10-K

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2012

[  ] 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: 0-52517

DELANCO BANCORP, INC.

(Name of small business issuer in its charter)

United States (State or other jurisdiction of incorporation or organization)	36-4519533 (I.R.S. Employer Identification No.)
615 Burlington Avenue, Delanco, New Jersey (Address of principal executive offices)	08075 (Zip Code)

Issuer’s telephone number: (856) 461-0611

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.01 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ____   No  X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes ____   No    X

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes X   No ___

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 by Rule 12b-2 of the Act).

Yes ____   No  X

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of September 30, 2011 was approximately $8.2 million.

The number of shares outstanding of the registrant’s common stock as of June 29, 2012 was 1,634,725.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2012 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

INDEX

Part I

		Page
Item 1.	Business	1
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	18

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 8.	Financial Statements and Supplementary Data	34
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	34
Item 9A.	Controls and Procedures	34
Item 9B.	Other Information	34

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	35
Item 11.	Executive Compensation	36
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	36
Item 13.	Certain Relationships and Related Transactions, and Director Independence	36
Item 14.	Principal Accounting Fees and Services	36

Part IV

Item 15. Exhibits and Financial Statement Schedules   37

SIGNATURES

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This report contains certain “forward-looking statements” within the meaning of the federal securities laws that are based on assumptions and may describe future plans, strategies and expectations of Delanco Bancorp, Inc. (the “Company”), Delanco MHC and Delanco Federal Savings Bank.  These forward-looking statements are generally identified by terms such as “expects,” “believes,” “anticipates,” “intends,” “estimates,” “projects” and similar expressions.

Management’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on the operations of Delanco Bancorp and its subsidiaries include, but are not limited to, the following:  interest rate trends; the general economic climate in the market area in which we operate, as well as nationwide; our ability to control costs and expenses; competitive products and pricing; loan delinquency rates and changes in federal and state legislation and regulation.  Additional factors that may affect our results are discussed in this Annual Report on Form 10-K under “Item 1A—Risk Factors.”  These risks and uncertainties should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements.  We assume no obligation to update any forward-looking statements.

PART I

ITEM 1.             BUSINESS

General

Delanco Bancorp, Inc. was organized in 2002 as a federal corporation at the direction of Delanco Federal Savings Bank, in connection with the reorganization of the Bank from the mutual form of organization to the mutual holding company form of organization.  On March 30, 2007, Delanco Bancorp completed a minority stock offering.

Delanco Bancorp’s business activity is the ownership of the outstanding capital stock of Delanco Federal Savings Bank.  Delanco Bancorp does not own or lease any property but instead uses the premises, equipment and other property of Delanco Federal Savings Bank with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement.  In the future, Delanco Bancorp may acquire or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so.

Delanco Federal Savings Bank operates as a community-oriented financial institution offering traditional financial services to consumers and businesses in our market area.  We attract deposits from the general public and use those funds to originate a variety of consumer and business loans.

Our website address is www.delancofsb.com.  Information on our website should not be considered a part of this report.

Market Area

We are headquartered in Delanco Township, New Jersey.  In addition to our main office, we operate a full-service branch office in Cinnaminson, New Jersey.  Delanco and Cinnaminson are in western Burlington County, New Jersey, across the Delaware River from northeastern Philadelphia.  Historically, substantially all of our loans were made to borrowers who resided within approximately ten miles of our main office.  Beginning in 2005, we expanded our lending area to all of Pennsylvania and New Jersey, with a focus on Philadelphia and southwestern New Jersey.  During 2009, we refocused our lending to southwestern New Jersey.

Competition

We face significant competition for the attraction of deposits and origination of loans.  Our most direct competition for deposits has historically come from the many financial institutions operating in our market area and, to a lesser extent, from other financial service companies such as brokerage firms, credit unions and insurance companies.  Several large holding companies operate banks in our market area, including Bank of America, Wells Fargo & Company (formerly known as Wachovia), TD Bank and PNC Bank.  These institutions are significantly larger than us and, therefore, have significantly greater resources.  We also face competition for customers’ funds from money market funds, mutual funds and other corporate and government securities.  At June 30, 2011, which is the most recent date for which data is available from the FDIC, we held 1.53% of the deposits in Burlington County, New Jersey.

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Our competition for loans comes primarily from financial institutions in our market area and, to a lesser extent, from other financial service providers, such as mortgage companies and mortgage brokers.  Competition for loans also comes from non-depository financial service companies, such as insurance companies, securities companies and specialty finance companies.

We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.  Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks.  Federal law permits affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry.  Competition for deposits and the origination of loans could limit our growth in the future.

Lending Activities

One- to Four-Family Residential Loans.  We offer three types of residential mortgage loans:  fixed-rate loans, balloon loans and adjustable-rate loans.  We offer fixed-rate mortgage loans with terms of 15, 20 or 30 years and balloon mortgage loans with terms of five, ten or 15 years.  We offer adjustable-rate mortgage loans with interest rates and payments that adjust annually after an initial fixed period of one or three years.  Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a percentage above the one year U.S. Treasury index.  The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6.0% over the initial interest rate of the loan.  We generally retain all of the mortgage loans that we originate, although from time to time we have sold some of the 30-year, fixed-rate mortgage loans that we originated.  If we choose to sell any mortgages in the future, it would be with the servicing of the loans retained by the Bank.

Borrower demand for adjustable-rate or balloon loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate or balloon loans.  The relative amount of fixed-rate, balloon and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment.  The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.

While one- to four-family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan.  Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.  We do not offer loans with negative amortization and generally do not offer interest only loans.

We will make loans with loan-to-value ratios up to 95%; however, we require private mortgage insurance for loans with a loan-to-value ratio over 80%.  We require all properties securing mortgage loans to be appraised by a board-approved independent appraiser.  We generally require title insurance on all first mortgage loans.  Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.

Construction Loans. We originate loans to individuals and, to a lesser extent, builders to finance the construction of residential dwellings. We also make construction loans for small commercial development projects. Our construction loans generally provide for the payment of interest only during the construction phase, which are usually nine months for residential properties and 12 months for commercial properties.  Loans generally can be made with a maximum loan to value ratio of 90% on residential construction and 80% on commercial construction, based on appraised value as if complete.  Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also will require an inspection of the property before disbursement of funds during the term of the construction loan.

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Commercial and Multi-Family Real Estate Loans.We offer fixed- and adjustable-rate mortgage loans secured by a variety of commercial and multi-family real estate, such as small office buildings, warehouses, retail properties and small apartment buildings.  We originate a variety of fixed- and adjustable-rate commercial real estate and multi-family real estate loans generally for terms up to 5-7years and payments based on an amortization schedule of up to 25 years.  Adjustable-rate loans are typically based on the Prime Rate.  Loans are secured by first mortgages, and amounts generally do not exceed 80% of the property’s appraised value.

On March 17, 2010, Delanco Federal Savings Bank consented to the issuance of a Cease and Desist Order (the “Order”) promulgated by the Office of Thrift Supervision ("OTS").  On July 21, 2011 the OTS was eliminated and merged into the Office of the Comptroller of the Currency (“OCC”).  As the Bank’s primary regulator, the Order is now enforced by the OCC. The Order imposes certain restrictions on the operations of the Bank, including limiting the Bank’s ability to engage in commercial lending, including construction loans to builders for residential and commercial properties, without prior written non-objection from the OCC.  See “Regulation and Supervision-Cease and Desist Order” for a detailed description of the Order.

Commercial Loans.  We offer commercial business loans to professionals, sole proprietorships and small businesses in our market area.  We offer installment loans for capital improvements, equipment acquisition and long-term working capital.  These loans are secured by business assets other than real estate, such as business equipment and inventory, or are backed by the personal guarantee of the borrower.  We originate lines of credit to finance the working capital needs of businesses to be repaid by seasonal cash flows or to provide a period of time during which the business can borrow funds for planned equipment purchases.  We also offer accounts receivable lines of credit.

When making commercial business loans, we consider the financial statements of the borrower, the borrower’s payment history of both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business, the viability of the industry in which the customer operates and the value of the collateral.

Consumer Loans.  Our consumer loans consist primarily of home equity loans and lines of credit.  We occasionally make loans secured by passbook or certificate accounts and automobile loans.

We offer home equity loans with a maximum combined loan to value ratio of 80% or less.  Home equity lines of credit have adjustable rates of interest that are indexed to the Prime Rate as published by The Wall Street Journal.  Home equity loans have fixed interest rates and terms that typically range from five to 15 years.  Some of our home equity loans are originated as five-year balloon loans with monthly payments based on a 20- to 30-year amortization schedule.

The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan.  Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

Loan Underwriting Risks.

Adjustable-Rate Loans.While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults.  The marketability of the underlying property also may be adversely affected in a high interest rate environment.  In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

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Construction Loans.  Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction.  During the construction phase, a number of factors could result in delays and cost overruns.  If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the building.  If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment.  If we are forced to foreclose on a building before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Commercial and Multi-Family Real Estate Loans.Loans secured by commercial and multi-family real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans.  Of primary concern in commercial and multi-family real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project.  Payments on loans secured by income properties often depend on successful operation and management of the properties.  As a result, repayment of such loans may be subject to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy.  To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on commercial and multi-family real estate loans.  In reaching a decision on whether to make a commercial or multi-family real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property.  We have generally required that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.25.  An environmental survey or environmental risk insurance is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

Commercial Loans.  Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.  As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself.  Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Consumer Loans.  Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles.  In the latter case, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower.  Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Loan Originations, Purchases and Sales.  Loan originations come from a number of sources.  The primary sources of loan originations are existing customers, walk-in traffic, advertising and referrals from customers.

From time to time, we will purchase participations in loans from the Thrift Institutions Community Investment Corporation of New Jersey to supplement our lending portfolio.Loan participations totaled $460 thousand at March 31, 2012.  Loan participations are also subject to the same credit analysis and loan approvals as loans we originate.  We are permitted to review all of the documentation relating to any loan in which we participate.  However, in a purchased participation loan, we do not service the loan and thus are subject to the policies and practices of the lead lender with regard to monitoring delinquencies, pursuing collections and instituting foreclosure proceedings.

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In the past, we have sold some of the 30-year fixed rate loans that we originated to the Federal Home Loan Bank of New York for interest risk management purposes.  In recent periods we have retained all of the loans that we have originated.  We may sell loans from time to time in the future to help manage our asset/liability mix and limit our interest rate risk.  It would be the intent of the Bank to retain the servicing on any loans sold.

Loan Approval Procedures and Authority.  Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our board of directors and management.  The board of directors has granted loan approval authority to certain officers or groups of officers up to prescribed limits, based on the officer’s experience and tenure.  All loans over $500,000 must be approved by the loan committee of the board of directors or the full board, depending on the size.

Loans to One Borrower.  The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of our stated capital and reserves.  At March 31, 2012, our regulatory limit on loans to one borrower was $1.9million.  At that date, our largest lending relationship was $1.1 million and was secured by residential real estate.  This loan was performing in accordance with it terms at 3/31/12.

Loan Commitments.  We issue commitments for fixed- and adjustable-rate mortgage loans conditioned upon the occurrence of certain events.  Commitments to originate mortgage loans are legally binding agreements to lend to our customers.  Generally, our loan commitments expire after 60 days.

Investment Activities

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions.  Within certain regulatory limits, we also may invest a portion of our assets in corporate securities and mutual funds.  We also are required to maintain an investment in Federal Home Loan Bank of New York and Atlantic Central Bankers Bank stock.

At March 31, 2012, our investment portfolio totaled $17.7 million, or 13.2% of total assets, and consisted primarily of mortgage-backed securities and debt securities of government sponsored enterprises.

Our investment objectives are to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to generate a favorable return.  Our board of directors has the overall responsibility for the investment portfolio, including approval of our investment policy.  The Asset/Liability Committee is responsible for implementation of the investment policy and monitoring our investment performance.Ourboard of directors reviews the status of our investment portfolio on a monthly basis, or more frequently if warranted.

Deposit Activities and Other Sources of Funds

General.  Deposits, borrowings and loan repayments are the major sources of our funds for lending and other investment purposes.  Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

Deposit Accounts.  Substantially all of our depositors are residents of New Jersey.  Deposits are attracted from within our market area through the offering of a broad selection of deposit instruments, including non-interest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), savings accounts and certificates of deposit.  In addition to accounts for individuals, we also offer commercial checking accounts designed for the businesses operating in our market area.  We do not have any brokered deposits.  From time to time we promote various accounts in an effort to increase deposits.

Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors.  In determining the terms of our deposit accounts, we consider the rates offered by our competition, our liquidity needs, profitability to us, and customer preferences and concerns.  We generally review our deposit mix and pricing bi-weekly.  Our deposit pricing strategy has generally been to offer competitive rates and to be towards the top of the local market for rates on all types of deposit products.

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Borrowings.  We have the ability to utilize advances from the Federal Home Loan Bank of New York, Atlantic Central Bankers Bank and The Federal Reserve Bank of Philadelphia to supplement our investable funds.  The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions.  As a member, we are required to own capital stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.  Advances are made under several different programs, each having its own interest rate and range of maturities.  Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.  Atlantic Central Bankers Bank provides correspondent banking services, both credit and non credit, to financial institutions in the Mid-Atlantic region.  As a member, we are required to own capital stock in Atlantic Central Bankers Bank and are authorized to apply for advances under an unsecured line of credit.  The Federal Reserve Bank of Philadelphia functions as a central reserve bank providing credit for member financial institutions.  We are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.

Personnel

As of March 31, 2012, we had 25 full-time equivalent employees, none of whom is represented by a collective bargaining unit.  We believe our relationship with our employees is good.

Subsidiaries

The only subsidiary of Delanco Bancorp is Delanco Federal Savings Bank.  Delanco Federal Savings Bank does not have any active subsidiaries.

Regulation and Supervision

General

Delanco Federal Savings Bank, as a federal savings association, is currently subject to extensive regulation, examination and supervision by the OCC, as its primary federal regulator, and by the Federal Deposit Insurance Corporation as the insurer of its deposits.  Delanco Federal is a member of the Federal Home Loan Bank System and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.  Delanco Federal must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions.  There are periodic examinations by the OCC to evaluate Delanco Federal’s safety and soundness and compliance with various regulatory requirements.  This regulatory structure is intended primarily for the protection of the insurance fund and depositors.  The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of an adequate allowance for loan losses for regulatory purposes.  Any change in such policies, whether by the OCC, the Federal Deposit Insurance Corporation or Congress, could have a material adverse impact on Delanco Bancorp and Delanco Federal and their operations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) made extensive changes to the regulation of Delanco Federal.  Under the Dodd-Frank Act, the Office of Thrift Supervision was eliminated and responsibility for the supervision and regulation of federal savings associations such as Delanco Federal was transferred to the OCC on July 21, 2011.  The OCC is the agency that is primarily responsible for the regulation and supervision of national banks.  Additionally, the Dodd-Frank Act created a new Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve Board.  The Consumer Financial Protection Bureau assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements.  However, institutions of less than $10 billion in assets, such as Delanco Federal, will continue to be examined for compliance with consumer protection and fair lending laws and regulations by, and be subject to the enforcement authority of, their prudential regulators.

