loan is delinquent for more than 90 days, or earlier in some cases, the loan is placed on
non-accrual status, unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan. If the decision is made to continue accruing interest on the loan, periodic reviews are made to confirm
the accruing status of the loan. All interest accrued but not collected for loans that are placed on non-accrual or loans charged-off is reversed against income. The interest on these loans is accounted for on the cash basis or cost-recovery method,
until qualifying for return to accrual basis. Loans are returned to the accrual status when all of the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The Bank considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Bank will be
unable to collect all amounts due according to the contractual terms of the loan agreement. The Banks impaired loans include troubled debt restructurings, and performing and non-performing loans in which full payment of principal or interest
is not expected. The Bank calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loans effective interest rate, or at the loans observable market price or the fair
value of its collateral.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance available for losses incurred on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination
is made that a loss is likely to occur. Recoveries are credited to the allowance at the time of recovery.

The allowance is an
amount that represents the amount of probable and reasonably estimable known and inherent losses in the loan portfolio, based on evaluations of the collectability of loans. The evaluations take into consideration such factors as changes in the types
and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, estimated losses relating to specifically identified loans,
and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impacted loans, value of collateral,
estimated losses on our commercial and residential loan portfolios and general amounts for historical loss experience. All of these estimates may be susceptible to significant change.

It should be understood that estimates of future loan losses involve an exercise of judgment. While it is possible that in particular
periods, the Bank may sustain losses, which are substantial relative to the allowance for



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



loan losses, it is the judgment of management that the allowance for loan losses reflected in the accompanying statements of condition is adequate to absorb possible losses in the existing loan
portfolio.

Loans Held-for-Sale

Loans held-for-sale include originated mortgage loans intended for sale in the secondary market, which are carried at the lower of cost or estimated market value. Loans held-for-sale are identified at the
time of origination, in accordance with the Banks interest rate risk strategy. In addition, the Bank occasionally sells loans that it originates, but cannot hold, due to regulatory limitations on loans to one borrower, concentrations of credit
in a particular property type or industry.

Student loans are held for investment purposes as long as the student is still in
school. In accordance with the Banks agreement with Student Loan Marketing Association (SLMA), these loans are transferred to the held-for-sale category and are sold, once the student has gone into repayment status.

Loan Fees, Loan Costs, Discounts and Premiums

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as an adjustment to the related loans yield using the interest method over the contractual
life of the loan.

Discounts received in connection with mortgage loans purchased are amortized to income over the term of the
loan using the interest method. Premiums on purchased loans are amortized over the term of the loan using the interest method.

Premises
and Equipment

Premises and equipment are carried at cost, less accumulated depreciation. The Bank computes depreciation
and amortization generally on the straight-line method for both financial reporting and Federal income tax purposes. Estimated useful lives of premises and equipment range as follows:



|                                  |  |              
|--------------------------------- |  | -------------
|Buildings                         |  | 20  40 Years
|Furniture, Fixtures and Equipment |  | 3  10 Years 
|Automobiles                       |  | 5 Years      

Real Estate Owned

Real estate acquired through, or in lieu of, loan foreclosure is initially recorded at fair value, less estimated cost to
sell, at the date of foreclosure and any related write-down is charged to the allowance for loan losses. Management periodically performs valuations, and an allowance for losses will be established when any significant and permanent decline reduces
the fair value to less than the carrying value. The ability of the Company to recover the carrying value of real estate is based upon future sales of the real estate owned. The ability to effect such sales is subject to market conditions and other
factors, many of which are beyond the Companys control. Operating income of such properties, net of related expenses, and gains and losses on their disposition are included in the accompanying statements of income.

Income Taxes

Deferred
income tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision for income taxes.



62



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



When tax returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the
financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if
any.

Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds
the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheets along with any associated interest or penalties that would be payable to the taxing authorities upon
examination. Interest and/or penalties associated with unrecognized tax benefits, if any, would be classified as additional income taxes in the statements of income.

Advertising Costs

The Company expenses advertising costs as incurred.
Advertising costs were $163,000, $223,000, and $200,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

Comprehensive Earnings

Accounting principles generally require that recognized revenue, expenses, gains and
losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheets, such items,
along with net earnings, are components of comprehensive earnings.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans and deferred taxes.

Recent Accounting Pronouncements

In June 2009, the
FASB replaced The Hierarchy of Generally Accepted Accounting Principles, with the FASB Accounting Standards Codification (the Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The
Codification was effective for financial statements issued for periods ending after September 15, 2009.

In December
2007, the FASB issued guidance that establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities



63



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. The guidance is effective for fiscal years
beginning on or after December 15, 2008. There was no impact from adoption of this guidance, as the Company did not have an acquisition during 2009.

On January 1, 2009, the Company adopted new guidance that related to accounting for noncontrolling interests in consolidated financial statements. The new accounting guidance states for entities to
provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners separately within the consolidated statement of financial condition within equity, but separate
from the parents equity and separately on the face of the consolidated statement of operations. Further, the new guidance states that changes in a parents ownership interest while the parent retains its controlling financial interest in
its subsidiary should be accounted for consistently and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary should be initially measured at fair value. The adoption of this guidance had no
impact on the Company.

In March 2008, the FASB issued guidance that amended and expanded the disclosure requirements for
derivative instruments and hedging activities. The guidance requires qualitative disclosure about objectives and strategies for using derivative and hedging instruments, quantitative disclosures about fair value amounts of the instruments and gains
and losses on such instruments, as well as disclosures about credit-risk features in derivative agreements. The guidance was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The
adoption of this guidance had no impact on the Company.

In June 2008, the FASB issued guidance which addresses whether
instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, included in the earnings allocation in computing earnings per common share (EPS) under the two-class method. Unvested
share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. This guidance
was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented were to be adjusted retrospectively (including interim financial
statements, summaries of earnings, and selected financial data) to conform to the provisions of this guidance. Since the Companys unvested restricted stock awards do not contain nonforfeitable rights to dividends, they are not included under
the scope of this pronouncement, and therefore, the adoption of this guidance had no impact on the Company.

In May 2009, FASB
issued new guidance relating to subsequent events and established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The new
guidance sets forth:



| |  |  | the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.
| | - |  | -------------------------------------------------------------------------------------------------------------------

The Company has adopted the new guidance that was effective for financial statements issued for interim and annual periods ending after
June 15, 2009.



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



In April 2009, the FASB amended existing guidance for determining whether impairment is
other-than-temporary for debt securities. The guidance requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its
amortized cost basis. If either of these criteria are met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the amount of
impairment is split into two components as follows: 1) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income and 2) OTTI related to credit loss, which must be
recognized in the income statement. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Additionally, disclosures about other-than-temporary impairments for
debt and equity securities were expanded. This guidance was effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance had no impact on the Company.

In August 2009, the FASB issues Accounting Standards Update (ASU) 2009-05, Fair Value Measurements and Disclosures, which
updates ASC 820, Fair Value Measurements and Disclosures. The updated guidance affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction
and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. It also requires an entity to base its conclusion about whether
a transaction was not orderly on the weight of the evidence. This guidance was effective October 1, 2009. The adoption of the new guidance had no impact on the Company.

In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 166, Accounting for Transfers of
Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166). This statement is not yet included in the Codification, but will impact ASC 860, Transfers and Servicing. This statement prescribes the information that
a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferors continuing involvement in transferred
financial assets. Specifically, among other aspects, SFAS 166 amends Statement of Financial Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the
concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FIN 46(R) to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in
SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009. This pronouncement is not expected to have an impact on our consolidated financial position and results of operations.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). This
statement is not yet included in the Codification, but will impact ASC 810, Consolidation. This statement amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised December 2003)an interpretation of
ARB No. 51, or FIN 46(R), to require an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the
enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and (2) the obligation to absorb losses of the entity that could
potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. SFAS 167 also amends FIN 46(R) to require ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. This pronouncement is not expected to have an impact on our consolidated financial
position and results of operations.



65



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 2. | Securities
|------- | ----------

A summary of
securities classified as available-for-sale at December 31, 2009 and 2008, with gross unrealized gains and losses, is as follows:



|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|-------------------------------------- |  | ----------------- | ------ | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ------
|                                       |  | December 31, 2009
|                                       |  | AmortizedCost     |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                       |  | (In Thousands)   
|Securities Available-for-Sale          |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|Mortgage-Backed Securities             |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|GNMA                                   |  | $                 | 508    |                      | $ | 40                    |  | $ |                    |   |  | $ | 548   
|FNMA                                   |  |                   | 17,330 |                      |   | 770                   |  |   |                    |   |  |   | 18,100
|FHLMC                                  |  |                   | 8,026  |                      |   | 405                   |  |   |                    |   |  |   | 8,431 
|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|                                       |  |                   | 25,864 |                      |   | 1,215                 |  |   |                    |   |  |   | 27,079
|U.S. Government and Agency Obligations |  |                   | 35,267 |                      |   | 348                   |  |   | (170                | ) |  |   | 35,445
|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|Total                                  |  | $                 | 61,131 |                      | $ | 1,563                 |  | $ | (170                | ) |  | $ | 62,524
|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|                                       | 
|                                       |  | December 31, 2008
|                                       |  | AmortizedCost     |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                       |  | (In Thousands)   
|Securities Available-for-Sale          |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|Mortgage-Backed Securities             |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|GNMA                                   |  | $                 | 15,682 |                      | $ | 427                   |  | $ |                    |   |  | $ | 16,109
|FNMA                                   |  |                   | 25,750 |                      |   | 727                   |  |   |                    |   |  |   | 26,477
|FHLMC                                  |  |                   | 11,228 |                      |   | 345                   |  |   |                    |   |  |   | 11,573
|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|                                       |  |                   | 52,660 |                      |   | 1,499                 |  |   |                    |   |  |   | 54,159
|U.S. Government and Agency Obligations |  |                   | 25,405 |                      |   | 527                   |  |   |                    |   |  |   | 25,932
|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|Total                                  |  | $                 | 78,065 |                      | $ | 2,026                 |  | $ |                    |   |  | $ | 80,091
|                                       |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       



66



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



A summary of securities classified as held-to-maturity at December 31, 2009 and
2008, with gross unrealized gains and losses, is as follows:



|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|-------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                       |  | December 31, 2009
|                                       |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                       |  | (In Thousands)   
|Securities Held-to-Maturity            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Mortgage-Backed Securities             |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|GNMA                                   |  | $                 | 12,386  |                      | $ | 376                   |  | $ |                    |   |  | $ | 12,762 
|FNMA                                   |  |                   | 49,211  |                      |   | 2,263                 |  |   | (2                  | ) |  |   | 51,472 
|FHLMC                                  |  |                   | 28,597  |                      |   | 1,600                 |  |   | (1                  | ) |  |   | 30,196 
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|                                       |  |                   | 90,194  |                      |   | 4,239                 |  |   | (3                  | ) |  |   | 94,430 
|U.S. Government and Agency Obligations |  |                   | 3,000   |                      |   |                      |  |   | (15                 | ) |  |   | 2,985  
|Municipal Bonds                        |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Revenue Bonds                          |  |                   | 286     |                      |   | 14                    |  |   |                    |   |  |   | 300    
|General Obligation Bonds               |  |                   | 1,066   |                      |   | 18                    |  |   |                    |   |  |   | 1,084  
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|                                       |  |                   | 1,352   |                      |   | 32                    |  |   |                    |   |  |   | 1,384  
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                                  |  | $                 | 94,546  |                      | $ | 4,271                 |  | $ | (18                 | ) |  | $ | 98,799 
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|                                       | 
|                                       |  | December 31, 2008
|                                       |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                       |  | (In Thousands)   
|Securities Held-to-Maturity            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Mortgage-Backed Securities             |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|GNMA                                   |  | $                 | 11,695  |                      | $ | 220                   |  | $ | (7                  | ) |  | $ | 11,908 
|FNMA                                   |  |                   | 65,818  |                      |   | 2,052                 |  |   | (17                 | ) |  |   | 67,853 
|FHLMC                                  |  |                   | 39,809  |                      |   | 1,487                 |  |   | (7                  | ) |  |   | 41,289 
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|                                       |  |                   | 117,322 |                      |   | 3,759                 |  |   | (31                 | ) |  |   | 121,050
|U.S. Government and Agency Obligations |  |                   | 3,000   |                      |   | 1                     |  |   |                    |   |  |   | 3,001  
|Municipal Bonds                        |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Revenue Bonds                          |  |                   | 550     |                      |   | 23                    |  |   |                    |   |  |   | 573    
|General Obligation Bonds               |  |                   | 2,557   |                      |   | 74                    |  |   |                    |   |  |   | 2,631  
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|                                       |  |                   | 3,107   |                      |   | 97                    |  |   |                    |   |  |   | 3,204  
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                                  |  | $                 | 123,429 |                      | $ | 3,857                 |  | $ | (31                 | ) |  | $ | 127,255
|                                       |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        



