Louisiana Bancorp (LABC) 10-Q 2010 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, 2010

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.    ¨  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	¨  (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    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, 2010, there were 3,788,838 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	3
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4T -	Controls and Procedures	27
PART II - OTHER INFORMATION
Item 1 -	Legal Proceedings	28
Item 1A -	Risk Factors	28
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3 -	Defaults Upon Senior Securities	28
Item 4 -	(Removed and Reserved)	28
Item 5 -	Other Information	28
Item 6 -	Exhibits	28
Signatures		29

2

LOUISIANA BANCORP, INC.

Consolidated Balance Sheets

	(unaudited) September 30,  2010			December 31, 2009
	(in thousands)
Assets
Cash and Due from Banks	$	1,869		$	2,317
Short-term Interest-Bearing Deposits		4,690			2,418
Total Cash and Cash Equivalents		6,559			4,735
Certificates of Deposit		635			1,525
Securities Available-for-Sale, at Fair Value (amortized cost of $55,755, and $61,131, respectively)		57,153			62,524
Securities Held-to-Maturity, at Amortized Cost (estimated fair value of $75,084, and $98,799, respectively)		70,835			94,546
Loans, Net of Allowance for Loan Losses of $1,903, and $1,661, respectively		179,067			158,446
Accrued Interest Receivable		1,321			1,326
Other Real Estate Owned		1,421			1,573
Stock in Federal Home Loan Bank		2,000			1,995
Premises and Equipment, Net		1,723			1,797
Other Assets		1,676			1,312
Total Assets	$	322,390		$	329,779
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing	$	7,287		$	7,893
Interest-bearing		180,143			180,729
Total deposits		187,430			188,622
Borrowings		68,564			63,810
Advance Payments by Borrowers for Taxes and Insurance		2,377			1,914
Accrued Interest Payable		432			597
Other Liabilities		1,987			1,488
Total Liabilities		260,790			256,431
Commitments and Contingencies		—			—
Shareholders’ Equity
Common Stock, $.01 Par Value, 40,000,000 Shares Authorized; 6,345,732 Shares Issued; 3,797,838 Shares Outstanding at September 30, 2010 and 4,764,322 Shares Outstanding at December 31, 2009		63			63
Additional Paid-in-Capital		62,719			62,586
Unearned ESOP Shares		(4,442	)		(4,442	)
Unearned Recognition and Retention Plan Shares		(2,084	)		(2,636	)
Treasury Stock, at Cost (2,547,894 Shares at September 30, 2010 and 1,581,410 Shares at December 31, 2009)		(35,043	)		(20,803	)
Retained Earnings		39,465			37,660
Accumulated Other Comprehensive Income		922			920
Total Shareholders’ Equity		61,600			73,348
Total Liabilities and Shareholders’ Equity	$	322,390		$	329,779

See accompanying notes to unaudited consolidated financial statements.

3

LOUISIANA BANCORP, INC.

Consolidated Statements of Income (Unaudited)

	For the Three Months Ended  September 30,				For the Nine Months Ended September 30,
	2010		2009		2010		2009
	(in thousands, except per share data)
Interest and Dividend Income
Loans, Including Fees	$	2,652	$	2,180	$	7,663	$	6,055
Mortgage Backed Securities		1,168		1,786		3,876		5,992
Investment Securities		196		174		637		538
Other interest-bearing deposits		11		18		31		57
Total Interest and Dividend Income		4,027		4,158		12,207		12,642
Interest Expense
Deposits		798		913		2,434		2,799
Borrowings		675		646		1,998		1,942
Total Interest Expense		1,473		1,559		4,432		4,741
Net Interest Income		2,554		2,599		7,775		7,901
Provision for Loan Losses		82		73		241		126
Net Interest Income after Provision for Loan Losses		2,472		2,526		7,534		7,775
Non-Interest Income
Customer Service Fees		87		76		247		246
Gain on Sale of Securities		119		—		204		91
Other Income		74		21		171		69
Total Non-Interest Income		280		97		622		406
Non-Interest Expense
Salaries and Employee Benefits		1,112		1,068		3,431		3,281
Occupancy Expense		276		298		840		851
Other Expenses		430		378		1,135		1,153
Total Non-Interest Expense		1,818		1,744		5,406		5,285
Income Before Income Tax Expense		934		879		2,750		2,896
Income Tax Expense		317		315		945		1,030
Net Income	$	617	$	564	$	1,805	$	1,866
Earnings Per Share
Basic	$	0.18	$	0.12	$	0.47	$	0.39
Diluted	$	0.17	$	0.12	$	0.46	$	0.39

See accompanying notes to unaudited financial statements.

4

LOUISIANA BANCORP, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)

	For the Nine Months Ended September 30,
	2010			2009
	(in thousands)
Net Income	$	1,805		$	1,866
Other Comprehensive Income, Net of Tax
Unrealized Holding Gains Arising During the period		196			304
Reclassification Adjustment for Gains Included in Net Income		(194	)		(91	)
Total Other Comprehensive Income		2			213
Comprehensive Income	$	1,807		$	2,079

See accompanying notes to unaudited financial statements.

5

LOUISIANA BANCORP, INC.