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Certain of the regulatory requirements that are or will be applicable to Delanco Federal and Delanco Bancorp are described below.  This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on Delanco Federal and Delanco Bancorp.

Federal Banking Regulation

Business Activities.  The activities of federal savings banks, such as Delanco Federal, are governed by federal laws and regulations.  Those laws and regulations delineate the nature and extent of the business activities in which federal savings banks may engage.  In particular, certain lending authority for federal savings banks, e.g., commercial, non-residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.

Capital Requirements.  The applicable capital regulations require savings associations to meet three minimum capital standards: a 1.5% tangible capital to total assets ratio, a 4% Tier 1 capital to total assets leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system) and an 8% risk-based capital ratio.  In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard.  The regulations also require that, in meeting the tangible, leverage and risk- based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard for savings associations requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital less certain specified deductions from total capital such as reciprocal holdings of depository institution capital instruments and equity investments) to risk-weighted assets of at least 4% and 8%, respectively.  In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet activities, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of 0% to 100%, assigned by the capital regulation based on the risks believed inherent in the type of asset. Tier 1 (core) capital is generally defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships.  The components of supplementary capital (Tier 2 capital) include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible debt securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values.  Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

The OCC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular risks or circumstances.  At March 31, 2012, Delanco Federal met each of its capital requirements.

Prompt Corrective Regulatory Action.  The OCC is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization.  Generally, a savings association that has a ratio of total capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be “undercapitalized.”  A savings association that has a total risk-based capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized” and a savings association that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”  Subject to a narrow exception, the OCC is required to appoint a receiver or conservator within specified time frames for an institution that is “critically undercapitalized.”  The regulation also provides that a capital restoration plan must be filed with the OCC within 45 days of the date a savings association is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.”  Compliance with the plan must be guaranteed by any parent holding company up to the lesser of 5% of the savings association’s total assets when it was deemed to be undercapitalized or the amount necessary to achieve compliance with applicable capital requirements.  In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion.  The OCC could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors.  Significantly and critically undercapitalized institutions are subject to additional mandatory and discretionary measures.

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Insurance of Deposit Accounts.  Delanco Federal’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.  Under the Federal Deposit Insurance Corporation’s existing risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors, with less risky institutions paying lower assessments.  An institution’s assessment rate depends upon the category to which it is assigned.  Effective April 1, 2009, assessment rates ranged from seven to 77.5 basis points.  On February 7, 2011, the Federal Deposit Insurance Corporation issued final rules, effective April 1, 2011, implementing changes to the assessment rules resulting from the Dodd-Frank Act.  Initially, the base assessment rates will range from two and one half to 45 basis points.  The rate schedules will automatically adjust in the future when the Deposit Insurance Fund reaches certain milestones.  No institution may pay a dividend if in default of the federal deposit insurance assessment.

The FDIC imposed on all insured institutions a special emergency assessment of five basis points of total assets minus Tier 1 capital, as of June 30, 2009 (capped at ten basis points of an institution’s deposit assessment base), in order to cover losses to the Deposit Insurance Fund.  That special assessment was collected on September 30, 2009.  The FDIC provided for similar assessments during the final two quarters of 2009, if deemed necessary.  In lieu of further special assessments, however, the FDIC required insured institutions to prepay estimated quarterly risk-based assessments for the fourth quarter of 2009 through the fourth quarter of 2012.  That pre-payment, which included an assumed assessment base increase of 5%, was due December 30, 2009.  The pre-payment was recorded as a prepaid expense asset as of December 30, 2009. As of December 31, 2009 and each quarter thereafter, a charge to earnings is recorded for each regular assessment with an offsetting credit to the prepaid asset.

Due to difficult economic conditions, deposit insurance per account owner was recently raised to $250,000.  That change was made permanent by the Dodd-Frank Act.  In addition, the Federal Deposit Insurance Corporation adopted an optional Temporary Liquidity Guarantee Program by which, for a fee, non-interest bearing transaction accounts would receive unlimited insurance coverage until December 31, 2010 and certain senior unsecured debt issued by institutions and their holding companies between October 13, 2008 and June 30, 2010 would be guaranteed by the Federal Deposit Insurance Corporation through June 30, 2012, or in some cases, December 31, 2012.  Delanco Federal does not participate in the unlimited coverage for noninterest bearing transaction accounts program

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits.  The Federal Deposit Insurance Corporation must seek to achieve the 1.35% ratio by September 30, 2020.  Insured institutions with assets of $10 billion or more are supposed to fund the increase.  The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit Insurance Corporation.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments.  A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Delanco Federal.  Management cannot predict what insurance assessment rates will be in the future. Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation or the OCC.  The management of Delanco Federal does not know of any practice, condition or violation that might lead to termination of deposit insurance.

Loans to One Borrower.  Federal law provides that savings associations are generally subject to the limits on loans to one borrower applicable to national banks.  Generally, subject to certain exceptions, a savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.  An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral.

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Qualified Thrift Lender Test.  Federal law requires savings associations to meet a qualified thrift lender test.  Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities but also including education, credit card and small business loans) in at least nine months out of each 12-month period.

A savings association that fails the qualified thrift lender test is subject to certain operating restrictions and the Dodd-Frank Act also specifies that failing the qualified thrift lender test is a violation of law that could result in an enforcement action and dividend limitations.  As of March 31, 2012, Delanco Federal maintained 87.6 % of its portfolio assets in qualified thrift investments and, therefore, met the qualified thrift lender test.

Limitation on Capital Distributions.  Federal regulations impose limitations upon all capital distributions by a savings association, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger.  Under the regulations, an application to and the prior approval of the OCC is required before any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under OCC regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC.  If an application is not required, the institution must still provide 30 days prior written notice to the Board of Governors of the Federal Reserve System of the capital distribution if, like Delanco Federal, it is a subsidiary of a holding company, as well as an informational notice filing to the OCC.  If Delanco Federal’s capital ever fell below its regulatory requirements or the OCC notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OCC determines that such distribution would constitute an unsafe or unsound practice.

Standards for Safety and Soundness.  The federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness in various areas such as internal controls and information systems, internal audit, loan documentation and credit underwriting, interest rate exposure, asset growth and quality, earnings and compensation, fees and benefits.  The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.  If the OCC determines that a savings association fails to meet any standard prescribed by the guidelines, the OCC may require the institution to submit an acceptable plan to achieve compliance with the standard.

Community Reinvestment Act.  All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. An institution’s failure to satisfactorily comply with the provisions of the Community Reinvestment Act could result in denials of regulatory applications. Responsibility for administering the Community Reinvestment Act, unlike other fair lending laws, is not being transferred to the Consumer Financial Protection Bureau. Delanco Federal received an “outstanding” Community Reinvestment Act rating in its most recently completed examination.

Transactions with Related Parties.  Federal law limits Delanco Federal’s authority to engage in transactions with “affiliates” (e.g., any entity that controls or is under common control with Delanco Federal, including Delanco Bancorp and Delanco MHC and their other subsidiaries).  The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings association.  The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings association’s capital and surplus.  Certain transactions with affiliates are required to be secured by collateral in an amount and of a type specified by federal law.  The purchase of low quality assets from affiliates is generally prohibited.  Transactions with affiliates must generally be on terms and under circumstances that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies.  In addition, savings associations are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings association may purchase the securities of any affiliate other than a subsidiary.

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The Sarbanes-Oxley Act of 2002 generally prohibits loans by Delanco Bancorp to its executive officers and directors.  However, the law contains a specific exception for loans by a depository institution to its executive officers and directors in compliance with federal banking laws.  Under such laws, Delanco Federal’s authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities such persons control, is limited.  The laws limit both the individual and aggregate amount of loans that Delanco Federal may make to insiders based, in part, on Delanco Federal’s capital level and requires that certain board approval procedures be followed.  Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment.  There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees.  Loans to executive officers are subject to additional limitations based on the type of loan involved.

Enforcement.  The OCC currently has primary enforcement responsibility over savings associations and has authority to bring actions against the institution and all institution-affiliated parties, including shareholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on an insured institution.  Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors to institution of receivership, conservatorship or termination of deposit insurance.  Civil penalties cover a wide range of violations and can amount to $25 thousand per day, or even $1 million per day in especially egregious cases.  The Federal Deposit Insurance Corporation has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings association. If action is not taken by the OCC, the Federal Deposit Insurance Corporation has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations.

Assessments.  Savings associations were previously required to pay assessments to the Office of Thrift Supervision to fund the agency’s operations.  The general assessments, paid on a semi-annual basis, were computed based upon the savings association’s (including consolidated subsidiaries) total assets, condition and complexity of portfolio.  The OCC, which succeeded the Office of Thrift Supervision, is similarly funded through assessments imposed on regulated institutions.  The combined assessment paid to the Office of Thrift Supervision and the OCC for the fiscal year ended March 31, 2012 totaled $75 thousand.

Federal Home Loan Bank System.  Delanco Federal is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks.  The Federal Home Loan Bank provides a central credit facility primarily for member institutions. Delanco Federal, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank.  Delanco Federal was in compliance with this requirement with an investment in Federal Home Loan Bank stock at March 31, 2012 of $219 thousand.

Federal Reserve Board System.  The Federal Reserve Board regulations require savings associations to maintain non-interest earning reserves against their transaction accounts (primarily Negotiable Order of Withdrawal (NOW) and regular checking accounts).  The regulations generally provide that reserves be maintained against aggregate transaction accounts as follows: a 3% reserve ratio is assessed on net transaction accounts up to and including $58.8 million; a 10% reserve ratio is applied above $58.8 million.  The first $10.7 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements.  The amounts are adjusted annually and, for 2012, require a 3% ratio for up to $71.0 million and an exemption of $11.5 million.  Delanco Federal complies with the foregoing requirements. In October 2008, the Federal Reserve Board began paying interest on certain reserve balances.

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Other Regulations

Delanco Federal’s operations are also subject to federal laws applicable to credit transactions, including the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

• rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Delanco Federal also are subject to laws such as the:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and

• Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check.

Holding Company Regulation

General.  As a savings and loan holding company, Delanco Bancorp is subject to Federal Reserve Board regulations, examinations, supervision, reporting requirements and regulations regarding its activities.  Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to Delanco Federal.

Pursuant to federal law and regulations and policy, a savings and loan holding company such as Delanco Bancorp may generally engage in the activities permitted for financial holding companies under Section 4(k) of the Bank Holding Company Act and certain other activities that have been authorized for savings and loan holding companies by regulation.

Federal law prohibits a savings and loan holding company from, directly or indirectly or through one or more subsidiaries, acquiring more than 5% of the voting stock of another savings association, or savings and loan holding company thereof, without prior written approval of the Federal Reserve Board or from acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary holding company or savings association.  A savings and loan holding company is also prohibited from acquiring more than 5% of a company engaged in activities other than those authorized by federal law or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings associations, the Federal Reserve Board must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings associations in more than one state, except: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings association in another state if the laws of the state of the target savings association specifically permit such acquisitions.  The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

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Capital.  Savings and loan holding companies are not currently subject to specific regulatory capital requirements.  The Dodd-Frank Act, however, requires the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves.  That will eliminate the inclusion of certain instruments, such as trust preferred securities, from tier 1 capital.  Instruments issued prior to May 19, 2010 will be grandfathered for companies with consolidated assets of $15 billion or less.  There is a five year transition period from the July 21, 2010 date of enactment of the Dodd-Frank Act before the capital requirements will apply to savings and loan holding companies.

Source of Strength.  The Dodd-Frank Act also extends the “source of strength” doctrine to savings and loan holding companies.  The regulatory agencies must promulgate regulations implementing the “source of strength” policy that holding companies act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Delanco Federal must notify the Federal Reserve Board prior to paying a dividend to Delanco Bancorp.  The Federal Reserve Board may disapprove a dividend if, among other things, the Federal Reserve Board determines that the federal savings bank would be undercapitalized on a pro forma basis or the dividend is determined to raise safety or soundness concerns.

Acquisition of Delanco Bancorp.  Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company or savings association.  Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the outstanding voting stock of the company or institution, unless the Federal Reserve Board has found that the acquisition will not result in a change of control.  Under the Change in Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition.  Any company that acquires control would then be subject to regulation as a savings and loan holding company.

Cease and Desist Order

On March 17, 2010, the Bank entered into a Stipulation and Consent to the Issuance of Order to Cease and Desist with the OTS, whereby the Bank consented to the issuance of an Order to Cease and Desist promulgated by the OTS, without admitting or denying that grounds exist for the OTS to initiate an administrative proceeding against the Bank. On July 21, 2011 the OTS was eliminated and merged into the OCC.  As the Bank’s primary regulator, the Order is now enforced by the OCC.

The Order requires the Bank to take the following actions:

· maintain (i) a tier 1 (core) capital to adjusted total assets ratio of at least 6.0% and (ii) a total risk-based capital to risk-weighted assets ratio of at least 10.0% after the funding of an adequate allowance for loan and lease losses;

· If the Bank fails to meet these capital ratio requirements at any time, within 15 days thereafter prepare a written contingency plan detailing actions to be taken, with specific time frames, providing for (i) a merger with another federally insured depository institution or holding company thereof,  or (ii) voluntary liquidation;

· prepare a problem asset plan that will include strategies, targets and timeframes to reduce the Bank’s level of criticized assets and nonperforming loans;

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· within 30 days after the end of each quarter, prepare a quarterly written asset status report that will include the requirements contained in the Order;

· prepare an updated business plan that will include the requirements contained in the Order and that also will include strategies to restructure the Bank’s operations, strengthen and improve the Bank’s earnings, reduce expenses and achieve positive core income and consistent profitability;

· restrict quarterly asset growth to an amount not to exceed net interest credited on deposit liabilities for the prior quarter without the prior non-objection of the OCC;

· refrain from making, investing in or purchasing any new commercial loans without the prior non-objection of the OCC (the Bank may refinance, extend or otherwise modify any existing commercial loans, so long as no new loan proceeds are advanced as part of the transaction);

· cease to accept, renew or roll over any brokered deposit or act as a deposit broker, without the prior written waiver of the Federal Deposit Insurance Corporation;

· not make any severance or indemnification payments without complying with regulatory requirements regarding such payments; and

· comply with prior regulatory notification requirements for any changes in directors or senior executive officers.

The Bank continues to work with its borrowers where possible and is pursuing legal action where the ability to work with the borrower does not exist.  As of March 31, 2012, the Bank has entered into formal forbearance agreements with four relationships totaling $1.5million that require current payments while the borrowers restructure their finances.

At March 31, 2012, the Bank’s tier 1 (core) capital to adjusted total assets ratio was 7.93% and its total risk-based capital to risk-weighted assets ratio was 14.13%.  At March 31, 2012, the Bank exceeded all of its regulatory capital requirements and was considered “well capitalized” under regulatory guidelines.

On July 23, 2010, the Bank received a non-objection from the OTS regarding the updated business plan that it submitted under the requirements of the Order.

ITEM 1A.          RISK FACTORS

A return of recessionary conditions could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.

