Louisiana Bancorp (LABC) 10-Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 September 30, 2008

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 of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1600 Veterans Memorial Boulevard, Metairie, Louisiana	70005
(Address of Principal Executive Offices)	(Zip Code)

(504) 834-1190

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨    No

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 Exchange Act).    ¨  Yes    x  No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 12, 2008, there were 6,027,946 shares of the Registrant’s common stock outstanding.

PART I—FINANCIAL INFORMATION

Interim financial information required by Rule 10-01 of Regulation S-X and Item 303 of Regulation S-K is included in this Form 10-Q as referenced below.

		Page
Item 1 -	Financial Statements
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4T -	Controls and Procedures	24
PART II—OTHER INFORMATION
Item 1	Legal Proceedings	24
Item 1A -	Risk Factors	24
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3 -	Defaults Upon Senior Securities	25
Item 4 -	Submission of Matters to a Vote of Security Holders	25
Item 5 -	Other Information	25
Item 6 -	Exhibits	25
Signatures		26

2

LOUISIANA BANCORP, INC.

BALANCE SHEETS

(Dollars in Thousands)

ASSETS

	September 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
Cash and Due from Banks	$	2,548		$	1,450
Short-term Interest-bearing Deposits in other Banks		5,374			10,198
Total Cash and Cash Equivalents		7,922			11,648
Certificates of Deposit		1,621			2,110
Securities Available-for-Sale, at Fair Value
(Amortized Cost of $56,906 and $72,178, respectively)		57,153			72,636
Securities Held-to-Maturity, at Amortized Cost
(Estimated Fair Value of $112,324 and $82,622, respectively)		112,073			81,643
Loans, Net of Allowance for Loan Losses of $1,960 and $1,999, respectively		105,797			96,902
Accrued Interest Receivable		1,478			1,675
Stock in Federal Home Loan Bank, at Cost		1,169			1,374
Premises and Equipment, Net		1,810			1,877
Other Assets		1,060			1,079
Total Assets	$	290,083		$	270,944
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits
Noninterest-bearing	$	5,129		$	3,099
Interest-bearing		143,954			140,530
Total Deposits		149,083			143,629
FHLB Advances and other Borrowings		50,708			34,416
Advance Payments by Borrowers for Taxes and Insurance		1,848			1,582
Accrued Interest Payable		587			575
Other Liabilities		2,104			872
Total Liabilities	$	204,330		$	181,074
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Common Stock, $.01 par value, 6,345,732 shares issued	$	63			63
Additional Paid-in-Capital		62,200			62,073
Unearned ESOP Shares		(4,950	)		(4,950	)
Unearned Recognition and Retention Plan Shares		(3,041	)		—
Treasury Stock, at cost (240,400 shares at September 30, 2008)		(3,071	)		—
Retained Earnings		34,389			32,382
Accumulated Other Comprehensive Income		163			302
Total Shareholders’ Equity		85,753			89,870
Total Liabilities and Shareholders’ Equity	$	290,083		$	270,944

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

3

LOUISIANA BANCORP, INC.

STATEMENTS OF INCOME (Unaudited)

(Dollars in Thousands, except per share data)

	For the Three Months Ended Sept. 30,						For the Nine Months Ended Sept. 30,
	2008			2007			2008			2007
INTEREST AND DIVIDEND INCOME
Loans, Including Fees	$	1,769		$	1,633		$	5,177		$	4,803
Mortgage Backed Securities		1,613			1,047			4,616			3,070
Investment Securities		461			445			1,564			1,066
Other Interest Bearing Deposits		66			527			287			773
Total Interest and Dividend Income		3,909			3,652			11,644			9,712
INTEREST EXPENSE
Deposits		945			1,044			2,967			3,118
Borrowings		514			304			1,406			1,051
Total Interest Expense		1,459			1,348			4,373			4,169
NET INTEREST INCOME		2,450			2,304			7,271			5,543
RECOVERY FOR LOAN LOSSES		(12	)		(75	)		(39	)		(135	)
NET INTEREST INCOME AFTER RECOVERY FOR LOAN LOSSES		2,462			2,379			7,310			5,678
NON-INTEREST INCOME
Customer Service Fees		124			111			285			249
Other Income		28			36			105			115
Total Non-Interest Income		152			147			390			364
NON-INTEREST EXPENSE
Salaries and Employee Benefits		1,022			753			2,961			2,249
Occupancy Expense		268			237			770			752
Loss on Sale of Securities		—			—			—			20
Other Expenses		221			189			1,015			569
Total Non-Interest Expenses		1,511			1,179			4,746			3,590
INCOME BEFORE INCOME TAX EXPENSE		1,103			1,347			2,954			2,452
INCOME TAX EXPENSE		354			447			947			801
NET INCOME	$	749		$	900		$	2,007		$	1,651
EARNINGS PER SHARE
Basic	$	0.13			N/A		$	0.35			N/A
Diluted	$	0.13			N/A		$	0.35			N/A

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

4

LOUISIANA BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(Dollars in Thousands)

	For the Nine Months Ended Sept 30,
	2008			2007
NET INCOME	$	2,007		$	1,651
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized Holding Gains (Losses) Arising During the Period		(139	)		396
Reclassification Adjustment for Losses Included in Net Income		—			20
Total Other Comprehensive Income (Loss)		(139	)		416
COMPREHENSIVE INCOME	$	1,868		$	2,067

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

5

LOUISIANA BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Nine Months Ended September 30, 2008 and 2007

(Dollars in Thousands)

