UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|
|
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
EXCHANGE
ACT OF 1934
|
For
the quarterly period ended
|
March
31, 2008
|
o
|
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
000-51078
|
|
LINCOLN
PARK BANCORP
|
(Exact
name of registrant as specified in its
charter)
|
FEDERAL
|
61-1479859
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
Number)
|
|
|
31
Boonton Turnpike, Lincoln Park, New Jersey
|
07035
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
Registrant’s
telephone number, including area code
|
(973)
694-0330
|
None
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
|
Indicate
by check
X
whether
the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
x
No
o
|
|
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.
|
Larger
Accelerated Filer
|
o
|
Accelerated
Filer
|
o
|
Non-Accelerated
Filer
|
o
(Do not check if a smaller reporting company)
|
Smaller
Reporting Company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.) Yes
o
No
x
|
|
The
number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 1,825,845 shares of
common stock, par value $.01 per share, as of May 14,
2008.
|
LINCOLN
PARK BANCORP AND SUBSIDIARY
INDEX
|
Page
|
PART
I - FINANCIAL INFORMATION
|
Number
|
|
|
Item
1:
|
Financial
Statements
|
|
|
|
|
|
Consolidated
Statements of Financial Condition
|
|
|
at
March 31, 2008 and December 31, 2007 (Unaudited)
|
3
|
|
|
|
|
Consolidated
Statements of Operations for the Three Months
|
|
|
Ended
March 31, 2008 and 2007 (Unaudited)
|
4
|
|
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
|
|
for
the Three Months Ended March 31, 2008 and 2007 (Unaudited)
|
5
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Three Months
|
|
|
Ended
March 31, 2008 and 2007 (Unaudited)
|
6
|
|
|
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
7 –
11
|
|
|
|
Item
2:
|
Management’s
Discussion and Analysis of
|
|
|
Financial
Condition and Results of Operations
|
12
–18
|
|
|
|
Item
3:
|
Quantitative
and Qualitative Disclosure About Market Risk
|
19
|
|
|
|
Item
4:
|
Controls
and Procedures
|
19
|
|
|
|
PART
II - OTHER INFORMATION
|
19
– 22
|
|
|
Item
1:
|
Legal
Proceedings
|
20
|
Item
1A:
|
Risk
Factors
|
20
|
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
20
|
Item
3:
|
Defaults
Upon Senior Securities
|
21
|
Item
4:
|
Submission
of Matters to a Vote of Security Holders
|
21
|
Item
5:
|
Other
Information
|
21
|
Item
6:
|
Exhibits
|
22
|
|
|
SIGNATURES
|
23
|
PART I
–FINANCIAL INFORMATION
LINCOLN
PARK BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(Unaudited)
ITEM
1. FINANCIAL STATEMENTS
|
|
March
31,
|
|
|
December
31,
|
|
ASSETS
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
(In
thousands, except for share and
|
|
|
|
per
share amounts)
|
|
|
|
|
|
|
|
|
Cash
and amounts due from depository institutions
|
|
$
|
1,274
|
|
|
$
|
1,380
|
|
Interest-bearing
deposits in other banks
|
|
|
6,538
|
|
|
|
1,121
|
|
|
|
|
|
|
|
|
|
|
Total
cash and cash equivalents
|
|
|
7,812
|
|
|
|
2,501
|
|
|
|
|
|
|
|
|
|
|
Term
deposits
|
|
|
198
|
|
|
|
295
|
|
Securities
available for sale
|
|
|
647
|
|
|
|
1,521
|
|
Securities
held to maturity
|
|
|
22,528
|
|
|
|
21,243
|
|
Loans
receivable, net of allowance for loan losses of $207
|
|
|
|
|
|
|
|
|
and
$187, respectively
|
|
|
73,063
|
|
|
|
73,085
|
|
Premises
and equipment
|
|
|
1,570
|
|
|
|
1,584
|
|
Federal
Home Loan Bank of New York stock, at cost
|
|
|
1,352
|
|
|
|
1,195
|
|
Interest
receivable
|
|
|
494
|
|
|
|
523
|
|
Other
assets
|
|
|
452
|
|
|
|
718
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
108,116
|
|
|
$
|
102,665
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Non-interest
bearing deposits
|
|
$
|
2,918
|
|
|
$
|
2,054
|
|
Interest
bearing deposits
|
|
|
64,003
|
|
|
|
62,913
|
|
Total
deposits
|
|
|
66,921
|
|
|
|
64,967
|
|
|
|
|
|
|
|
|
|
|
Advances
from Federal Home Loan Bank of New York
|
|
|
27,057
|
|
|
|
23,552
|
|
Advance
payments by borrowers for taxes and insurance
|
|
|
427
|
|
|
|
399
|
|
Other
liabilities
|
|
|
581
|
|
|
|
601
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
94,986
|
|
|
|
89,519
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock; no par value; 1,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
none
issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock; $.01 par value; 5,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
1,851,500
issued; 1,825,845 outstanding
|
|
|
19
|
|
|
|
19
|
|
Additional
paid-in capital
|
|
|
7,576
|
|
|
|
7,558
|
|
Retained
earnings
|
|
|
6,303
|
|
|
|
6,307
|
|
Treasury
stock; 25,655 shares, at cost
|
|
|
(200
|
)
|
|
|
(200
|
)
|
Unearned
ESOP shares
|
|
|
(323
|
)
|
|
|
(328
|
)
|
Accumulated
other comprehensive loss
|
|
|
(245
|
)
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
13,130
|
|
|
|
13,146
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
108,116
|
|
|
$
|
102,665
|
|
See notes
to consolidated financial statements.