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

For the Nine Months Ended September 30, 2010 and 2009

(Dollars in thousands)

	Common Stock		Additional Paid-in Capital			Unearned ESOP Stock			Unearned RRP Stock			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
Balances at December 31, 2008	$	63	$	62,305		$	(4,696	)	$	(3,200	)	$	(5,208	)	$	35,126	$	1,337	$	85,727
Net Income - Nine Months Ended September 30, 2009																1,866				1,866
Other Comprehensive Income,
Net of Applicable
Deferred Income Taxes																		213		213
Stock Purchased for Treasury													(9,356	)						(9,356	)
RRP Shares Earned				(48	)					554										506
Stock Option Expense				177																177
Balance at September 30, 2009	$	63	$	62,434		$	(4,696	)	$	(2,646	)	$	(14,564	)	$	36,992	$	1,550	$	79,133
Balances at December 31, 2009	$	63	$	62,586		$	(4,442	)	$	(2,636	)	$	(20,803	)	$	37,660	$	920	$	73,348
Net Income - Nine Months Ended September 30, 2010																1,805				1,805
Other Comprehensive Income,
Net of Applicable
Deferred Income Taxes																		2		2
Stock Purchased for Treasury													(14,240	)						(14,240	)
RRP Shares Earned				(48	)					552										504
Stock Option Expense				181																181
Balance at September 30, 2010	$	63	$	62,719		$	(4,442	)	$	(2,084	)	$	(35,043	)	$	39,465	$	922	$	61,600

See accompanying notes to unaudited consolidated financial statements.

6

LOUISIANA BANCORP, INC.

Consolidated Statements of Cash Flows (Unaudited)

	For the Nine Months Ended September 30
	2010			2009
	(in thousands)
Cash Flows from Operating Activities
Net Income	$	1,805		$	1,866
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		168			177
Provision for Loan Losses		241			126
Net Increase in RRP Shares Earned		504			506
Stock Option Plan Expense		181			177
Discount Accretion Net of Premium Amortization		(177	)		(258	)
Gain on Insurance Settlement		—			(2	)
Deferred Income Tax Benefit		(40	)		(40	)
Gain on Sale of Securities		(204	)		(91	)
Gain on Sale of Loans		(110	)		(8	)
Originations of Loans Held-for-Sale		(16,675	)		(4,548	)
Proceeds from Sales of Loans Held-for-Sale		16,803			4,547
Decrease in Accrued Interest Receivable		5			214
Impairment of Other Real Estate Owned		152			—
Increase in Other Assets		(326	)		(184	)
Decrease in Accrued Interest Payable		(165	)		(88	)
Increase (Decrease) in Other Liabilities		499			(18	)
Net Cash Provided by Operating Activities		2,661			2,376
Cash Flows from Investing Activities
Investment in Certificates of Deposit		(427	)		(1,666	)
Purchase of Securities Available-for-Sale		(27,995	)		(21,991	)
Purchase of Securities Held-to-Maturity		—			(5,601	)
Proceeds from Maturities of Certificates of Deposit		1,317			1,368
Proceeds from Maturities of Securities Available-for-Sale		27,959			34,654
Proceeds from Maturities of Securities Held-to-Maturity		23,743			27,002
Proceeds from Sales of Securities		5,760			1,849
Net Increase in Loans Receivable		(21,369	)		(34,551	)
Proceeds from Sales of Loans Held for Investing		489			861
Insurance Proceeds - Property Damage		—			42
Purchase of Property and Equipment		(94	)		(246	)
Net Increase in Investment in Federal Home Loan Bank Stock		(5	)		(5	)
Net Cash Provided by Investing Activities		9,378			1,716

See accompanying notes to unaudited consolidated financial statements.

7

	For the Nine Months Ended September 30,
	2010			2009
	(in thousands)
Cash Flows from Financing Activities
(Decrease) Increase in Deposits		(1,192	)		26,020
Increase in Advances by Borrowers for Taxes and Insurance		463			541
Increase (Decrease) in Borrowings		4,754			(15,142	)
Purchase of Treasury stock		(14,240	)		(9,356	)
Net Cash (Used in) Provided by Financing Activities		(10,215	)		2,063
Net Increase in Cash and Cash Equivalents		1,824			6,155
Cash and Cash Equivalents, Beginning of Year		4,735			4,974
Cash and Cash Equivalents, End of Year	$	6,559		$	11,129
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period:
Interest	$	4,597		$	4,830
Income Taxes	$	1,323		$	2,098
Loans Transferred to Other Real Estate Owned During the Period	$	—		$	553

See accompanying notes to unaudited consolidated financial statements.

8

LOUISIANA BANCORP, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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, 2010, are not necessarily indicative of the results which may be expected for the entire fiscal year.

NATURE OF OPERATIONS

Louisiana Bancorp, Inc. (the “Company”) was organized as a Louisiana corporation on March 16, 2007, for the purpose of becoming the holding company of Bank of New Orleans (the “Bank”) in anticipation of converting the Bank from a federally chartered mutual savings bank to a federally chartered stock savings bank. In July 2007, the conversion of the Bank was completed. 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. The Bank operates in the banking/savings and loan industry and, as such, attracts deposits from the general public and uses such deposits primarily to originate loans secured by first mortgage loans on owner-occupied single-family residences and other properties, as well as those for 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 2 summarizes the types of securities in which the Company invests. Note 3 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.

INVESTMENT SECURITIES

Securities are being accounted for in accordance with FASB Accounting Standards Codification (“ASC”) 320-10,Investments – Debt and Equity Securities.FASB ASC 320-10 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 these classifications 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, 2010 or December 31, 2009.

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

LOANS

The 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.

9

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

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

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 performing and non-performing loans on 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 or 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. During the second quarter of 2010, the Bank sold the outstanding balance of its student loan portfolio to Sallie Mae. The Bank will no longer originate student loans under the Sallie Mae agreement.

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.

10

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.