67



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



The amortized cost and fair value of available-for-sale and held-to-maturity securities
by contractual maturity at December 31, 2009, are as follows. Actual maturities will differ from contractual maturities because borrowers may have the right to put or prepay obligations with or without call or prepayment penalties.



|                     |  |                              |        |                            |   |               |  |                    |        |  |   |       
|-------------------- |  | ---------------------------- | ------ | -------------------------- | - | ------------- |  | ------------------ | ------ |  | - | ------
|                     |  | Available-for-SaleSecurities |        | Held-to-MaturitySecurities
|                     |  | AmortizedCost                |        | EstimatedFairValue         |   | AmortizedCost |  | EstimatedFairValue
|                     |  | (In Thousands)              
|Amounts Maturing in: |  |                              |        |                            |   |               |  |                    |        |  |   |       
|Less than One Year   |  | $                            |       |                            | $ |              |  | $                  | 10     |  | $ | 10    
|One to Five Years    |  |                              | 42,335 |                            |   | 42,715        |  |                    | 8,248  |  |   | 8,419 
|Five to Ten Years    |  |                              | 5,054  |                            |   | 5,339         |  |                    | 12,875 |  |   | 13,521
|Over Ten Years       |  |                              | 13,742 |                            |   | 14,470        |  |                    | 73,413 |  |   | 76,849
|                     |  |                              |        |                            |   |               |  |                    |        |  |   |       
|Total                |  | $                            | 61,131 |                            | $ | 62,524        |  | $                  | 94,546 |  | $ | 98,799
|                     |  |                              |        |                            |   |               |  |                    |        |  |   |       

During the year ended December 31, 2009, the
Company sold available-for-sale securities for $13,781,000, resulting in realized gains of $406,000. During the years ended December 31, 2008 and December 31, 2007, the Company sold available-for-sale investment securities for $350,000 and
$1,980,000, respectively. In 2008, the Company realized gains on the sale of available-for-sale securities of $3,000, and in 2007, the Company realized losses on the sale of available-for sale securities of $20,000.

Information pertaining to securities with gross unrealized losses at December 31, 2009 and 2008, aggregated by investment category and
length of time that individual securities have been in a continuous loss position follows:



|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|-------------------------------------- |  | -------------------------- | --- | ----------------------------- | - | ------------------------- |  | ------------------ | - |  | - | -
|                                       |  | Available-for-Sale        
|                                       |  | Losses Less Than 12 Months |     | Losses Greater Than 12 Months
|                                       |  | Gross  Unrealized  Losses  |     | EstimatedFairValue            |   | Gross  Unrealized  Losses |  | EstimatedFairValue
|                                       |  | (In Thousands)            
|December 31, 2009                      |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|Mortgage-Backed Securities             |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|GNMA                                   |  | $                          |    |                               | $ |                          |  | $                  |  |  | $ | 
|FNMA                                   |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|FHLMC                                  |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|                                       |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|U.S. Government and Agency Obligations |  |                            | 170 |                               |   | 15,295                    |  |                    |  |  |   | 
|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|Total                                  |  | $                          | 170 |                               | $ | 15,295                    |  | $                  |  |  | $ | 
|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|December 31, 2008                      |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|Mortgage-Backed Securities             |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|GNMA                                   |  | $                          |    |                               | $ |                          |  | $                  |  |  | $ | 
|FNMA                                   |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|FHLMC                                  |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|                                       |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|U.S. Government and Agency Obligations |  |                            |    |                               |   |                          |  |                    |  |  |   | 
|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  
|Total                                  |  | $                          |    |                               | $ |                          |  | $                  |  |  | $ | 
|                                       |  |                            |     |                               |   |                           |  |                    |   |  |   |  



68



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|-------------------------------------- |  | ----------------------------- | -- | ----------------------------- | - | ----------------------------- |  | ------------------ | - |  | - | --
|                                       |  | Held-to-Maturity             
|                                       |  | Losses Less Than 12 Months    |    | Losses Greater Than 12 Months
|                                       |  | Gross    Unrealized    Losses |    | EstimatedFairValue            |   | Gross    Unrealized    Losses |  | EstimatedFairValue
|                                       |  | (In Thousands)               
|December 31, 2009                      |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|Mortgage-Backed Securities             |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|GNMA                                   |  | $                             |   |                               | $ |                              |  | $                  |  |  | $ |  
|FNMA                                   |  |                               | 2  |                               |   | 477                           |  |                    |  |  |   |  
|FHLMC                                  |  |                               |   |                               |   |                              |  |                    | 1 |  |   | 43
|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|                                       |  |                               | 2  |                               |   | 477                           |  |                    | 1 |  |   | 43
|U.S. Government and Agency Obligations |  |                               | 15 |                               |   | 2,985                         |  |                    |  |  |   |  
|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|Total                                  |  | $                             | 17 |                               | $ | 3,462                         |  | $                  | 1 |  | $ | 43
|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|December 31, 2008                      |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|Mortgage-Backed Securities             |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|GNMA                                   |  | $                             | 7  |                               | $ | 325                           |  | $                  |  |  | $ |  
|FNMA                                   |  |                               | 17 |                               |   | 1,874                         |  |                    |  |  |   |  
|FHLMC                                  |  |                               | 7  |                               |   | 996                           |  |                    |  |  |   |  
|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|                                       |  |                               | 31 |                               |   | 3,195                         |  |                    |  |  |   |  
|U.S. Government and Agency Obligations |  |                               |   |                               |   |                              |  |                    |  |  |   |  
|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   
|Total                                  |  | $                             | 31 |                               | $ | 3,195                         |  | $                  |  |  | $ |  
|                                       |  |                               |    |                               |   |                               |  |                    |   |  |   |   

The unrealized losses on the Companys
investments were caused by interest rate increases. The Company purchased these investments at a premium relative to their face amount in anticipation of a continuing stable interest rate environment. Because the decline in market value is
attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company did not consider these investments to be
other-than-temporarily impaired at December 31, 2009 or 2008.

During 2009 and 2008, the Company transferred certain
municipal bonds from the held-to-maturity category to the available-for-sale category. The amortized costs of the securities transferred during 2009 were $1,758,000 with an unrealized gain of $2,000. The amortized costs of the securities transferred
during 2008 were $347,000 and the related unrealized gain was $3,000. These securities were transferred to available-for-sale due to a decline in their respective credit ratings caused by decreased credit support, as provided by the securities
guarantors. ASC 320, Investments-Debt and Equity Securities, provides that a security may be reclassified from held-to-maturity to available-for-sale in the event of a decline in the issuers creditworthiness.



69



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 3. | Loans
|------- | -----

A summary of the
balances of loans follows as of December 31, 2009 and 2008:



|                                          |  |                |         |   |      |   |         |  
|----------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                          |  | 2009           |         |   | 2008 |  
|                                          |  | (In Thousands) |        
|Loans Secured by Mortgages on Real Estate |  |                |         |   |      |   |         |  
|1-4 Family Residential                    |  | $              | 85,726  |   |      | $ | 51,547  |  
|Home Equity Loans and Lines               |  |                | 14,389  |   |      |   | 10,297  |  
|Multi-family Residential                  |  |                | 9,423   |   |      |   | 7,859   |  
|Commercial Real Estate                    |  |                | 47,798  |   |      |   | 39,700  |  
|Land                                      |  |                | 1,213   |   |      |   | 1,095   |  
|                                          |  |                |         |   |      |   |         |  
|Total Loans Secured by Real Estate        |  |                | 158,549 |   |      |   | 110,498 |  
|                                          |  |                |         |   |      |   |         |  
|Consumer and Other Loans                  |  |                |         |   |      |   |         |  
|Student Loan                              |  |                | 485     |   |      |   | 1,398   |  
|Loans Secured by Deposits                 |  |                | 478     |   |      |   | 283     |  
|Other                                     |  |                | 835     |   |      |   | 1,368   |  
|                                          |  |                |         |   |      |   |         |  
|Total Consumer and Other Loans            |  |                | 1,798   |   |      |   | 3,049   |  
|                                          |  |                |         |   |      |   |         |  
|Less:                                     |  |                |         |   |      |   |         |  
|Allowance for Loan Losses                 |  |                | (1,661  | ) |      |   | (1,952  | )
|Net Deferred Loan Origination Fess/Costs  |  |                | (240    | ) |      |   | (359    | )
|                                          |  |                |         |   |      |   |         |  
|Total Loans, Net                          |  | $              | 158,446 |   |      | $ | 111,236 |  
|                                          |  |                |         |   |      |   |         |  

An analysis of the allowance for loan losses is as follows for the years ended
December 31st:



|                                     |  |                |       |   |      |   |       |      |  |   |       |  
|------------------------------------ |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                     |  | 2009           |       |   | 2008 |   |       | 2007 | 
|                                     |  | (In Thousands) |      
|Balance, Beginning of Year           |  | $              | 1,952 |   |      | $ | 1,999 |      |  | $ | 2,292 |  
|Provision (Recovery) for Loan Losses |  |                | 337   |   |      |   | (43   | )    |  |   | (268  | )
|Loans Charged-Off                    |  |                | (628  | ) |      |   | (4    | )    |  |   | (25   | )
|                                     |  |                |       |   |      |   |       |      |  |   |       |  
|Balance, End of Year                 |  | $              | 1,661 |   |      | $ | 1,952 |      |  | $ | 1,999 |  
|                                     |  |                |       |   |      |   |       |      |  |   |       |  

A summary of the loans evaluated for possible impairment follows:



|                                              |  |                |       |      |   |    
|--------------------------------------------- |  | -------------- | ----- | ---- | - | ---
|                                              |  | 2009           |       | 2008
|                                              |  | (In Thousands)
|Impaired Loans Requiring a Loss Allowance     |  | $              | 937   |      | $ | 450
|Impaired Loans not Requiring a Loss Allowance |  |                | 66    |      |   | 70 
|                                              |  |                |       |      |   |    
|Total Impaired Loans                          |  | $              | 1,003 |      | $ | 520
|                                              |  |                |       |      |   |    
|Loss Allowance on Impaired Loans              |  | $              | 332   |      | $ | 281
|                                              |  |                |       |      |   |    

At December 31, 2009 and 2008, all impaired loans
were in nonaccrual status. As of December 31, 2009, and 2008, the Bank did not hold any renegotiated loans.