Following a national home price peak in mid-2006, falling home prices and sharply reduced sales volumes, along with the collapse of the United States’ subprime mortgage industry in early 2007, significantly contributed to a recession that officially lasted until June 2009, although the effects continued thereafter.  Dramatic declines in real estate values and high levels of foreclosures resulted in significant asset write-downs by financial institutions, which have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail.  Concerns over the United States’ credit rating (which in 2011 was downgraded by Standard & Poor’s), the European sovereign debt crisis, and continued high unemployment in the United States, among other economic indicators, have contributed to increased volatility in the capital markets and diminished expectations for the economy.  A return of recessionary conditions and/or continued negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability.  Further declines in real estate values and sales volumes and continued high unemployment levels may result in higher than expected loan delinquencies and a decline in demand for our products and services.  These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.

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While we have made progress in reducing our non-performing loans and the number of restructured debts, we continue to have an elevated level of classified assets.  As we work through the resolution of these assets, the continued economic problems that exist in the financial markets could have a negative impact on the Company.

We are a party to a Cease and Desist with the OCC and our failure to comply with that Order may result in further regulatory enforcement actions, including restrictions on our operations.

On March 17, 2010, Delanco Federal Savings Bank consented to the issuance of a Cease and Desist Order promulgated by the OTS.  On July 21, 2011 the OTS was eliminated and merged into the OCC.  As the Bank’s primary regulator, the Order is now enforced by the OCC.  The Order was based on the Bank’s 2009 report of examination in which the OTS concluded that grounds existed for the initiation of administrative proceedings against the Bank.  Without admitting or denying that such grounds existed, the Bank determined to enter into the Order to cooperate with the OTS and as evidence of the Bank’s intent to comply with all applicable laws and regulations and engage in safe and sound practices.  The Order imposes certain minimum capital ratio requirements as well as certain restrictions on the operations of the Bank, including limiting the Bank’s ability to engage in commercial lending without prior written approval from the OCC and the Bank’s ability to grow its assets.  The Order will remain in effect until terminated, modified, or suspended in writing by the OCC.

A failure to comply with the Order could result in the initiation of further enforcement actions by the OCC, including the imposition of civil monetary penalties.  The Order has resulted in additional regulatory compliance expense for the Company.  A detailed description of the Order can found at “Regulation and Supervision—Cease and Desist Order.”

If we do not rent the excess office space in our Cinnaminson branch building, it will negatively impact earnings.

Our Cinnaminson branch was designed and built to have rental units for third party tenants.  Our inability to rent all ofthose units will necessitate that the Bank cover some orall of the operating expenses for the building without the rental income to offset those expenses, thus having a negative impact on our earnings.  Currently, two of the three rental units are occupied by third party tenants.  The third office suite is currently occupied by our employees.

Our previous emphasis on commercial lending may expose us to increased lending risks.

At March 31, 2012, $18.6million, or 18.4%, of our loan portfolio consisted of commercial and multi-family real estate loans and commercial business loans, down from $23.6 million at March 31, 2011.  These types of loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property or a business.  These types of loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans.  Commercial business loans expose us to additional risks since they typically are made on the basis of the borrower’s ability to make repayments from the cash flow of the borrower’s business and are secured by non-real estate collateral that may depreciate over time.  In addition, since such loans generally entail greater risk than one- to four-family residential mortgage loans, we may need to increase our allowance for loan losses in the future to account for potential losses.  While the Bank has been restricted from makingnew commercial loans in the past year, the existing commercial loan portfolio contains potential risks.  Even though the Bank has been working on collecting the money owed on non-performing loans by either collection efforts or the repossession of collateral and/or foreclosure of real estate, there is no guaranty that the Bank will receive the full amount due and that the existing loan loss allowance will be sufficient to cover the losses.  See “Regulation and Supervision—Cease and Desist Order” for further information on certain restrictions regarding our ability to engage in commercial lending.

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

Our net interest income is the interest we earn on loans and investment less the interest we pay on our deposits and borrowings.  Our net interest margin is the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding.  Changes in interest rates—up or down—could adversely affect our net interest margin and, as a result, our net interest income.  Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our net interest margin to expand or contract.  Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates.  As a result, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest margin to contract until the yield catches up.  Changes in the slope of the “yield curve”—or the spread between short-term and long-term interest rates—could also reduce our net interest margin.  Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates.  Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we can earn on our assets.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk Management.”

Financial reform legislation recently enacted by Congress will, among other things, tighten capital standards, create a new Consumer Financial Protection Bureau and result in new laws and regulations that are expected to increase our costs of operations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act has and will continue to change the current bank regulatory structure and affect the lending, investment, trading and operating activities of financial institutions and their holding companies.  The Dodd-Frank Act requires the Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for insured depository institutions, and the components of Tier 1 capital would be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions.  The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements within 18 months of the date of enactment of the Dodd-Frank Act that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act also created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws.  The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as Delanco Federal, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.  The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10.0 billion in assets.  Banks and savings institutions with $10.0 billion or less in assets will be examined by their applicable bank regulators.

In addition, the Dodd-Frank Act increased stockholder influence over boards of directors by requiring certain public companies to give stockholders a nonbinding vote on executive compensation and so-called “golden parachute” payments, and by authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate and solicit votes for their own candidates using a company’s proxy materials.  Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several years.  While it is difficult to anticipate the overall impact of the Dodd-Frank Act on us and the financial service industry, it is expected that at a minimum it will increase our operating costs.

Increased and/or special FDIC assessments will hurt our earnings.

The recent economic recession has caused a high level of bank failures, which has dramatically increased FDIC resolution costs and led to a significant reduction in the balance of the Deposit Insurance Fund. As a result, the FDIC has significantly increased the initial base assessment rates paid by financial institutions for deposit insurance. Increases in the base assessment rate have increased our deposit insurance costs and negatively impacted our earnings. In addition, in May 2009, the FDIC imposed a special assessment on all insured institutions. Our special assessment, which was reflected in earnings for the quarter ended September 30, 2009, was $62,118. In lieu of imposing an additional special assessment, the FDIC required all institutions to prepay their assessments for all of 2010, 2011 and 2012, which for us totaled $1,054,970.  Additional increases in the base assessment rate or additional special assessments would negatively impact our earnings.

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

When borrowers default and do not repay the loans that we make to them, we may lose money.  The allowance for loan losses is the amount estimated by management as necessary to cover probable losses in the loan portfolio at the statement of financial condition date.  The allowance is established through the provision for loan losses, which is charged to income.  Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment.  Among the material estimates required to establish the allowance are:  loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio.  If our estimates and judgments regarding such matters prove to be incorrect, our allowance for loan losses might not be sufficient, and additional loan loss provisions might need to be made.  Depending on the amount of such loan loss provisions, the adverse impact on our earnings could be material.  We might increase the allowance because of changing economic conditions.  For example, in a rising interest rate environment, borrowers with adjustable-rate loans could see their payments increase.  There may be a significant increase in the number of borrowers who are unable or unwilling to repay their loans, resulting in our charging off more loans and increasing our allowance. In addition, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined loan-to-value ratios.  The recent decline in the national economy and the local economies of the areas in which the loans are concentrated could result in an increase in loan delinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional loan loss allowances in future periods.

In addition, bank regulators may require us to make a provision for loan losses or otherwise recognize further loan charge-offs following their periodic review of our loan portfolio, our underwriting procedures, and our loan loss allowance.  Any increase in our allowance for loan losses or loan charge-offs as required by such regulatory authorities could have a material adverse effect on our financial condition and results of operations.  A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings.  Please see “Allowance for Loan Losses” under “Critical Accounting Policies” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for a discussion of the procedures we follow in establishing our loan loss allowance.

Strong competition within our market area could hurt our profits and slow growth.

We face intense competition in making loans, attracting deposits and hiring and retaining experienced employees.  This competition has made it more difficult for us to make new loans and attract deposits.  Price competition for loans and deposits sometimes results in us charging lower interest rates on our loans and paying higher interest rates on our deposits, which reduces our net interest income.  Competition also makes it more difficult and costly to attract and retain qualified employees.  At June 30, 2011, which is the most recent date for which data is available from the FDIC, we held 1.53% of the deposits in Burlington County, New Jersey.  Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide.  We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.  Our profitability depends upon our continued ability to compete successfully in our market area.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by the Federal Reserve Board and the OCC, our primary federal regulators, and by the Federal Deposit Insurance Corporation, as insurer of our deposits.  Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of Delanco Federal Savings Bank rather than for holders of Delanco Bancorp common stock.  Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

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Delanco MHC’s majority control of our common stock will enable it to exercise voting control over most matters put to a vote of stockholders and will prevent stockholders from forcing a sale or a second-step conversion transaction you may find advantageous.

Delanco MHC owns a majority of Delanco Bancorp’s common stock and, through its board of directors, is able to exercise voting control over most matters put to a vote of stockholders.  For example, Delanco MHC may exercise its voting control to prevent a sale or merger transaction or to defeat a stockholder nominee for election to the board of directors of Delanco Bancorp.  The same directors and officers who manage Delanco Bancorp and Delanco Federal Savings Bank also manage Delanco MHC. As a federally chartered mutual holding company, the board of directors of Delanco MHC must ensure that the interests of depositors of Delanco Federal Savings Bank are represented and considered in matters put to a vote of stockholders of Delanco Bancorp.  Therefore, the votes cast by Delanco MHC may not be in your personal best interests as a stockholder.  For example, Delanco MHC may exercise its voting control to defeat a stockholder nominee for election to the board of directors of Delanco Bancorp.  Delanco MHC’s ability to control the outcome of the election of the board of directors of Delanco Bancorp restricts the ability of minority stockholders to effect a change of management.  In addition, stockholders will not be able to force a merger or second-step conversion transaction without the consent of Delanco MHC, as such transactions require the approval of at least two-thirds of all outstanding voting stock, which can only be achieved if Delanco MHC voted to approve such transactions.  Some stockholders may desire a sale or merger transaction, since stockholders typically receive a premium for their shares, or a second-step conversion transaction, since fully converted institutions tend to trade at higher multiples than mutual holding companies.

Our mutual holding company structure limits our ability to raise additional equity capital.

Our mutual holding company structure limits our ability to raise additional equity capital without undertaking a second-step conversion transaction because we cannot issue stock in an amount that would cause Delanco MHC to own less than a majority of our outstanding shares.  Currently, Delanco MHC owns 55% of our outstanding shares.  In addition, any stock issuance by us must be approved by the Federal Reserve Board and must be structured in a manner similar to a mutual to stock conversion, including the stock purchase priorities accorded to members of the mutual holding company, unless otherwise approved by the Federal Reserve Board.  These requirements limit our ability to control the timing and structure of a stock offering.

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ITEM 1B.          UNRESOLVED STAFF COMMENTS

None.

ITEM 2.             PROPERTIES

We conduct our business through our main office in Delanco, New Jersey and our branch office in Cinnaminson, New Jersey, both of which we own.  The net book value of our land, buildings, furniture, fixtures and equipment was $7.1 million as of March 31, 2012.

ITEM 3.             LEGAL PROCEEDINGS

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business.  We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 4.             MINE SAFETY DISCLOSURES

Not applicable.

PART II

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

The common stock of Delanco Bancorp is quoted on the OTC Bulletin Board under the symbol “DLNO.”  The following table sets forth the high and low sales prices of the common stock, as reported by the OTC Bulletin Board, during each quarter of fiscal 2012 and 2011.  As of June 15, 2012 there were approximately 298 holders of record of the Company’s common stock.

For the Year Ended March 31, 2012	High		Low
First Quarter	$	6.30	$	5.05
Second Quarter		6.25		4.96
Third Quarter		5.75		4.77
Fourth Quarter		5.00		4.77

For the Year Ended March 31, 2011	High		Low
First Quarter	$	2.10	$	1.25
Second Quarter		3.50		1.30
Third Quarter		4.00		2.50
Fourth Quarter		5.99		3.99

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Pursuant to Federal Reserve Board regulations, Delanco Bancorp will not be required to obtain prior Federal Reserve Board approval to pay a dividend unless the declaration and payment of a dividend could raise supervisory concerns about the safe and sound operation of Delanco Bancorp and Delanco Federal, where the dividend declared for a period is not supported by earnings for that period, or where we plan to declare a material increase in our common stock dividend.

Our ability to pay dividends to shareholders may depend, in part, upon capital distributions we receive from Delanco Federal, earnings, if any, from our lending and investment portfolios and other assets and earnings from the investment of the net proceeds from the offering that we retain.  OCC and Federal Reserve Board regulations limit dividends and other distributions from Delanco Federal to us.  No insured depository institution may make a capital distribution if, after making the distribution, the institution would be undercapitalized or if the proposed distribution raises safety and soundness concerns.

As of March 31, 2012, Delanco Bancorp satisfied all prescribed capital requirements.  Future dividend payments will depend on the Company’s profitability, approval by its Board of Directors and prevailing regulations.  To date, we have not declared any cash dividends.

Since completion of the offering on March 30, 2007, we have not repurchased any of our common stock and have no publicly announced repurchase plans or programs.

ITEM 6.             SELECTED FINANCIAL DATA

	Years Ended March 31,
(Dollars in thousands, except per share data)	2012			2011		2010
Financial Condition Data:
Total assets	$	134,308		$	136,172	$	139,922
Investment securities		17,699			15,944		16,618
Loans receivable, net		99,432			103,867		107,204
Deposits		121,589			120,842		127,164
Borrowings	─				2,100	─
Total stockholders’ equity		11,743			12,213		11,735
Operating Data:
Interest income		5,891			6,693		6,973
Interest expense		1,431			1,890		2,640
Net interest income		4,460			4,803		4,333
Provision for loan losses		1,602			440		1,140
Net interest income after provision for loan losses		2,858			4,363		3,193
Noninterest income		150			134		174
Noninterest expenses		3,751			3,740		3,666
Income before taxes		(743	)		757		(299	)
Income tax benefit		(249	)		289		(482	)
Net income	$	(494	)	$	468	$	183
Per Share Data:
Earnings per share, basic	$	(0.31	)	$	0.30	$	0.12
Earnings per share, diluted		(0.31	)		0.30		0.12
Weighted average shares – basic		1,586,664			1,583,460		1,580,256
Weighted average shares – diluted		1,586,664			1,583,460		1,580,256

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	Years Ended March 31,
	2012		2011		2010
Performance Ratios:
Return on average assets		(0.37)%		0.34%		0.13%
Return on average equity		(4.04)		3.89		1.59
Interest rate spread (1)		3.53		3.75		3.33
Net interest margin (2)		3.60		3.82		3.43
Noninterest expense to average assets		2.79		2.73		2.67
Efficiency ratio (3)		81.37		75.75		81.34
Average interest-earning assets to average interest-bearing liabilities		106.57		104.80		104.88
Average equity to average assets		9.10		8.76		8.39
Capital Ratios (4):
Tangible capital		7.93		8.67		7.76
Core capital		7.93		8.67		7.76
Total risk-based capital		14.13		14.52		12.62
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans		1.15		1.22		0.92
Allowance for loan losses as a percent of nonperforming oans		16.13		23.80		16.47
Net charge-offs (recoveries) to average outstanding loans during the period		1.68		0.15		1.57
Non-performing loans as a percent of total loans		8.57		5.14		5.60

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

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

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

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

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

The objective of this section is to help potential investors understand our views on our results of operations and financial condition.  You should read this discussion in conjunction with the financial statements and notes to the financial statements that appear at the end of this report.