NOTE 2 – SECURITIES

A summary of securities classified as available-for-sale at September 30, 2010 and December 31, 2009, with gross unrealized gains and losses, follows:

	September 30, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Securities Available-for-Sale
Mortgage-Backed Securities
GNMA	$	—	$	—	$	—		$	—
FNMA		11,370		642		—			12,012
FHLMC		5,327		339		—			5,666
Total Mortgage-Backed Securities		16,697		981		—			17,678
U.S. Government and Agency Obligations		39,058		417		—			39,475
Total Securities Available-for-Sale	$	55,755	$	1,398	$	—		$	57,153
	December 31, 2009
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Securities Available-for-Sale
Mortgage-Backed Securities
GNMA	$	508	$	40	$	—		$	548
FNMA		17,330		770		—			18,100
FHLMC		8,026		405		—			8,431
Total Mortgage-Backed Securities		25,864		1,215		—			27,079
U.S. Government and Agency Obligations		35,267		348		(170	)		35,445
Total Securities Available-for-Sale	$	61,131	$	1,563	$	(170	)	$	62,524

11

A summary of securities classified as held-to-maturity at September 30, 2010 and December 31, 2009, with gross unrealized gains and losses, follows:

	September 30, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Securities Held-to-Maturity
Mortgage-Backed Securities
GNMA	$	9,970	$	385	$	—		$	10,355
FNMA		37,462		2,301		—			39,763
FHLMC		22,050		1,541		—			23,591
Total Mortgage-Backed Securities		69,482		4,227		—			73,709
U.S. Government and Agency Obligations		—		—		—			—
Municipal Bonds
Revenue Bonds		285		10		—			295
General Obligation Bonds		1,068		12		—			1,080
Total Municipal Obligations		1,353		22		—			1,375
Total Securities Held-to-Maturity	$	70,835	$	4,249	$	—		$	75,084
	December 31, 2009
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Securities Held-to-Maturity
Mortgage-Backed Securities
GNMA	$	12,386	$	376	$	—		$	12,762
FNMA		49,211		2,263		(2	)		51,472
FHLMC		28,597		1,600		(1	)		30,196
Total Mortgage-Backed Securities		90,194		4,239		(3	)		94,430
U.S. Government and Agency Obligations		3,000		—		(15	)		2,985
Municipal Bonds
Revenue Bonds		286		14		—			300
General Obligation Bonds		1,066		18		—			1,084
Total Municipal Obligations		1,352		32		—			1,384
Total Securities Held-to-Maturity	$	94,546	$	4,271	$	(18	)	$	98,799

The amortized cost and fair value of available-for-sale and held-to-maturity securities by contractual maturity at September 30, 2010, 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	$	—	$	—	$	856	$	873
One to Five Years		43,661		44,239		3,261		3,384
Five to Ten Years		5,997		6,407		13,443		14,308
Over Ten Years		6,097		6,507		53,275		56,519
	$	55,755	$	57,153	$	70,835	$	75,084

12

Information pertaining to securities with gross unrealized losses at September 30, 2010 and December 31, 2009, 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, 2010
Mortgage-Backed Securities
GNMA	$	—	$	—	$	—	$	—
FNMA		—		—		—		—
FHLMC		—		—		—		—
Total Mortgage-Backed Securities		—		—		—		—
U.S. Government and Agency Obligations		—		—		—		—
Total	$	—	$	—	$	—	$	—
December 31, 2009
Mortgage-Backed Securities
GNMA	$	—	$	—	$	—	$	—
FNMA		—		—		—		—
FHLMC		—		—		—		—
Total Mortgage-Backed Securities		—		—		—		—
U.S. Government and Agency Obligations		170		15,295		—		—
Total	$	170	$	15,295	$	—	$	—
	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, 2010
Mortgage-Backed Securities
GNMA	$	—	$	—	$	—	$	—
FNMA		—		—		—		—
FHLMC		—		—		—		—
Total Mortgage-Backed Securities		—		—		—		—
U.S. Government and Agency Obligations		—		—		—		—
Municipal Bonds		—		—		—		—
Total	$	—	$	—	$	—	$	—
December 31, 2009
Mortgage-Backed Securities
GNMA	$	—	$	—	$	—	$	—
FNMA		2		477		—		—
FHLMC		—		—		1		43
Total Mortgage-Backed Securities		2		477		1		43
U.S. Government and Agency Obligations		15		2,985		—		— ��
Municipal Bonds		—		—		—		—
Total	$	17	$	3,462	$	1	$	43

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 at maturity, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2010 or December 31, 2009.

13

NOTE 3 – LOANS

The following table summarizes the composition of our total net loans receivable:

	September 30, 2010			December 31, 2009
	(in thousands)
Loans Secured by Mortgages on Real Estate
1-4 Family Residential	$	100,113		$	85,726
Home Equity Loans and Lines		15,868			14,389
Multi-family Residential		10,841			9,423
Non-residential		52,000			47,798
Land		964			1,213
Total Loans Secured by Real Estate		179,786			158,549
Consumer and Other Loans
Student Loans		—			485
Loans Secured by Deposits		454			478
Other		920			835
Total Consumer and Other Loans		1,374			1,798
Less:
Allowance for Loan Losses		(1,903	)		(1,661	)
Net Deferred Loan Origination Fess/Costs		(190	)		(240	)
Total Loans, Net	$	179,067		$	158,446

Our loan portfolio does not contain any loans that would be considered subprime, “alt-a”, no-doc, or no-interest.

An analysis of the allowance for loan losses follows:

	Nine Months Ended September 30, 2010			Year Ended December 31, 2009
	(in thousands)
Balance, Beginning of Period	$	1,661		$	1,952
Provision for Loan Losses		241			337
Loans Charged-Off		(2	)		(628	)
Recoveries on charged off loans		3			—
Balance, End of Period	$	1,903		$	1,661

A summary of the loans evaluated for impairment follows:

	September 30, 2010		December 31, 2009
	(in thousands)
Impaired Loans Requiring a Loss Allowance	$	920	$	937
Impaired Loans Not Requiring a Loss Allowance		410		66
Total Impaired Loans	$	1,330	$	1,003
Loss Allowance on Impaired Loans	$	391	$	332

At September 30, 2010 and December 31, 2009, all impaired loans were in nonaccrual status. The Bank did not hold any renegotiated loans on these dates. At September 30, 2010 and December 31, 2009, approximately $53,000 and $12,000 of interest was foregone on nonaccrual loans.