LINCOLN
PARK BANCORP AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
thousands, except for per
|
|
|
|
share
amounts)
|
|
Interest
income:
|
|
|
|
|
|
|
Loans,
including fees
|
|
$
|
1,046
|
|
|
$
|
974
|
|
Securities
|
|
|
285
|
|
|
|
267
|
|
Other
interest-earning assets
|
|
|
17
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Total
interest income
|
|
|
1,348
|
|
|
|
1,256
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
556
|
|
|
|
496
|
|
Advances
and other borrowed money
|
|
|
217
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
Total
interest expense
|
|
|
773
|
|
|
|
728
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
575
|
|
|
|
528
|
|
Provision
for loan losses
|
|
|
20
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Net
interest income after provision for loan losses
|
|
|
555
|
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
Fees
and service charges
|
|
|
23
|
|
|
|
24
|
|
Gains
on sale of available for sale securities
|
|
|
-
|
|
|
|
3
|
|
(Loss)
on call of held to maturity securities
|
|
|
(1
|
)
|
|
|
-
|
|
Miscellaneous
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest income
|
|
|
28
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expenses:
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
268
|
|
|
|
225
|
|
Net
occupancy expense of premises
|
|
|
37
|
|
|
|
28
|
|
Equipment
|
|
|
76
|
|
|
|
66
|
|
Advertising
|
|
|
10
|
|
|
|
8
|
|
Federal
insurance premium
|
|
|
2
|
|
|
|
2
|
|
Miscellaneous
|
|
|
194
|
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest expenses
|
|
|
587
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income before income taxes
|
|
|
(4
|
)
|
|
|
49
|
|
Income
tax (benefit) expense
|
|
|
(2
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(2
|
)
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income per common share:
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
-
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares and
|
|
|
|
|
|
|
|
|
common
stock equivalents outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,768
|
|
|
|
1,788
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
1,768
|
|
|
|
1,789
|
|
See notes
to consolidated financial statements.
LINCOLN
PARK BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
|
Other
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Treasury
|
|
|
ESOP
|
|
|
Comprehensive
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Stock
|
|
|
Shares
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
BALANCE-DECEMBER
31, 2006
|
|
$
|
19
|
|
|
$
|
7,485
|
|
|
$
|
6,252
|
|
|
$
|
-
|
|
|
$
|
(347
|
)
|
|
$
|
(165
|
)
|
|
$
|
13,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for three months
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
ended
March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available
for sale, net of deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes of $6
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
9
|
|
Directors
Retirement Plan, net of deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
taxes
of $4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
7
|
|
Total
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP
shares released
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
4
|
|
Restricted
stock earned
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Stock
options
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE-March
31, 2007
|
|
$
|
19
|
|
|
$
|
7,502
|
|
|
$
|
6,286
|
|
|
$
|
-
|
|
|
$
|
(342
|
)
|
|
$
|
(149
|
)
|
|
$
|
13,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE-December 31,
2007
|
|
$
|
19
|
|
|
$
|
7,558
|
|
|
$
|
6,307
|
|
|
$
|
(200
|
)
|
|
$
|
(328
|
)
|
|
$
|
(210
|
)
|
|
$
|
13,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding loss on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available
for sale, net of deferred taxes $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
(39
|
)
|
Directors'
retirement plan, net of deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
taxes
$3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
Total
Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP
shares released
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
3
|
|
Restricted
stock earned
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Stock
options
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE-March
31, 2008
|
|
$
|
19
|
|
|
$
|
7,576
|
|
|
$
|
6,303
|
|
|
$
|
(200
|
)
|
|
$
|
(323
|
)
|
|
$
|
(245
|
)
|
|
$
|
13,130
|
|
See notes
to consolidated financial statements.
LINCOLN
PARK BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
Thousands)
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(2
|
)
|
|
$
|
35
|
|
Adjustments
to reconcile net (loss) income to net
|
|
|
|
|
|
|
|
|
cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
of premises and equipment
|
|
|
20
|
|
|
|
17
|
|
Amortization
and accretion, net
|
|
|
6
|
|
|
|
6
|
|
Loss
(gain) on calls and sales of securities AFS
|
|
|
1
|
|
|
|
(3
|
)
|
Provision
for loan losses
|
|
|
20
|
|
|
|
7
|
|
Decrease
(increase) in interest receivable
|
|
|
29
|
|
|
|
(33
|
)
|
Decrease
(increase) in other assets
|
|
|
303
|
|
|
|
(43
|
)
|
Deferred
taxes
|
|
|
(40
|
)
|
|
|
(7
|
)
|
(Decrease)
increase in accrued interest payable
|
|
|
(5
|
)
|
|
|
3
|
|
(Decrease)
increase in other liabilities
|
|
|
(11
|
)
|
|
|
11
|
|
ESOP
shares committed to be released
|
|
|
3
|
|
|
|
4
|
|
Restricted
stock earned
|
|
|
9
|
|
|
|
8
|
|
Stock
options
|
|
|
9
|
|
|
|
9
|
|
Net
cash provided by operating activities
|
|
|
342
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of term deposits
|
|
|
-
|
|
|
|
(297
|
)
|
Proceeds
from maturities of term deposits
|
|
|
99
|
|
|
|
99
|
|
Purchase
of securities available for sale
|
|
|
-
|
|
|
|
(147
|
)
|
Proceeds
from maturities and calls of securities available for sale
|
|
|
833
|
|
|
|
-
|
|
Principal
repayments on securities available for sale
|
|
|
2
|
|
|
|
5
|
|
Proceeds
from sale of securities available for sale
|
|
|
-
|
|
|
|
8
|
|
Purchases
of securities held to maturity
|
|
|
(5,957
|
)
|
|
|
-
|
|
Proceeds
from maturities and calls of securities held to maturity
|
|
|
4,530
|
|
|
|
100
|
|
Principal
repayments on securities held to maturity
|
|
|
139
|
|
|
|
41
|
|
Net
increase in loans receivable
|
|
|
(4
|
)
|
|
|
(2,998
|
)
|
Additions
to premises and equipment
|
|
|
(6
|
)
|
|
|
(3
|
)
|
Purchase
of Federal Home Loan Bank of New York stock
|
|
|
(337
|
)
|
|
|
(59
|
)
|
Redemption
of Federal Home Loan Bank of New York stock
|
|
|
180
|
|
|
|
70
|
|
Net
cash used in investing activities
|
|
|
(521
|
)
|
|
|
(3,181
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
1,957
|
|
|
|
2,764
|
|
Proceeds
from advances from Federal Home Loan Bank of New York
|
|
|
10,500
|
|
|
|
14,400
|
|
Repayments
of advances from Federal Home Loan Bank of New York
|
|
|
(6,995
|
)
|
|
|
(14,647
|
)
|
Net
increase in payments by borrowers for taxes and insurance
|
|
|
28
|
|
|
|
38
|
|
Net
cash provided by financing activities
|
|
|
5,490
|
|
|
|
2,555
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
5,311
|
|
|
|
(612
|
)
|
Cash
and cash equivalents - beginning
|
|
|
2,501
|
|
|
|
2,601
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - ending
|
|
$
|
7,812
|
|
|
$
|
1,989
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information:
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
on deposits and borrowings
|
|
$
|
778
|
|
|
$
|
725
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
See notes
to consolidated financial statements.