Overview

Our principal business is to acquire deposits from individuals and businesses in the communities surrounding our offices and to use these deposits to fund loans.  We focus on providing our products and services to two segments of customers:  individuals and small businesses.

Income.  Our primary source of pre-tax income is net interest income.  Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings.  Changes in levels of interest rates affect our net interest income.

A secondary source of income is non-interest income, which is revenue that we receive from providing products and services.  The majority of our non-interest income generally comes from service charges (mostly from service charges on deposit accounts).  In some years, we recognize income from the sale of loans and securities. Our facility in Cinnaminson includes space that we will rent to other businesses.  Currently, two of the rental units are occupied.

20

Allowance for Loan Losses.  The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio.  We evaluate the need to establish allowances against losses on loans on a quarterly basis.  When additional allowances are necessary, a provision for loan losses is charged to earnings.

Expenses.  The noninterest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses, data processing expenses and other miscellaneous expenses, such as office supplies, telephone, postage, advertising and professional services.

Our largest noninterest expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes, and expenses for health insurance, retirement plans and other employee benefits.  We have incurred additional noninterest expenses as a result of operating as a public company.  These additional expenses consist primarily of legal and accounting fees and expenses of stockholder communications and meetings.  In the future, we may recognize additional annual employee compensation expenses stemming from share-based compensation.  We cannot determine the actual amount of this expense at this time because applicable accounting practices require that they be based on the fair market value of the shares of common stock at specific points in the future.

Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities.

Critical Accounting Policies

In the preparation of our consolidated financial statements, we have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States.  Our significant accounting policies are described in the notes to our financial statements.

Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities.  We consider these accounting policies to be critical accounting policies.  The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances.  Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses.  We consider the allowance for loan losses to be a critical accounting policy.  The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date.  The allowance is established through the provision for loan losses, which is charged to income.  Determining the amount of the allowance for loan losses involves a high degree of judgment.  Among the material estimates required to establish the allowance are:  loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio.  All of these estimates are susceptible to significant change.  Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio.  Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation.  In addition, the OCC, as an integral part of its examination process, periodically reviews our allowance for loan losses.  Such agency may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination.  A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.  See note 2 of the notes to the financial statements included in this report.

Deferred Income Taxes.  We use the asset and liability method of accounting for income taxes.  Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income.  The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change.

21

The calculation of deferred taxes for GAAP capital differs from the calculation of deferred taxes for regulatory capital. For regulatory capital, deferred tax assets that are dependent upon future taxable income for realization are limited to the lesser of either the amount of deferred tax assets that the institution expects to realize within one year of the calendar quarter-end date, or 10% of Delanco Federal Savings Bank’s (the “Bank”)Tier I capital. As a result of this variance, our Tier I regulatory capital ratio is lower than our GAAP capital ratio by 81 basis points.

Balance Sheet Analysis

Overview. Total assets at March 31, 2012 were $134.3 million, a decrease of $1.9 million, or 1.4%, from total assets of $136.2 million at March 31, 2011.  The change in the asset composition primarily reflected a decrease in net loans of $4.4 million, partially offset by an increase in cash and cash equivalents of $987 thousand and an in increase investment securities of $1.7 million.  Total liabilities were $122.6 million, a decrease of $1.4 million, or 1.1% from total liabilities of $124.0 million at March 31, 2011.  The change in liabilities primarily reflected an increase in total deposits of $700 thousand, offset by a decrease in borrowed funds of $2.1 million.  Total equity decreased by $470 thousand, reflecting the net loss for the year.

Loans.At March 31, 2012, total loans, net, were $99.4 million, or 74.0% of total assets.  During the year ended March 31, 2012, loans decreased by $4.4 million due primarily to refinances in the residential and commercial real estate portfolios, partially offset by an increase in construction lending.  Commercial and multi-family real estate loans decreased by $4.7 million, commercial loans decreased by $256 thousand and residential loans decreasedby $43 thousand.

Table 1:  Loan Portfolio Analysis

	2012						2011						2010
March 31, (Dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Real estate loans:
Residential	$	80,179			79.3	%	$	80,222			76.2	%	$	79,637			73.5	%
Commercial and multi-family		17,130			16.9			21,866			20.8			23,998			22.2
Construction		1,289			1.3			374			0.4			395			0.4
Total real estate loans		98,598			97.5			102,462			97.4			104,030			96.1
Commercial loans		1,480			1.5			1,736			1.6			2,821			2.6
Consumer loans		1,047			1.0			1,026			1.0			1,419			1.3
Total loans		101,125			100	%		105,224			100.0	%		108,270			100.0	%
Loans in process		(450	)				─						─
Net deferred loan fees		(82	)					(71	)					(67	)
Allowance for losses		(1,161	)					(1,286	)					(999	)
Loans, net	$	99,432					$	103,867					$	107,204

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The following table sets forth certain information at March 31, 2012 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The table does not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less.The amounts shown below exclude applicable loans in process, unearned interest in consumer loans and net deferred loan costs.Our adjustable-rate mortgage loans generally do not provide for downward adjustments below the initial discounted contract rate. When market interest rates rise, the interest rates on these loans may increase based on the contract rate (the index plus the margin) exceeding the initial interest rate floor.

Table 2:  Contractual Maturities and Interest Rate Sensitivity

March 31, 2012 (Dollars in thousands)	Real Estate Loans		Commercial Loans		Consumer Loans		Total Loans
Amounts due in:
One year or less		17,666		1,392		22		19,080
More than one to five years		9,042		88		335		9,465
More than five years		71,890	─			690		72,580
Total		98,598		1,480		1,047		101,125
Interest rate terms on amounts due after one year:
Fixed-rate loans		70,362		88		646		71,096
Adjustable-rate loans		10,570	─			379		10,949
Total		80,932		88		1,025		82,045

Securities.The investment securities portfolio was $17.7 million, or 13.2% of total assets, at March 31, 2012. At that date, 16.5% of the investment portfolio was invested in mortgage-backed securities, while the remainder was invested primarily inU.S. Government agency and other debt securities. The portfolio increase was due to the purchases of debt securities.

Table 3:  Investment Securities

	2012				2011				2010
March 31, (Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available for sale:
Mutual funds	$	237	$	242	$	249	$	248	$	256	$	258
Total available for sale		237		242		249		248		256		258
Securities held to maturity:
Government sponsored enterprise securities		14,545		14,505		8,890		8,650		6,997		7,013
Mortgage-backed securities		2,912		3,101		6,806		7,031		9,363		9,793
Total held to maturity		17,457		17,606		15,696		15,681		16,360		16,806
Total	$	17,694	$	17,848	$	15,945	$	15,929	$	16,616	$	17,064

The following table sets forth the stated maturities and weighted average yields of our mortgage-backed securities at March 31, 2012. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These re-pricing schedules are not reflected in the table below. Approximately $844,000 of the mortgage-backed securities listed has adjustable interest rates.

Table 4:  Investment Maturities Schedule

	One Year or Less					More than One Year to Five Years					More than Five Years to Ten Years					More than Ten Years					Total
March 31, 2012 (Dollars in thousands)	Carrying Value		Weighted Average Yield			Carrying Value		Weighted Average Yield			Carrying Value		Weighted Average Yield			Carrying Value		Weighted Average Yield			Carrying Value		Weighted Average Yield
Securities available-for-sale:
Mutual funds	$	─		─	%	$	─		─	%	$	─		─	%	$	─		─	%	$	242		─	%
Total available for sale
Securities held to maturity:
Government sponsored enterprise securities		104		1.60			500		2.00			3,444		2.72			10,499		2.93			14,547		2.82
Mortgage-backed securities		─		─			10		8.57			─		─			2,900		3.97			2,910		3.99
Total held to maturity		104		1.60			510		2.13			3,444		2.72			13,399		3.16			17,457		3.11
Total	$	104		1.60	%	$	510		2.13			3,444		2.72			13,399		3.16			17,699		─

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Deposits. Our deposit base is comprised of demand deposits, money market and passbook accounts and time deposits. We consider demand deposits and money market and passbook accounts to be core deposits. At March 31, 2012, core deposits were 47.4% of total deposits. We do not have any brokered deposits. Overall deposits increased by $747,000 as the Bank attracted core deposits and reduced higher costing deposits.

Table 5:  Deposits

	2012					2011					2010
March 31, (Dollars in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Noninterest-bearing demand deposits	$	4,673		3.8	%	$	4,161		3.4	%	$	3,941		3.1	%
Interest-bearing demand deposits		13,086		10.8			13,136		10.9			9,922		7.8
Savings and money market accounts		39,877		32.8			39,550		32.7			42,510		33.4
Certificates of deposit		63,953		52.6			63,995		53.0			70,791		55.7
Total	$	121,589		100.0	%	$	120,842		100.0	%	$	127,164		100.0	%

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

March 31, 2012 (Dollars in thousands)	Certificates of Deposit
Maturity Period
Three months or less	$	3,025
Over three through six months		2,999
Over six through twelve months		4,093
Over twelve months		9,055
Total	$	19,172

Borrowings. For recent periods, we have occasionally used short-term FHLB and Atlantic Central Banker’s Bank advances as an additional source of liquidity. At March 31, 2012, we had no advances outstanding.

Table 7:  Borrowings

March 31, (Dollars in thousands)	2012			2011			2010
Maximum amount outstanding at any month end during the period:
Advances	$	2,500		$	2,100		$	3,000
Average amount outstanding during the period (1):
Advances		458			175			917
Weighted average interest rate during the period (1):
Advances		0.33	%		0.89	%		1.89	%
Balance outstanding at end of period:
Advances	─				2,100		─
Weighted average interest rate at end of period:
Advances	─				0.89	%	─

 (1) Averages are based on month-end balances.

Results of Operations for the Years Ended March 31, 2012 and 2011

Financial Highlights. Net loss for the year ended March 31, 2012 was $494,000 compared to net income of $468,000 for the year ended March 31, 2011.  The decrease in net income was primarily the result of the increased provision for loan losses.

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Table 8:  Summary Income Statements
 

Year Ended March 31, (Dollars in thousands)	2012			2011			2012 v. 2011		% Change
Net interest income	$	4,460		$	4,803		(343	)		7.1	%
Provision for loan losses		1,602			440		1,162			264.1
Noninterest income		150			134		16			11.9
Noninterest expenses		3,751			3,740		11			0.3
Net income		(494	)		468		(962	)		(205.5	)
Return on average equity		(4.04	)%		3.89	%
Return on average assets		(0.37	)		0.34

Net Interest Income. Net interest income decreased $343 thousand to $4.5 million for the year ended March 31, 2012 from $4.8 million for the year ended March 31, 2011 driven by a decrease in interest income earned on loans and investments, partially offset by a decline in the interest paid on deposits. Both the 22 basis point decrease in our interest rate spread and the 22 basis point decrease in our net interest margin reflect the impact of lower interest yields on interest earning assets. The rates earned on assets declined, resulting in a 12% decrease in total interest income as compared to a 24.3% decrease in total interest expense.

Average loans in the year ended March 31, 2012 decreased $2.8 million or 2.7%, compared with 2011, driven by loan pay offs.

Average investment securities in the year ended March 31, 2012 increased $896,000, or 5.7%, compared to 2011. The growth in the investment portfolio was due to the increase in U.S. Government and agency securities. Declining interest rates decreased the average yield on earning assets to 4.76% for the year ended March 31, 2012, compared with 5.32% for 2011.

Average interest-bearing deposits in the year ended March 31, 2012 decreased $3.8 million, compared with 2011.

Table 9:  Analysis of Net Interest Income

Year Ended March 31, (Dollars in thousands)	2012			2011				2012 v. 2011		% Change
Components of net interest income
Loans	$	5,338		$	6,061		$	(723	)		(11.9	)%
Investment securities		553			632			(79	)		(12.5	)
Total interest income		5,891			6,693			(802	)		(12.0	)
Deposits		1,431			1,890			(459	)		(24.3	)
Borrowings		─			─
Total interest expense		1,431			1,890			(459	)		(24.3	)
Net interest income		4,460			4,803			(343	)		(7.1	)
Average yields and rates paid
Interest-earning assets		4.76	%		5.32	%		(56	)bp
Interest-bearing liabilities		1.23			1.57			(34	)
Interest rate spread		3.53			3.75			(22	)
Net interest margin		3.60			3.82			(22	)
Average balances
Loans	$	102,606		$	105,400		$	(2,794	)		(2.7	)
Investment securities		16,717			15,821			896			5.7
Earning assets		123,850			125,823			(1,973	)		(1.6	)
Interest-bearing deposits		116,218			120,054			(3,836	)		(3.2	)

Provision for Loan Losses.  The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio.  We evaluate the need to establish allowances against losses on loans on a quarterly basis.  When additional allowances are necessary, a provision for loan losses is charged to earnings.  Provisions for loan losses were $1,602,000 in the year ended March 31, 2012 compared to $440,000 in the year ended March 31, 2011.  The provision for loan losses was primarily attributable to management’s systematic evaluation of risk associated with the loan portfolio.  We had $1,753,000 in charge-offs in the year ended March 31, 2012, compared to $206,000 in charge-offs in the year ended March 31, 2011.

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The allowance for loan losses was $1.2 million, or 1.15% of total loans outstanding as of March 31, 2012 as compared with $1.3 million, or 1.22% as of March 31, 2011.  An analysis of the changes in the allowance for loan losses is presented under “Risk Management – Analysis and Determination of the Allowance for Loan Losses.”

Noninterest Income.  Noninterest income increased in year ended March 31, 2012 compared to the same period in the prior year due to an increase in service charges and increased rental income as rental income was received on two rental units in our Cinnaminson branch, partially offset by losses on the sale of real estate owned.

Table 10:  Noninterest Income Summary

Year Ended March 31, (Dollars in thousands)	2012			2011			$ Change			% Change
Service charges	$	145		$	135			10			7.4
Loss on sale of real estate owned		(37	)		(27	)		(10	)		(37.0	)
Rental income		22			6			16			266.7
Income from bank owned life insurance		6			6		─			─
Other		14			14		─			─
Total		150			134			16			11.9

Noninterest Expenses.Noninterest expenses increased in the year ended March 31, 2012 by $11 thousand over the prior year primarily due to the increase of loan expenses related to the collection of delinquent loans and loans in foreclosure, partially offset by the decrease in the federal deposit insurance premium expense and the occupancy expense.