At
December 31, 2009 and 2008, approximately $11,647 and $4,500 of interest was foregone on non-accrual loans.



70



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



In the ordinary course of business, the Bank has granted loans to directors, executive
officers and their affiliates. In the opinion of management, such transactions were on substantially 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 collectability or present any other unfavorable features to the Bank. An analysis of the changes in loans to such borrowers follows:



|                           |  |                |        |   |      |   |       |  
|-------------------------- |  | -------------- | ------ | - | ---- | - | ----- | -
|                           |  | 2009           |        |   | 2008 |  
|                           |  | (In Thousands) |       
|Balance, Beginning of Year |  | $              | 2,799  |   |      | $ | 2,564 |  
|Additions                  |  |                | 2,758  |   |      |   | 461   |  
|Payments and Renewals      |  |                | (1,041 | ) |      |   | (226  | )
|                           |  |                |        |   |      |   |       |  
|Balance, End of Year       |  | $              | 4,516  |   |      | $ | 2,799 |  
|                           |  |                |        |   |      |   |       |  



|Note 4. | Accrued Interest Receivable
|------- | ---------------------------

Accrued interest receivable at December 31, 2009 and 2008, consists of the following:



|                           |  |                |       |      |   |      
|-------------------------- |  | -------------- | ----- | ---- | - | -----
|                           |  | 2009           |       | 2008
|                           |  | (In Thousands)
|Loans                      |  | $              | 671   |      | $ | 561  
|Investments                |  |                | 170   |      |   | 352  
|Mortgage-Backed Securities |  |                | 485   |      |   | 736  
|                           |  |                |       |      |   |      
|Total Accrued Interest     |  | $              | 1,326 |      | $ | 1,649
|                           |  |                |       |      |   |      



|Note 5. | Premises and Equipment
|------- | ----------------------

A summary of the cost and accumulated depreciation of premises and equipment follows as of December 31st:



|                                          |  |                |        |   |      |   |        |  
|----------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                          |  | 2009           |        |   | 2008 |  
|                                          |  | (In Thousands) |       
|Land, Buildings and Improvements          |  | $              | 3,932  |   |      | $ | 3,829  |  
|Furniture and Fixtures                    |  |                | 1,792  |   |      |   | 1,711  |  
|Automobiles                               |  |                | 94     |   |      |   | 93     |  
|                                          |  |                |        |   |      |   |        |  
|                                          |  |                | 5,818  |   |      |   | 5,633  |  
|Accumulated Depreciation and Amortization |  |                | (4,021 | ) |      |   | (3,829 | )
|                                          |  |                |        |   |      |   |        |  
|Total                                     |  | $              | 1,797  |   |      | $ | 1,804  |  
|                                          |  |                |        |   |      |   |        |  

Depreciation expense for the years ended December 31, 2009, 2008 and 2007, was approximately $239,000,
$230,000, and $242,000, respectively.



71



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 6. | Deposits
|------- | --------

Interest
bearing deposit account balances at December 31, 2009 and 2008, are summarized as follows:



|                        |  |                                      |   |  |                                  |   |  |        |         |         |        |   |        |   |         |  |        |  
|----------------------- |  | ------------------------------------ | - |  | -------------------------------- | - |  | ------ | ------- | ------- | ------ | - | ------ | - | ------- |  | ------ | -
|                        |  | Weighted AverageRate at December 31, |   |  | Account Balances at December 31, |  
|                        |  | 2009                                 |   |  | 2008                             |  
|                        |  | 2009                                 |   |  | 2008                             |   |  | Amount |         | Percent |        |   | Amount |   | Percent | 
|                        |  | (In Thousands)                       |  
|NOW and MMDA            |  | 0.29                                 | % |  | 0.34                             | % |  | $      | 26,786  |         | 14.82  | % |        | $ | 24,988  |  | 15.98  | %
|Savings Accounts        |  | 0.50                                 | % |  | 0.50                             | % |  |        | 18,328  |         | 10.14  | % |        |   | 18,017  |  | 11.52  | %
|Certificates of Deposit |  | 2.51                                 | % |  | 3.34                             | % |  |        | 135,615 |         | 75.04  | % |        |   | 113,365 |  | 72.50  | %
|                        |  |                                      |   |  |                                  |   |  |        |         |         |        |   |        |   |         |  |        |  
|Total                   |  |                                      |   |  |                                  |   |  | $      | 180,729 |         | 100.00 | % |        | $ | 156,370 |  | 100.00 | %
|                        |  |                                      |   |  |                                  |   |  |        |         |         |        |   |        |   |         |  |        |  

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2009
and 2008, was $49,909,000 and $35,674,000, respectively. On October 3, 2008, President George W. Bush signed the Emergency Economic Stabilization Act of 2008, which temporarily increased the basic FDIC coverage limits from $100,000 to $250,000
per depositor, through December 31, 2009. On May 20, 2009, President Barack Obama passed legislation that extended the $250,000 coverage limit through December 31, 2013.

In addition, the Bank of New Orleans has elected to participate in the Transaction Account Guarantee Program offered through the FDICs
Temporary Liquidity Guarantee Program. The Transaction Account Guarantee Program provides unlimited FDIC coverage of non-interest bearing transaction accounts, and certain interest-bearing transaction accounts through June 30, 2010.

Certificates of deposit at December 31, 2009, mature as follows (in thousands):



|                              |  |   |         |  |        |  
|----------------------------- |  | - | ------- |  | ------ | -
|Certificate Accounts Maturing |  |   |         |  |        |  
|One Year or Less              |  | $ | 89,070  |  | 65.68  | %
|One to Two Years              |  |   | 17,306  |  | 12.76  | %
|Two to Three Years            |  |   | 10,518  |  | 7.76   | %
|Three to Five Years           |  |   | 18,721  |  | 13.80  | %
|                              |  |   |         |  |        |  
|Total                         |  | $ | 135,615 |  | 100.00 | %
|                              |  |   |         |  |        |  

Interest expense by deposit type for each of the following periods is as follows:



|                                 |  |                |       |      |   |       |  |   |      
|-------------------------------- |  | -------------- | ----- | ---- | - | ----- |  | - | -----
|                                 |  | 2009           |       | 2008 |   | 2007 
|                                 |  | (In Thousands)
|Certificates of Deposit          |  | $              | 3,537 |      | $ | 3,751 |  | $ | 3,953
|Interest Bearing Demand Deposits |  |                | 84    |      |   | 86    |  |   | 90   
|Savings Accounts                 |  |                | 93    |      |   | 92    |  |   | 123  
|                                 |  |                |       |      |   |       |  |   |      
|Total                            |  | $              | 3,714 |      | $ | 3,929 |  | $ | 4,166
|                                 |  |                |       |      |   |       |  |   |      

The Bank held deposits of approximately $13,200,000
and $12,379,000, for related parties at December 31, 2009 and 2008, respectively.



72



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 7. | Borrowings
|------- | ----------

Federal Home Loan Bank
Advances

Pursuant to collateral agreements with the Federal Home Loan Bank of Dallas (FHLB), advances issued
by the Federal Home Loan Bank are secured by a blanket floating lien on first mortgage loans. Total interest expense recognized on FHLB advances in 2009, 2008 and 2007, was $1,542,000, $1,164,000, and $1,335,000, respectively.

Advances consisted of the following at December 31, 2009 and 2008, respectively.



|              |  |                    |        |      |   |       
|------------- |  | ------------------ | ------ | ---- | - | ------
|              |  | FHLB Advance Total
|Contract Rate |  | 2009               |        | 2008
|              |  | (In Thousands)    
|0%  0.99%    |  | $                  | 2,000  |      | $ | 15,500
|1%  1.99%    |  |                    |       |      |   |      
|2%  2.99%    |  |                    |       |      |   |      
|3%  3.99%    |  |                    | 14,974 |      |   | 10,420
|4%  4.99%    |  |                    | 18,500 |      |   | 18,353
|5%  5.99%    |  |                    | 2,336  |      |   | 6,387 
|              |  |                    |        |      |   |       
|              |  | $                  | 37,810 |      | $ | 50,660
|              |  |                    |        |      |   |       

Maturities of FHLB Advances at December 31, 2009,
are as follows:



|                         |  |                |       
|------------------------ |  | -------------- | ------
|Year Ending December 31, |  | AmountMaturing
|                         |  | (In Thousands)
|2010                     |  | $              | 2,561 
|2011                     |  |                | 11,999
|2012                     |  |                | 9,427 
|2013                     |  |                | 4,559 
|2014                     |  |                | 80    
|Thereafter               |  |                | 9,184 
|                         |  |                |       
|Total                    |  | $              | 37,810
|                         |  |                |       

Reverse Repurchase Agreements

Periodically, the Company accesses other borrowing sources as a source of liquidity and term funding. These borrowings are structured as
reverse repurchase agreements and are secured by US Government or US Agency securities. Reverse repurchase agreements totaled $26,000,000 at both December 31, 2009 and 2008.

Reverse Repurchase Agreements consisted of the following at December 31, 2009 and 2008, respectively:



|              |  |                            |        |      |   |       
|------------- |  | -------------------------- | ------ | ---- | - | ------
|              |  | Repurchase Agreement Total
|Contract Rate |  | 2009                       |        | 2008
|              |  | (In Thousands)            
|3%  3.99%    |  | $                          | 16,000 |      | $ | 16,000
|4%  4.99%    |  |                            | 10,000 |      |   | 10,000
|              |  |                            |        |      |   |       
|              |  | $                          | 26,000 |      | $ | 26,000
|              |  |                            |        |      |   |       



73



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Maturities of Reverse Repurchase Agreements at December 31, 2009, are as follows:



|                        |  |                |       
|----------------------- |  | -------------- | ------
|Year EndingDecember 31, |  | AmountMaturing
|                        |  | (In Thousands)
|2012                    |  | $              | 10,000
|2013                    |  |                | 16,000
|                        |  |                |       
|Total                   |  | $              | 26,000
|                        |  |                |       

Interest expense on reverse repurchase agreements
totaled $1,021,000, $870,000 and $55,000 for the years ended December 31, 2009, 2008 and 2007, respectively.



|Note 8. | Income Taxes
|------- | ------------

Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Companys
deferred tax assets and liabilities as of December 31, 2009 and 2008, are as follows:



|                                                         |  |                |       |   |      |   |      |  
|-------------------------------------------------------- |  | -------------- | ----- | - | ---- | - | ---- | -
|                                                         |  | 2009           |       |   | 2008 |  
|                                                         |  | (In Thousands) |      
|Deferred Tax Assets                                      |  |                |       |   |      |   |      |  
|Allowance for Loan Losses                                |  | $              | 448   |   |      | $ | 364  |  
|Deferred Loan Fees                                       |  |                | 81    |   |      |   | 122  |  
|Deferred Compensation                                    |  |                | 498   |   |      |   | 154  |  
|Stock Options                                            |  |                | 101   |   |      |   | 47   |  
|                                                         |  |                |       |   |      |   |      |  
|Total Deferred Tax Assets                                |  |                | 1,128 |   |      |   | 687  |  
|                                                         |  |                |       |   |      |   |      |  
|Deferred Tax Liabilities                                 |  |                |       |   |      |   |      |  
|Market Value Adjustment to Available-for-Sale Securities |  |                | (474  | ) |      |   | (689 | )
|FHLB Stock Dividends                                     |  |                | (130  | ) |      |   | (147 | )
|Other                                                    |  |                | (21   | ) |      |   | (88  | )
|                                                         |  |                |       |   |      |   |      |  
|Total Deferred Tax Liabilities                           |  |                | (625  | ) |      |   | (924 | )
|                                                         |  |                |       |   |      |   |      |  
|Net Deferred Tax Asset (Liability)                       |  | $              | 503   |   |      | $ | (237 | )
|                                                         |  |                |       |   |      |   |      |  

Generally accepted accounting principles do not require that deferred income taxes be provided on certain
portions of the allowance for loan losses that existed as of December 31, 1987. At December 31, 2009, retained earnings included approximately $1,300,000 representing such bad debt deductions for which the related deferred income
taxes of approximately $442,000 have not been provided.