	Common Stock		Additional Paid-in Capital		Unearned ESOP Stock			Unearned RRP Stock			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
BALANCES AT DECEMBER 31, 2006	$	—		—	$	—			—			—		$	29,741	$	(543	)	$	29,198
Net Income – Nine Months Ended Sept. 30, 2007															1,651					1,651
Other Comprehensive Losses, Net of Applicable Deferred Income Taxes		—		—		—			—			—			—		416			416
Issuance of Common Stock for Initial Public Offering net of expenses of $1.3 million		63		62,063																62,126
Stock Purchase for ESOP						(5,077	)													(5,077	)
Balances At Sept. 30, 2007	$	63	$	62,063	$	(5,077	)		—			—		$	31,392	$	(127	)	$	88,314
BALANCES AT DECEMBER 31, 2007	$	63	$	62,073	$	(4,950	)		—			—		$	32,382	$	302		$	89,870
Net Income – Nine Months Ended Sept. 30, 2008															2,007					2,007
Other Comprehensive Losses, Net of Applicable Deferred Income Taxes																	(139	)		(139	)
Stock Purchased for Recognition and Retention Plan									(3,041	)										(3,041	)
Stock Option Expense				127																127
Treasury Stock Purchase												(3,071	)							(3,071	)
Balances at Sept. 30, 2008	$	63	$	62,200	$	(4,950	)	$	(3,041	)	$	(3,071	)	$	34,389	$	163		$	85,753

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

6

LOUISIANA BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in Thousands)

	For the Nine Months Ended Sept. 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,007		$	1,651
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		173			183
Recovery of Provision for Loan Losses		(39	)		(135	)
Stock Based Compensation		127			—
Discount (Accretion) Net of Premium Amortization		(99	)		101
Deferred Income Tax Benefit		(34	)		—
Loss on Sale of Securities		—			20
Gain on Sale of Loans		(28	)		(19	)
Gain on Sale of Property and Equipment		(7	)		—
Originations of Loans Held-for-Sale		(1,281	)		(653	)
Proceeds from Sales of Loans Held-for-Sale		1,269			666
Decrease (Increase) in Accrued Interest Receivable		197			(210	)
Decrease in Other Assets		124			180
Increase in Accrued Interest Payable		12			38
Increase (Decrease) in Other Liabilities		1,232			(119	)
Net Cash Provided by Operating Activities		3,653			1,703
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Certificates of Deposit	$	(1,314	)		(615	)
Purchase of Securities Available-for-Sale		(22,069	)		(26,055	)
Purchase of Securities Held-to-Maturity		(45,787	)		(22,153	)
Proceeds from Maturities of Certificates of Deposits		1,803			1,535
Proceeds from Maturities of Securities Available-for-Sale		37,275			6,556
Proceeds from Maturities of Securities Held-to-Maturity		15,523			9,550
Proceeds from Sales of Securities Available-for-Sale		—			1,980
Increase in Loans Receivable		(9,861	)		(2,696	)
Proceeds from Sales of Loans Held for Investment		1,045			1,381
Purchase of Property and Equipment		(114	)		(156	)
Proceeds from Sales of Property and Equipment		15			—
Net Decrease in Investment in Federal Home Loan Bank Stock		205			847
Net Cash (Used in) Provided by Investing Activities		(23,279	)		(29,826	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Deposits		5,454			(7,468	)
Increase (Decrease) in Advances by Borrowers for Taxes and Insurance		266			(1,020	)
Increase (Decrease) in Borrowings		16,292			(9,819	)
Net Proceeds from common stock offering		—			62,126
Stock Purchased for Employee Stock Ownership Plan		—			(5,077	)
Stock Purchased for Recognition and Retention Plan		(3,041	)		—
Purchase of Treasury Stock		(3,071	)		—
Net Cash Provided by Financing Activities		15,900			38,742
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(3,726	)		10,619
				��
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		11,648			3,825
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	7,922		$	14,444
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest	$	4,361		$	4,131
Income Taxes	$	654		$	455

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

7

LOUISIANA BANCORP, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Louisiana Bancorp, Inc., a Louisiana corporation (the “Company” or “Louisiana Bancorp”), was organized by the Bank of New Orleans (the “Bank”) in March 2007 to facilitate the conversion of the Bank from the mutual to the stock form (the “Conversion”). The Conversion was completed on July 9, 2007, at which time the Company became the holding company for the Bank and issued 6,345,732 shares of its common stock to certain depositors of the Bank and the Company’s employee stock ownership plan in a subscription offering. The Company is now the Bank’s parent holding company and holds all of the issued and outstanding shares of capital stock of the Bank.

As used in this quarterly report on Form 10-Q, all references to the Company refer collectively to the Company and the Bank, unless otherwise indicated.

The accompanying unaudited financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three month and nine month periods ended September 30, 2008, are not necessarily indicative of the results which may be expected for the entire fiscal year.

NATURE OF OPERATIONS

The Bank is a Federal stock form savings bank which attracts deposits from the general public and uses such deposits primarily to originate loans secured by first mortgages on owner-occupied, single family residences and other properties, as well as those for other consumer needs.

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

SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

Most of the Company’s activities are with customers located within the greater New Orleans area in Louisiana. Note B summarizes the types of securities in which the Company invests. Note C summarizes the types of lending in which the Company engages. The Company 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, short-term interest-bearing deposits in other banks, federal funds sold and securities purchased under agreements to resell, all of which were purchased with an original maturity of three months or less.

INVESTMENT SECURITIES

Securities are being accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 115,Accounting for Certain Investments in Debt and Equity Securities. SFAS No. 115 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 September 30, 2008 or December 31, 2007.