LINCOLN
PARK BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
1. PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of Lincoln Park Bancorp
(the “Company”) and its wholly owned subsidiary, Lincoln Park Savings Bank (the
“Bank”), and the Bank’s wholly owned subsidiary LPS Investment
Company. The Company’s business is conducted principally through the
Bank. All significant intercompany accounts and transactions have
been eliminated in consolidation.
2. BASIS OF
PRESENTATION
The
accompanying unaudited consolidated financial statements were prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) for
interim financial information as well as instructions for Form 10-Q and Rule
10-01 of regulation S-X. Accordingly, they do not include information
or footnotes necessary for a complete presentation of financial condition,
results of operations, changes in stockholders’ equity and cash flows in
conformity with GAAP. However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been included. The
results of operations for the three months ended March 31, 2008, are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
3. NET
INCOME PER COMMON SHARE
Basic net
income per common share is computed by dividing net income available to common
shareholders by the weighted average number of shares of common stock
outstanding, adjusted for unearned shares of the ESOP and unvested restricted
stock awards. Diluted net income per common share is calculated by dividing net
income by the weighted average number of shares of common stock and
common stock equivalents outstanding decreased by the number of common shares
that are assumed to be repurchased with the proceeds from the exercise or
conversion of the common stock equivalents, if dilutive, (treasury stock method)
along with the assumed tax benefit from the exercise of non-qualified
options. Shares issued and reacquired during any period are weighted
for the portion of the period they were outstanding.
4. CRITICAL
ACCOUNTING POLICIES
We
consider accounting policies involving significant judgments and assumptions by
management that have, or could have, a material impact on the carrying value of
certain assets or on income to be critical accounting
policies. Material estimates that are particularly susceptible to
significant changes relate to the determination of the allowance for loan
losses. Determining the amount of the allowance for loan losses
necessarily involves a high degree of judgment. Management reviews
the level of the allowance on a quarterly basis, at a minimum, and establishes
the provision for loan losses based on the composition of the loan portfolio,
delinquency levels, loss experience, economic conditions, and other factors
related to the collectibility of the loan portfolio. Since there has
been no material shift in the loan portfolio, the level of the allowance for
loan losses has changed primarily due to changes in the size of the loan
portfolio and the level of nonperforming loans.
We have
allocated the allowance among categories of loan types as well as classification
status at each period-end date. Assumptions and allocation
percentages based on loan types and classification status have been consistently
applied. Management regularly evaluates various risk factors related
to the loan portfolio, such as type of loan, underlying collateral and payment
status, and the corresponding allowance allocation
LINCOLN
PARK BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
4. CRITICAL
ACCOUNTING POLICIES (Continued)
percentages. Although
we believe that we use the best information available to establish the allowance
for loan losses, future additions to the allowance may be necessary based on
estimates that are susceptible to change as a result of changes in economic
conditions and other factors. In addition, the regulatory
authorities, as an integral part of their examinations process, periodically
review our allowance for loan losses. Such agencies may require us to
recognize adjustments to the allowance based on its judgments about information
available to it at the time of their examinations.
5. FAIR
VALUE DISCLOSURES
Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements”, for financial assets and financial liabilities. In
accordance with Financial Accounting Standards Board Staff Position (FSP) No.
157-2, “Effective Date of FASB Statement No. 157,” the Company will delay
application of SFAS 157 for non-financial assets and non-financial liabilities,
until January 1, 2009. SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements.
SFAS 157 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants. A fair value
measurement assumes that the transaction to sell the asset or transfer the
liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market for the asset or
liability. The price in the principal (or most advantageous) market
used to measure the fair value of the asset or liability shall not be adjusted
for transaction costs. An orderly transaction is a transaction that
assumes exposure to the market for a period prior to the measurement date to
allow for marketing activities that are usual and customary for transactions
involving such assets and liabilities; it is not a forced
transaction. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable, (iii) able to
transact, and (iv) willing to transact.
SFAS 157 requires the use of valuation
techniques that are consistent with the market approach, the income approach
and/or the cost approach. The market approach uses prices and other
relevant information generated by market transactions involving identical or
comparable assets and liabilities. The income approach uses valuation
techniques to convert future amounts, such as cash flows or earnings, to a
single present amount on a discounted basis. The cost approach is
based on the amount that currently would be required to replace the service
capacity of an asset (replacement cost). Valuation techniques should
be consistently applied. Inputs to valuation techniques refer to the
assumptions that market participants would use in pricing the asset or
liability. Inputs may be observable, meaning those that reflect the
assumptions market participants would use in pricing the asset or liability
developed based on market data obtained from independent sources, or
unobservable, meaning those that reflect the reporting entity’s own assumptions
about the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances. In that regard, SFAS 157 establishes a fair value
hierarchy for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as
follows:
Level
1 Inputs – Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
Level
2 Inputs – Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability; either directly or
indirectly. These might include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted prices that
are observable for the assets or liabilities (such as interest rates,
volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived
principally from or corroborated by market data by correction or other
means.
LINCOLN
PARK BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
5. FAIR
VALUE DISCLOSURES (Continued)
Level
3 Inputs – Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity’s own assumptions about the assumptions that
market participants would use in pricing the assets or liabilities.
A description of the valuation
methodologies used for instruments measured at fair value, as well as the
general classification of such instruments pursuant to the valuation hierarchy,
is set forth below. These valuation methodologies were applied to all
of the Company’s financial assets and financial liabilities carried at the fair
value effective January 1, 2008.