Table 11:  Noninterest Expense Summary

Year Ended March 31, (Dollars in thousands)	2012		2011			$ Change			% Change
Salaries and employee benefits	$	1,583	$	1,579			4			0.3
Advertising		25		25			─			─
Office supplies, telephone and postage		98		91			7			7.7
Loan expenses		203		(10	)		213			2130.0
Occupancy expense		649		719			(70	)		(9.7	)
Federal deposit insurance premiums		283		381			(98	)		(25.7	)
Real estate owned loss reserve		104		88			16			18.2
Data processing expenses		215		196			19			9.7
ATM expenses		25		22			3			13.6
Bank charges and fees		77		90			(13	)		(14.4	)
Insurance and surety bond premiums		80		71			9			12.7
Dues and subscriptions		26		27			(1	)		(3.7	)
Professional fees		208		245			(37	)		(15.1	)
Real estate owned expense		56		66			(10	)		(15.2	)
Other		119		150			(31	)		(20.7	)
Total	$	3,751	$	3,740			11			0.3

Income Tax Expense (Benefit).The benefit for income taxes was $249,000 for 2012, compared to an expense of $289,000 for 2011.

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Average Balance Sheets and Related Yields and Rates

The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs.  The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented.  For purposes of this table, average balances have been calculated using month-end balances, and nonaccrual loans are included in average balances only.  Management does not believe that use of month-end balances instead of daily average balances has caused any material differences in the information presented.  Loan fees are included in interest income on loans and are insignificant.

Table 12:  Average Balance Tables

	2012								2011
Year Ended March 31, (Dollars in thousands)	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans	$	102,606		$	5,338		5.20	%	$	105,400		$	6,061		5.75	%
Investment securities		16,717			542		3.24			15,821			624		3.94
Other interest-earning assets		4,527			11		0.24			4,602			8		0.17
Total interest-earning assets		123,850			5,891		4.76			125,823			6,693		5.32
Noninterest-earning assets		10,575								11,366
Total assets	$	134,425							$	137,189
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	12,342		$	54		0.44	%	$	13,049			84		0.64
Savings and money market accounts		40,516			270		0.67			40,538			342		0.84
Certificates of deposit		63,360			1,108		1.75			66,467			1,464		2.20
Total interest-bearing deposits		116,218			1,432		1.23			120,054			1,890		1.57
FHLB advances		335		─		─				6		─		─
Total interest-bearing liabilities		116,553			1,432		1.23			120,060			1,890		1.57
Noninterest-bearing demand deposits		4								4,143
Other noninterest-bearing liabilities		5,636								968
Total liabilities		122,193								125,171
Retained earnings		12,232								12,018
Total liabilities and retained earnings	$	134,425							$	137,189
Net interest income				$	4,459							$	4,803
Interest rate spread							3.53								3.75
Net interest margin							3.60								3.82
Average interest-earning assets to average interest-bearing liabilities		106.26	%							104.80	%

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Rate/Volume Analysis. The following tables set forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). Changes due to both volume and rate have been allocated proportionally to the volume and rate changes. The net column represents the sum of the prior columns.

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

2012 Compared to 2011 (Dollars in thousands)	Volume			Rate			Net
Interest income:
Loans receivable		(160	)		(563	)		(723	)
Investment securities		35			(117	)		(82	)
Other interest-earning assets	─				3			3
Total		(125	)		(677	)		(802	)
Interest expense:
Deposits		(61	)		(397	)		(458	)
FHLB advances	─			─			─
Total		(61	)		(397	)		(458	)
Increase (decrease) in net interest income		(64	)		(280	)		(344	)

Risk Management

Overview.  Managing risk is an essential part of successfully managing a financial institution.  Our most prominent risk exposures are credit risk, interest rate risk and market risk.  Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due.  Interest rate risk is the potential reduction of interest income as a result of changes in interest rates.  Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are accounted for on a mark-to-market basis.  Other risks that we face are operational risks, liquidity risks and reputation risk.  Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery.  Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers.  Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or revenue.

Credit Risk Management.  Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans.  See “Regulation and Supervision—Cease and Desist Order” for further information on certain regulatory directives applicable to our credit functions.

When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status, including contacting the borrower by letter and phone at regular intervals.  When the borrower is in default, we may commence collection proceedings.  If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is acquired at foreclosure and subsequently sold.  Generally, when a consumer loan becomes 60 days past due, we institute collection proceedings and attempt to repossess any personal property that secures the loan.  Management informs the board of directors monthly of the amount of loans delinquent more than 30 days, all loans in foreclosure and repossessed property that we own.

Analysis of Nonperforming and Classified Assets.  We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets.  Loans are generally placed on nonaccrual status when they become 90 days delinquent at which time the accrual of interest ceases and the allowance for any uncollectible accrued interest is established and charged against operations.  Typically, payments received on a nonaccrual loan are applied to the outstanding principal and interest as determined at the time of collection of the loan.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold.  When property is acquired it is recorded at the lower of its cost, which is the unpaid balance of the loan, plus foreclosure costs, or fair market value at the date of foreclosure.  Holding costs and declines in fair value after acquisition of the property result in charges against income.

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Table 14:  Nonperforming Assets

March 31, (Dollars in thousands)	2012			2011			2010
Nonaccrual loans:
Residential real estate	$	2,517		$	2,973		$	2,053
Commercial and multi-family real estate		4,727			2,374			3,789
Construction	─			─			─
Commercial	─				46			225
Consumer	─				11		─
Total		7,244			5,404			6,067
Accruing loans past due 90 days or more:
Residential real estate	─			─			─
Commercial and multi-family real estate	─			─			─
Construction	─			─			─
Commercial	─			─			─
Consumer	─			─			─
Total	─			─			─
Other nonperforming assets		846			771			413
Total nonperforming assets		8,090			6,175			6,480
Troubled debt restructurings		1,387			2,438			3,792
Troubled debt restructurings and total nonperforming assets	$	9,477		$	8,613		$	10,272
Total nonperforming loans to total loans		7.16	%		5.14	%		5.60	%
Total nonperforming loans to total assets		5.39			3.97			4.34
Total nonperforming assets and troubled debt restructurings to total assets		7.06			6.33			7.34

Interest income that would have been recorded for the year ended March 31, 2012, had non-accruing loans been current according to their original terms amounted to $467,842. No uncollected interest related to nonaccrual loans was included in interest income for the year ended March 31, 2012.

Federal regulations require us to review and classify our assets on a regular basis.  In addition, the OCC has the authority to identify problem assets and, if appropriate, require them to be classified.  There are three classifications for problem assets:  substandard, doubtful and loss.  “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. This category includes other real estate owned. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.  An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.  The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. These are considered criticized assets. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.

Table 15:  Criticized/Classified Assets

March 31, (Dollars in thousands)	2012		2011		2010
Special mention assets	$	1,045	$	1,026	$	2,545
Substandard assets		9,313		9,639		9,898
Doubtful assets	─		─			225
Loss assets	─		─		─
Total criticized/classified assets	$	10,358	$	10,665	$	12,668

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Other than disclosed in the above tables, there are no other loans that management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

Analysis and Determination of the Allowance for Loan Losses.

The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a specific valuation allowance on identified problem loans; (2) a general valuation allowance on the remainder of the loan portfolio; and (3) an unallocated component. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available to absorb losses in the loan portfolio.

For loans that are classified as impaired, we establish an allowance when the discounted cash flows (or collateral value or observable market price) of the loan is lower than its carrying value. We also establish a specific allowance for classified loans that do not have an individual allowance. The evaluation is based on our asset review and classified loan list.

We establish a general allowance for loans that are not classified to recognize the inherent losses associated with lending activities. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages to each category. The allowance percentages have been derived using percentages commonly applied under the regulatory framework for Delanco Federal Savings Bank and other similarly-sized institutions. The percentages may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary lending areas, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are reevaluated periodically to ensure their relevance in the current economic environment. An unallocated component is maintained to cover uncertainties that could affect our estimate of probable losses.

We identify loans that may need to be charged off as a loss by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectability. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan or a shortfall in collateral value would result in our charging off the loan or the portion of the loan that was impaired.

The OCC, as an integral part of its examination process, periodically reviews our allowance for loan losses. The OCC may require us to make additional provisions for loan losses based on judgments different from ours.

At March 31, 2012, our allowance for loan losses represented 1.15% of total gross loans. The allowance for loan losses decreased 9.7% from March 31, 2011 to March 31, 2012. The decrease in the allowance was primarily attributable to write-downs on non-performing assets based on current valuations done during the year on residential, multi-family and commercial loans. Althoughnon-performing loans increased during the year ended March 31, 2012, the allowance for loan losses was deemed adequate.

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The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.

Table 16:  Allocation of Allowance of Loan Losses

	2012					2011					2010
March 31, (Dollars in thousands)	Amount		% of Loans in Category to Total Loans			Amount		% of Loans in Category to Total Loans			Amount		% of Loans in Category to Total Loans
Residential real estate		553		79.3	%	$	507		76.2	%	$	125		73.5	%
Commercial and multi-family real estate		469		16.9			596		20.8			683		22.2
Construction	─			1.3		─			0.4		─			0.4
Commercial		41		1.5			70		1.6			101		2.6
Consumer		98		1.0			113		1.0			91		1.3
Unallocated	─		─			─			─		─		─
Total allowance for loan losses	$	1,161		100.0	%	$	1,286		100.0	%	$	999		100.0	%

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles, there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Table 17:  Analysis of Loan Loss Experience

Year Ended March 31, (Dollars in thousands)	2012			2011			2010
Allowance at beginning of period	$	1,286		$	999		$	1,547
Provision for loan losses		1,602			440			1,140
Charge offs:
Residential real estate loans		536			31		─
Commercial and multi-family real estate loans		770			92			815
Construction loans	─			─			─
Commercial loans		46			51			503
Consumer loans		401			32			419
Total charge-offs		1,753			206			1,737
Recoveries		26			53			49
Net charge-offs		1,727			153			1,688
Allowance at end of period	$	1,161		$	1,286		$	999
Allowance to nonperforming loans		16.01	%		23.80	%		16.47	%
Allowance to total loans outstanding at the end of the period		1.15			1.22			0.92
Net charge-offs (recoveries) to average loans outstanding during the period		1.68			0.15			1.57

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Interest Rate Risk Management.Our earnings and the market value of our assets and liabilities are subject to fluctuations caused by changes in the level of interest rates. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes originating balloon loans or loans with adjustable interest rates and promoting core deposit products and short-term time deposits.

We have an Asset/Liability Management Committee to coordinate all aspects involving asset/liability management.  The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

We use an interest rate sensitivity analysis prepared by a third party vendor to review our level of interest rate risk.  Economic Value of Equity (EVE) is a measure of long-term interest rate risk. This analysis measures the difference between the market values of the assets and the liabilities.  In this analysis the program calculates the discounted cash flow (market value) of each category on the balance sheet under each of five rate conditions. This analysis assesses the risk of loss in market risk sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or a 100 basis point decreases in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement.  We measure interest rate risk by modeling the changes in EVE over a variety of interest rate scenarios.  The following table, which is based on information that we provide to the OCC in our quarterly reporting, presents the change in our EVE at March 31, 2012 that would occur in the event of an immediate change in interest rates based on our assumptions, with no effect given to any steps that we might take to counteract that change.

Table 18:  EVE Analysis

	Economic Value of Equity (Dollars in thousands)						Economic Value of Equity as % of Market Value of Assets
Basis Point (“bp”) Change in Rates	$ Amount		$ Change		% Change		NPV Ratio		Change
300		6,123		(8,693)		(59)		4.90%		(587)bp
200		9,887		(4,929)		(33)		7.60		(317)
100		12,540		(2,276)		(15)		9.35		(142)
0		14,816	─		─			10.77	─
(100)		17,001		2,185		15		12.05		128

The program uses certain assumptions in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to re-pricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table.

Liquidity Management.  Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities of and payments on investment securities and borrowings from the Federal Home Loan Bank of New York, Atlantic Central Bankers Bank and the Federal Reserve Bank of Philadelphia.  While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

32

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents.  The levels of these assets depend on our operating, financing, lending and investing activities during any given period.  At March 31, 2012, cash and cash equivalents totaled $6.6 million.  At March 31, 2012, we had no outstanding borrowings and had arrangements to borrow up to an additional $12.1 million from the Federal Home Loan Bank of New York.

At March 31, 2012, substantially all of our investment securities were classified as held to maturity.  We have classified our investments in this manner, rather than as available for sale, because they were purchased primarily to provide a source of income and not to provide liquidity. We anticipate that a portion of future investments will be classified as available for sale in order to give us greater flexibility in the management of our investment portfolio.

A significant use of our liquidity is the funding of loan originations.  At March 31, 2012, we had $450,000 in loan commitments outstanding.  In addition, we had $5.3 million in unused lines of credit.  Historically, many of the lines of credit expire without being fully drawn; therefore, the total commitment amounts do not necessarily represent future cash requirements.  Another significant use of our liquidity is the funding of deposit withdrawals.  Certificates of deposit due within one year of March 31, 2012 totaled $36.7 million, or 57.4% of certificates of deposit.  The large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods in the recent low interest rate environment.  If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings.  Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2013.  We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us.  We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activities are the origination and purchase of loans and the purchase of securities.  Our primary financing activities consist of activity in deposit accounts and Federal Home Loan Bank advances.  Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors.  We generally manage the pricing of our deposits to be competitive.  Occasionally, we offer promotional rates on certain deposit products to attract deposits.

The Company is a separate entity and apart from the Bank and must provide for its own liquidity. As of March 31, 2012, the Company had $296,000 in cash and cash equivalents compared to $278,000 as of March 31, 2011.  Substantially all of the Company’s cash and cash equivalents were obtained from proceeds it retained from the Bank’s mutual-to-stock conversion completed in March 2007.  In addition to its operating expenses, Company may utilize its cash position for the payment of dividends or to repurchase common stock, subject to applicable restrictions. 

The Company can receive dividends from the Bank.  Payment of such dividends to the Company by the Bank is limited under federal law. The amount that can be paid in any calendar year, without prior regulatory approval, cannot exceed the retained net earnings (as defined) for the year plus the preceding two calendar years. The Company believes that such restriction will not have an impact on the Company’s ability to meet its ongoing cash obligations.

Capital Management.  We are subject to various regulatory capital requirements administered by the OCC, including a risk-based capital measure.  The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories.  At March 31, 2012, we exceeded all of our regulatory capital requirements.  We are considered “well capitalized” under regulatory guidelines.  See “Regulation and Supervision—Regulation of Federal Savings Associations—Capital Requirements,” and note 19 of the notes to the financial statements.

Off-Balance Sheet Arrangements.  In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements.  These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.  Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit.  For information about our loan commitments and unused lines of credit, see note 18 of the notes to the financial statements.

33

For the year ended March 31, 2012, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is incorporated herein by reference to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item is included herein beginning on page F-1.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting

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

(c) Changes in Internal Control Over Financial Reporting

Except as indicated herein, there were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2012 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.              OTHER INFORMATION

None.

34

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

For information relating to the directors of the Company, the section captioned “Proposal 1 – Election of Directors” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference.

Executive Officers and Key Employees

The executive officers of Delanco MHC and Delanco Bancorp are elected annually by the board of directors and serve at the board’s discretion.  Ages presented are as of March 31, 2012.  The executive officers of Delanco MHC and Delanco Bancorp are:

Name	Position
James E. Igo	Chairman, President and Chief Executive Officer
Eva Modi	Senior Vice President and Chief Financial Officer

The officers of Delanco Federal Savings Bank are elected annually by the board of directors and serve at the board’s discretion.  The executive officers and key employees of Delanco Federal Savings Bank are:

Name	Position
James E. Igo	Chairman, President and Chief Executive Officer
Eva Modi	Senior Vice President and Chief Financial Officer
Douglas R. Allen, Jr.	Senior Vice President

Below is information regarding our officers who are not also directors. Each officer has held his or her current position for at least the last five years, unless otherwise stated.