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.

8

LOANS

The Company 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 sale agreements. A substantial portion of the loan portfolio is represented by mortgage loans secured by properties located throughout the greater New Orleans area. The ability of the Company’s debtors to honor their contracts is dependent, in part, 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. When a loan is placed on non-accrual status, interest accrued during the current year prior to the judgment of uncollectibility is charged to operations. Interest accrued during prior periods is charged to the allowance for loan losses. Generally, any payments received on non-accrual loans are applied first to outstanding loan amounts and next to the recovery of charged-off loan amounts. Any excess is treated as recovery of lost interest.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructuring, and performing and non-performing major loans in which full payment of principal or interest is not expected. The Company 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 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.

It should be understood that estimates of future loan losses involve an exercise of judgment. While it is possible that in particular periods, the Company may sustain losses, which are substantial relative to the allowance for 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 Company’s interest rate risk strategy. In addition, the Company 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 Company’s agreement with the Student Loan Marketing Association (“Sallie Mae”), these loans are transferred to the held-for-sale category and are sold once the student has gone into repayment status.

9

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 accreted 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 Company 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.

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 shareholders’ 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.

10

NOTE B – SECURITIES

A summary of securities classified as available-for-sale at September 30, 2008 and December 31, 2007, with gross unrealized gains and losses, is as follows:

	September 30, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In Thousands)
Securities Available-for-Sale
U.S. Government and Agency Obligations	$	32,399	$	190	$	(16	)	$	32,573
Mortgage-Backed Securities:
GNMA		718	$	20		—			738
FNMA		17,085		82		(55	)		17,112
FHLMC		6,704		44		(18	)		6,730
Total Mortgage-Backed Securities		24,507		146		(73	)		24,580
Total Securities Available-for-Sale	$	56,906	$	336	$	(89	)	$	57,153
	December 31, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In Thousands)
Securities Available-for-Sale
U.S. Government and Agency Obligations	$	40,138	$	332	$	(2	)	$	40,468
Mortgage-Backed Securities:
GNMA		909	$	31		—			940
FNMA		21,452		111		(80	)		21,483
FHLMC		9,679		78		(12	)		9,745
Total Mortgage-Backed Securities		32,040		220		(92	)		32,168
Total Securities Available-for-Sale	$	72,178	$	552	$	(94	)	$	72,636

11

A summary of securities classified as held-to-maturity at September 30, 2008 and December 31, 2007, with gross unrealized gains and losses, is as follows:

	September 30, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In Thousands)
Securities Held-to-Maturity:
U.S. Government and Agency Obligations	$	—	$	—	$	—		$	—
Municipal Obligations:
Revenue Bonds		550		17		—			567
General Obligation Bonds		2,903		74		—			2,977
Total Municipal Obligations		3,453		91		—			3,544
Mortgage-Backed Securities:
GNMA		8,804		67		(1	)		8,870
FNMA		68,246		384		(429	)		68,201
FHLMC		31,570		202		(63	)		31,709
Total Mortgage-Backed Securities		108,620		653		(493	)		108,780
Total Securities-Held-to-Maturity	$	112,073	$	744	$	(493	)	$	112,324
	December 31, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In Thousands)
Securities Held-to-Maturity:
U.S. Government and Agency Obligations	$	3,500	$	34	$	—		$	3,534
Municipal Obligations:
Revenue Bonds		550		24		—			574
General Obligation Bond		2,900		98		—			2,998
Total Municipal Obligations		3,450		122		—			3,572
Mortgage-Backed Securities:
GNMA		1,761		62		—			1,823
FNMA		43,203		532		(79	)		43,656
FHLMC		29,729		358		(50	)		30,037
Total Mortgage-Backed Securities		74,693		952		(129	)		75,516
Total Securities-Held-to-Maturity	$	81,643	$	1,108	$	(129	)	$	82,622

The amortized cost and fair value of available-for-sale and held-to-maturity securities by contractual maturity at September 30, 2008, are as follows. Actual maturities will differ from contractual maturities because borrowers have the right to put or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale Securities				Held-to-Maturity Securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In Thousands)
Amounts Maturing in:
Within One Year	$	13,313	$	13,363	$	2	$	2
One to Five Years		29,566		29,567		4,491		4,596
Five to Ten Years		7,278		7,427		18,300		18,385
Over Ten Years		6,749		6,796		89,280		89,341
	$	56,906	$	57,153	$	112,073	$	112,324

12

Information pertaining to securities with gross unrealized losses at September 30, 2008 and December 31, 2007, 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		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value
	(In Thousands)
September 30, 2008
U.S. Government and Agency Obligations	$	16	$	8,284	$	—	$	—
Mortgage-Backed Securities:
FNMA		28		10,022		27		1,187
FHLMC		18		3,483		—		—
Total Mortgage-Backed Securities		46		13,505		27		1,187
Total	$	62	$	21,789	$	27	$	1,187
December 31, 2007
U.S. Government and Agency Obligations	$	2	$	1,498	$	—	$	—
Mortgage-Backed Securities:
FNMA		—		—		80		13,974
FHLMC		—		—		12		5,675
Total Mortgage-Backed Securities		—		—		92		19,649
Total	$	2	$	1,498	$	92	$	19,649
	Held-to-Maturity
	Losses Less Than 12 Months				Losses Greater Than 12 Months
	Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value
	(In Thousands)
September 30, 2008
Mortgage-Backed Securities:
GNMA	$	1	$	130	$	—	$	—
FNMA		411		39,114		18		806
FHLMC		39		6,539		24		948
Total	$	451	$	45,783	$	42	$	1,754
December 31, 2007
Mortgage-Backed Securities:
GNMA	$	—	$	—	$	—	$	—
FNMA		2		527		77		11,543
FHLMC		5		752		45		4,132
Total	$	7	$	1,279	$	122	$	15,675

The unrealized losses on the Company’s investments were caused by interest rate increases. 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 September 30, 2008 or December 31, 2007.