In general, fair value is based upon
quoted market prices, where available. If such quoted market prices
are not available, fair value is based upon internally developed models that
primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value. These adjustments
may include amounts to reflect counter-party credit quality, the Company’s
creditworthiness, among other things, as well as unobservable
parameters. Any such valuation adjustments are applied consistently
over time. The Company’s valuation methodologies may produce a fair
value calculation that may not be indicative of net realizable value or
reflective of future fair values. While management believes the
Company’s valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.
Available for Sale
Securities
. Securities classified as available for sale are
reported at fair value utilizing Level 2 inputs. For these
securities, the Company obtains fair value measurements from an independent
pricing service. The fair value measurements consider observable data
that may include dealer quotes, market spreads, cash flows, the U.S. Treasury
yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information, and the bond’s terms and conditions,
among other things.
At March 31, 2008, the following table
represents the fair value measurement on available for sale
securities.
|
|
Fair
Value Measurements at Reporting Date Using
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
3/31/2008
|
|
|
Quoted
Prices in
Active
Markets for Identical Assets
(Level
1)
|
|
|
Significant
Other Observable Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
$
|
647
|
|
|
$
|
-
|
|
|
$
|
647
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
647
|
|
|
$
|
-
|
|
|
$
|
647
|
|
|
$
|
-
|
|
Certain financial assets and financial
liabilities are measured at fair value on a nonrecurring basis; that is, the
instruments are not measured at fair value on an ongoing basis but are subject
to fair value adjustments in certain circumstances (for example, when there is
evidence of impairment). Financial assets and financial liabilities
measured at fair value on a nonrecurring basis, such as long-lived assets
measured at fair value for impairment assessment, were not significant at March
31, 2008. As stated above, SFAS 157 will be applicable to these fair value
measurements beginning January 1, 2009.
LINCOLN
PARK BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
5. FAIR
VALUE DISCLOSURES (Continued)
Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities – Including an
amendment of FASB Statement No. 115”. SFAS 159 permits the Company to
choose to measure eligible items at fair value at specified election
dates. Unrealized gains and losses on items for which the fair value
measurement option has been elected are reported in earnings at each subsequent
reporting date. The fair value option (i) may be applied instrument
by instrument, with certain exceptions, thus the Company may record identical
financial assets and liabilities at fair value or by another measurement basis
permitted under generally accepted accounting principles, (ii) is irrevocable
(unless a new election date occurs), and (iii) is applied only to entire
instruments and not to portions of instruments. Adoption of SFAS 159
on January 1, 2008 did not have any material impact on the Company’s financial
statements.
6. DIRECTORS’
RETIREMENT PLAN
Periodic
expenses for the Company’s Directors’ retirement plan were as
follows:
|
|
(In
thousands)
|
|
|
|
Three
Months Ended
March
31, 2008
|
|
|
Three
Months Ended
March
31, 2007
|
|
Service
Cost
|
|
$
|
4
|
|
|
$
|
3
|
|
Interest
Cost
|
|
|
6
|
|
|
|
5
|
|
Past
Service Liability
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
17
|
|
|
$
|
15
|
|
7. RECENT
ACCOUNTING PRONOUNCEMENTS
FAS
-157-2
In
February 2008, the FASB issued FASB Staff Position (FSP) 157-2, “Effective Date
of FASB Statement No. 157,” that permits a one-year deferral in applying the
measurement provisions of Statement No. 157 to non-financial assets and
non-financial liabilities (non-financial items) that are not recognized or
disclosed at fair value in an entity’s financial statements on a recurring basis
(at least annually). Therefore, if the change in fair value of a
non-financial item is not required to be recognized or disclosed in the
financial statements on an annual basis or more frequently, the effective date
of application of Statement 157 to that item is deferred until fiscal years
beginning after November 15, 2008 and interim periods within those fiscal
years. This deferral does not apply, however, to an entity that
applied Statement 157 in interim or annual financial statements prior to the
issuance of FSP-157-2. The Company is currently evaluating the
impact, if any, that the adoption of FSP 157-2 will have on the Company’s
consolidated financial statements.
LINCOLN
PARK BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
7. RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
SAB
109
Staff
Accounting Bulletin No. 109 (SAB 109), “Written Loan Commitments Recorded at
Fair Value Through Earnings” expresses the views of the staff regarding written
loan commitments that are accounted for at fair value through earnings under
generally accepted accounting principles. To make the staff’s views
consistent with current authoritative accounting guidance, the SAB revises and
rescinds portions of SAB No. 105, “Application of Accounting Principles to Loan
Commitments.” Specifically, the SAB revises the SEC staff’s views on
incorporating expected net future cash flows related to loan servicing
activities in the fair value measurement of a written loan
commitment. The SAB retains the staff’s views on incorporating
expected net future cash flows related to internally-developed intangible assets
in the fair value measurement of a written loan commitment. The staff
expects registrants to apply the views in Question 1 of SAB 109 on a prospective
basis to derivative loan commitments issued or modified in fiscal quarters
beginning after December 15, 2007. The Company does not expect SAB
109 to have a material impact on its consolidated financial
statements.
SAB
110
Staff
Accounting Bulletin No. 110 (SAB 110) amends and replaces Question 6 of Section
D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin
series. Question 6 of Section D.2 of Topic 14 expresses the views of
the staff regarding the use of the “simplified” method in developing an estimate
of expected term of “plain vanilla” share options and allows usage of the
“simplified” method for share option grants prior to December 31,
2007. SAB 110 allows public companies which do not have historically
sufficient experience to provide a reasonable estimate to continue use of the
“simplified” method for estimating the expected term of “plain vanilla” share
option grants after December 31, 2007. SAB 110 is effective January
1, 2008. The Company does not expect SAB 110 to have a material
impact on its financial statements.
FASB
Statement No. 141 (R)
FASB
Statement No. 141 (R) “Business Combinations” was issued in December of
2007. This Statement establishes principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree. The Statement also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. The guidance will become effective as of the
beginning of a company’s fiscal year beginning after December 15,
2008. This new pronouncement will impact the Company’s accounting for
business combinations completed beginning January 1, 2009.