The provision for income taxes for 2009, 2008 and
2007, consists of the following for the years ended December 31st:



|                               |  |                |       |   |      |   |       |  |   |       |  
|------------------------------ |  | -------------- | ----- | - | ---- | - | ----- |  | - | ----- | -
|                               |  | 2009           |       |   | 2008 |   | 2007  | 
|                               |  | (In Thousands) |      
|Current Expense                |  | $              | 1,773 |   |      | $ | 1,227 |  | $ | 1,768 |  
|Deferred Tax Expense (Benefit) |  |                | (343  | ) |      |   | 70    |  |   | (640  | )
|                               |  |                |       |   |      |   |       |  |   |       |  
|Total                          |  | $              | 1,430 |   |      | $ | 1,297 |  | $ | 1,128 |  
|                               |  |                |       |   |      |   |       |  |   |       |  



74



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



The provision for Federal income taxes differs from that computed by applying Federal
statutory rates to income before Federal income tax expense, as indicated in the following analysis:



|                            |  |                |       |   |      |      |   |      |   |       |   |  |      |   |  |   |       |   |  |      |  
|--------------------------- |  | -------------- | ----- | - | ---- | ---- | - | ---- | - | ----- | - |  | ---- | - |  | - | ----- | - |  | ---- | -
|                            |  | 2009           |       |   | 2008 |      |   | 2007 |  
|                            |  | (In Thousands) |      
|Expected Tax Provision      |  | $              | 1,348 |   |      | 34.0 | % |      | $ | 1,374 |   |  | 34.0 | % |  | $ | 1,281 |   |  | 34.0 | %
|Non-Deductible Expenses     |  |                | 4     |   |      | 0.1  |   |      |   | 4     |   |  | 0.1  |   |  |   | 4     |   |  | 0.1  |  
|Effect of Tax Exempt Income |  |                | (19   | ) |      | (0.5 | ) |      |   | (46   | ) |  | (1.2 | ) |  |   | (46   | ) |  | (1.2 | )
|Other                       |  |                | 97    |   |      | 2.4  |   |      |   | (35   | ) |  | (0.4 | ) |  |   | (111  | ) |  | (2.9 | )
|                            |  |                |       |   |      |      |   |      |   |       |   |  |      |   |  |   |       |   |  |      |  
|Total                       |  | $              | 1,430 |   |      | 36.0 |   |      | $ | 1,297 |   |  | 32.5 |   |  | $ | 1,128 |   |  | 30.0 |  
|                            |  |                |       |   |      |      |   |      |   |       |   |  |      |   |  |   |       |   |  |      |  

The Company had no amount of interest and/or penalties recognized in the consolidated statements of income
for the years ended December 31, 2009, 2008, or 2007, nor any amount of interest and/or penalties payable that were recognized in the consolidated balance sheets as of December 31, 2009 or 2008.

As of December 31, 2009 and 2008, the Company had no uncertain tax positions. As of December 31, 2009, the tax years that remain
open for examination by tax jurisdictions include 2008, 2007 and 2006.



|Note 9. | Comprehensive Income
|------- | --------------------

Comprehensive income was comprised of changes in the Banks unrealized holding gains or losses on securities available-for-sale during 2009, 2008 and 2007. The components of comprehensive income and related tax effects are as follows:



|                                                                |  |                |      |   |      |   |       |      |  |   |       |  
|--------------------------------------------------------------- |  | -------------- | ---- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                |  | 2009           |      |   | 2008 |   |       | 2007 | 
|                                                                |  | (In Thousands) |     
|Gross Unrealized Holding (Losses)                               |  |                |      |   |      |   |       |      |  |   |       |  
|Gains Arising During the Period                                 |  | $              | (226 | ) |      | $ | 1,570 |      |  | $ | 1,261 |  
|Tax Benefit (Expense)                                           |  |                | 77   |   |      |   | (533  | )    |  |   | (429  | )
|                                                                |  |                |      |   |      |   |       |      |  |   |       |  
|Total                                                           |  |                | (149 | ) |      |   | 1,037 |      |  |   | 832   |  
|                                                                |  |                |      |   |      |   |       |      |  |   |       |  
|Reclassification Adjustment for (Gains)                         |  |                |      |   |      |   |       |      |  |   |       |  
|Losses Included in Net Income                                   |  |                | (406 | ) |      |   | (3    | )    |  |   | 20    |  
|Tax Expense (Benefit)                                           |  |                | 138  |   |      |   | 1     |      |  |   | (7    | )
|                                                                |  |                |      |   |      |   |       |      |  |   |       |  
|Total                                                           |  |                | (268 | ) |      |   | (2    | )    |  |   | 13    |  
|                                                                |  |                |      |   |      |   |       |      |  |   |       |  
|Net Unrealized Holding (Losses) Gains Arising During the Period |  | $              | (417 | ) |      | $ | 1,035 |      |  | $ | 845   |  
|                                                                |  |                |      |   |      |   |       |      |  |   |       |  



|Note 10. | Regulatory Matters
|-------- | ------------------

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 result in certain
mandatory, and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank and the 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.



75



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



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), tangible capital to adjusted total assets (as
defined), and tangible equity to adjusted total assets (as defined). As of December 31, 2009, the Bank met all of the capital requirements to which it is subject and was deemed to be well capitalized. There have been no subsequent
conditions or events which management believes have changed the Banks status.

The actual and required capital amounts
and ratios applicable to the Bank for the years ended December 31, 2009 and 2008 are presented in the following tables:



|                          |  |                        |        |       |                              |   |        |                                                                       |        |  |      |        |  |       |        |  |       |  
|------------------------- |  | ---------------------- | ------ | ----- | ---------------------------- | - | ------ | --------------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                          |  | Actual                 |        |       | Minimum for AdequacyPurposes |   |        | Minimum to be WellCapitalized UnderPrompt CorrectiveAction
Provisions |       
|                          |  | Amount                 |        | Ratio |                              |   | Amount |                                                                       | Ratio  |  |      | Amount |  | Ratio |       
|                          |  | (Dollars in Thousands) |       
|December 31, 2009         |  |                        |        |       |                              |   |        |                                                                       |        |  |      |        |  |       |        |  |       |  
|                          |  |                        |        |       |                              |  
|Tangible Capital          |  | $                      | 58,322 |       | 18.20                        | % |        | $                                                                     | 4,808  |  | 1.50 | %      |  |       | N/A    |  | N/A   |  
|Core/Leverage Capital     |  |                        | 58,322 |       | 18.20                        | % |        |                                                                       | 9,615  |  | 3.00 | %      |  | $     | 16,026 |  | 5.00  | %
|Tier 1 Risk-Based Capital |  |                        | 58,261 |       | 40.55                        | % |        |                                                                       | 5,748  |  | 4.00 | %      |  |       | 8,622  |  | 6.00  | %
|Total Risk-Based Capital  |  |                        | 59,589 |       | 41.47                        | % |        |                                                                       | 11,495 |  | 8.00 | %      |  |       | 14,369 |  | 10.00 | %
|                          |  |                        |        |       |                              |  
|December 31, 2008         |  |                        |        |       |                              |   |        |                                                                       |        |  |      |        |  |       |        |  |       |  
|                          |  |                        |        |       |                              |  
|Tangible Capital          |  | $                      | 55,816 |       | 18.35                        | % |        | $                                                                     | 4,562  |  | 1.50 | %      |  |       | N/A    |  | N/A   |  
|Core/Leverage Capital     |  |                        | 55,816 |       | 18.35                        | % |        |                                                                       | 9,124  |  | 3.00 | %      |  | $     | 15,207 |  | 5.00  | %
|Tier 1 Risk-Based Capital |  |                        | 55,755 |       | 47.99                        | % |        |                                                                       | 4,647  |  | 4.00 | %      |  |       | 6,970  |  | 6.00  | %
|Total Risk-Based Capital  |  |                        | 57,209 |       | 49.24                        | % |        |                                                                       | 9,294  |  | 8.00 | %      |  |       | 11,617 |  | 10.00 | %

The
Banks capital under generally accepted accounting principles (GAAP) is reconciled as follows:



|                                                  |  |                |        |   |      |   |        |  
|------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                  |  | 2009           |        |   | 2008 |  
|                                                  |  | (In Thousands) |       
|Capital Under GAAP                                |  | $              | 59,043 |   |      | $ | 56,884 |  
|Unrealized Gains on Available-for-Sale Securities |  |                | (721   | ) |      |   | (1,068 | )
|                                                  |  |                |        |   |      |   |        |  
|Tier 1 Capital                                    |  |                | 58,322 |   |      |   | 55,816 |  
|Allowance for Loan Losses                         |  |                | 1,328  |   |      |   | 1,454  |  
|Recourse Obligations                              |  |                | (61    | ) |      |   | (61    | )
|                                                  |  |                |        |   |      |   |        |  
|Total Risk-Based Capital                          |  | $              | 59,589 |   |      | $ | 57,209 |  
|                                                  |  |                |        |   |      |   |        |  



|Note 11. | Financial Instruments with Off-Balance Sheet Risk
|-------- | -------------------------------------------------

The Company has entered into certain credit related commitments with off-balance sheet risk in the normal course of business in order to meet the financing needs of its customers. The financial
instruments include commitments to extend credit and commitments to sell loans. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The contract
amounts of those instruments reflect the extent of the involvement the Company has in particular classes of financial instruments. The Companys exposure to credit loss is represented by the contractual amount of these commitments. The Company
follows the same credit policies in making commitments as it does for on-balance sheet instruments.



76



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines of credit may expire without being drawn upon.
Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on managements credit evaluation of the customer.

As of December 31, 2009 and 2008, the Company had made various commitments to extend credit totaling approximately $10,729,000 and
$10,875,000, respectively, and had no commitments to sell loans at a loss. Of the $10,729,000 in outstanding commitments at December 31, 2009, approximately $1,488,000 were for fixed rate loans with interest rates ranging from 5.95% to 7.65%
and approximately $9,241,000 were for variable rate loans with interest ranging from 3.50% to 9.50%. No material losses or gains are anticipated as a result of these transactions.



|Note 12. | Commitments and Contingencies
|-------- | -----------------------------

Operating Leases

The Company conducts certain of its operations in leased facilities. At December 31,
2009, minimum rental commitments under non-cancelable operating leases were as follows (in thousands):



|                         |  |        |    
|------------------------ |  | ------ | ---
|Years EndingDecember 31, |  | Amount
|2010                     |  | $      | 31 
|2011                     |  |        | 31 
|2012                     |  |        | 31 
|2013                     |  |        | 31 
|2014                     |  |        | 31 
|Thereafter               |  |        | 40 
|                         |  |        |    
|Total                    |  | $      | 195
|                         |  |        |    

Total rent expense incurred by the Company under
leases amounted to $72,000, $61,000 and $57,000 for each of the years ended December 31, 2009, 2008, and 2007, respectively.

It is expected that in the normal course of business, expiring leases will be renewed or replaced by leases on other property.