Eva Modi has been Senior Vice President and Chief Financial Officer of Delanco MHC, Delanco Bancorp and Delanco Federal Savings Bank since March 4, 2009.  Ms. Modi served as Vice President – Accounting of Delanco Federal Savings Bank since December, 2007.  Ms. Modi was previously employed by a public accounting firm from May 2002 until November 2007 as Senior Manager.  Age 51.

Douglas R. Allen, Jr. has served as Senior Vice President since March 4, 2010 and previously served as President, Chief Executive Officer and Chief Financial Officer of Delanco MHC, Delanco Bancorp and Delanco Federal Savings Bank since January 1, 2008.  Mr. Allen served as Senior Vice President and Chief Financial Officer of Delanco Federal Savings Bank since 1990 and of Delanco MHC and Delanco Bancorp since their formation.  Mr. Allen joined Delanco Federal Savings Bank in 1976.  Age 64.

Compliance with Section 16(a) of the Exchange Act

For information regarding compliance with Section 16(a) of the Exchange Act, the section captioned “Compliance with Section 16(a) of the Exchange Act” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference.

Disclosure of Code of Ethics

The Board of Directors has adopted a Code of Ethics that applies to all employees of the Company.  A copy of the code of ethics can be obtained, without charge, upon written request to James E. Igo, Delanco Bancorp, Inc., 615 Burlington Avenue, Delanco, New Jersey 08075.

35

Corporate Governance

For information regarding the audit committee and its composition and the audit committee financial expert, the section captioned “Corporate Governance—Committees of the Board of Directors—Audit Committee” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference.

ITEM 11.                EXECUTIVE COMPENSATION

For information regarding executive compensation the section entitled “Executive Compensation” and “Directors’ Compensation” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders are incorporated by reference.

ITEM 12.                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a) Security Ownership of Certain Owners

The information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Proxy Statement for the 2012 Annual Meeting of Stockholders.

(b) Security Ownership of Management

The information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Proxy Statement for the 2012 Annual Meeting of Stockholders.

(c) Changes in Control

Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

(d) Equity Compensation

No awards have been made under the Company’s 2008 Equity Incentive Plan (the “Plan”), which Plan was approved by stockholders.  The aggregate number of shares reserved and available for issuance pursuant to awards granted under the Plan is 112,141.  The Plan authorizes the issuance of 80,101 shares pursuant to stock options and 32,040 shares pursuant to restricted stock awards.

ITEM 13.                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

For information regarding certain relationships and related party transactions, the section captioned “Other Information Relating to Directors and Executive Officers—Transactions with Related Persons” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference.

Corporate Governance

For information regarding director independence, the section captioned “Corporate Governance—Director Independence” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference.

ITEM 14.                PRINCIPAL ACCOUNTANT FEES AND SERVICES

For information regarding the principal accountant fees and expenses, the section captioned “Items to be Voted on by Stockholders—Item 2— Ratification of Independent Registered Public Accounting Firm—Audit and Non-Audit Fees” and “Items to be Voted on by Stockholders—Item 2—Ratification of Independent Registered Public Accounting Firm—Policy on Audit Committee Pre-Approval of Audit Committee and Permissible Non-Audit Services by the Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference.

36

ITEM 15.               EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

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

(3) Exhibits

3.1 Charter of Delanco Bancorp, Inc. (Incorporated herein by reference to Exhibit 3.1 to the Registration Statement on Form SB-2 (File No. 333-139339))

3.2 Bylaws of Delanco Bancorp, Inc. (Incorporated herein by reference to Exhibit 3.2 to the Form 8-K filed with the Securities and Exchange Commission on August 21, 2010)

4.0 Stock Certificate of Delanco Bancorp, Inc. (Incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form SB-2 (File No. 333-139339)

10.1 Order to Cease and Desist dated March 17, 2010, by and between Delanco Federal Savings Bank and the OCC (Incorporated herein by reference to Exhibit 10.1 to the Form 10-K filed with the Securities and Exchange Commission on June 28, 2010))

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

10.5 Delanco Federal Savings Bank Directors Retirement Plan (Incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form SB-2 (File No. 333-139339))

10.6 Delanco Bancorp, Inc. 2008 Equity Incentive Plan (Incorporated herein by reference the Company’s definitive proxy materials for the Annual Meeting of Stockholders filed with the Securities and Exchange Commission on July 17, 2008)

23.1 Consent of Connolly, Grady & Cha, P.C.

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

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

32.0  Section 1350 Certification

101 The following materials from the Company’s Annual Report on Form 10-K for the year ended March 31, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text. *

* Furnished, not filed.

37

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		DELANCO BANCORP, INC.
Date:  June 29, 2012	By:	/s/ James E. Igo
		James E. Igo
		Chairman, President and Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Name	Title	Date
/s/ James E. Igo	Chairman, President and Chief Executive Officer	June 29, 2012
James E. Igo
/s/ Eva Modi	Chief Financial Officer (principal financial and accounting officer)	June 29, 2012
Eva Modi
/s/ Thomas J. Coleman, III	Director	June 29, 2012
Thomas J. Coleman, III
/s/ William C. Jenkins	Director	June 29, 2012
William C. Jenkins
/s/ John A. Latimer	Director	June 29, 2012
John A. Latimer
/s/ James W. Verner	Director	June 29, 2012
James W. Verner
/s/ Renee C. Vidal	Director	June 29, 2012
Renee C. Vidal

MANAGEMENT’S REPORT ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and of the preparation of our consolidated financial statements for external purposes in accordance with United States generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its internal control over financial reporting as of March 31, 2012, using the criteria established in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on this assessment, management has concluded that, as of March 31, 2012, the Company’s internal control over financial reporting was effective based on the criteria.

This annual report does not include an attestation report of the Company’s Independent Registered Public Accounting Firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s Independent Registered Public Accounting Firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Delanco Bancorp, Inc. and Subsidiary

March 31, 2012 and 2011

Contents

	Page
Report of Independent Registered Public Accounting Firm	F-1
Financial Statements
Consolidated Statements of Financial Condition As of March 31, 2012 and 2011	F-2
Consolidated Statements of Operations For the Years Ended March 31, 2012 and 2011	F-3
Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended March 31, 2012 and 2011	F-4
Consolidated Statements of Cash Flows For the Years Ended March 31, 2012 and 2011	F-5
Notes to Consolidated Financial Statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Delanco Bancorp, Inc.

615 Burlington Avenue

Delanco, New Jersey 08075

We have audited the accompanying consolidated statements of financial condition of Delanco Bancorp, Inc. and subsidiary (the Company) as of March 31, 2012 and 2011, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Delanco Bancorp, Inc. and subsidiary as of March 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

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

Certified Public Accountants

Philadelphia, Pennsylvania

June 8, 2012

F-1

Delanco Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

Assets

	March 31,
Cash and cash equivalents	2012			2011
Cash and amount due from depository institutions	$	569,884		$	658,449
Interest-bearing deposits in other banks		6,079,801			5,004,180
Total cash and cash equivalents		6,649,685			5,662,629
Investment securities
Securities held-to-maturity (fair value of $17,606,748 and $15,680,809 at March 31, 2012 and 2011, respectively)		17,457,498			15,696,063
Securities available-for-sale (amortized cost of $237,096 and $249,295 at March 31, 2012 and 2011, respectively)		241,826			248,062
Total investment securities		17,699,324			15,944,125
Loans, net of allowance for loan losses of $1,160,535 and $1,286,301 at March 31, 2012 and 2011, respectively		99,431,618			103,867,330
Accrued interest receivable		417,102			458,524
Premises and equipment, net		7,131,980			7,398,015
Federal Home Loan Bank stock, at cost		219,100			274,700
Deferred income taxes		991,000			747,900
Bank-owned life insurance		147,508			141,703
Prepaid and refundable income taxes		160,250
Real estate owned		845,669			770,639
Other assets		615,383			906,834
Total Assets	$	134,308,619		$	136,172,399
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Non-interest bearing deposits	$	4,673,349		$	4,161,255
Interest-bearing deposits		116,915,542			116,681,155
Total deposits		121,588,891			120,842,410
Line of credit from Atlantic Central Bankers Bank					1,000,000
Advances from Federal Home Loan Bank					1,100,000
Accrued interest payable		15,912			22,658
Advance payments by borrowers for taxes and insurance		399,920			394,864
Other liabilities		560,432			599,146
Total liabilities		122,565,155			123,959,078
Commitments and Contingencies (Note 21)
Stockholders’ Equity
Preferred stock, $.01 par value, 3,000,000 shares authorized; None issued
Common stock, $.01 par value, 7,000,000 shares authorized; 1,634,725 shares issued and outstanding as of March 31, 2012 and 2011	$	16,347		$	16,347
Additional paid-in capital		6,590,557			6,606,577
Retained earnings, substantially restricted		5,656,867			6,150,811
Unearned common stock held by employee stock ownership plan		(480,608	)		(512,648	)
Accumulated other comprehensive loss		(39,699	)		(47,766	)
Total stockholders’ equity		11,743,464			12,213,321
Total Liabilities and Stockholders’ Equity	$	134,308,619		$	136,172,399

See accompanying notes to consolidated financial statements.

F-2

Delanco Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

	Years Ended March 31,
Interest Income	2012			2011
Loans	$	5,338,028		$	6,061,439
Investment securities		553,237			631,675
Total interest income		5,891,265			6,693,114
Interest Expense
Interest-bearing checking accounts		54,092			83,730
Passbook and money market accounts		269,568			341,974
Certificates of deposits		1,107,622			1,463,898
Advances from Federal Home Loan Bank		236			52
Total interest expense		1,431,518			1,889,654
Net interest income		4,459,747			4,803,460
Provision for loan losses		1,601,892			440,100
Net interest income after provision for loan losses		2,857,855			4,363,360
Non-Interest Income
Service charges		145,301			134,655
Income from bank-owned life insurance		5,805			5,699
Rental income		21,958			6,733
Other		13,642			13,934
Net loss on sale of real estate owned		(36,382	)		(27,472	)
Total non-interest income		150,324			133,549
Non-Interest Expense
Salaries and employee benefits		1,583,294			1,579,165
Advertising		24,730			25,068
Office supplies, telephone and postage		97,549			90,070
Loan expense		203,126			(10,311	)
Occupancy expense		648,635			718,731
Federal insurance premiums		282,555			381,252
Real estate owned – impairment losses		104,316			87,900
Data processing expenses		215,240			195,821
ATM expenses		24,810			21,844
Bank charges and fees		77,425			89,651
Insurance and surety bond premium		80,170			71,061
Dues and subscriptions		25,863			26,912
Professional fees		208,175			245,287
Real estate owned expenses		56,368			65,990
Other		118,919			151,538
Total non-interest expense		3,751,175			3,739,979
Income (Loss) Before Income Tax Expense (Benefit)		(742,996	)		756,930
Income tax expense (benefit)		(249,052	)		289,083
Net Income (Loss)	$	(493,944	)	$	467,847
Income (loss) per share
Basic	$	(0.31	)	$	0.30
Diluted	$	(0.31	)	$	0.30
Weighted average shares outstanding
Basic		1,586,664			1,583,460
Diluted		1,586,664			1,583,460

See accompanying notes to consolidated financial statements.

F-3

Delanco Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended March 31, 2012 and 2011

	Common Stock				Additional Paid-in			Retained			CommonStock Held			Accumulated Other Comprehensive			Total Stockholders'			Comprehensive
	Shares		Amount		Capital			Earnings			By ESOP			Income (Loss)			Equity			Income (Loss)
BALANCES, MARCH 31, 2010		1,634,725	$	16,347	$	6,625,801		$	5,682,964		$	(544,688	)	$	(45,548	)	$	11,734,876
Net income									467,847									467,847			467,847
Net change in unrealized (loss) on securities available- for-sale, net of deferred taxes of ($1,478)															(2,218	)		(2,218	)		(2,218	)
Comprehensive income																				$	465,629
3204.05 shares of common stock transferred to ESOP for services						(19,224	)					32,040						12,816
BALANCES, MARCH 31, 2011		1,634,725	$	16,347	$	6,606,577		$	6,150,811		$	(512,648	)	$	(47,766	)	$	12,213,321
Net loss									(493,944	)								(493,944	)		(493,944	)
Net change in unrealized gain on securities available- for-sale, net of deferred taxes of $2,385															3,578			3,578			3,578
Postretirement benefit plan adjustments – net of deferred taxes of $2,993															4,489			4,489			4,489
Comprehensive loss																				$	(485,877	)
3204.05 shares of common stock transferred to ESOP for services						(16,020	)					32,040						16,020
BALANCES, MARCH 31, 2012		1,634,725	$	16,347	$	6,590,557		$	5,656,867		$	(480,608	)	$	(39,699	)	$	11,743,464

See accompanying notes to consolidated financial statements.

F-4

Delanco Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

	Years Ended March 31,
Cash Flows from Operating Activities	2012			2011
Net income (loss)	$	(493,944	)	$	467,847
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of ESOP		16,020			12,816
Deferred income tax (benefit)		(240,996	)		282,610
Depreciation		325,603			343,936
Amortization of premiums and discounts, net		(2,859	)		(43,447	)
Income from bank owned life insurance		(5,805	)		(5,699	)
Provision for loan losses		1,601,892			440,100
Changes in operating assets and liabilities (Increase) decrease in:
Accrued interest receivable		41,422			34,158
Other assets		291,451			296,842
Prepaid and refundable income taxes		(160,250	)		11,822
Real estate owned		(75,030	)		221,295
Increase (decrease) in:
Accrued interest payable		(6,746	)		(22,922	)
Other liabilities		(38,714	)		45,152
Net cash provided by operating activities		1,252,044			2,084,510
Cash Flows from Investing Activities
Proceeds from sale of securities available-for-sale		12,199			6,404
Purchases of securities held-to-maturity		(19,000,000	)		(12,894,320	)
Proceeds from maturities and principal repayments of securities held-to-maturity		17,241,424			13,601,302
Redemption of Federal Home Loan Bank stock		55,600			(68,000	)
Net decrease in loans		2,833,820			2,317,646
Purchases of premises and equipment		(59,568	)		(17,983	)
Net cash provided by investing activities		1,083,475			2,945,049
Cash Flows from Financing Activities
Net increase (decrease) in deposits		746,481			(6,321,172	)
Net increase (decrease) in advance payments by borrowers for taxes and insurance		5,056			(29,427	)
(Payments) borrowing on line of credit from Atlantic Central Bankers Bank		(1,000,000	)		1,000,000
(Payments on) advances from Federal Home Loan Bank		(1,100,000	)		1,100,000
Net cash used in financing activities		(1,348,463	)		(4,250,599	)
Net Increase in Cash and Cash Equivalents	$	987,056		$	778,960
Cash and Cash Equivalents, Beginning of Year		5,662,629			4,883,669
Cash and Cash Equivalents, End of Year	$	6,649,685		$	5,662,629
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest	$	1,438,264		$	1,912,576
Cash paid during the year for income taxes	$	161,920		$	3,540
Loans transferred to real estate owned	$	620,685		$	578,966
Total increase (decrease) in unrealized gain on securities available-for-sale, net of tax	$	3,578		$	(2,218	)

See accompanying notes to consolidated financial statements.