14

For all periods presented below, nonaccrual loans are reported exclusive of the allowance for loan loss in accordance with accounting principles generally accepted in the United States of America.

	9/30/2010			6/30/2010			3/31/2010			12/31/2009
	(Dollars in Thousands)
Nonperforming Assets:
Non-Accruing Loans
Real Estate Loans:
One-to Four-Family Residential	$	34		$	22		$	262		$	36
Home Equity Loans and Lines		711			609			365			378
Multi-Family Residential		515			515			515			515
Commercial Real Estate		—			—			—			—
Land		—			—			—			—
Consumer and Other		70			71			73			74
Total Non-Accruing Loans		1,330			1,217			1,215			1,003
Accruing Loans 90 Days or More Past Due:
Real Estate Loans:
One-to Four-Family Residential		—			—			—			—
Home Equity Loans and Lines		—			—			—			—
Multi-Family Residential		—			—			—			—
Commercial Real Estate		—			—			—			—
Land		—			—			—			—
Consumer and Other		—			—			—			—
Total Accruing Loans 90 Days or More Past Due		—			—			—			—
Total Nonperforming Loans	$	1,330		$	1,217		$	1,215		$	1,003
Real Estate Owned, Net		1,421			1,528			1,553			1,573
Total Nonperforming Assets	$	2,751		$	2,745		$	2,768		$	2,576
Troubled Debt Restructurings		—			—			—			—
Total Nonperforming Loans as a Percent of Total Loans		0.73	%		0.71	%		0.73	%		0.63	%
Total Nonperforming Loans as a Percent of Total Assets		0.41	%		0.37	%		0.37	%		0.30	%
Total Nonperforming Assets as a Percent of Total Assets		0.85	%		0.84	%		0.85	%		0.78	%

15

NOTE 4 – EARNINGS PER COMMON SHARE

Earnings per common share (“EPS”) are computed using the weighted average number of shares outstanding as prescribed in FASB ASC 260-10,Earnings per Share. Net income is divided by the weighted average number of shares outstanding during the period to calculate basic net earnings per common share. Diluted earnings per common share are calculated to give effect to dilutive stock options.

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
	2010			2009			2010			2009
Net Income	$	617,000		$	564,000		$	1,805,000		$	1,866,000
Weighted Average Shares Issued		6,345,732			6,345,732			6,345,732			6,345,732
Weighted Average Unearned ESOP Shares		(444,204	)		(469,586	)		(444,204	)		(469,586	)
Weighted Average Unearned RRP Shares		(165,304	)		(209,888	)		(172,361	)		(216,970	)
Weighted Average Treasury Shares		(2,245,438	)		(1,071,859	)		(1,918,123	)		(897,254	)
Weighted Average Shares Outstanding for Basic EPS		3,490,786			4,594,399			3,811,044			4,761,922
Earnings per Share, Basic	$	0.18		$	0.12		$	0.47		$	0.39
Weighted Average Shares Outstanding for Basic EPS		3,490,786			4,594,399			3,811,044			4,761,922
Effect of Dilutive Securities		103,512			74,359			109,356			63,993
Weighted Average Shares Outstanding for Diluted EPS		3,594,298			4,668,758			3,920,400			4,825,915
Earnings per Shares, Diluted	$	0.17		$	0.12		$	0.46		$	0.39

NOTE 5 – REGULATORY CAPITAL

The actual and required regulatory capital amounts and ratios applicable to the Bank at September 30, 2010 and December 31, 2009, are presented in the following table:

	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, 2010
Tangible Capital	$	49,976		15.63	%	$	4,796		1.50	%		N/A		N/A
Core/Leverage Capital		49,976		15.63	%		9,593		3.00	%	$	15,988		5.00	%
Tier 1 Risk-Based Capital		49,915		33.21	%		6,013		4.00	%		9,019		6.00	%
Total Risk-Based Capital		51,421		34.21	%		12,026		8.00	%		15,032		10.00	%
December 31, 2009
Tangible Capital	$	58,322		18.20	%	$	4,808		1.50	%		N/A		N/A
Core/Leverage Capital		58,322		18.20	%		9,615		3.00	%	$	16,026		5.00	%
Tier 1 Risk-Based Capital		58,261		40.55	%		5,748		4.00	%		8,622		6.00	%
Total Risk-Based Capital		59,589		41.47	%		11,495		8.00	%		14,369		10.00	%

16

The Bank’s capital under accounting principles generally accepted in the United States (“GAAP”) is reconciled to its regulatory capital as follows:

	September 30, 2010			December 31, 2009
	(in thousands)
Capital Under GAAP	$	50,825		$	59,043
Unrealized Gains on Available-for-Sale Securities		(849	)		(721	)
Tier 1 Capital		49,976			58,322
Allowance for Loan Losses		1,506			1,328
Recourse Obligations		(61	)		(61	)
Total Risk-Based Capital	$	51,421		$	59,589

NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

• Level 1 - Quoted prices for identical assets or liabilities in active markets.

• Level 2 - Observable inputs other than quoted prices included within Level I, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or other inputs that are observable in the market or can be corroborated by observable market data.

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

17

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2010 and December 31, 2009. All of the mortgage-backed securities reported at fair value on September 30, 2010, and December 31, 2009, were secured by first mortgage loans on residential real estate.