13

NOTE C – LOANS

A summary of the balances of loans follows:

	September 30, 2008			December 31, 2007
	(In Thousands)
Loans Secured by First Mortgages on Real Estate:
1-4 Family Residential	$	46,925		$	46,437
Multi-Family Residential, Commercial and Land		48,390			40,215
Total Real Estate Loans		95,315			86,652
Consumer and Other Loans:
Student Loans		1,730			2,133
Loans Secured by Deposits		261			530
Home Equity Loans and Lines		9,494			8,702
Other		1,342			1,260
Total Consumer and Other Loans		12,827			12,625
Less:
Allowance for Loan Losses		(1,960	)		(1,999	)
Net Deferred Loan Origination Costs		(385	)		(376	)
Loans, Net	$	105,797		$	96,902

An analysis of the allowance for loan losses is as follows:

	Nine Months Ended September 30, 2008			Year Ended December 31, 2007
	(In Thousands)
Balance, Beginning of Period	$	1,999		$	2,292
Reduction of Provision for Losses		(39	)		(268	)
Loans Charged-off, net of recoveries		—			(25	)
Balance, End of Period	$	1,960		$	1,999

Nonaccrual loans, net of allowance for loan loss, amounted to approximately $223,000 and $502,000 at September 30, 2008 and December 31, 2007, respectively. As of September 30, 2008 and December 31, 2007, the Company did not hold any loans classified as troubled debt restructurings.

NOTE D – 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 initiate certain mandatory, and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank and the Company’s financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to risk-weighted assets (as defined in the regulations), Tier I capital to adjusted total assets (as defined), tangible capital to adjusted total assets (as defined), and tangible equity to adjusted total assets (as defined). During the second quarter of 2008, the Bank paid a $4.7 million cash dividend to the Company, which reduced the Bank’s regulatory capital. The cash dividend was paid primarily for tax planning purposes with respect to the Louisiana bank shares tax. As of September 30, 2008 and December 31, 2007, 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.

14

The actual and required capital amounts and ratios applicable to the Bank at September 30, 2008 and December 31, 2007, are presented in the following tables:

	Actual				Minimum for Adequacy Purposes				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount			Ratio
	(Dollars in Thousands)
September 30, 2008
Tangible Capital	$	54,917	20.55	%	$	4,009	1.50	%		N/A		N/A
Tangible Equity Ratio		54,917	20.55			5,346	2.00			N/A		N/A
Core/Leverage Capital		54,917	20.55			8,019	3.00		$	13,365		5.00	%
Tier 1 Risk-Based Capital		54,856	49.71			4,414	4.00			6,621		6.00
Total Risk-Based Capital	$	56,239	50.96	%	$	8,829	8.00	%	$	11,036		10.00	%
December 31, 2007											��
Tangible Capital	$	58,084	23.52	%	$	3,704	1.50	%		N/A		N/A
Tangible Equity Ratio		58,084	23.52			4,939	2.00			N/A		N/A
Core/Leverage Capital		58,084	23.52			7,408	3.00		$	12,347		5.00	%
Tier 1 Risk-Based Capital		57,906	57.72			4,013	4.00			6,020		6.00
Total Risk-Based Capital	$	59,165	58.97	%	$	8,026	8.00	%	$	10,033		10.00	%

The Bank’s capital under generally accepted accounting principles (“GAAP”) is reconciled as follows:

	September 30, 2008			December 31, 2007
	(In Thousands)
Capital Under GAAP	$	55,046		$	58,281
Unrealized Gains on Available-for-Sale Securities		(129	)		(197	)
Tier 1 Capital		54,917			58,084
Allowance for Loan Losses(1)		1,383			1,259
Recourse Obligations		(61	)		(178	)
Total-Risk Based Capital	$	56,239		$	59,165

(1) The allowance for loan losses included in risk-based capital is limited to 1.25% of risk-based assets. At September 30, 2008, $278,000 of the Company’s allowance for loan losses was excluded from total risk-based capital.

NOTE E – EMPLOYEE STOCK OWNERSHIP PLAN

In connection with the Conversion, the Company established an employee stock ownership plan (“ESOP”) that will provide retirement benefits to all eligible employees of Bank of New Orleans. On July 9, 2007, the ESOP borrowed $5,076,590 from Company and used these funds to purchase 8%, or 507,659 shares, of the shares sold in the Company’s offering. As the loan is repaid and shares are released from collateral, the shares are allocated to the ESOP participants based on their individual compensation as a percentage of total plan compensation. The Company recognizes compensation expense equal to the fair value of the ESOP shares committed to be released during the period.

15

NOTE F – EARNINGS PER COMMON SHARE

Earnings per common share are computed using the weighted average number of shares outstanding as prescribed in SFAS No. 128. Earnings per common share are not calculated for either the three-month or nine-month period ending September 30, 2007, because the Company’s conversion to a stock form of ownership did not occur until July 2007. Therefore, for periods prior to, or containing July 2007, earnings per share are not presented because the per share data would not be comparable to periods in which common shares were outstanding for the period.