The Company is the lessor of office space to a director of the Company, under an operating lease expiring in 2014. Terms of the lease are on current market conditions and rates. Minimum future rentals to
be received on non-cancelable leases as of December 31, 2009, are as follows:



|                          |  |        |       
|------------------------- |  | ------ | ------
|Years Ending December 31, |  | Amount
|2010                      |  | $      | 19,688
|2011                      |  |        | 19,688
|2012                      |  |        | 19,688
|2013                      |  |        | 19,688
|2014                      |  |        | 4,922 
|                          |  |        |       
|Total                     |  | $      | 83,674
|                          |  |        |       



77



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Total rental income from this lease amounted to $19,000, $17,000 and $17,000 for each of
the years ended December 31, 2009, 2008 and 2007, respectively.

Employment Contracts

The Company has entered into employment contracts with key employees. These compensation commitments expire as follows:



|                          |  |        |          
|------------------------- |  | ------ | ---------
|Years Ending December 31, |  | Amount
|2010                      |  | $      | 346,500  
|2011                      |  |        | 346,500  
|2012                      |  |        | 346,500  
|                          |  |        |          
|Total                     |  | $      | 1,039,500
|                          |  |        |          



|Note 13. | Concentration of Credit Risk
|-------- | ----------------------------

In accordance with industry practices, the Company has deposits in other financial institutions for more than the insured limit. These deposits in other institutions do not represent more than the normal industry credit risk.



|Note 14. | Estimated Fair Value of Financial Instruments
|-------- | ---------------------------------------------

The following disclosure is made in accordance with the requirements of ASC 825, Financial Instruments. Financial instruments are defined as cash and contractual rights and obligations that require
settlement, directly or indirectly, in cash. In cases where quoted market prices are not available, fair values have been estimated using the present value of future cash flows or other valuation techniques. The results of these techniques are
highly sensitive to the assumptions used, such as those concerning appropriate discount rates and estimates of future cash flows, which require considerable judgment. Accordingly, estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current settlement of the underlying financial instruments. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. These disclosures should not be
interpreted as representing an aggregate measure of the underlying value of the Company.

The following methods and
assumptions were used by the Company in estimating fair value disclosures for financial instruments.

Cash and Cash Equivalents

The carrying amount of cash and due from financial institutions, federal funds sold and short-term investments approximate
fair values.

Certificates of Deposit

The fair values for certificates of deposit are estimated through discounted cash flow analysis, using current rates at which certificates of deposit with similar terms could be obtained.

Securities

Fair values for
securities, excluding Federal Home Loan Bank stock, are based on quoted market prices. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.



78



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Loans Receivable, Net

The fair values of loans are estimated through discounted cash flow analysis, using current rates at which loans with similar terms would be
made to borrowers with similar credit quality. Appropriate adjustments are made to reflect probable credit losses. The carrying amount of accrued interest on loans approximated its fair value.

Federal Home Loan Bank Stock

The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Deposit Liabilities

ASC 825 specifies that the fair value of deposit liabilities with no defined maturity is
the amount payable on demand at the reporting date, i.e., their carrying or book value. These deposits include interest and non-interest bearing checking, passbook, and money market accounts. The fair value of fixed rate certificates of deposit is
estimated using a discounted cash flow calculation that applies interest rates currently offered on certificates of similar remaining maturities to a schedule of aggregate expected cash flows on time deposits.

Borrowings

The fair value
of fixed rate borrowings is estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements.

Off-Balance Sheet Instruments

Off-balance sheet financial instruments
include commitments to extend credit and undisbursed lines of credit. The fair value of such instruments is estimated using fees currently charged for similar arrangements in the marketplace, adjusted for changes in terms and credit risk as
appropriate.

The estimated fair values of the Companys financial instruments are as follows:



|                                                                |  |                   |         |   |                   |   |         |                |  |   |            |   |  |   |         |  
|--------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | ------- | -------------- |  | - | ---------- | - |  | - | ------- | -
|                                                                |  | December 31, 2009 |         |   | December 31, 2008 |  
|                                                                |  | CarryingAmount    |         |   | Fair Value        |   |         | CarryingAmount |  |   | Fair Value |  
|                                                                |  | (In Thousands)    |        
|Financial Assets                                                |  |                   |         |   |                   |   |         |                |  |   |            |   |  |   |         |  
|Cash and Cash Equivalents                                       |  | $                 | 4,735   |   |                   | $ | 4,735   |                |  | $ | 4,974      |   |  | $ | 4,974   |  
|Certificates of Deposit                                         |  |                   | 1,525   |   |                   |   | 1,425   |                |  |   | 1,425      |   |  |   | 1,425   |  
|Securities                                                      |  |                   | 157,070 |   |                   |   | 161,323 |                |  |   | 203,520    |   |  |   | 207,346 |  
|                                                                |  |                   |         |  
|Loans                                                           |  |                   | 160,107 |   |                   |   | 162,246 |                |  |   | 113,188    |   |  |   | 115,041 |  
|Less Allowance for Loan Losses                                  |  |                   | (1,661  | ) |                   |   | (1,661  | )              |  |   | (1,952     | ) |  |   | (1,952  | )
|                                                                |  |                   |         |   |                   |   |         |                |  |   |            |   |  |   |         |  
|Loans, Net of Allowance                                         |  |                   | 158,446 |   |                   |   | 160,585 |                |  |   | 111,236    |   |  |   | 113,089 |  
|                                                                |  |                   |         |  
|Federal Home Loan Bank Stock                                    |  |                   | 1,995   |   |                   |   | 1,995   |                |  |   | 2,293      |   |  |   | 2,293   |  
|                                                                |  |                   |         |  
|Financial Liabilities                                           |  |                   |         |   |                   |   |         |                |  |   |            |   |  |   |         |  
|Deposits                                                        |  | $                 | 188,622 |   |                   | $ | 190,684 |                |  | $ | 160,589    |   |  | $ | 162,696 |  
|Borrowings                                                      |  |                   | 63,810  |   |                   |   | 67,163  |                |  |   | 76,660     |   |  |   | 80,070  |  
|                                                                |  |                   |         |  
|Unrecognized Financial Instruments Commitments to Extend Credit |  | $                 | 10,729  |   |                   | $ | 10,727  |                |  | $ | 10,875     |   |  | $ | 10,973  |  



79



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



The Company adopted ASC 820, Fair Value Measurements, on January 1, 2008 for
all financial assets and liabilities and nonfinancial assets and liabilities that are recognized at fair value in the financial statements on a recurring basis (at least annually). ASC 820 defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the price that would be
received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be
calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk
including our own credit risk.

In addition to defining fair value, ASC 820 expands the disclosure requirements around fair
value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is
reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:



| |  |  | Level 1Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Level 2Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in
markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market date for substantially the full term of the assets or liabilities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3Inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in
pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents the Companys assets and liabilities measured at fair value on a recurring basis at December 31, 2009
and 2008:



|                                     |  |                         |        |           |   |           |  |           |        |  |   |  
|------------------------------------ |  | ----------------------- | ------ | --------- | - | --------- |  | --------- | ------ |  | - | -
|                                     |  | Fair Value Measurements
|December 31, 2009                    |  | Total                   |        | (Level 1) |   | (Level 2) |  | (Level 3)
|                                     |  | (In Thousands)         
|Assets:                              |  |                         |       
|Available-for-Sale Securities        |  |                         |        |           |   |           |  |           |        |  |   |  
|Mortgage-Backed Securities           |  | $                       | 27,079 |           | $ |          |  | $         | 27,079 |  | $ | 
|US Government and Agency Obligations |  |                         | 35,445 |           |   |          |  |           | 35,445 |  |   | 
|                                     |  |                         |        |           |   |           |  |           |        |  |   |  
|Total                                |  | $                       | 62,524 |           | $ |          |  | $         | 62,524 |  | $ | 
|                                     |  |                         |        |           |   |           |  |           |        |  |   |  
|                                     | 
|                                     |  | Fair Value Measurements
|December 31, 2008                    |  | Total                   |        | (Level 1) |   | (Level 2) |  | (Level 3)
|                                     |  | (In Thousands)         
|Assets:                              |  |                         |       
|Available-for-Sale Securities        |  |                         |        |           |   |           |  |           |        |  |   |  
|Mortgage-Backed Securities           |  | $                       | 54,159 |           | $ |          |  | $         | 54,159 |  | $ | 
|US Government and Agency Obligations |  |                         | 25,932 |           |   |          |  |           | 25,932 |  |   | 
|                                     |  |                         |        |           |   |           |  |           |        |  |   |  
|Total                                |  | $                       | 80,091 |           | $ |          |  | $         | 80,091 |  | $ | 
|                                     |  |                         |        |           |   |           |  |           |        |  |   |  



80



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##### Table of Contents

##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



The Company did not record any liabilities at fair market value for which measurement of
the fair value was made on a recurring basis at December 31, 2009 or 2008.

The following table presents the
Companys assets and liabilities measured at fair value on a non-recurring basis at December 31, 2009 and 2008:



|                        |  |                         |       |           |   |           |  |           |       |  |   |    
|----------------------- |  | ----------------------- | ----- | --------- | - | --------- |  | --------- | ----- |  | - | ---
|                        |  | Fair Value Measurements
|December 31, 2009       |  | Total                   |       | (Level 1) |   | (Level 2) |  | (Level 3)
|                        |  | (In Thousands)         
|Assets:                 |  |                         |      
|Impaired Loans          |  | $                       | 605   |           | $ |          |  | $         | 425   |  | $ | 180
|Other Real Estate Owned |  |                         | 1,573 |           |   |          |  |           | 1,573 |  |   |   
|                        |  |                         |       |           |   |           |  |           |       |  |   |    
|Total                   |  | $                       | 2,178 |           | $ |          |  | $         | 1,998 |  | $ | 180
|                        |  |                         |       |           |   |           |  |           |       |  |   |    
|                        | 
|                        |  | Fair Value Measurements
|December 31, 2008       |  | Total                   |       | (Level 1) |   | (Level 2) |  | (Level 3)
|                        |  | (In Thousands)         
|Assets:                 |  |                         |      
|Impaired Loans          |  | $                       | 169   |           | $ |          |  | $         |      |  | $ | 169
|Other Real Estate Owned |  |                         |      |           |   |          |  |           |      |  |   |   
|                        |  |                         |       |           |   |           |  |           |       |  |   |    
|Total                   |  | $                       | 169   |           | $ |          |  | $         |      |  | $ | 169
|                        |  |                         |       |           |   |           |  |           |       |  |   |    



|Note 15. | Employee Benefits
|-------- | -----------------

The
Bank has a 401(k) plan covering all employees who meet certain age and service requirements. Contributions to the plan are made at the discretion of the Board of Directors. The 401(k) expense amounted to approximately $13,000, $12,000 and $13,000
for the years ended December 31, 2009, 2008, and 2007, respectively. The plan contains profit sharing provisions, with employer contributions to the plan based on a percentage of wages, net of forfeitures. The most recent profit sharing
contribution occurred in 2007 in the amount of $28,000.

The Bank adopted a Supplemental Executive Retirement Plan
(SERP) during 2006 for its Chief Executive Officer. The agreement requires the Banks Chief Executive Officer to remain employed by the Bank through January 15, 2013 in exchange for retirement benefits payable in equal
quarterly installments of $25,000 for ten consecutive years. In the event of disability, the Banks Chief Executive Officer is entitled to receive equal quarterly installments of $25,000 for ten consecutive years. In the event of termination,
other than for disability, the Banks Chief Executive Officer is entitled to benefits accrued through that period. In the event of death, benefits will be payable to the Chief Executive Officers designated beneficiary. For the years ended
December 31, 2009, 2008 and 2007, the Bank accrued $86,000, $82,000 and $78,000 in accordance with this agreement. The Banks future compensation expense under this plan is $64,000 per year.