Description	Balance as of September 30, 2010		Fair Value Measurements
			(Level 1)		(Level 2)		(Level 3)
					(in thousands)
Available-for-Sale Securities
Mortgage-Backed Securities	$	17,678	$	—	$	17,678	$	—
US Government & Agency Obligations		39,475		—		39,475		—
Loans held-for-sale		2,160		2,160		—		—
Total	$	59,313	$	2,160	$	57,153	$	—
Description	Balance as of December 31, 2009		Fair Value Measurements
			(Level 1)		(Level 2)		(Level 3)
					(in thousands)
Available-for-Sale Securities
Mortgage-Backed Securities	$	27,079	$	—	$	27,079	$	—
US Government & Agency Obligations		35,445		—		35,445		—
Loans held-for-sale		—		—		—		— ��
Total	$	62,524	$	—	$	62,524	$	—

The Company did not record any liabilities at fair market value for which measurement of the fair value was made on a recurring basis at September 30, 2010 or December 31, 2009.

The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis at September 30, 2010 and December 31, 2009.

Description	Balance as of September 30, 2010		Fair Value Measurements
			(Level 1)		(Level 2)		(Level 3)
					(in thousands)
Impaired Loans	$	577	$	—	$	350	$	227
Other Real Estate Owned		1,421		—		1,421		—
Total	$	1,998	$	—	$	1,771	$	227
Description	Balance as of December 31, 2009		Fair Value Measurements
			(Level 1)		(Level 2)		(Level 3)
					(in thousands)
Impaired Loans	$	605	$	—	$	425	$	180
Other Real Estate Owned		1,573		—		1,573		—
Total	$	2,178	$	—	$	1,998	$	180

The Company did not record any liabilities at fair market value for which measurement of the fair value was made on a non-recurring basis at September 30, 2010 or December 31, 2009.

18

FASB ASC 825,Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practical to estimate. Included in this disclosure are the methods and significant assumptions used to estimate the fair value of financial instruments. A detailed description of the valuation methodologies used in estimating the fair value of the financial instruments can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

	September 30, 2010						December 31, 2009
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(in thousands)
Financial Assets
Cash and Cash Equivalents	$	6,559		$	6,559		$	4,735		$	4,735
Certificates of Deposit		635			644			1,525			1,425
Securities		127,988			132,237			157,070			161,323
Loans		180,970			189,275			160,107			162,246
Less Allowance for Loan Losses		(1,903	)		(1,903	)		(1,661	)		(1,661	)
Loans, Net of Allowance		179,067			187,372			158,446			160,585
Federal Home Loan Bank Stock		2,000			2,000			1,995			1,995
Financial Liabilities
Deposits	$	187,430		$	195,169		$	188,622		$	190,684
Borrowings		68,564			73,155			63,810			67,163
Unrecognized Financial Instruments
Commitments to Extend Credit	$	12,918		$	12,686		$	10,729		$	10,727

NOTE 7 – SUBSEQUENT EVENTS

In accordance with FASB ASC 855,Subsequent Events, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2010. In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued.

19

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’s results of operations are primarily dependent on the results of the Bank, which 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.

During the second quarter of 2010, the Deepwater Horizon oil spill began off the coast of Louisiana, resulting in one of the country’s worst environmental disasters. On September 19, 2010, the relief well process was completed and the leak was sealed. Clean-up efforts are on-going across the affected regions of the Gulf Coast and are expected to continue for quite some time. The long-term effects on the fishing and coastal tourism industries operating in Southeastern Louisiana and contiguous areas along the Gulf Coast remain uncertain. A thorough review of our loan portfolio indicates that the Bank has no direct exposure to either industry.

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 1 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, the 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, the 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 its 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.

20

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, 2010 and December 31, 2009

Total assets were $322.4 million at September 30, 2010, a decrease of $7.4 million from December 31, 2009. Cash and cash equivalents were $6.6 million and $4.7 million at September 30, 2010 and December 31, 2009, respectively. Total investment securities were $40.8 million at September 30, 2010 and $39.8 million at December 31, 2009. Our investment securities portfolio consists of U.S. Agency debt securities and municipal bonds. During the nine months ended September 30, 2010, total mortgage-backed securities decreased by $30.1 million, to $87.2 million. This decrease in the balance of our mortgage-backed securities was due to the receipt of scheduled principal reductions in addition to accelerated prepayments of the underlying mortgage loans. All of the mortgage-backed securities held by the Company at September 30, 2010, and December 31, 2009, were issued by government-sponsored enterprises, and we held no securities that would be deemed “sub-prime”, “Alt-A”, “interest-only”, or provide for the negative amortization of principal. Net loans receivable were $179.1 million at September 30, 2010, an increase of $20.6 million, or 13.0%, from December 31, 2009. During the nine months ended September 30, 2010, first mortgage loans secured by single family residences increased by $14.4 million, home equity loans and lines increased by $1.5 million, multi-family residential loans increased by $1.4 million, and non-residential real estate loans increased by $4.2 million.

Total impaired loans were $1.3 million and $1.0 million, respectively, at September 30, 2010 and December 31, 2009. At these dates, our impaired loans were comprised solely of nonaccrual loans. At September 30, 2010, total nonperforming loans were 0.73% of total loans, and 0.41% of total assets. Other real estate owned was $1.4 million at September 30, 2010, and $1.6 million at December 31, 2009. During the nine months ended September 30, 2010, the Bank recognized additional impairment charges against its other real estate owned of $152,000. At September 30, 2010, our other real estate owned consisted a single-family residence located in suburban New Orleans with a fair market value of $975,000 and a $1 million participation interest in a $170 million construction loan to finance a multi-use property in Baton Rouge, Louisiana. The fair market value of our participation interest in this project was $446,000 at September 30, 2010. Total nonperforming assets were $2.8 million at September 30, 2010, and $2.6 million at December 31, 2009.

Total deposits were $187.4 million at September 30, 2010, and $188.6 million at December 31, 2009. At September 30, 2010, total non-interest bearing deposits were $7.3 million and interest-bearing deposits were $180.1 million. Total Federal Home Loan Bank advances and other borrowings were $68.6 million at September 30, 2010, an increase of $4.8 million from December 31, 2009. We have increased our total borrowings in the form of Federal Home Loan Bank advances, with maturities ranging from five years to ten years, which will provide long-term funding for the growth in our loan portfolio.