EITF
06-11
In June
2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue No.
06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment
Awards” (“EITF 06-11”). EITF 06-11 states that an entity should
recognize a realized tax benefit associated with dividends on non-vested equity
shares, non-vested equity share units and outstanding equity share options
charged to retained earnings as an increase in additional paid in
capital. The amount recognized in additional paid in capital should
be included in the pool of excess tax benefits available to absorb potential
future tax deficiencies on share-based payment awards. EITF 06-11
should be applied prospectively to income tax benefits of dividends on
equity-classified share-based payment awards that are declared in fiscal years
beginning after December 15, 2007. The Company expects that EITF
06-11 will not have an impact on its consolidated financial
statements.
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM
2.
Forward-Looking
Statements
This Form
10-Q may include certain forward-looking statements based on current management
expectations. The actual results of the Company could differ
materially from those management expectations. Factors that could
cause future results to vary from current management expectations include, but
are not limited to, general economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the federal government, changes in tax
policies, rates and regulations of federal, state and local tax authorities,
changes in interest rates, deposit flows, the cost of funds, demand for loan
products, demand for financial services, competition, changes in the quality or
composition of loan and investment portfolios of the Bank, changes in accounting
principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting the Company’s operations,
markets, products, services and prices.
Comparison
of Financial Condition at March 31, 2008 and December 31, 2007
Total
assets increased by $5.5 million, or 5.3%, to $108.1 million at March 31, 2008,
from $102.7 million at December 31, 2007. At March 31, 2008, the
level of cash and cash equivalents increased by $5.3 million, or 212.3%, to $7.8
million from $2.5 million at December 31, 2007. The increase in cash
and cash equivalents was primarily due to advances from the Federal Home Loan
Bank. Term deposits decreased $97,000 to $198,000 at March 31, 2008
when compared with $295,000 at December 31, 2007. The decrease
in term deposits was due to the maturity of a certificate of
deposit.
Securities
available for sale decreased by $874,000, or 57.4%, to $647,000 at March 31,
2008, when compared with $1.5 million at December 31, 2007. The
decrease was mainly due to calls of $833,000 on U.S. Government Agency step-up
bonds. Securities held to maturity increased by $1.3 million, or
6.1%, to $22.5 million at March 31, 2008 when compared with $21.2 million at
December 31, 2007. The increase was due to purchases of securities
totaling $6.0 million, partially offset by maturities and calls of securities of
$4.5 million, and principal repayments of $139,000.
At March
31, 2008, and December 31, 2007, loans receivable totaled $73.1 million
representing no change since December 31, 2007.
Federal
Home Loan Bank of New York (“FHLB”) stock increased by $157,000, or 13.1%, to
$1.4 million at March 31, 2008 when compared to $1.2 million at
December 31, 2007, primarily due to an increase in borrowings.
Other
assets decreased by $266,000, or 37.0%, to $452,000 at March 31, 2008 from
$718,000 at December 31, 2007. The decrease was mainly due to the
closing of a loan in the amount of $270,000, that was originated and disbursed
to an attorney in December of 2007, but closed in January 2008.
Total
deposits increased by $2.0 million, or 3.0%, to $66.9 million at March 31, 2008
from $65.0 million at December 31, 2007. The increase in deposits was
due to a management decision to be more competitive with deposit
rates. Advances from the FHLB increased by $3.5 million, or 14.9%, to
$27.1 million at March 31, 2008 when compared with $23.6 million at December 31,
2007.
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison
of Financial Condition at March 31, 2008 and December 31, 2007
(Cont’d.)
Stockholders’
equity totaled $13.1 million at March 31, 2008 and December 31, 2007,
respectively, reflecting a net loss of $2,000, and an aggregate expense of
$25,000 for the ESOP, restricted stock, and stock options, for the three months
ended March 31, 2008. Accumulated other comprehensive loss totaled
$245,000 and $210,000 at March 31, 2008 and December 31, 2007, respectively,
representing a 16.4% decrease. The decrease was primarily due to
unrealized losses of $39,000 on available for sale securities.
Comparison
of Operating Results for the Three Months Ended March 31, 2008 and
2007
General.
For the three months
ending March 31, 2008, the Company incurred a net loss of $2,000 compared to net
income of $35,000 for the three months ending March 31, 2007. The
decrease in net income reflects increases in non-interest expenses and the
provision for loan losses and decreases in non-interest income, partially offset
by an increase in net interest income, and a decrease in income tax
expense.
Interest Income.
Interest
income increased by $92,000, or 7.3%, to $1.35 million for the three months
ended March 31, 2008, from $1.26 million for the three months ended March 31,
2007. The increase in interest income was due to increases of $72,000 in
interest income from loans, $18,000 in interest income on securities, and $2,000
in interest income from other interest earning assets.
Interest
income from loans increased by $72,000, or 7.4%, to $1.05 million for the three
months ended March 31, 2008, from $974,000 for the three months ended March 31,
2007.
The
increase was due to a $4.2 million or 6.21% increase in the average balance of
loans to $73.
1
million during the quarter
ended March 31, 2008 from $
68.9
million during the quarter
ended March 31, 2007 and an increase in the average yield to 5.72% from
5.
66
%. Interest income
from securities, including availabl
e for sale and held to maturity,
increased $18,000, or 6.8%, to $285,000 for the three months ended March 31,
2008, from $267,000 for the three months ended March 31, 2007. The
increase in interest income from securities was due to an increase in the
average yield to 5.13% in 2008 from 4.84% in 2007, and an increase
of $117,000 or
0.5
3
% in the average balance of
securities to $22.2 million in 2008 from $22.1
million in
2007.
Interest
income from other interest-earning assets increased $2,000, or 12.4%, to $17,000
for the three months ended March 31, 2008, from $15,000 for the three months
ended March 31, 2007. The increase in interest income from other
interest-earning assets was due to an increase in the average balance of other
interest assets to $2.8 million in 2008 compared to $1.5 million in
2007. This increase was partially offset by a decrease in the average
yield to 2.47% in 2008, from 3.70% in 2007.