F-5

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

1.     NATURE OF OPERATIONS

Delanco Bancorp, Inc. (the “Company”) is a federally-chartered subsidiary holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, Delanco Federal Savings Bank (the “Bank”), and its wholly-owned inactive subsidiary, Delanco Financial Services Corporation.  The Company is majority owned by Delanco MHC, a federally chartered mutual holding company.  Delanco MHC has virtually no operations or assets other than an investment in the Company, and is not included in these financial statements.  The Bank provides a variety of financial services to individual and business customers located primarily in Southern New Jersey and Southeastern Pennsylvania.  The Bank’s primary source of revenue is from single-family residential and commercial loans.  The Bank is subject to regulation by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles (“GAAP”) and predominant practices within the banking industry. The consolidated financial statements of the Company include the accounts of Delanco Federal Savings Bank and its subsidiary, Delanco Financial Services Corporation. Intercompany balances and transactions are eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the allowance for losses on loans, the valuation of foreclosed real estate and the evaluation of income taxes. In connection with the determination of the estimated losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties.

A majority of the Bank’s loan portfolio consists of single-family residential and commercial loans in Southern New Jersey and Southeastern Pennsylvania. Accordingly, the ultimate collectibility of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions.

While management uses available information to recognize losses on loans and foreclosed real estate, further reductions in the carrying amounts of loans and foreclosed assets may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans and foreclosed real estate. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans and foreclosed real estate may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

F-6

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment Securities

Securities Held-to-Maturity: Securities that management has the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts that are recognized in interest income using methods approximating the interest method over the period to maturity. Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by issuers of the securities. Mortgage-backed securities are carried at unpaid principal balances, adjusted for unamortized premiums and unearned discounts. Premiums and discounts are amortized using methods approximating the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments.

Securities Available-for-Sale: Available-for-sale securities consist of investment securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are included in other comprehensive income. Realized gains (losses) on available-for-sale securities are included in other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method. The amortization of premiums and the accretion of discounts are recognized in interest income using methods approximating the interest method over the period of maturity.

Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans and Allowance for Loan Losses

The Bank grants mortgage, commercial, consumer and lines of credit loans to customers. A substantial portion of the loan portfolio is represented by mortgage and commercial loans in Southern New Jersey and Southeastern Pennsylvania. The ability of the Bank’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas.

Loans are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees and unearned discounts.

Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method. Amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The recognition of income on a loan is discontinued and previously accrued interest is reversed, when interest or principal payments become ninety (90) days past due unless, in the opinion of management, the outstanding interest remains collectible. Past due status is determined based on contractual terms. Interest is subsequently recognized only as received until the loan is returned to accrual status. A loan is restored to accrual status when all interest and principal payments are current and the borrower has demonstrated to management the ability to make payments of principal and interest as scheduled. The Bank’s practice is to charge off any loan or portion of a loan when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the depreciation of the underlying collateral, the loan’s classification as a loss by regulatory examiners, or for other reasons.

F-7

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general, and unallocated components. The specific component relates to loans that are classified as doubtful, substandard, or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a customer’s financial difficulties, the Bank grants a concession for other than an insignificant period of time to the customer that the Bank would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Bank strives to identify customers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Bank grants the customer new terms that provide for a reduction of either interest or principal, the Bank measures any impairment on the restructuring as previously noted for impaired loans.

Bank-Owned Life Insurance

The Bank owns a life insurance policy on the life of a retired member of the Board of Directors. The cash surrender value of the policy is recorded as an asset of the bank and changes in this value are reflected in non-interest income. Death benefit proceeds in excess of the policy’s cash surrender value will be recognized as income upon receipt. There are no policy loans offset against the cash surrender value or restrictions on the use of the proceeds.

F-8

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Premises and Equipment

Land is carried at cost. Other premises and equipment are recorded at cost less accumulated depreciation. Office buildings and improvements are depreciated using the straight line method using useful lives ranging from 3 to 40 years. Furniture, fixtures and equipment are depreciated using the straight line method with useful lives ranging from 3 to 10 years. Charges for maintenance and repairs are expensed as incurred.

Real Estate Owned

Real estate owned is comprised of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Real estate owned is recorded at the lower of the carrying value of the loan or the fair value of the property, net of estimated selling costs. Costs relating to the development or improvement of the properties are capitalized while expenses related to the operation and maintenance of properties are recorded as an expense as incurred. Gains or losses upon dispositions are reflected in earnings as realized. The Company had $845,669 and $770,639 in real estate owned at March 31, 2012 and 2011, respectively. The Company recorded $36,382 and $27,472 loss on sale of real estate owned for the years ended March 31, 2012 and 2011, respectively.

Income Taxes

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards and differences between the basis of available-for-sale securities, allowance for loan losses, estimated losses on real estate owned, accumulated depreciation, and accrued employee benefits for financial and income tax reporting.

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

Statements of Cash Flows

The Company considers all cash and amounts due from depository institutions and interest-bearing deposits in other banks to be cash equivalents for purposes of the statements of cash flows.

Advertising Costs

Advertising costs are expensed as incurred.  Advertising expenses totaled $24,729 and $25,068 for the years ended March 31, 2012 and 2011, respectively respectively.

Employee Stock Ownership Plan (“ESOP”)

The Company accounts for its ESOP based on guidance by FASB ASC 718-40-50 (formerly SOP 93-6). Shares are released to participants proportionately as the loan is repaid. If the Company declares a dividend, the dividends on the allocated shares would be recorded as dividends and charged to retained earnings. Dividends declared on common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan. Allocation of shares to the ESOP participants is contingent upon the repayment of the loan to the Company.

F-9

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Share

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

Reclassifications

Certain reclassifications have been made to the 2011 financial statement presentation to correspond to the current year’s format. Total equity and net income are unchanged due to these reclassifications.

3.     RECENT ACCOUNTING PRONOUNCEMENTS

Below is a discussion of recent accounting pronouncements. Recent pronouncements not discussed below were deemed to not be applicable to the Company.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): The amendments in this update supersede certain pending paragraphs in ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to deliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private and nonprofit entities. The amendments in this update are effective for public entities for fiscal years, and interim annual periods within those years, beginning after December 15, 2011, consistent with ASU 2011-05. The Company will adopt the provisions of this guidance in its first fiscal quarter ending June 30, 2012.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet, Disclosure about Offsetting Assets and Liabilities (Topic210): The objective of this update is to provide enhanced disclosures that will enable users of its financial statements toevaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhancement disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they offset in accordance with either Section 210-20-45 or Sections 815-10-45. These amendments are effective for annual periods beginning on or after January 3, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

In December 2011, the FASB issued ASU 2011-10, Property, Plant and Equipment (Topic 360): The objective of this updateis to resolve the diversity in practice about whether the guidance in the Subtopic 360-20, Property, Plant and Equipment –Real Estate Sales, applies to a parent that ceases to have a controlling financial interest (as described in Subtopic 810-10 Consolidation – Overall) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. This update does not address whether the guidance in Subtopic 360-20 would apply to other circumstances when parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

F-10

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

3.     RECENT ACCOUNTING PRONOUNCEMENTS  (Continued)

In June 2011, the FASB issued ASU 2011-05,Comprehensive Income (Topic 220):Presentation of Comprehensive Income. This ASU amends theFASB Accounting Standards Codification(Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholder’s equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company will adopt the provisions of this guidance in its first fiscal quarter ending June 30, 2012.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to achieve Common FairValue Measurement (Topic 820) and Disclosure Requirement in U.S. GAAP and IFRSs. This ASU represents the convergedguidance of the FASB and the IASB (the “Boards”) on fair value measurement. The collective efforts of the Boards and their staff, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurement, including a consistent meaning of the term “fair value”. The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments in this update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

In April 2011, the FASB issued ASU 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Controlfor Repurchase Agreements. The ASU is intended to improve financial reporting of repurchase agreements (“repos”) andother agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments to the Codification in this ASU are intended to improve the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to purchase or redeem the financial assets. The amendments in this update apply to all entities, both public and nonpublic. This ASU is effective for the first interim or annual periods beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modification of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

4.     RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain reserve funds in vault cash or on deposit with the Federal Reserve Bank.  The Bank’s vault cash satisfied the required reserve at March 31, 2012 and 2011.

F-11

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

5.     INVESTMENT SECURITIES

Investment securities have been classified according to management’s intent.  The amortized cost of securities and their approximate fair values as of March 31, 2012 and 2011 are as follows:

	Held-to-Maturity
	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Federal Home Loan Bank Bonds	$	3,944,679	$	5,438	$	(8,455	)	$	3,941,662
Federal Farm Credit Bonds		3,000,000		2,330		(25,440	)		2,976,890
Federal Home Loan Mortgage Corporation Bonds		1,499,258				(6,153	)		1,493,105
Federal National Mortgage Association		5,997,304		25,730		(33,549	)		5,989,485
Municipal Bond		104,320							104,320
		14,545,561		33,498		(73,597	)		14,505,462
Mortgage-Backed Securities:
Federal Home Loan Mortgage Corporation		1,429,534		89,059		(1,932	)		1,516,661
Federal National Mortgage Association		1,146,163		90,220		(243	)		1,236,140
Government National Mortgage Corporation		336,240		13,238		(993	)		348,485
		2,911,937		192,517		(3,168	)		3,101,286
Total	$	17,457,498	$	226,015		(76,765	)	$	17,606,748

	Held-to-Maturity
	March 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Federal Home Loan Bank Bonds	$	4,746,159	$	110	$	(162,712	)	$	4,583,557
Federal Farm Credit Bonds		1,000,133				(22,093	)		978,040
Federal Home Loan Mortgage Corporation Bonds		999,137				(14,417	)		984,720
Federal National Mortgage Association		2,000,000		2,915		(43,495	)		1,959,420
Municipal Bond		144,320							144,320
		8,889,749		3,025		(242,717	)		8,650,057

F-12

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

5.      INVESTMENT SECURITIES  (Continued)

	Held-to-Maturity
	March 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair  Value
Mortgage-Backed Securities:
Federal Home Loan Mortgage Corporation		2,027,616		71,849					2,099,465
Federal National Mortgage Association		4,358,582		138,772		(80	)		4,497,274
Government National Mortgage Corporation		420,116		13,902		(5	)		434,013
		6,806,314		224,523		(85	)		7,030,752
Total	$	15,696,063	$	227,548		(242,802	)	$	15,680,809

	Available-for-Sale
	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses	Fair  Value
Mutual Fund Shares	$	237,096	$	4,730	$	$	241,826

	Available-for-Sale
	March 31, 2011
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses			Fair  Value
Mutual Fund Shares	$	249,295	$	$	(1,233	)	$	248,062

F-13

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

5.      INVESTMENT SECURITIES  (Continued)

The following is a summary of maturities of securities held-to-maturity and available-for-sale as of March 31, 2012 and 2011.

	March 31, 2012
	Held-to-maturity				Available-for-sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	104,450	$	104,450	$		$
After one year through five years		510,271		531,593
After five years through ten years		3,444,444		3,449,467
After ten years		13,398,333		13,521,238
Equity securities						237,096		241,826
	$	17,457,498	$	17,606,748	$	237,096	$	241,826

	March 31, 2011
	Held-to-maturity				Available-for-sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	2,020,308	$	2,035,189	$		$
After one year through five years		1,880,356		1,898,902
After five years through ten years		6,754,359		6,605,651
After ten years		5,041,040		5,141,067
Equity securities						249,295		248,062
	$	15,696,063	$	15,680,809	$	249,295	$	248,062

The amortized cost and fair value of mortgage-backed securities are presented in the held-to-maturity category by contractual maturity in the preceding table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties.

Information pertaining to securities with gross unrealized losses at March 31, 2012 and 2011, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

F-14

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

5.      INVESTMENT SECURITIES  (Continued)

	Less Than 12 Months					12 Months or Greater		Total
March 31, 2012	Fair Value		Gross Unrealized Losses			Fair Value	Gross Unrealized Losses	Value		Unrealized Losses
Federal Home Loan Bank Bonds	$	2,000,000	$	(8,455	)	$	$	$	2,000,000	$	(8,455	)
Federal Farm Credit Bonds		2,500,000		(25,440	)				2,500,000		(25,440	)
Federal Home Loan Mortgage Corporation		1,499,258		(6,153	)				1,499,258		(6,153	)
Federal National Mortgage Association		4,497,304		(33,549	)				4,497,304		(33,549	)
		10,496,562		(73,597	)				10,496,562		(73,597	)
Mortgage-Backed Securities:
Federal Home Loan Mortgage Corporation		374,299		(1,932	)				374,299		(1,932	)
Federal National Mortgage Association		345,832		(243	)				345,832		(243	)
Government National Mortgage Association		39,060		(993	)				39,060		(993	)
		759,191		(3,168	)				759,191		(3,168	)
Total	$	11,255,753	$	(76,765	)	$	$	$	11,255,753	$	(76,765	)

	Less Than 12 Months					12 Months or Greater		Total
March 31, 2011	Fair Value		Gross Unrealized Losses			Fair Value	Gross Unrealized Losses	Value		Unrealized Losses
Federal Home Loan Bank Bonds	$	4,582,352	$	(162,712	)	$	$	$	4,582,352	$	(162,712	)
Federal Farm Credit Bonds		978,040		(22,093	)				978,040		(22,093	)
Federal Home Loan Mortgage Corporation		984,720		(14,417	)				984,720		(14,417	)
Federal National Mortgage Association		1,456,505		(43,495	)				1,456,505		(43,495	)
Municipal Bond
		8,001,617		(242,717	)				8,001,617		(242,717	)

F-15

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

5.     INVESTMENT SECURITIES  (Continued)

	Less Than 12 Months					12 Months or Greater					0Total
March 31, 2011	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Value		Losses Unrealized
Mortgage-Backed Securities:
Federal National Mortgage Association		146,243		(80	)							146,243		(80	)
Government National Mortgage Association		580		(5	)							580		(5	)
		146,823		(85	)							146,823		(85	)
Mutual Fund Shares							247,637		(1,233	)		247,637		(1,233	)
Total	$	8,148,440	$	(242,802	)	$	247,637	$	(1,233	)	$	8,396,077	$	(244,035	)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2012, the twenty-six debt securities with unrealized losses have depreciated 0.68% from the Bank’s amortized cost basis.  These unrealized losses relate principally to current interest rates for similar types of securities.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.  As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary.

The Bank has pledged FFCB bond with a market value of approximately $503,000 and FHLMC mortgage-backed securities of $28,000 at March 31, 2012 and 2011, respectively, to the New Jersey Commissioner of Banking and Insurance under the provisions of the Government Unit Deposit Protection Act that enables the Bank to act as a public depository.