Total shareholders’ equity was $61.6 million at September 30, 2010, a decrease of $11.7 million from December 31, 2009. This decrease in shareholders’ equity was primarily due to the Company’s acquisition of an aggregate of 966,484 shares of its common stock during the first nine months of 2010, at an aggregate cost of $14.2 million, pursuant to its publicly announced repurchase plans. The cost of the Company’s repurchase programs were partially offset by net income of $1.8 million, and the release of 43,784 shares held by the Company’s Recognition and Retention Plan Trust, with a cost basis of $552,000, which became vested and were released to participants during the first quarter of 2010. Our average equity to assets ratio for the third quarter of 2010 was 19.99%, and 21.27% for the nine month period ended September 30, 2010. The Bank’s tier 1 capital ratio was 15.63% at September 30, 2010, and therefore, the Bank was considered well-capitalized under regulatory standards at such date. The Bank’s tier 1 capital has been reduced by capital distributions of $9.9 million made by the Bank to the Company during the nine months ended September 30, 2010. These distributions were made to provide liquidity to the Company’s capital management initiatives, which includes, but is not limited to, its stock repurchase programs.

21

Comparison of Our Operating Results for the Three Months and Nine Months Ended September 30, 2010 and 2009

General.Net income for the quarter ended September 30, 2010 was $617,000, an increase of $53,000 from the third quarter of 2009. Net interest income was $2.6 million for the respective quarters ended September 30, 2010 and 2009. Non-interest income was $280,000 for the third quarter of 2010, an increase of 183,000 from the third quarter of 2009. This increase is primarily attributed to gains realized on the sale of securities. Non-interest expense for the three month periods ended September 30, 2010 and September 30, 2009 was $1.8 million and $1.7 million, respectively. The Company’s return on average assets was 0.76% for the third quarter of 2010, an increase of 0.07% from the third quarter of 2009. Net income for the nine months ended September 30, 2010 was $1.8 million compared to $1.9 million for the nine months ended September 30, 2009. Net interest income was $7.8 million for the nine months ended September 30, 2010, and $7.9 million for the nine months ended September 30, 2009. Non-interest income for the nine months ended September 30, 2010 was $622,000, an increase of $216,000 compared to the nine months ended September 30, 2009. Non-interest expense was $5.4 million for the nine months ended September 30, 2010, and $5.3 million for the nine months ended September 30, 2009. For the nine month periods ended September 30, 2010 and 2009, our return on average assets was 0.73% and 0.77%, respectively.

22

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 income 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.

	Three months Ended September 30,
	2010							2009
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars in Thousands)
Interest-Earning Assets:
Loans Receivable (1)	$	174,677	$	2,652		6.07	%	$	139,836	$	2,180		6.24	%
Mortgage-backed Securities		92,538		1,168		5.05	%		139,349		1,786		5.13	%
Investment Securities		37,976		196		2.06	%		27,659		174		2.52	%
Other Interest-Earning Assets		12,662		11		0.35	%		12,640		18		0.57	%
Total Interest-Earning Assets		317,853		4,027		5.07	%		319,484		4,158		5.21	%
Non-Interest Earning Assets		8,088							6,359
Total Assets	$	325,941						$	325,843
Interest-Bearing Liabilities:
Passbook, Checking and Money Market Accounts	$	42,658		40		0.38	%	$	43,137		45		0.42	%
Certificates of Deposit		137,219		758		2.21	%		129,248		868		2.69	%
Total Interest-Bearing Deposits		179,877		798		1.77	%		172,385		913		2.12	%
Borrowings		69,037		675		3.91	%		62,876		646		4.11	%
Total Interest-Bearing Liabilities		248,914		1,473		2.37	%		235,261		1,559		2.65	%
Non-Interest Bearing Liabilities		11,864							11,088
Total Liabilities		260,778							246,349
Stockholders’ Equity		65,163							79,494
Total Liabilities and Stockholders’ Equity	$	325,941						$	325,843
Net Interest-Earning Assets	$	68,939						$	84,223
Net Interest Income; Average Interest Rate Spread			$	2,554		2.70	%			$	2,599		2.56	%
Net Interest Margin (2)						3.21	%						3.25	%
Average Interest-Earning Assets to Average Interest-Bearing Liabilities						127.70	%						135.80	%

⁽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.

23

	Nine months Ended September 30,
	2010							2009
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars in Thousands)
Interest-Earning Assets:
Loans Receivable (1)	$	167,740	$	7,663		6.09	%	$	127,401	$	6,055		6.34	%
Mortgage-backed Securities		102,780		3,876		5.03	%		153,139		5,992		5.22	%
Investment Securities		39,465		637		2.15	%		24,624		538		2.91	%
Other Interest-Earning Assets		9,498		31		0.44	%		10,923		57		0.70	%
Total Interest-Earning Assets		319,483		12,207		5.09	%		316,087		12,642		5.33	%
Non-Interest Earning Assets		7,972							6,438
Total Assets	$	327,455						$	322,525
Interest-Bearing Liabilities:
Passbook, Checking and Money Market Accounts	$	43,112		121		0.37	%	$	43,121		133		0.41	%
Certificates of Deposit		135,571		2,313		2.27	%		122,928		2,666		2.89	%
Total Interest-Bearing Deposits		178,683		2,434		1.82	%		166,049		2,799		2.25	%
Borrowings		67,968		1,998		3.92	%		65,800		1,942		3.94	%
Total Interest-Bearing Liabilities		246,651		4,432		2.40	%		231,849		4,741		2.73	%
Non-Interest Bearing Liabilities		11,155							9,279
Total Liabilities		257,806							241,128
Stockholders’ Equity		69,648							81,397
Total Liabilities and Stockholders’ Equity	$	327,454						$	322,525
Net Interest-Earning Assets	$	72,832						$	84,238
Net Interest Income; Average Interest Rate Spread			$	7,775		2.69	%			$	7,901		2.60	%
Net Interest Margin (2)						3.24	%						3.33	%
Average Interest-Earning Assets to Average Interest-Bearing Liabilities						129.53	%						136.33	%