	Three Months Ended Sept. 30,					Nine Months Ended Sept. 30,
	2008			2007		2008			2007
Net Income	$	749,000		$	900,000	$	2,007,000		$	1,651,000
Weighted average shares outstanding		6,345,732			N/A		6,345,732			N/A
Less: average number of unallocated ESOP shares		(494,968	)		N/A		(494,968	)		N/A
Less: average number of nonvested RRP shares		(182,678	)		N/A		(79,733	)		N/A
Less: average number of treasury shares		(56,565	)		N/A		(18,993	)		N/A
Weighted average shares outstanding for basic earnings per share		5,611,521			N/A		5,752,038			N/A
Earnings per share, basic	$	0.13			N/A	$	0.35			N/A
Weighted average shares outstanding for basic earnings per share		5,611,521			N/A		5,752,038			N/A
Effect of dilutive securities		43,815			N/A		25,650			N/A
Weighted average shares outstanding for diluted earnings per share		5,655,336			N/A		5,777,688			N/A
Earnings per share, diluted	$	0.13			N/A	$	0.35			N/A

NOTE G – 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 will provide 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 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 will acquire 4%, or 253,829 shares, of the issued and outstanding shares of the Company, which will be 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 September 30, 2008, 221,177 shares had been awarded under the provisions of the Plan to directors, officers and employees of the Company, and 241,384 shares had been acquired by the Trust through purchases on the open market for future distribution.

The Company recognizes compensation expense during the vesting period based on a share price of $11.52, the closing price of the Company’s common stock on the date of the plan awards. Compensation expense related to the Recognition and Retention Plan during the three and nine month periods ended September 30, 2008 was $127,000 and $318,000, respectively.

16

	At September 30, 2008
	Number of Shares	Grant Date Fair Value
Shares Granted	221,177	$	11.52
Shares Vested	—
Shares Forfeited	—
Nonvested Shares at the end of the Period	221,177	$	11.52

NOTE H – 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 will provide 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.

Pursuant to the terms of the Option plan, 634,573 shares, or 10%, of common stock of the Company 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 September 30, 2008, options to acquire 462,197 shares of common stock had been granted under the provisions of the Plan to directors, officers and employees of the Company.

	At September 30, 2008
	Number of Shares	Weighted Avg. Exercise Price
Options Granted	462,197	$	11.53
Options Exercised	—
Options Forfeited	—
Outstanding Options at the end of the Period	462,197	$	11.53

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 nine months ended September 30, 2008 having estimated fair values on the respective dates of grant of $2.21 and $2.51, as determined by use of the Black-Scholes Option Pricing Model with the following assumptions:

	Options Granted February 2008		Options Granted September 2008
Dividend Yield	1.39	%	1.29	%
Expected Volatility	13.59	%	14.95	%
Risk-free interest rate	3.29	%	3.09	%
Expected Life of options	7.5 years		7.5 years

The dividend yield is reflective of the Company’s expectations regarding future periods. Actual dividend yields may vary from this assumption. Due to the brief trading experience of the Company’s stock, a peer group of similarly capitalized and converted institutions was used in deriving the expected volatility component of the calculation. 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.

Compensation expense related to the Stock Option Plan during the three and nine month periods ended September 30, 2008 was $51,000 and $127,000, respectively.

17

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company and the Bank that are based on the beliefs of management as well as assumptions made by and information currently available to management. In addition, in portions of this document the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “should” and similar expressions or the negative thereof, as they relate to the Company or the Bank or their management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company and/or the Bank with respect to forward-looking events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

General

The Company commenced operations as the parent holding company for the Bank on July 9, 2007 upon consummation of the Conversion. The Company’s results of operations are primarily dependent on the results of the Bank, which now is a wholly owned subsidiary of the Company. The Bank’s results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by provisions for, or recoveries from, the allowance 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. 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.

Critical Accounting Policies

In reviewing and understanding financial information for the Company, 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. The accounting and financial reporting policies of the Company 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 its judgment of information available to it 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.

18

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.

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.

Comparison of Financial Condition at September 30, 2008 and December 31, 2007

During the nine month period ending September 30, 2008, total assets increased by $19.2 million to $290.1 million compared to $270.9 million at December 31, 2007. Total loans receivable increased during the period by $8.9 million, primarily due to growth in first mortgage loans secured by commercial real estate collateral. Total investment securities decreased by $11.4 million, while our mortgage-backed securities increased by $26.3 million. The increase in our mortgage-backed securities portfolio was due primarily to a wholesale funding strategy, in which Fannie Mae and Freddie Mac fixed-rate mortgage-backed securities were purchased with the proceeds received from a blend of reverse repurchase agreements and FHLB advances.

Total deposits increased by $5.5 million during the nine months ended September 30, 2008 to $149.1 million. Non-interest bearing deposits increased by $2.1 million and interest bearing deposits increased by $3.4 million during the period. Total borrowings, which includes FHLB advances and reverse repurchase agreements, were $50.7 million at September 30, 2008, an increase of $16.3 million from December 31, 2007. These additional borrowings were used primarily to fund the purchase of mortgage-backed securities, as stated previously.

Total shareholders’ equity was $85.8 million at September 30, 2008, or 29.6% of assets. Shareholders’ equity was $4.1 million less at September 30, 2008 compared to December 31, 2007 due primarily to repurchases of common shares for the Company’s 2007 Recognition and Retention Plan at a cost of $3.0 million, and repurchases of common shares for treasury at a cost of $3.1 million pursuant to the Company’s initial stock repurchase program. Net income credited to shareholders’ equity for the nine months ended September 30, 2008 was $2.0 million.