In March 2007, the Bank implemented a SERP for the benefit of the Banks Chief Financial Officer. The Plan provides for annual credits
to an accumulation account at the rate of 10% of the Executives annual base pay. The account is credited with earnings on an annual basis at a rate determined by the Board of Directors. The Executive will be fully vested (100%) in his
Accumulation Account at age 65. The Plan provides for partial vesting when the Executive receives the Early Retirement Age of 55 and remains in the employ of the Bank. Upon reaching the Early Retirement Age, the Executive will be vested
75% in the Accumulation Account. Additional vesting will be credited at the rate of 2.5% per annum for years of service after attaining the Early



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Retirement Age. Notwithstanding, the other provisions of the agreement, the Executive will be 100% vested in the Accumulation Account in the event of death, permanent disability, termination
without cause, or termination following a change of control. For the years ended December 31, 2009, 2008 and 2007, the Bank accrued $9,700, $8,600 and $7,900 in accordance with this agreement in the respective periods.



|Note 16. | Related Party Transactions
|-------- | --------------------------

The Bank purchased insurance policies through an insurance agency of which one of the Banks directors is an executive officer. Premiums for such policies totaled $57,000, $42,000 and $132,000 for the years ended December 31, 2009,
2008, and 2007, respectively. In addition, during the fiscal years ended December 31, 2009, 2008 and 2007, the Bank paid premiums in the amount of $386,000, $264,000 and $251,000, respectively, directly to our health insurance provider. All of the
above-described premiums were gross of any commissions which we understand may have been earned by the insurance agency.



|Note 17. | Employee Stock Ownership Plan
|-------- | -----------------------------

During 2007, Louisiana Bancorp, Inc. instituted an employee stock ownership plan. The Louisiana Bancorp Employee Stock Ownership Plan (ESOP) enables all eligible employees of the Bank to share in the growth of the Company
through the acquisition of stock. Employees are generally eligible to participate in the ESOP after completion of one year of service and attaining age 21.

The ESOP purchased eight percent of the shares offered in the initial public offering of the Company (507,659 shares). This purchase was facilitated by a loan from the Company to the ESOP in the amount of
$5,077,000. The loan is secured by a pledge of the ESOP shares. The shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheets. The corresponding note is being paid back in 80 equal quarterly payments of
$130,000 on the last business day of each quarter, beginning September 30, 2007, at the rate of 8.25%. The note payable and the corresponding note receivable have been eliminated for consolidation purposes.

The Company may contribute to the plan, in the form of debt service, at the discretion of its Board of Directors. Dividends received on the
ESOP shares are utilized to service the debt. Shares are released for allocation to plan participants based on principal and interest payments of the note. Compensation expense is recognized based on the number of shares allocated to plan
participants each year and the average market price of the stock for the current year. Released ESOP shares become outstanding for earnings per share computations.

As compensation expense is incurred, the Unearned ESOP Shares account is reduced based on the original cost of the stock. The difference between the cost and average market price of shares released for
allocation is applied to Additional Paid-In Capital. ESOP compensation expense was approximately $343,000, $307,000, and $137,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

The ESOP shares as of December 31, 2009 and 2008 were as follows:



|                                |  |      |           |      |   |          
|------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                |  | 2009 |           | 2008
|Allocated Shares                |  |      | 38,073    |      |   | 12,691   
|Shares Released for Allocation  |  |      | 25,382    |      |   | 25,382   
|Unreleased Shares               |  |      | 444,204   |      |   | 469,586  
|                                |  |      |           |      |   |          
|Total ESOP Shares               |  |      | 507,659   |      |   | 507,659  
|                                |  |      |           |      |   |          
|Fair Value of Unreleased Shares |  | $    | 6,440,958 |      | $ | 6,010,701
|                                |  |      |           |      |   |          
|Stock Price at December 31      |  | $    | 14.50     |      | $ | 12.80    
|                                |  |      |           |      |   |          



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 18. | Recognition and Retention Plan
|-------- | ------------------------------

On February 14, 2008, the shareholders of Louisiana Bancorp approved the Companys 2007 Recognition and Retention Plan. The 2007 Recognition and Retention Plan provides the Companys directors and key employees with an equity
interest in the Company as compensation for their contributions to the success of the Company, and as an incentive for future such contributions. The Compensation Committee of the Company makes grants under the 2007 Recognition and Retention Plan to
eligible participants based on these factors. Plan participants vest in their share awards at a rate of 20% per year over a five year period, beginning on the date of the plan share award. If service to the Company is terminated for any reason
other than death, disability or change in control, the unvested shares awards shall be forfeited.

The Recognition and
Retention Plan Trust (the Trust) has been established to acquire, hold, administer, invest, and make distributions from the Trust in accordance with provisions of the Plan and Trust. The Trust acquired 4%, or 253,829 shares, of the then
issued and outstanding shares of the Company, which are held pursuant to the Plans vesting requirements. The Recognition and Retention Plan provides that grants to each officer or employee and non-employee director shall not exceed 25% and 5%,
respectively. Shares awarded to non-employee directors in the aggregate shall not exceed 30% of the shares available under the Plan. As of December 31, 2009, 225,177 shares had been awarded under the provisions of the Plan to directors,
officers and employees of the Company.

The Company recognized compensation expense during 2009 at a weighted average
per-share vesting date fair value of $11.54. Compensation expense related to the Recognition and Retention Plan was $512,000 for the year ended December 31, 2009, and $446,000 for the year ended December 31, 2008. At December 31,
2009, there were 30,752 shares available for future grants under the Plan.

A summary of the changes in the Companys
granted, but nonvested shares, as of December 31, 2009 follows:



|                          |  |                  |   |  |                                      |      
|------------------------- |  | ---------------- | - |  | ------------------------------------ | -----
|                          |  | Nonvested Shares
|                          |  | Shares           |   |  | Weighted-AverageGrant DateFair Value
|BalanceDecember 31, 2008 |  | 225,177          |   |  | $                                    | 11.54
|Granted                   |  |                 |   |  |                                      |     
|Vested                    |  | (44,741          | ) |  |                                      | 11.54
|Forfeited                 |  | (2,100           | ) |  |                                      | 11.52
|                          |  |                  |   |  |                                      |      
|BalanceDecember 31, 2009 |  | 178,336          |   |  | $                                    | 11.54
|                          |  |                  |   |  |                                      |      



|Note 19. | Stock Option Plan
|-------- | -----------------

On
February 14, 2008, the shareholders of Louisiana Bancorp also approved the Companys 2007 Stock Option Plan. The 2007 Stock Option Plan provides the Companys directors and key employees with an equity interest in the Company as
compensation for their contributions to the success of the Company, and as an incentive for future such contributions. The Compensation Committee of the Company grants options to eligible participants based on these factors. Plan participants vest
in their options at a rate of 20% per year over a five year period, beginning on the grant date of the option. Vested options have an exercise period of ten years commencing on the date of grant. If service to the Company is terminated for any
reason other than death, disability or change in control, the unvested options shall be forfeited.



83



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



Pursuant to the terms of the Option plan, 634,573 shares, or 10%, of common stock of the
Company at the time of the plans adoption have been reserved for future issuance. The Stock Option Plan provides that grants to each officer or employee and non-employee director shall not exceed 25% and 5%, respectively. Options granted to
non-employee directors in the aggregate shall not exceed 30% of the shares available under the Plan.

As of December 31,
2009, options to acquire 561,197 shares of common stock had been granted under the provisions of the Plan to directors, officers and employees of the Company, at a weighted average exercise price of $11.81.

The Company recognizes compensation expense during the vesting period based on the fair value of the option on the date of grant. The
Company awarded options during the year ended December 31, 2009 having estimated fair values on their respective dates of grant that ranged from $2.41 to $2.69, as determined by use of the Black-Scholes Option Pricing Model with the following
assumptions:



|                                       |  |                 |           |   |  |   |           |  
|-------------------------------------- |  | --------------- | --------- | - |  | - | --------- | -
|                                       |  | Range of Values |          
|For Options Granted During 2009        |  |                 |           |   |  |   |           |  
|Expected Dividend Yield                |  |                 | 1.11      | % |  |   | 1.19      | %
|Expected Volatility                    |  |                 | 12.26     | % |  |   | 12.66     | %
|Risk-Free Interest Rate                |  |                 | 2.94      | % |  |   | 2.96      | %
|Expected Life of Option                |  |                 | 7.5 Years |   |  |   | 7.5 Years |  
|Weighted-Average Grant Date Fair Value |  | $               | 2.41      |   |  | $ | 2.69      |  

The dividend yield is
reflective of the Companys expectations regarding future periods. Actual dividend yields may vary from this assumption. The risk-free interest rate reflects the interpolated rate for a U.S. Treasury security with a term equivalent to the
expected life of the options.

A summary of the activity in the Stock Option Plan is as follows:



|                                         |  |         |  |                              |       |                                      |            |                         |   |          
|---------------------------------------- |  | ------- |  | ---------------------------- | ----- | ------------------------------------ | ---------- | ----------------------- | - | ---------
|                                         |  | Shares  |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractTerm |            | AggregateIntrinsicValue
|Outstanding, December 31, 2008           |  | 512,197 |  | $                            | 11.61 |                                      |            |                         |   |          
|Options Granted                          |  | 49,000  |  |                              | 13.93 |                                      |            |                         |   |          
|Options Exercised                        |  |        |  |                              |      |                                      |            |                         |   |          
|Options Forfeited                        |  |        |  |                              |      |                                      |            |                         |   |          
|                                         |  |         |  |                              |       |                                      |            |                         |   |          
|Outstanding, December 31, 2009           |  | 561,197 |  | $                            | 11.81 |                                      | 8.35 Years |                         | $ | 1,507,687
|                                         |  |         |  |                              |       |                                      |            |                         |   |          
|Options Exercisable at December 31, 2009 |  | 102,439 |  | $                            | 11.61 |                                      | 8.21 Years |                         | $ | 295,917  
|                                         |  |         |  |                              |       |                                      |            |                         |   |          



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



A summary of the status of the Companys nonvested options as of December 31,
2009, and changes during the year ended December 31, 2009, is as follows:



|                               |  |          |   |  |                                     |      
|------------------------------ |  | -------- | - |  | ----------------------------------- | -----
|                               |  | Shares   |   |  | WeightedAverageGrant-DateFair Value
|Nonvested at December 31, 2008 |  | 512,197  |   |  | $                                   | 11.61
|Options Granted                |  | 49,000   |   |  |                                     | 13.93
|Options Vested                 |  | (102,439 | ) |  |                                     | 11.61
|Options Forfeited              |  |         |   |  |                                     |     
|                               |  |          |   |  |                                     |      
|Nonvested at December 31, 2009 |  | 458,758  |   |  | $                                   | 11.86
|                               |  |          |   |  |                                     |      

As of December 31, 2009, there was $821,000 of
total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 3.4 years. Compensation expense related to the Stock
Option Plan was $239,000 and $179,000, respectively, for the years ended December 31, 2009 and 2008.



|Note 20. | Earnings per Common Share
|-------- | -------------------------

The Company computes earnings per share in accordance with FASB ASC 260-10, Earnings per Share. Net income is divided by the weighted average number of shares outstanding during the year to calculate basic net earnings per common
share. Diluted earnings per common share are calculated to give effect to stock options.