⁽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 was $2.6 million for both the third quarter of 2010 and the third quarter of 2009. Interest income was $4.0 million for the third quarter of 2010, a decrease of $131,000 from the third quarter of 2009. Total average interest-earning assets were $317.9 million during the third quarter of 2010 and $319.5 million during the third quarter of 2009. The average yield on our interest-earning assets was 5.07% during the third quarter of 2010, a decrease of 14 basis points compared to the third quarter of 2009. Interest income on loans was $2.7 million during the third quarter of 2010, an increase of $472,000 compared to the third quarter of 2009. The increase in interest income from loans was due primarily to a $34.8 million increase in the average balance of our loans receivable, the effect of which was reduced by a 17 basis point decrease in the average yield of our loan portfolio. The average balance of our mortgage-backed securities decreased by $46.8 million during the third quarter of 2010 compared to the third quarter of 2009, contributing to a decrease in interest income on mortgage-backed securities of $618,000. Interest income on investment securities during the third quarter of 2010 was $196,000 on an average balance of $38.0 million. Net interest income for the nine months ended September 30, 2010 was $7.8 million, a decrease of $126,000 from the nine months ended September 30, 2009. Interest income for the respective nine month periods ended September 30, 2010 and 2009, was $12.2 million and $12.6 million. Total average interest-earning assets were $319.5 million during the first nine months of 2010, an increase of $3.4 million compared to the first nine months of 2009. The average yield on our interest-earning assets was 5.09% for the first nine months of 2010, and 5.33% for the first nine months of 2009. Interest income on loans receivable was $7.7 million and $6.1 million, respectively, for the nine month periods ended September 30, 2010 and September 30, 2009. The average balance of our loans receivable was $167.7 million during the first nine months of 2010, an increase of $40.3 million from the first nine months of 2009. The average yield of our loans receivable was 6.09% during the nine months ended September 30, 2010, a decrease of 25 basis points from the nine months ended September 30, 2009. Interest income on mortgage-backed securities was $3.9 million for the first nine months of 2010, a decrease of $2.1 million from the first nine months of 2009. The average balance of our mortgage-backed securities during the first nine months of 2010 was $102.8 million, which earned an average yield of 5.03% compared to an average balance of $153.1 million during the first nine months of 2009, at an average yield of 5.22%. The decline in the balance of our mortgage-backed securities, for both the three month and nine month periods of 2010, was due to accelerated prepayments of principal associated with the refinancing of the underlying mortgage loans. During the nine months ended September 30, 2010, interest income on investment securities was $637,000, an increase of $99,000 compared to the nine months ended September 30, 2009. The average balance of our investment securities was $39.5 million at September 30, 2010, and $24.6 million at September 30, 2009.

24

Interest Expense. Total interest expense was $1.5 million, with our interest-bearing liabilities having an average cost of 2.37% during the third quarter of 2010, compared to $1.6 million and an average cost of 2.65% for the third quarter of 2009. During the quarter ended September 30, 2010, the average balance of our interest-bearing deposits was $179.9 million, an increase of $7.5 million compared to the quarter ended September 30, 2009. The average rate paid on interest-bearing deposits was 1.77% during the quarter ended September 30, 2010, a decrease of 35 basis points from the quarter ended September 30, 2009. Interest expense on borrowings was $675,000 at an average cost of 3.91% during the third quarter of 2010, and $646,000 at an average cost of 4.11% during the third quarter of 2009. The net interest rate spread between our interest-earning assets and our interest-bearing liabilities was 2.70% for the third quarter of 2010, an increase of 14 basis points from the third quarter of 2009. For the nine month period ended September 30, 2010, total interest expense was $4.4 million, a decrease of $309,000 compared to the nine month period ended September 30, 2009. The average balance of our interest-bearing deposits was $178.7 million, and $166.0 million, for the respective nine month periods ended September 30, 2010 and 2009. The average interest rate paid on interest-bearing deposits was 1.82% during the first nine months of 2010, a decrease of 43 basis points from the first nine months of 2009. The average rate paid on total interest-bearing liabilities during the first nine months of 2010 was 2.40%, a decrease of 33 basis points from the first nine months of 2009. The average interest rate spread for the nine month periods ended September 30, 2010 and 2009 was 2.69% and 2.60%, respectively. Our net interest margin for the nine month period ended September 30, 2010 was 3.24%, a decrease of nine basis points from the nine month period ended September 30, 2009.

Provision 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 Bank recorded provisions for loan losses of $82,000 during the third quarter of 2010, compared to provisions for loan losses of $73,000 during the third quarter of 2009. For the nine month period ended September 30, 2010, the Bank recorded provisions for loan losses of $241,000, an increase of $115,000 compared to the first nine months of 2009. During the nine months ended September 30, 2010, the Bank charged-off $2,000 against its allowance for loan losses, compared to $396,000 during the nine months ended September 30, 2009. Our total allowance for loan losses was $1.9 million at September 30, 2010, or 148.67% of our non-performing loans at such date. Stated as a percentage of total loans receivable, our allowance for loan losses was 1.05% and 1.04% at September 30, 2010 and December 31, 2009, respectively.