Comparison of Our Operating Results for the Three Months and Nine Months Ended September 30, 2008 and 2007

General.The Company’s net income for the quarter ended September 30, 2008 was $749,000, a decrease of $151,000 from the quarter ended September 30, 2007. For the nine month period ended September 30, 2008, the Company reported net income of $2.0 million, an increase of $356,000 from the nine month period ended September 30, 2007. The decline in net income for the three month period ended September 30, 2008 compared to the three month period ended September 30, 2007 is due to increases in non-interest expense related to our equity-based compensation plans and the Louisiana bank shares tax. These non-interest expenses items did not exist for periods prior to January 1, 2008. The increase in net income for the nine month period ended September 30, 2008 compared to the nine month period ended September 30, 2007 is primarily attributed to the additional interest income generated by higher average balances of interest earning assets following the Company’s initial public offering in July 2007. Average interest earning assets for the nine months ended September 30, 2008 were $278.7 million, an increase of $48.7 million from the nine months ended September 30, 2007. The impact of the increased level of interest income was partially offset by the higher levels of non-interest expense.

Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following tables show 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.

19

	Three Months Ended September 30,
	2008						2007
	(Dollars in Thousands)
	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
Interest-earning assets:
Loans receivable(1)	$	104,849	$	1,769	6.75	%	$	90,897	$	1,633	7.19	%
Mortgage-backed securities		127,822		1,613	5.05			90,254		1,047	4.64
Investment securities		42,819		461	4.31			38,029		445	4.68
Other interest-earning assets		8,745		66	3.02			35,222		527	5.98
Total interest-earning assets		284,235		3,909	5.50			254,402		3,652	5.74
Non-interest-earning assets		7,066						7,224
Total assets		291,301						261,626
Interest-bearing liabilities:
Passbook, checking and money market accounts		43,270		43	0.40			46,193		54	0.47
Certificate accounts		101,003		902	3.57			93,815		990	4.22
Total deposits		144,273		945	2.62			140,008		1,044	2.98
Borrowings		50,371		514	4.08			26,235		304	4.64
Total interest-bearing liabilities		194,644		1,459	3.00	%		166,243		1,348	3.24	%
Non-interest-bearing liabilities		8,228						7,455
Total liabilities		202,872						173,698
Stockholders’ Equity		88,429						87,928
Total liabilities and Stockholders’ Equity	$	291,301					$	261,626
Net interest-earning assets	$	89,591					$	88,159
Net interest income; average interest rate spread			$	2,450	2.50	%			$	2,304	2.50	%
Net interest margin(2)					3.45	%					3.62	%
Average interest-earning assets to average interest-bearing liabilities					146.03	%					153.03	%

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

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

20

	Nine Months Ended September 30,
	2008						2007
	(Dollars in Thousands)
	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
Interest-earning assets:
Loans receivable(1)	$	101,763	$	5,177	6.78	%	$	93,028	$	4,803	6.88	%
Mortgage-backed securities		120,818		4,616	5.09			87,086		3,070	4.70
Investment securities		44,538		1,564	4.68			29,516		1,066	4.82
Other interest-earning assets		11,630		287	3.29			20,362		773	5.06
Total interest-earning assets		278,749		11,644	5.57			229,992		9,712	5.63
Non-interest-earning assets		6,734						6,935
Total assets		285,483						236,927
Interest-bearing liabilities:
Passbook, checking and money market accounts		44,341		134	0.40			52,794		166	0.42
Certificate accounts		98,085		2,833	3.85			96,011		2,952	4.10
Total deposits		142,426		2,967	2.78			148,805		3,118	2.79
Borrowings		45,708		1,406	4.10			30,568		1,051	4.58
Total interest-bearing liabilities		188,134		4,373	3.10	%		179,373		4,169	3.10	%
Non-interest-bearing liabilities		7,702						8,469
Total liabilities		195,836						187,842
Stockholders’ Equity		89,647						49,085
Total liabilities and Stockholders’ Equity	$	285,483					$	236,927
Net interest-earning assets	$	90,615					$	50,619
Net interest income; average interest rate spread			$	7,271	2.47	%			$	5,543	2.53	%
Net interest margin(2)					3.48	%					3.21	%
Average interest-earning assets to average interest-bearing liabilities					148.17	%					128.22	%

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

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

Interest Income. Net interest income for the third quarter of 2008 was $2.5 million, an increase of $146,000 from the third quarter of 2007. Interest income for the third quarter of 2008 and 2007, was $3.9 million and $3.7 million, respectively. Average interest earning assets for the third quarter increased by $29.8 million to $284.2 million compared to the third quarter of 2007. This growth in average interest earning assets is primarily attributed to increases in our net loans receivable and mortgage-backed securities portfolio. Interest income on loans receivable increased by $136,000 in the third quarter of 2008 compared to the third quarter of 2007 due to growth in average loans receivable of $14.0 million between the periods. The average yield on our loan portfolio declined from 7.19% during the third quarter of 2007, to 6.75% for the third quarter of 2008. This decline in average yield is attributed to a decrease in the market rate for mortgage loans between the periods compared. Interest income on mortgage-backed securities increased by $566,000 in the third quarter of 2008 compared to the third quarter of 2007, and interest income on investment securities increased by $16,000 between the respective 2008 and 2007 periods. The average balance of our mortgage-backed securities increased by $37.6 million to $127.8 million, from the third quarter of 2007 to the third quarter of 2008. This increase in average balance is primarily attributed to leverage strategies implemented in the fourth quarter of 2007 and the first quarter of 2008, in which mortgage-backed securities issued by Fannie Mae and Freddie Mac were purchased with the proceeds received from a blend of FHLB advances and reverse repurchase agreements.