Interest Expense.
Total
interest expense increased $45,000, or 6.1%, to $773,000 for the three months
ended. March 31, 2008, from $728,000 for the three months ended March 31,
2007. The interest expense on interest-bearing deposits increased by
$60,000, or 12.1%, to $556,000 in 2008 when compared with $496,000 in the
comparable 2007 period. The increase in interest expense on deposits
resulted from an increase in the average cost of interest-bearing deposits to
3.54%from 3.40%, and an increase in the average balance of interest-bearing
deposits to $62.8 million in 2008
from
$58.2 million in 2007.
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison
of Operating Results for the Three Months Ended March 31, 2008 and 2007
(Cont’d.)
Interest
expense on borrowed money decreased $15,000 or 6.47% to $217,000 in 2008 from
$232,000 in the comparable 2007 period. The decrease was due to a
$138,000 decrease in the average balance of borrowed money to $21.8 million in
2008 from $21.9 million in 2007, and a decrease in the cost of borrowed money to
3.98% in 2008 from 4.23% in 2007.
Net Interest Income.
Net
interest income increased $47,000, or 9.0%, to $575,000 for the three months
ended March 31, 2008 from $528,000 for the three months ended March 31,
2007. Our interest rate spread increased to 1.84% in 2008 from 1.80%
in 2007, and our net interest margin increased to 2.34% in 2008 from 2.28% in
2007.
Provision for Loan Losses.
We
establish provisions for loan losses, which are charged to operations, at a
level necessary to absorb known and inherent losses that are both probable and
reasonably estimable at the date of the financial statements. In evaluating the
level of the allowance for loan losses, management considers historical loss
experience, the types of loans and the amount of loans in the loan portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information becomes
available or as future events change.
Based on
our evaluation of these factors, we recorded provision for loan losses of
$20,000 for the three months ended March 31, 2008 and $7,000 for the three
months ended March 31, 2007. We had no charge-offs during the three
month periods ended March 31, 2008 and 2007. We used the same
methodology and generally similar assumptions in assessing the allowance for
both periods. The allowance for loan losses was $207,000, or 0.28% of
gross loans outstanding at March 31, 2008, as compared with $ 187,000, or 0.26%
of gross loans at December 31, 2007, and $143,000, or 0.20% of gross loans
outstanding at March 31, 2007. The level of the allowance is based on
estimates, and the ultimate losses may vary from the estimates.
Non-interest Income.
Non-interest income decreased $4,000, or 12.5%, to $28,000 for the three
months ended March 31, 2008, compared to $32,000 for the three months ended
March 31, 2007. The primary reason for the decrease was a loss of
$1,000 recorded on the call of a security in 2008, when compared to a gain of
$3,000 on the sale of securities recorded in 2007.
Non-interest Expenses.
Non-interest expenses were $587,000 and $504,000 for the three months
ended March 31, 2008 and 2007, respectively, representing an increase of $83,000
or 16.6%. The increase in non-interest expenses was primarily due to increases
of $19,000 in miscellaneous expenses, $10,000 in equipment expense,
and $43,000 in salaries and employee benefits expense.
Salary
and employee benefits increased by $43,000 to $268,000 in 2008 from $225,000 in
2007. The increase was due to an addition in full time personnel in
general and also to staff the Montville branch, which opened in July
2007. Equipment expenses increased $10,000 or 15.2% to $76,000 in
2008 from $66,000 in 2007, primarily due to purchases, upgrading and maintenance
of software and other equipment. Miscellaneous expenses increased
$19,000 or 10.9% to $194,000 in 2008 from $175,000 in 2007. The
primary reason for the increase was legal fees, which increased by $14,000 for
the three months ended March 31, 2008.
Occupancy
expenses increased $9,000 or 32.1% to $37,000 in 2008 from $28,000 in 2007 due
to increased expenditure in repairs and maintenance of the banking facility.
Advertising expenses increased $2,000 or 25.0% to $10,000 in 2008 from $8,000 in
2007 due to an effort to advertise more in our local community.
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison
of Operating Results for the Three Months Ended March 31, 2008 and 2007
(Cont’d.)
Income Tax
Expense.
For the three months ended March 31, 2008, there was
a tax benefit of $2,000 compared to a provision for income taxes of $14,000 for
the three months ended March 31, 2007. The decrease in the provision for income
taxes was primarily due to a decrease of $53,000 in income before income taxes.
For the three months ended March 31, 2008, net loss before income taxes amounted
to $4,000 when compared to net income before income taxes of $49,000 for the
three months ended March 31, 2007.
Management
of Market Risk
General
. The
majority of our assets and liabilities are monetary in
nature. Consequently, our most significant form of market risk is
interest rate risk. Our assets, consisting primarily of mortgage
loans, have longer maturities than our liabilities, consisting primarily of
deposits. As a result, a principal part of our business strategy is
to manage interest rate risk and reduce the exposure of our net interest income
to changes in market interest rates. Our full board of directors is
responsible for evaluating the interest rate risk inherent in our assets and
liabilities, for determining the level of risk that is appropriate, given our
business strategy, operating environment, capital, liquidity and performance
objectives, and for managing this risk consistent with the guidelines approved
by the board of directors. Senior management monitors the level of
interest rate risk and reports to the board of directors on a regular basis with
respect to our asset/liability policies and interest rate risk
position.
We have emphasized the origination of
fixed-rate mortgage loans for retention in our portfolio in order to maximize
our net interest income. We accept increased exposure to interest
rate fluctuations as a result of our investment in such loans. In a
period of rising interest rates, our net interest rate spread and net interest
income may be negatively affected. In addition, we have sought to
manage and mitigate our exposure to interest rate risks in the following
ways:
●
|
We
maintain moderate levels of short-term liquid assets. At March
31, 2008, our short-term liquid assets totaled $7.8
million;
|
|
|
●
|
We
originate for portfolio adjustable-rate mortgage loans and adjustable home
equity lines of credit. At March 31, 2008, our adjustable-rate
mortgage loans totaled $12.3 million and our adjustable home equity lines
of credit totaled $5.0 million;
|
|
|
●
|
We
attempt to increase the maturity of our liabilities as market conditions
allow. In particular, in recent years, we have emphasized
intermediate- to long-term FHLB advances as a source of
funds. At March 31, 2008, we had $15.4 million of FHLB advances
with terms to maturity of between three and thirteen years;
and
|
|
|
●
|
We
invest in securities with step-up rate features providing for increased
interest rates prior to maturity according to a pre-determined schedule
and formula. However, these step-up rates may not keep pace
with rising interest rates in the event of a rapidly rising rate
environment. In addition, these investments may be called at
the option of the issuer.
|
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management
of Market Risk (Cont’d.)