25

Non-interest Income.Non-interest income for the third quarter of 2010 was $280,000, an increase of $183,000 from the third quarter of 2009. Customer service fees, which are primarily comprised of fees earned on transaction accounts and broker fees earned on certain loan sales, were $87,000 during the third quarter of 2010, an increase of $11,000 from the third quarter of 2009. During the third quarter of 2010, the Company realized gains of $119,000 on the sale of $1.0 million in US Agency securities and $1.6 million in mortgage-backed securities. There were no such transactions recorded during the third quarter of 2009. Other non-interest income was $74,000 for the third quarter of 2010, an increase of $53,000 from the third quarter of 2009. This increase was due to an increase of $50,000 in gains on residential mortgage loans sold in the secondary market. Non-interest income for the nine month periods ended September 30, 2010 and 2009 was $622,000 and $406,000, respectively. Customer service fees were $247,000, during the first nine months of 2010, and $246,000 during the first nine months of 2009. Gains on the sale of securities were $204,000 and $91,000 for the respective nine month periods in 2010 and 2009. Other non-interest income increased from $69,000 during the first nine months of 2009, to $171,000 during the first nine months of 2010. This increase was due to a $100,000 increase in gains realized on the sale of residential mortgage loans.

Non-interest Expense.Non-interest expense for the quarter ended September 30, 2010 was $1.8 million, an increase of $74,000 from the quarter ended September 30, 2009. Salaries and employee benefits expense was $1.1 million for both the third quarter of 2010 and the third quarter of 2009. Occupancy expenses were $276,000 and $298,000 for the respective quarters ended September 30, 2010, and 2009. Other non-interest expense was $430,000 for the September 30, 2010 quarter, an increase of $52,000 from the September 30, 2009 quarter. Following the receipt of an OTS Shared National Credit report during the third quarter of 2010, the Bank wrote-down its investment in other real estate owned by $107,000. The report pertains to a $170 million construction loan on a multi-use development in Baton Rouge, Louisiana, in which the Bank has a 0.6% participation interest. The Bank’s original investment in this project was $1.0 million. With the $107,000 write-down of this asset during the third quarter of 2010, the Bank has made write-downs of $503,000 in the aggregate with respect to its interest in this Shared National Credit. Decreases in advertising expenses, our Louisiana Bank Shares tax accrual, and other miscellaneous expenses, offset the effect of the other real estate owned write-down. Non-interest expense for the nine months ended September 30, 2010 was $5.4 million, an increase of $121,000 compared to the nine months ended September 30, 2009. Salaries and benefits expense increased by $150,000, to $ 3.4 million, during the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This increase is primarily attributed to higher levels of base compensation and increased employee stock ownership plan expenses. Occupancy expenses were $840,000 and $851,000, respectively, for the nine month periods ended September 30, 2010 and 2009. Other non-interest expense for the first nine months of 2010 was $1.1 million, a decrease of $18,000 from the first nine months of 2009. During the nine months ended September 30, 2010, the Company reported impairment charges of $152,000 against its other real estate owned. In addition to the $107,000 write-down recorded during the third quarter of 2010, the Company recognized $45,000 in impairment charges against a single-family residence earlier in the year. A $61,000 reduction in our FDIC assessment between the respective nine month periods ended September 30, 2010, and September 30, 2009, and a $50,000 reduction in our Louisiana bank shares tax accrual, offset the effects of the other real estate owned impairments charges in the 2010 period.

Income Tax Expense.Income tax expense for the third quarter of 2010 was $317,000, an increase of $2,000 from the third quarter of 2009. For the respective nine month periods ended September 30, 2010, and 2009, income tax expense was $945,000 and $1.0 million.

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, 2010, our cash and cash equivalents amounted to $6.6 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, 2010, we had certificates of deposit maturing within the next 12 months amounting to $87.7 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, 2010, we had $68.6 million in total borrowings, including $42.6 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 collateral for advances. At September 30, 2010, the Company had $179.5 million in additional borrowings available through the Federal Home Loan Bank.

26

The following table summarizes our contractual cash obligations at September 30, 2010.

	Payments Due by Period
	Total		To 1 Year		More Than 1 Year to 3 Years		More Than 3 Years to 5 Years		More Than 5 Years
	(Dollars In Thousands)
Certificates of Deposit	$	137,276	$	87,660	$	27,573	$	22,043	$	—
FHLB Advances and Other Borrowings		68,564		8,270		43,229		7,468		9,597
Total Long-Term Debt		205,840		95,930		70,802		29,511		9,597
Operating Lease Obligations	$	172	$	31	$	62	$	62	$	17
Total Contractual Obligations	$	206,012	$	95,961	$	70,864	$	29,573	$	9,614

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 our 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, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – How We Manage Market Risk” at Part II, Item 7 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

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.

27

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 31-33 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (SEC File No. 1-33573), which is incorporated herein by reference thereto.

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 of shares pursuant to repurchase plans approved by the Company’s Board of Directors, as 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 Plan or Program		Maximum Number of Shares that May Yet be Purchased Under the Plan of Program (1) (2)
July 1 - July 31, 2010		—		—		—		—
August 1 - August 31, 2010		210,406	$	14.72		210,406		—
September 1 - September 30, 2010		199,886		14.75		199,886		—
Total		410,292	$	14.73		410,292

(1) On July 30, 2010, the Company announced a ninth stock repurchase program to acquire up to 5%, or 210,406 shares of its outstanding common stock over a six-month period. The repurchase program was completed on August 26, 2010.

(2) On September 14, 2010, the Company announced a tenth stock repurchase program to acquire up to 5%, or 199,886 shares of its outstanding common stock over a six-month period. The repurchase program was completed on September 21, 2010.

Item 3 - Defaults Upon Senior Securities.

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

Item 4 - (Removed and Reserved)

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) /Section 302 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

28

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, 2010	By:	/s/ Lawrence J. LeBon, III
		Lawrence J. LeBon, III
		President and Chief Executive Officer
Date: November 12, 2010	By:	/s/ John LeBlanc
		John LeBlanc
		Senior Vice President and Chief Financial Officer

29