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Net interest income for the nine month period ended September 30, 2008 was $7.3 million, an increase of $1.7 million from the first nine months of 2007. Interest income for the respective nine month periods ended September 30, 2008 and 2007 was $11.6 million and $9.7 million. The average yield on our interest earning assets for the nine months ended September 30, 2008 was 5.57%, a decrease of six basis points from the nine month period ended September 30, 2007. Total average interest earning assets grew by $48.8 million during the nine month period ended September 30, 2008 compared to the period ended September 30, 2007 primarily due to the consummation of the Company’s initial public offering in July 2007 and the wholesale leverage strategies referenced previously. During the first nine months of 2008, interest income on loans receivable increased by $374,000 and the average balance of our loans receivable increased by $8.7 million, compared to the first nine months of 2007. Interest income on mortgage-backed securities increased by $1.5 million and interest income on investment securities increased by $498,000, between the nine months ended September 30, 2008 and September 30, 2007. The average balance of our mortgage-backed securities portfolio increased by $33.7 million, and the average balance of our investment securities increased by $15.0 million during the nine month period ended September 30, 2008 compared to the nine month period ended September 30, 2007.

Interest Expense. Interest expense was $1.5 million for the quarter ended September 30, 2008 compared to $1.3 million for the quarter ended September 30, 2007. Interest paid on deposits for the third quarter of 2008 was $945,000, a decrease a $99,000 from the third quarter of 2007. Despite growth of $4.3 million in average deposits during the 2008 quarter as compared to the 2007 quarter, interest expense declined due to a decrease in the average rate paid on deposits. The average rate paid on deposits during the third quarter of 2008 was 2.62%, a decrease of 36 basis points from the third quarter of 2007. Interest expense on borrowings was $514,000 during the third quarter of 2008, an increase of $210,000 from the third quarter of 2007. Average total borrowings were $50.4 million for the third quarter of 2008 compared to $26.2 million for the third quarter of 2007. The increase in borrowings was primarily due to wholesale funding strategies used to fund the acquisition of Fannie Mae and Freddie Mac mortgage backed securities collateralized by conventional, conforming mortgage loans. For the nine month period ended September 30, 2008, interest expense increased by $204,000 to $4.4 million, as compared to the nine month period ended September 30, 2007. Average interest-bearing liabilities increased to $188.1 million during the nine months ended September 30, 2008, an increase of $8.8 million from the nine month period ended September 30, 2007. Average interest-bearing deposits declined by $6.4 million for the nine month period ended September 30, 2008 in comparison with the nine month period ended September 30, 2007. The decline in average deposits reflects the short-term deposit of $53.9 million in proceeds received from subscribers in our stock offering in June 2007, which were subsequently disbursed in July 2007 when the Company’s initial public offering closed. These short-term deposits increased the average balance of interest-bearing deposits during the nine month period ended September 30, 2007. Interest expense on total borrowings was $1.4 million for the nine months ended September 30, 2008, an increase of $355,000 from the nine months ended September 30, 2007. As stated previously, total borrowings increased as the Bank levered its balance sheet to acquire additional mortgage backed securities in the fourth quarter of 2007 and first quarter of 2008.

Provision (Recovery) for Loan Losses.We have identified the evaluation of the allowance for loan losses as a critical accounting policy where amounts are sensitive to material variation. This policy is significantly affected by our judgment and uncertainties and there is a likelihood that materially different amounts would be reported under different, but reasonably plausible, conditions or assumptions. Our activity in the provision for loan losses, which are charges or recoveries to operating results, is undertaken in order to maintain a level of total allowance for losses that management believes covers all known and inherent losses that are both probable and reasonably estimable at each reporting date. Our evaluation process typically 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. Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to make additional provisions for estimated loan losses based upon judgments different from those of management.

The Company recorded net recoveries on its allowance for loan losses of $12,000 during the third quarter of 2008, compared to net recoveries on its loan loss provisions of $75,000 for the same quarter of 2007. For the nine month periods ended September 30, 2008 and 2007, the Company recorded net recoveries of $39,000 and $135,000, respectively. The recoveries in both the 2008 and 2007 periods pertain to provisions for loan losses previously made on loans secured by Katrina-damaged properties that were subsequently paid off by the borrowers. Our allowance for loan losses as a percentage of total loans receivable was 1.82% at September 30, 2008, a decline of 19 basis points from December 31, 2007. Our September 30, 2008 allowance for loan losses provides coverage equal to 878.92% of our non-performing loans.

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Non-interest Income.Our non-interest income for the third quarter of 2008 was $152,000 compared to $147,000 for the third quarter of 2007. Non-interest income for the nine months ended September 30, 2008 and 2007 was $390,000 and $364,000, respectively.

Non-interest Expense.Non-interest expense for the third quarter of 2008 was $1.5 million, an increase of $332,000 from the third quarter of 2007. Salaries and employee benefits expense increased by $269,000 due to overall higher levels of salaries and the implementation of the Company’s equity based compensation plans, which were approved by our shareholders in February 2008. Occupancy expenses and other non-interest expenses increased by $31,000 and $32,000, respectively, during the third quarter of 2008 compared to the third quarter of 2007. On a linked-quarter basis, other non-interest expense decreased $178,000 during the third quarter of 2008 compared to the second quarter of 2008. This decline in other non-interest expense was primarily due to a revision of the Company’s estimated Louisiana bank shares tax. For the nine months ended September 30, 2008 and 2007, non-interest expense was $4.7 million and $3.6 million, respectively. Salary and benefit expenses increased by $712,000 and other non-interest expense increased by $446,000 during the nine month period ending September 30, 2008, over the comparable nine month period in 2007. As stated earlier, the increased levels of salaries and benefits expense for the 2008 periods was due to overall higher levels of salaries and the implementation of our equity-based compensation plans that were approved by our shareholders in February 2008. The increase in other noninterest expense during the nine month period ended September 30, 2008 compared to the first nine months of 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 $214,000 and the Louisiana corporate franchise tax was $68,000 for the nine month period ending September 30, 2008. The remaining increase in other non-interest expense was due to increased advertising expenditures and higher levels of professional fees due to our status as a publicly traded company in the 2008 period.