|                                           |  |                                               |           |      |   |           |  |   |          
|------------------------------------------ |  | --------------------------------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                           |  | 2009                                          |           | 2008 |   | 2007     
|                                           |  | (Dollars in Thousands, Except Per Share Data)
|Numerator                                  |  |                                               |           |      |   |           |  |   |          
|Net Income                                 |  | $                                             | 2,534     |      | $ | 2,744     |  | $ | 2,641    
|Effect of Dilutive Securities              |  |                                               |          |      |   |          |  |   |         
|                                           |  |                                               |           |      |   |           |  |   |          
|Numerator for Diluted Earnings Per Share   |  | $                                             | 2,534     |      | $ | 2,744     |  | $ | 2,641    
|                                           |  |                                               |           |      |   |           |  |   |          
|Denominator                                |  |                                               |           |      |   |           |  |   |          
|Weighted-Average Shares Outstanding        |  |                                               | 4,659,328 |      |   | 5,632,733 |  |   | 2,815,101
|Effect of Potentially Dilutive Securities  |  |                                               | 72,559    |      |   | 25,352    |  |   |         
|                                           |  |                                               |           |      |   |           |  |   |          
|Denominator for Diluted Earnings Per Share |  |                                               | 4,731,887 |      |   | 5,658,085 |  |   | 2,815,101
|                                           |  |                                               |           |      |   |           |  |   |          
|Earnings Per Share                         |  |                                               |           |      |   |           |  |   |          
|Basic                                      |  | $                                             | 0.54      |      | $ | 0.49      |  | $ | 0.94     
|                                           |  |                                               |           |      |   |           |  |   |          
|Diluted                                    |  | $                                             | 0.54      |      | $ | 0.49      |  | $ | 0.94     
|                                           |  |                                               |           |      |   |           |  |   |          

The following table presents the components of average
outstanding shares for purposes of calculating earnings per share:



|                             |  |            |   |  |           |   |  |           |  
|---------------------------- |  | ---------- | - |  | --------- | - |  | --------- | -
|                             |  | 2009       |   |  | 2008      |   |  | 2007      |  
|Average Common Shares Issued |  | 6,345,732  |   |  | 6,345,732 |   |  | 3,059,855 |  
|Average Unearned ESOP Shares |  | (469,516   | ) |  | (494,899  | ) |  | (244,754  | )
|Average Unearned RRP Shares  |  | (215,150   | ) |  | (123,534  | ) |  |          |  
|Average Treasury Shares      |  | (1,001,738 | ) |  | (94,566   | ) |  |          |  
|                             |  |            |   |  |           |   |  |           |  
|                             |  | 4,659,328  |   |  | 5,632,733 |   |  | 2,815,101 |  
|                             |  |            |   |  |           |   |  |           |  

Due to the abbreviated year during 2007, the denominator used in the earnings per share calculation is lower
than would have been presented if the Company had been public for a full year.



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 21. | Condensed Financial InformationParent Company Only
|-------- | ---------------------------------------------------

Financial information pertaining only to Louisiana Bancorp, Inc. is as follows:

LOUISIANA BANCORP, INC.

Condensed Balance Sheets

As of December 31, 2009 and 2008

(Dollars in
Thousands)



|                                             |  |      |        |      |   |       
|-------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                             |  | 2009 |        | 2008
|Assets                                       |  |      |        |      |   |       
|Cash and Cash Equivalents                    |  | $    | 1,091  |      | $ | 2,632 
|Certificates of Deposits                     |  |      | 931    |      |   | 633   
|Securities Available for Sale, at Fair Value |  |      | 7,613  |      |   | 20,812
|Investment in Subsidiary                     |  |      | 63,485 |      |   | 61,580
|Loan to ESOP                                 |  |      | 4,790  |      |   | 4,908 
|Accrued Interest Receivable                  |  |      | 58     |      |   | 147   
|Other Assets                                 |  |      | 23     |      |   | 1     
|                                             |  |      |        |      |   |       
|Total Assets                                 |  | $    | 77,991 |      | $ | 90,713
|                                             |  |      |        |      |   |       
|Liabilities and Shareholders Equity         |  |      |        |      |   |       
|Due to Subsidiary                            |  | $    | 102    |      | $ | 8     
|Other Liabilities                            |  |      | 99     |      |   | 282   
|                                             |  |      |        |      |   |       
|Total Liabilities                            |  |      | 201    |      |   | 290   
|                                             |  |      |        |      |   |       
|Total Shareholders Equity                   |  |      | 77,790 |      |   | 90,423
|                                             |  |      |        |      |   |       
|Total Liabilities and Shareholders Equity   |  | $    | 77,991 |      | $ | 90,713
|                                             |  |      |        |      |   |       



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



LOUISIANA BANCORP, INC.

Statements of Operations

For the Years Ending
December 31, 2009, 2008 and 2007

(Dollars in Thousands)



|                                               |  |      |       |   |      |   |        |      |  |   |       |  
|---------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                               |  | 2009 |       |   | 2008 |   |        | 2007 | 
|Income                                         |  |      |       |   |      |   |        |      |  |   |       |  
|Interest Income ESOP Loan                      |  | $    | 401   |   |      | $ | 410    |      |  | $ | 200   |  
|Interest Income Investment Securities          |  |      | 510   |   |      |   | 890    |      |  |   | 402   |  
|Dividend Income from Subsidiary                |  |      |      |   |      |   | 4,711  |      |  |   |      |  
|Other Interest Income                          |  |      | 39    |   |      |   | 65     |      |  |   | 167   |  
|                                               |  |      |       |   |      |   |        |      |  |   |       |  
|Total Income                                   |  |      | 950   |   |      |   | 6,076  |      |  |   | 769   |  
|                                               |  |      |       |   |      |   |        |      |  |   |       |  
|Operating Expenses                             |  |      | 385   |   |      |   | 444    |      |  |   | 132   |  
|                                               |  |      |       |   |      |   |        |      |  |   |       |  
|Income Before Income Taxes and                 |  |      |       |   |      |   |        |      |  |   |       |  
|Undistributed Earnings of Subsidiary           |  |      | 565   |   |      |   | 5,632  |      |  |   | 637   |  
|Federal Income Tax Expense                     |  |      | (194  | ) |      |   | (313   | )    |  |   | (216  | )
|Equity in Undistributed Earnings of Subsidiary |  |      | 2,163 |   |      |   | (2,575 | )    |  |   | 1,469 |  
|                                               |  |      |       |   |      |   |        |      |  |   |       |  
|Net Income                                     |  | $    | 2,534 |   |      | $ | 2,744  |      |  | $ | 1,890 |  
|                                               |  |      |       |   |      |   |        |      |  |   |       |  



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



LOUISIANA BANCORP, INC.

Statements of Cash Flows

For the Years Ending
December 31, 2009 and 2008

(Dollars in Thousands)



|                                                                                  |  |      |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | 2009 |         |   | 2008 |  
|Cash Flows from Operating Activities                                              |  |      |         |   |      |   |         |  
|Net Income                                                                        |  | $    | 2,534   |   |      | $ | 2,744   |  
|Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |  |      |         |   |      |   |         |  
|Equity in Undistributed Income of Subsidiaries                                    |  |      | (2,163  | ) |      |   | 2,575   |  
|Net Increase in Recognition and Retention Plan Shares Earned                      |  |      | 516     |   |      |   |        |  
|Stock Option Plan Expense                                                         |  |      | 239     |   |      |   | 179     |  
|Discount Accretion Net of Premium Amortization                                    |  |      | (24     | ) |      |   | (32     | )
|Deferred Income Tax Expense (Benefit)                                             |  |      | (18     | ) |      |   |        |  
|Loss (Gain) on Sale of Securities                                                 |  |      | (7      | ) |      |   |        |  
|Decrease (Increase) in Accrued Interest Receivable                                |  |      | 90      |   |      |   | 55      |  
|Decrease (Increase) in Other Assets                                               |  |      | (22     | ) |      |   | 21      |  
|Increase (Decrease) in Due to Subsidiary                                          |  |      | 95      |   |      |   | (3      | )
|Increase (Decrease) in Other Liabilities                                          |  |      | (128    | ) |      |   | 106     |  
|                                                                                  |  |      |         |   |      |   |         |  
|Net Cash Provided by Operating Activities                                         |  |      | 1,112   |   |      |   | 5,645   |  
|                                                                                  |  |      |         |   |      |   |         |  
|Cash Flows from Investing Activities                                              |  |      |         |   |      |   |         |  
|Purchases of Certificates of Deposit                                              |  |      | (1,280  | ) |      |   | (633    | )
|Purchases of Investment SecuritiesAvailable-for-Sale                             |  |      | (3,997  | ) |      |   | (22,069 | )
|Proceeds from Maturities of Certificates of Deposit                               |  |      | 982     |   |      |   | 130     |  
|Proceeds from Maturities of Securities Available-for-Sale                         |  |      | 12,112  |   |      |   | 21,985  |  
|Proceeds for Sales of Securities Available-for-Sale                               |  |      | 5,007   |   |      |   |        |  
|Repayments of ESOP Loan by Subsidiary                                             |  |      | 118     |   |      |   | 109     |  
|                                                                                  |  |      |         |   |      |   |         |  
|Net Cash Provided by (Used in) Investing Activities                               |  |      | 12,942  |   |      |   | (478    | )
|                                                                                  |  |      |         |   |      |   |         |  
|Cash Flows from Financing Activities                                              |  |      |         |   |      |   |         |  
|Stock Purchased for RRP                                                           |  |      |        |   |      |   | (3,200  | )
|Purchase of Treasury Stock                                                        |  |      | (15,595 | ) |      |   | (5,208  | )
|                                                                                  |  |      |         |   |      |   |         |  
|Net Cash Used in Financing Activities                                             |  |      | (15,595 | ) |      |   | (8,408  | )
|                                                                                  |  |      |         |   |      |   |         |  
|Net Decrease in Cash and Cash Equivalents                                         |  |      | (1,541  | ) |      |   | (3,241  | )
|                                                                                  |  |     
|Cash and Cash Equivalents, Beginning of Year                                      |  |      | 2,632   |   |      |   | 5,873   |  
|                                                                                  |  |      |         |   |      |   |         |  
|                                                                                  |  |     
|Cash and Cash Equivalents, End of Year                                            |  | $    | 1,091   |   |      | $ | 2,632   |  
|                                                                                  |  |      |         |   |      |   |         |  



88



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##### Index to Financial Statements

LOUISIANA BANCORP, INC.

Notes to Consolidated Financial Statements(Continued)



|Note 22. | Plan of Reorganization and Stock Issuance
|-------- | -----------------------------------------

As disclosed in Note 1, on March 16, 2007, Bank of New Orleans completed its reorganization to a federally-chartered stock savings bank and formed Louisiana Bancorp, Inc. to serve as the stock
holding company for the Bank. In connection with the reorganization, the Company sold 6,345,732 shares of its common stock at $10.00 per share. The Companys ESOP purchased 507,659 shares, financed by a loan from the Company. The net proceeds
from the sale of this stock were approximately $62,126,000, and the cost associated with the stock conversion was approximately $1,300,000.

As part of the Conversion, the Bank established a liquidation account in an amount equal to the net worth of the Bank as of the date of the latest consolidated balance sheet distributed in connection with
the Conversion. The liquidation account is maintained for the benefit of eligible account holders and supplemental eligible account holders who maintain their accounts at the Bank after the Conversion. The liquidation account will be reduced
annually to the extent that such account holders have reduced their qualifying deposits as of each anniversary date. Subsequent increases will not restore an account holders interest in the liquidation account. In the event of a complete
liquidation, each eligible account holder will be entitled to receive balances for accounts then held.



|Note 23. | Subsequent Events
|-------- | -----------------

In
accordance with FASB ASC 855, Subsequent Events, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effect of all subsequent events that provide additional
evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of December 31, 2009. In preparing these financial statements, the Company evaluated the events and transactions that occurred from
December 31, 2009 through March 15, 2010, the date these financial statements were available to be issued.