Net Portfolio
Value.
The Company utilizes an outside vendor to prepare the
computation of amounts by which the net present value of the Company’s cash flow
from assets, liabilities and off-balance sheet items (the Company’s net
portfolio value or “NPV”) would change in the event of a range of assumed
changes in market interest rates. The vendor provides the Company
with an interest rate sensitivity report of net portfolio value. The
vendor’s simulation model uses a discounted cash flow analysis and an
option-based pricing approach to measuring the interest rate sensitivity of net
portfolio value. The model estimates the economic value of each type
of asset, liability and off-balance sheet contract under the assumption that the
yield curve increases or decreases instantaneously by 200 basis
points. A basis point equals one-hundredth of one percent, and 100
basis points equal one percent. An increase in interest rates from 3%
to 5% would mean, for example, a 200 basis point increase in the “Change in
Interest Rates” column below. The vendor provides us the results of
the interest rate sensitivity model, which is based on information we provide to
them to estimate the sensitivity of our net portfolio.
The table
below sets forth, as of December 31, 2007, the latest date for which the vendor
has provided Lincoln Park Savings an interest rate sensitivity report of net
portfolio value and the estimated changes in our net portfolio value that would
result from the designated instantaneous changes in the yield
curve.
|
|
|
|
|
|
|
|
|
|
|
|
Net Portfolio Value as a
Percentage
|
|
Change
in
|
|
|
Net
Portfolio Value
|
|
|
of Present Value of
Assets
|
|
Interest
Rates
|
|
|
Estimated
|
|
|
Amount
of
|
|
|
Percent
of
|
|
|
|
|
|
Change in
Basis
|
|
(basis
points)
|
|
|
NPV
|
|
|
Change
|
|
|
Change
|
|
|
NPV
Ratio
|
|
|
Points
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+200
|
|
|
$
|
11,996
|
|
|
$
|
(3,229
|
)
|
|
|
(21
|
)%
|
|
|
12.70
|
%
|
|
(239)
basis points
|
|
0
|
|
|
|
15,225
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15.09
|
%
|
|
— basis
points
|
|
-200
|
|
|
|
16,762
|
|
|
|
1,537
|
|
|
|
10
|
%
|
|
|
15.80
|
%
|
|
71 basis
points
|
|
The table above indicates that at
December 31, 2007, in the event of a 200 basis point decrease in interest rates,
we would experience a 10% increase in net portfolio value. In the
event of a 200 basis point increase in interest rates, we would experience a 21%
decrease in net portfolio value.
Certain
shortcomings are inherent in the methodology used in the above interest rate
risk measurement. Modeling changes in net portfolio value require
making certain assumptions that may or may not reflect the manner in which
actual yields and costs respond to changes in market interest
rates. In this regard, the net portfolio value table presented
assumes 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 assumes that a particular change in interest rates is reflected
uniformly across the yield curve regardless of the duration or repricing of
specific assets and liabilities. Accordingly, although the net
portfolio value table provides an indication of our 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
its net interest income and will differ from actual results.
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity
and Capital Resources
The Bank
is required to maintain levels of liquid assets sufficient to ensure the Bank’s
safe and sound operation. Liquidity is the ability to meet current
and future financial obligations of a short-term nature. The Bank
adjusts its liquidity levels in order to meet funding needs for deposit
outflows, payment of real estate taxes from escrow accounts on mortgage loans,
repayment of borrowings, when applicable, and loan funding commitments. The Bank
also adjusts its liquidity level as appropriate to meet its asset/liability
objectives.
The
Bank’s primary sources of funds are deposits, amortization and prepayments of
loans and mortgage-backed securities principal, FHLB advances, maturities of
investment securities and funds provided from operations. While
scheduled loan and mortgage-backed securities amortization and maturing
investment securities are a relatively predictable source of funds, deposit flow
and loan and mortgage-backed securities prepayments are greatly influenced by
market interest rates, economic conditions and competition.
The
Bank’s liquidity, represented by cash and cash equivalents, is a product of its
operating, investing and financing activities.
The
primary sources of investing activity are lending and the purchase of
securities. Net loans amounted to $73.1 million at March 31, 2008 and
December 31, 2007, respectively. Securities available for sale
totaled $647,000 and $1.5 million at March 31, 2008 and December 31, 2007,
respectively. Securities held to maturity totaled $22.5 million and
$21.2 million at March 31, 2008 and December 31, 2007,
respectively. In addition to funding new loan production and
securities purchases through operating and financing activities, such activities
were funded by principal repayments on existing loans, mortgage-backed
securities, and borrowings from the FHLB.
Liquidity
management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term
investments, such as federal funds and interest-bearing deposits. If
the Bank requires funds beyond its ability to generate them internally,
borrowing agreements exist with the FHLB which provide an additional source of
funds. At March 31, 2008, advances from the FHLB amounted to $27.1
million.
The Bank
anticipates that it will have sufficient funds available to meet its current
loan commitments. At March 31, 2008, the Bank has outstanding
commitments to originate loans of $819,000, standby letters of credit of
$49,000, and unused lines of credit of $8.5 million. Certificates of
deposit scheduled to mature in one year or less at March 31, 2008, totaled $37.1
million. Management believes that, based upon its experience and the
Bank’s deposit flow history, a significant portion of such deposits will remain
with the Bank.
LINCOLN
PARK BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity
and Capital Resources (Cont’d.)