Income Tax Expense.Income tax expense for the third quarter of 2008 was $354,000 compared to $447,000 for the third quarter of 2007. The decrease in income tax expense for the 2008 period compared to the 2007 period was due to the decrease in pre-tax income during the period. Income tax expense for the nine months ended September 30, 2008 amounted to $947,000 compared to $801,000 for the nine months ended September 30, 2007. The increase in income tax expense during the nine month period ended September 30, 2008 compared to the nine month period ended September 30, 2007 period was due to the increase in pre-tax income during the period.

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 September 30, 2008, our cash and cash equivalents amounted to $7.9 million. In addition, at such date our available for sale investment and mortgage-backed securities amounted to an aggregate of $57.2 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 September 30, 2008, we had certificates of deposit maturing within the next 12 months amounting to $69.8 million. Based upon historical experience, we anticipate that a significant portion of the maturing certificates of deposit will be redeposited with us. At September 30, 2008, we had $50.7 million in total borrowings, including $24.7 million in FHLB advances and $26.0 million in reverse repurchase agreements with commercial banks.

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. As a member of the Federal Home Loan Bank of Dallas, we pledge residential mortgage loans and mortgage-backed securities as well as our stock in the Federal Home Loan Bank as collateral for advances. At September 30, 2008, the Company had $136.6 million in funds available through the Federal Home Loan Bank.

In light of the Company’s regulatory capital, which is significantly in excess of well capitalized standards, and taking into consideration the Company’s projected earnings, asset growth, and business strategy, we have decided not to seek Federal funding through the U. S. Treasury Department’s Capital Purchase Program, although we believe we would be eligible for such funds.

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The following table summarizes our contractual cash obligations at September 30, 2008.

			Payments Due By Period
	Total		To 1 Year		Over 1 to 3 Years		Over 3 to 5 Years		After 5 Years
	(In Thousands)
Certificates of deposit	$	102,059	$	69,833	$	20,819	$	11,407	$	—
Borrowings		50,708		5,077		9,139		36,143		349
Total long-term debt		152,767		74,910		29,958		47,550		349
Operating lease obligations		270		67		63		62		78
Total contractual obligations	$	153,037	$	74,977	$	30,021	$	47,612	$	427

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

Impact of Inflation and Changing Prices

The financial statements, accompanying notes, and related financial data of the Company 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.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk.

For a discussion of the Company’s asset and liability management policies as well as the methods used to manage its exposure to the risk of loss from adverse changes in market prices and rates market, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – How We Manage Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Item 4T – Controls and Procedures.

Our management evaluated, with the participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer 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 or 15d-15 under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1 – Legal Proceedings.

There are no matters required to be reported under this item.

Item 1A – Risk Factors.

See “Risk Factors” at pages 29-32 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (SEC File No. 1-33573), which is incorporated herein by reference thereto.

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Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Not applicable.

(b) Not applicable.

(c) The Company’s purchases of its common stock made during the quarter consisted of purchases by its 2007 Recognition and Retention Plan and Trust, which is an affiliate of the Company, and purchases of treasury shares pursuant to a 5% repurchase plan approved by the Company’s Board of Directors, are set forth in the following table.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1)(2)
July 1 – July 31, 2008	70,166	$	12.61	70,166	78,725
Aug. 1 – Aug. 31, 2008	31,651		12.74	31,651	364,360
Sept. 1 – Sept. 30, 2008	275,029		12.72	275,029	89,331
Total	376,846	$	12.70	376,846

(1) On February 14, 2008, shareholders of the Company voted to approve the 2007 Recognition and Retention Plan and Trust Agreement (“2007 RRP”), which is authorized to purchase of up to 253,829 shares of the Company’s common stock. As of September 30, 2008, 241,384 shares had been purchased by the 2007 RRP. The remaining 12,445 shares were purchased by the 2007 RRP in October 2008.

(2) On August 1, 2008, the Company announced a stock repurchase program to acquire 5%, or 317,286 shares of its common stock. The shares may be purchased in the open market or privately negotiated transactions from time to time depending upon market conditions and other factors over a six to twelve month period.

Item 3 – Defaults Upon Senior Securities.

There are no matters required to be reported under this item.

Item 4 – Submission of Matters to a Vote of Security Holders.

There are no matters required to be reported under this item.

Item 5 – Other Information.

There are no matters required to be reported under this item.

Item 6 – Exhibits.

(a) List of exhibits: (filed herewith unless otherwise noted)

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

31.2 Rule 13a-14(a)/15d-14(a) Section 302 Certification of the Chief Financial Officer

32.1 Section 1350 Certification

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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.

	LOUISIANA BANCORP, INC.
Date: November 12, 2008	By:	/s/ Lawrence J. LeBon, III
		Lawrence J. LeBon, III
		President and Chief Executive Officer
Date: November 12, 2008	By:	/s/ John LeBlanc
		John LeBlanc
		Senior Vice President and Chief Financial Officer

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