On
December 14, 2009, the Bank submitted a Capital Distribution Request to the Office of Thrift Supervision, in connection with a proposed dividend from the Bank of New Orleans to Louisiana Bancorp, Inc., which holds 100% of the issued and
outstanding stock of the Bank. The amount of the proposed dividend was $3.24 million. Following the payment of the proposed dividend, the Bank would remain well capitalized with Tier 1 capital of 17.19%, and Total Risk Based Capital of 39.22%. On
January 5, 2010, the Office of Thrift Supervision approved the request.



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##### Index to Financial Statements

|Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

Not Applicable.



|Item 9A(T). | Controls and Procedures.
|----------- | ------------------------

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of December 31, 2009. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and regulations and are operating in an
effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f)
under the Securities Exchange Act of 1934) occurred during the fourth fiscal quarter of 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Managements Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Securities and Exchange Act of 1934 Rules 13(a)-15(f). The Companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (GAAP). An adequate system of internal control encompasses the processes and procedures that have been established by
management to, among other things:



| |  |  | Maintain records that accurately reflect the Companys transactions;
| | - |  | --------------------------------------------------------------------



| |  |  | Prepare financial statements and footnote disclosures in accordance with GAAP that can be relied upon by external users;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Prevent and detect unauthorized acquisition, use or disposition of the Companys assets that could have a material effect of the financial
statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

Management, including the chief executive officer and chief financial officer, conducted an
evaluation of the effectiveness of the Companys controls over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on our evaluation under the framework in Internal ControlIntegrated Framework, management concluded that the Companys internal control over financial reporting was effective as of December 31, 2009.

This annual report on Form 10-K does not include an attestation report of the Companys registered public accounting
firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to a temporary rule of the Securities and Exchange Commission that
permits the Company to provide only managements report in this annual report on Form 10-K.



|Item 9B. | Other Information.
|-------- | ------------------

Not applicable.



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##### Index to Financial Statements

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance.
|-------- | -------------------------------------------------------

The information required herein is incorporated by reference from the information contained in the sections captioned Information with Respect to Nominees for Director, Continuing Directors and
Executive Officers and Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management  Section 16(a) Beneficial Ownership Reporting Compliance in the Companys definitive proxy statement for the
2010 Annual Meeting of Stockholders to be held in May 2010 (the Proxy Statement).

The Company has adopted a Code
of Conduct and Ethics that applies to its principal executive officer and principal financial officer, as well as other officers and employees of the Company and the Bank. A copy of the Code of Ethics is available on the Companys website at
www.bankofneworleans.com.



|Item 11. | Executive Compensation.
|-------- | -----------------------

The information required herein is incorporated by reference from the information contained in the sections captioned Management Compensation in the Proxy Statement.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|-------- | -----------------------------------------------------------------------------------------------

The information required herein regarding the Security Ownership of Certain Beneficial Owners and Management is incorporated by reference
from the information contained in the section captioned Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management in the Proxy Statement.

Equity Compensation Plan Information. The following table provides information as of December 31, 2009 with respect to
shares of common stock that may be issued under our existing equity compensation plans, which consist of the 2007 Stock Option Plan and 2007 Recognition and Retention Plan, both of which were approved by our shareholders.



|                                                           |  |                                                                                             |     |  |                                                                             |       |     |                                                                                                                                            |        
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------- | ----- | --- | ------------------------------------------------------------------------------------------------------------------------------------------ | -------
|Plan Category                                              |  | Number of securities to beissued upon exercise
ofoutstanding options, warrantsand rights(a) |     |  | Weighted-averageexercise price ofoutstanding options,warrants and rights(b) |       |     | Number of securities remainingavailable for future issuanceunder equity
compensationplans (excluding securitiesreflected in column (a))(c)
|Equity compensation plans approved by security holders     |  | 739,533                                                                                     | (1) |  | $                                                                           | 11.81 | (2) |                                                                                                                                            | 104,128
|Equity compensation plans not approved by security holders |  |                                                                                            |     |  |                                                                             |      |     |                                                                                                                                            |       
|                                                           |  |                                                                                             |     |  |                                                                             |       |     |                                                                                                                                            |        
|Total                                                      |  | 739,533                                                                                     |     |  | $                                                                           | 11.81 |     |                                                                                                                                            | 104,128
|                                                           |  |                                                                                             |     |  |                                                                             |       |     |                                                                                                                                            |        



|(1) | Includes 178,336 shares subject to restricted stock grants which were not vested as of December 31, 2009.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | The weighted-average exercise price excludes such restricted stock grants.
|--- | --------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions, and Director Independence.
|-------- | --------------------------------------------------------------------------

The information required herein is incorporated by reference from the information contained in the sections captioned Management
Compensation  Related Party Transactions and Information with Respect to Nominees for Director, Continuing Directors and Executive Officers in the Proxy Statement.



|Item 14. | Principal Accounting Fees and Services.
|-------- | ---------------------------------------

The information required herein is incorporated by reference from the information contained in the section captioned Ratification of Appointment of Independent Registered Public Accounting Firm
(Proposal Two)  Audit Fees in the Proxy Statement.



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules.
|-------- | -------------------------------------------



|(a) | (1) The following financial statements are incorporated by reference from Item 8 hereof:
|--- | ----------------------------------------------------------------------------------------



|                                                                                                    
|----------------------------------------------------------------------------------------------------
|Consolidated Statements of Financial Condition as of December 31, 2009 and 2008                     
|                                                                                                    
|Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 and 2007              
|                                                                                                    
|Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2009, 2008 and
2007
|                                                                                                    
|Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2009, 2008 and 2007
|                                                                                                    
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007          
|                                                                                                    
|Notes to Consolidated Financial Statements                                                          

(2) All 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

The following exhibits are filed as part of this Form 10-K and this list includes the Exhibit Index.



|     |  |                                                                                                                                    |  |               
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|No.  |  | Description                                                                                                                        |  | Location      
|3.1  |  | Articles of Incorporation of Louisiana Bancorp, Inc.                                                                               |  | (1)           
|     |  |                                                                                                                                   
|3.2  |  | Bylaws of Louisiana Bancorp, Inc.                                                                                                  |  | (1)           
|     |  |                                                                                                                                   
|4.0  |  | Form of Common Stock Certificate of Louisiana Bancorp, Inc.                                                                        |  | (1)           
|     |  |                                                                                                                                   
|10.1 |  | Amended and Restated Supplemental Executive Retirement Plan with Lawrence J. LeBon, III*                                           |  | (2)           
|     |  |                                                                                                                                   
|10.2 |  | Amended and Restated Supplement Executive Retirement Plan with John LeBlanc*                                                       |  | (2)           
|     |  |                                                                                                                                   
|10.3 |  | Amended and Restated Directors Deferred Compensation Plan*                                                                         |  | (2)           
|     |  |                                                                                                                                   
|10.4 |  | Amended and Restated Employment Agreement between Louisiana Bancorp, Inc. and Lawrence J. LeBon, III*                              |  | (2)           
|     |  |                                                                                                                                   
|10.5 |  | Amended and Restated Employment Agreement between Bank of New Orleans and Lawrence J. LeBon, III*                                  |  | (2)           
|     |  |                                                                                                                                   
|10.6 |  | Amended and Restated Employment Agreement between Louisiana Bancorp, Inc. and John LeBlanc*                                        |  | (2)           
|     |  |                                                                                                                                   
|10.7 |  | Amended and Restated Employment Agreement between Bank of New Orleans and John LeBlanc*                                            |  | (2)           
|     |  |                                                                                                                                   
|10.8 |  | 2007 Stock Option Plan*                                                                                                            |  | (3)           
|     |  |                                                                                                                                   
|10.9 |  | 2007 Recognition and Retention Plan and Trust Agreement*                                                                           |  | (3)           
|     |  |                                                                                                                                   
|22.0 |  | Subsidiaries of the RegistrantReference is made to Item 1. BusinessSubsidiaries of this Form 10-K for the required information |  |              
|     |  |                                                                                                                                   
|23.1 |  | Consent of LaPorte, Sehrt, Romig & Hand                                                                                            |  | Filed herewith
|     |  |                                                                                                                                   
|31.1 |  | Certification of Chief Executive Officer                                                                                           |  | Filed herewith
|     |  |                                                                                                                                   
|31.2 |  | Certification of Chief Financial Officer                                                                                           |  | Filed herewith
|     |  |                                                                                                                                   
|32.0 |  | Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer                                              |  | Filed herewith



|* | Denotes management compensation plan or arrangement.
|- | ----------------------------------------------------



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##### Index to Financial Statements

|(1) | Incorporated by reference from the Companys Registration Statement on Form S-1, filed with the SEC on March 21, 2007, as amended, and declared effective on
May 14, 2007 (File No. 333-141465).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference from the Companys Current Report on Form 8-K, dated as of October 28, 2008.
|--- | ------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference from the Companys definitive proxy statement for the special meeting of stockholders to be held on February 14, 2008, filed with
the SEC on December 28, 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Exhibits
|--- | --------

The exhibits listed
under (a)(3) of this Item 15 are filed herewith.



|(c) | Reference is made to (a)(2) of this Item 15.
|--- | --------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.



|               |  |  |  |                         |  |                               |  |                                                            
|-------------- |  |  |  | ----------------------- |  | ----------------------------- |  | -----------------------------------------------------------
|               |  |  |  | LOUISIANA BANCORP, INC.
|               |  |  | 
|March 23, 2010 |  |  |  | By:                     |  | /S/    LAWRENCE J. LEBON,
III
|               |  |  |  |                         |  |                               |  | Lawrence J. LeBon, III                                     
|               |  |  |  |                         |  |                               |  | Chairman of the Board, President andChief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.



|                                                     |  |                                                                                                          |  |               
|---------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | --------------
|Name                                                 |  | Title                                                                                                    |  | Date          
|                                                     |  |                                                                                                         
|/S/    LAWRENCE J.
LEBON, III Lawrence J. LeBon,
III |  | Chairman of the Board, President and Chief Executive Officer (principal executive officer)               |  | March 23, 2010
|                                                     |  |                                                                                                         
|/S/    JOHN
LEBLANC John LeBlanc                     |  | Senior Vice President and Chief Financial Officer (principal financial and principal accounting officer) |  | March 23, 2010
|                                                     |  |                                                                                                         
|/S/    MAURICE F. EAGAN,
JR. Maurice F. Eagan, Jr.   |  | Director                                                                                                 |  | March 23, 2010
|                                                     |  |                                                                                                         
|/S/    MICHAEL E.
GUARISCO Michael E. Guarisco       |  | Director                                                                                                 |  | March 23, 2010
|                                                     |  |                                                                                                         
|/S/    GORDON K.
KONRAD Gordon K. Konrad             |  | Director                                                                                                 |  | March 23, 2010
|                                                     |  |                                                                                                         
|/S/    BRIAN G.
LEBON, SR. Brian G. LeBon,
Sr.       |  | Director                                                                                                 |  | March 23, 2010
|                                                     |  |                                                                                                         
|/S/    IVAN J.
MIESTCHOVICH Ivan J. Miestchovich     |  | Director                                                                                                 |  | March 23, 2010



94