The
following table sets forth the Bank’s capital position at March 31, 2008, as
compared to the minimum regulatory capital requirements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To
Be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
Prompt
|
|
|
|
|
|
|
|
|
|
Minimum
Capital
|
|
|
Corrective
|
|
|
|
Actual
|
|
|
Requirements
|
|
|
Actions
Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
Total
Risk Based Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
risk-weighted assets)
|
|
$
|
9,821
|
|
|
|
17.37
|
%
|
|
$
|
4,523
|
|
|
|
8.00
|
%
|
|
$
|
5,654
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
risk-weighted assets)
|
|
|
9,614
|
|
|
|
17.00
|
%
|
|
|
2,262
|
|
|
|
4.00
|
%
|
|
|
3,393
|
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
(Tier 1) Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
average total assets)
|
|
|
9,614
|
|
|
|
9.73
|
%
|
|
|
3,952
|
|
|
|
4.00
|
%
|
|
|
4,940
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
adjusted total assets)
|
|
|
9,614
|
|
|
|
9.73
|
%
|
|
|
1,482
|
|
|
|
1.50
|
%
|
|
|
-
|
|
|
|
-
|
|
LINCOLN
PARK BANCORP AND SUBSIDIARY
CONTROLS
AND PROCEDURES
ITEM
3. Quantitative and Qualitative Disclosure about Market
Risk
Not
applicable. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Management of Market Risk”
herein.
ITEM
4. Controls and Procedures
Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of
the design and operation 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 the end of the period covered by this report. Based
upon that evaluation, the Chief Executive Officer and the Chief Financial
Officer has concluded that, as of the end of the period covered by this report,
our disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that the Company files or submits under
the Securities Exchange Act of 1934, is recorded, processed, summarized and
reported within the applicable time periods specified by the SEC’s rules and
forms.
There has
been no change in the Company’s internal control over financial reporting during
the Company’s most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
LINCOLN
PARK BANCORP AND SUBSIDIARY
PART II –
OTHER INFORMATION
ITEM
1.
Legal
Proceedings
Lincoln
Park Savings has, on September 13, 2007, been served with a Summons and
Complaint in the matter of
Donald Hom v. Lincoln Park
Savings Bank and The Board of Directors of Lincoln Park Savings Bank
,
Superior Court of New Jersey, Law Division, Morris County, Docket No.,
MRS-L-1548-07. The complaint by Donald Hom, former President and CEO
of Lincoln Park Savings, alleges an employment related claim pursuant to the New
Jersey Conscientious Employee Protection Act (
N.J.S.
34:19-1 et
seq.) The complaint has been referred to special counsel for Lincoln
Park Savings for defense.
Except as
noted above, neither the Company nor the Bank is involved in any pending legal
proceedings other then routine legal proceedings occurring in the ordinary
course of business, which involve amounts in the aggregate believed by
management to be immaterial to the financial condition of the Company and the
Bank.
ITEM
1A.
Risk
Factors
ITEM
2.
Unregistered Sales of Equity
Securities and Use of Proceeds
|
a)
|
Not
applicable
|
|
|
|
|
b)
|
Not
applicable
|
|
|
|
|
c)
|
Information
regarding the Company’s purchases of its equity securities (common stock)
during the three months ended March 31, 2008 is summarized
below:
|
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
For
Shares
|
Total
Number of
Shares
Purchased
Under
a Publicly
Announced
Repurchase
Plan
|
Maximum
Number
of
Shares That
May
Yet Be
Purchased
Under
Repurchased
Plan
|
January
1 – January 31
|
-
|
-
|
25,655
|
16,125
|
February
1 – February 29
|
-
|
-
|
25,655
|
16,125
|
March
1 – March 31
|
-
|
-
|
25,655
|
16,125
|
On August
27, 2007, the Company announced that its Board of Directors authorized a stock
repurchase program to repurchase up to 41,780 shares. As of March 31,
2008, an additional 16,125 shares remains to be purchased under the
program.
LINCOLN
PARK BANCORP AND SUBSIDIARY
PART II –
OTHER INFORMATION
ITEM
3.
Defaults Upon Senior
Securities
Not
applicable.
ITEM
4.
Submission of Matters to a
Vote of Security Holders
The
annual meeting of stockholders of the registrant was held on May 1,
2008. At the meeting, the stockholders elected Stanford Stoller to a
three year term and Henry Fitschen to a two year term as directors of the
Company. Also at the meeting, Beard Miller Company LLP was ratified
as the Company’s independent auditors. The results of the voting for
each matter considered were as follows:
|
a)
|
The
election as director to serve for a term of three years until a successor
has been elected and qualified.
|
|
For
|
|
Withheld
|
Stanford
Stoller
|
1,583,005
|
|
136,911
|
|
b)
|
The
election as director to serve for a term of two years until a successor
has been elected and qualified.
|
|
For
|
|
Withheld
|
Henry
Fitschen
|
1,601,255
|
|
118,661
|
|
c)
|
The
appointment of Beard Miller Company LLP as auditors of the Company for the
fiscal year ending December 31,
2008.
|
For
|
|
Against
|
|
Abstain
|
1,636,101
|
|
41,263
|
|
42,552
|
In
addition, the following directors, in addition to those elected, continue to
serve as directors after the annual meeting of stockholders:
|
David
G. Baker
|
|
|
John
F. Feeney
|
|
|
Edith
M. Perrotti
|
|
ITEM
5.
Other
Information
Not
applicable.
LINCOLN
PARK BANCORP AND SUBSIDIARY
PART II –
OTHER INFORMATION (cont’d)
ITEM
6.
Exhibits
The
following Exhibits are filed as part of this report.
|
11.0
|
Computation
of earnings per share.
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to n 906
of the Sarbanes-Oxley Act of 2002.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
LINCOLN
PARK BANCORP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
May 14,
2008
|
|
|
/s/ David G. Baker
|
|
|
|
|
|
David
G. Baker
|
|
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
May 14,
2008
|
|
|
/s/ Nandini Mallya
|
|
|
|
|
|
Nandini
Mallya
|
|
|
|
|
|
Vice
President and Treasurer
|
|
|
|
|
|
(Chief
Financial Officer)
|
|