6.     LOANS

The Bank monitors and assesses the credit risk of its loan portfolio using the classes set forth below.  These classes also represent the segments by which the Bank monitors the performance of its loan portfolio and estimates its allowance for loan losses.

F-16

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

Residential real estate loans consist of loans secured by one to four family residences located in the Bank’s market area. The Bank has originated one to four family residential mortgage loans in amounts up to 80% of the lesser of the appraised value or selling price of the mortgaged property without requiring mortgage insurance.  A mortgage loan originated by the Bank, for owner occupied property, whether fixed rate or adjustable rate, can have a term of up to 30 years.  Non-owner occupied property, whether fixed rate or adjustable rate, can have a term of up to 30 years.  Adjustable rate loan terms limit the periodic interest rate adjustment and the minimum and maximum rates that may be charged over the term of the loan based on the type of loan.

Commercial real estate loans are generally originated in amounts up to the lower of 80% of the appraised value or cost of the property and are secured by improved property such as multi-family dwelling units, office buildings, retail stores, warehouses, church buildings and other non-residential buildings, most of which are located in the Bank’s market area.  Commercial real estate loans are generally made with fixed interest rates which mature or reprice in 5 to 7 years with principal amortization of up to 25 years.

Commercial loans include short and long-term business loans and commercial lines of credit for the purposes of providing working capital, supporting accounts receivable, purchasing inventory and acquiring fixed assets.  The loans generally are secured by these types of assets as collateral and /or by personal guarantees provided by principals of the borrowers.

Construction loans will be made only if there is a permanent mortgage commitment in place.  Interest rates on commercial construction loans are typically in line with normal commercial mortgage loan rates, while interest rates on residential construction loans are slightly higher than normal residential mortgage loan rates.  These loans usually are adjustable rate loans and generally have terms of up to one year.

Consumer loans include installment loans and home equity loans, secured by first or second mortgages on homes owned or being purchased by the loan applicant.  Home equity term loans and credit lines are credit accommodations secured by either a first or second mortgage on the borrower’s residential property.  Interest rates charged on home equity term loans are generally fixed; interest on credit lines is usually a floating rate related to the prime rate.  The Bank generally requires a loan to value ratio of less than or equal to 80% of the appraised value, including any outstanding prior mortgage balance.

Loans at March 31, 2012 and 2011 are summarized as follows:

	March 31,
	2012			2011
Residential (one to four family) real estate	$	70,191,726		$	70,309,907
Multi-family and commercial real estate		17,130,030			19,872,062
Commercial		1,480,322			1,736,420
Home equity		9,986,541			11,906,354
Consumer		1,046,744			1,025,664
Construction		838,841			374,158
Total loans		100,674,204			105,224,565
Net deferred loan origination fees		(82,051	)		(70,934	)
Allowance for loan losses		(1,160,535	)		(1,286,301	)
		(1,242,586	)		(1,357,235	)
Loans, net	$	99,431,618		$	103,867,330

F-17

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act) made extensive changes tothe regulation of the Bank.  Under the Dodd-Frank Act, the Office of Thrift Supervision (OTS) was eliminated and responsibility for the supervision and regulation of federal savings associations such as the Bank was transferred to the Office of the Comptroller of the Currency (OCC) on July 21, 2011.  Under the authority issued to the OTS and now assumed by the OCC under the Home Owners Loan Act (HOLA) in 12 U.S.C. 1462 et seg. Subpart A, Section 560.93, the Bank is subject to a loans-to-one borrower limitation of 15% of capital funds.  At March 31, 2012, the loans-to-one-borrower limitation was $1.9 million; this excluded an additional 10% of adjusted capital funds or approximately $1.1 million, which may be loaned if collateralized by readily marketable securities.  At March 31, 2012, there were no loans outstanding or committed to any one borrower, which individually or in the aggregate exceeded the Bank’s loans-to-one-borrower limitations of 15% of capital funds.

A summary of the Bank’s credit quality indicators is as follows:

Pass – A credit which is assigned a rating of Pass shall exhibit some or all of the following characteristics:

a.  Loans that present an acceptable degree of risk associated with the financing being considered as measured against earnings and balance sheet trends, industry averages, etc.  Actual and projected indicators and market conditions provide satisfactory evidence that the credit will perform as agreed.

b.  Loans to borrowers that display acceptable financial conditions and operating results.  Debt service capacity is demonstrated and future prospects are considered good.

c.  Loans to borrowers where a comfort level is achieved by the strength of the cash flows from the business or project and the strength and quantity of the collateral or security position (i.e.; receivables, inventory and other readily marketable securities) as supported by a current valuation and/or the strong capabilities of a guarantor.

Special Mention – Loans on which the credit risk requires more than ordinary attention by the Loan Officer.  This may be the result of some erosion in the borrower’s financial condition, the economics of the industry, the capability of management, orchanges in the original transaction.  Loans which are currently sound yet exhibit potentially unacceptable credit risk or deteriorating long term prospects, will receive this classification.  Loans which deviate from loan policy or regulations will not generally be classified in this category, but will be separately reported as an area of concern.

Classified – Classified loans include those considered by the Bank to be substandard, doubtful or loss.

An asset is considered “substandard” if it involves more than an acceptable level of risk due to a deteriorating financial condition, unfavorable history of the borrower, inadequate payment capacity, insufficient security or other negative factors within the industry, market or management.  Substandard loans have clearly defined weaknesses which can jeopardize the timely payment of the loan.

Assets classified as “doubtful” exhibit all of the weaknesses defined under the substandard category but with enough risk to present a high probability of some principal loss on the loan, although not yet fully ascertainable in amount.

Assets classified as “loss” are those considered uncollectible or of little value, even though a collection effort may continue after the classification and potential charge-off.

F-18

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

Non-Performing Loans

Non-performing loans consist of non-accrual loans (loans on which the accrual of interest has ceased), loans over ninety days delinquent and still accruing interest, renegotiated loans and impaired loans.  Loans are generally placed on non-accrual status if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more, unless the collateral is considered sufficient to cover principal and interest and the loan is in the process of collection.

The following table represents loans by credit quality indicator at March 31, 2012:

	Pass		Special Mention Loans		Classified Loans		Non- Performing Loans		Total
Residential real estate	$	66,519,655	$	482,187	$	201,373	$	2,988,511	$	70,191,726
Multi-family and commercial real estate		11,245,514		248,424		1,381,066		4,255,026		17,130,030
Commercial		1,184,731		261,371		34,220				1,480,322
Home equity		9,986,541								9,986,541
Consumer		1,046,744								1,046,744
Construction		785,602		53,239						838,841
	$	90,768,787	$	1,045,221	$	1,616,659	$	7,243,537	$	100,674,204

The following table represents past-due loans as of March 31, 2012:

	30-89 Days Past Due and Still Accruing			90 Days or More Past Due and Still Accruing			Total Past Due and Still Accruing			Accruing Current Balances			Non- Accrual Balances			Total Loan Balances
Residential real estate	$	1,262,391		$			$	1,262,391		$	65,940,824		$	2,988,511		$	70,191,726
Multi-family and commercial real estate		1,204,668						1,204,668			11,670,336			4,255,026			17,130,030
Commercial		220,673						220,673			1,259,649						1,480,322
Home equity		41,983						41,983			9,944,558						9,986,541
Consumer		41,438						41,438			1,005,306						1,046,744
Construction											838,841						838,841
Total Loans	$	2,771,153		$			$	2,771,153		$	90,659,514		$	7,243,537		$	100,674,204
Percentage of Total Loans		2.75	%		N/A	%		2.75	%		90.05	%		7.20	%		100.0	%

F-19

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.      LOANS  (Continued)

The following table represents loans by credit quality indicator at March 31, 2011:

	Pass		Special Mention Loans		Classified Loans		Non- Performing Loans		Total
Residential real estate	$	61,096,650	$		$		$	1,778,502	$	62,875,152
Multi-family and commercial real estate		14,626,607		665,019		4,201,080		2,373,864		21,866,570
Commercial		1,294,682		360,796		34,471		46,471		1,736,420
Home equity		16,152,592						1,194,009		17,346,601
Consumer		1,014,946						10,718		1,025,664
Construction		374,158								374,158
	$	94,559,635	$	1,025,815	$	4,235,551	$	5,403,564	$	105,224,565

The following table represents past-due loans as of March 31, 2011:

	30-89 Days Past Due and Still Accruing			90 Days or More Past Due and Still Accruing			Total Past Due and Still Accruing			Accruing Current Balances			Non- Accrual Balances			Total Loan
Residential real estate	$	873,156		$			$	873,156		$	60,223,494		$	1,778,502		$	62,875,152
Multi-family and commercial
real estate		959,912						959,912			18,532,794			2,373,864			21,866,570
Commercial		320,098						320,098			1,369,851			46,471			1,736,420
Home equity		304,426						304,426			15,848,166			1,194,009			17,346,601
Consumer		20,386						20,386			994,560			10,718			1,025,664
Construction											374,158						374,158
Total Loans	$	2,477,978		$			$	2,477,978		$	97,343,023		$	5,403,564		$	105,224,565
Percentage of Total Loans		2.35	%		N/A	%		2.35	%		92.51	%		5.14	%		100.0	%

Impaired loans are measured based on the present value of expected future discounted cash flows, the fair value of the loan or the fair value of the underlying collateral if the loan is collateral dependent. The recognition of interest income on impaired loans is the same for non-accrual loans discussed above. At March 31, 2012, the Bank had 25 loan relationships totaling $7,243,537 in non-accrual loans as compared to 23 relationships totaling $5,403,564 at March 31, 2011. At March 31,2012,the Bank had no impaired loan relationships in which impaired loans had a related allowance for credit losses. The average balance of impaired loans totaled $8,476,876 for 2012 as compared to $5,444,577 for 2011, and interest income recorded on impaired loans during the year ended March 31, 2012 totaled $152,910 as compared to $154,440 for March 31, 2011.

F-20

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.      LOANS  (Continued)

The following table represents data on impaired loans at March 31, 2012 and 2011:

	March 31,
	2012		2011
Impaired loans for which a valuation allowance has been provided	$	-0-	$	2,881,997
Impaired loans for which no valuation allowance has been provided		8,630,741		2,576,471
Total loans determined to be impaired	$	8,630,741	$	5,458,468
Allowance for loans losses related to impaired loans	$	-0-	$	502,247
Average recorded investment in impaired loans	$	8,545,736	$	5,444,577
Cash basis interest income recognized on impaired loans	$	152,910	$	154,440

The following table presents impaired loans by portfolio class at March 31, 2012:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with a valuation allowance:
Residential real estate	$		$		$		$		$
Multi-family and commercial real estate
Commercial
Home equity
Consumer
Construction
Subtotal	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-

F-21

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with no valuation allowance:
Residential real estate	$	3,357,392	$	3,343,613	$		$	3,442,636	$	66,366
Multi-family and commercial real estate		5,287,128		5,287,128				4,852,947		86,544
Commercial								19,363
Home equity								111,121
Consumer								119,669
Construction
Subtotal	$	8,644,520	$	8,630,741	$	-0-	$	8,545,736	$	152,910
Total impaired loans:
Residential real estate	$	3,357,392	$	3,343,613	$		$	3,442,636	$	66,366
Multi-family and commercial real estate		5,287,128		5,287,128				4,852,947		86,544
Commercial								19,363
Home equity								111,121
Consumer								119,669
Construction
Total	$	8,644,520	$	8,630,741	$	-0-	$	8,545,736	$	152,910

The following table presents impaired loans by portfolio class at March 31, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with a valuation allowance:
Residential real estate	$	985,636	$	937,455	$	211,001	$	972,411	$
Multi-family and commercial real estate		1,438,858		1,438,858		209,000		1,439,056		40,238
Commercial		46,471		46,471		46,471		41,471		1,554
Home equity		403,257		403,257		28,000		403,257
Consumer		7,775		7,775		7,775		7,775
Construction
Subtotal	$	2,881,997	$	2,833,816	$	502,247	$	2,863,970	$	41,792

F-22

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with no valuation allowance:
Residential real estate	$	847,770	$	841,046	$		$	849,738	$	33,577
Multi-family and commercial real estate		935,007		935,007				935,702		51,262
Commercial
Home equity		790,752		790,752				791,193		27,529
Consumer		2,942		2,942				3,974		280
Construction
Subtotal	$	2,576,471	$	2,569,747	$		$	2,580,607	$	112,648
Total impaired loans:
Residential real estate	$	1,833,406	$	1,778,501	$	211,001	$	1,822,149	$	33,577
Multi-family and commercial real estate		2,373,865		2,373,865		209,000		2,374,758		91,500
Commercial		46,471		46,471		46,471		41,471		1,554
Home equity		1,194,009		1,194,009		28,000		1,194,450		27,529
Consumer		10,717		10,717		7,775		11,749		280
Construction
Total	$	5,458,468	$	5,403,563	$	502,247	$	5,444,577	$	154,440

F-23

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

	March 31,
	2012			2011
Non-accrual loans:
Residential real estate	$	2,988,511		$	2,972,510
Multi-family and commercial real estate		4,255,026			2,373,865
Commercial		46,471
Consumer		10,717
Construction
Total non-accrual loans		7,243,537			5,403,563
Impaired loans		1,387,204			2,438,318
Total non-performing loans		8,630,741			7,841,881
Real estate owned		845,669			770,639
Total non-performing assets	$	9,476,410		$	8,612,520
Non-performing loans as a percentage of loans		8.57	%		4.99	%
Non-performing assets as a percentage of loans and real estate owned		9.34	%		8.19	%
Non-performing assets as a percentage of total assets		7.06	%		6.33	%

During the year ended March 31, 2012, the Bank experienced a $1,840,000 net increase in non-accrual loans.  Thischangereflects the downgrading of eight loan relationships to non-accrual status totaling $3.3 million during the year ended March 31, 2012.  The downgraded loans consisted of four relationships representing residential mortgage and home equityloans totaling $797 thousand and four commercial relationships representing six loans totaling $2.5 million, partially offsetby the return of two loan relationships consisting of two loans totaling $186 thousand to an accruing basis, the transfer to real estate owned of one relationship consisting of one loan totaling $326 thousand, the payoff of one relationship consisting of one loan totaling $42 thousand and by total charge-offs of three loan relationships representing three loans in the amount of $57 thousand and the partial charge-off of 11 relationships consisting of 11 loans by $870 thousand.

The following table sets forth with respect to the Bank’s allowance for losses on loans:

	March 31,
	2012			2011
Balance at beginning of year	$	1,286,301		$	998,526
Provision:
Commercial		(3,670	)		20,901
Commercial real estate		642,863			(1,741	)
Residential real estate		580,660			413,160
Consumer		382,039			7,780
Total Provision	$	1,601,892		$	440,100

F-24

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

	March 31,
	2012			2011
Charge-Offs:
Commercial		816,329			143,491
Residential real estate		536,533			30,914
Consumer		400,552			31,601
Recoveries		(25,756	)		(53,681	)
Total Net Charge-Offs		1,727,658			152,325
Balance at end of year	$	1,160,535		$	1,286,301
Year-end loans outstanding	$	100,674,204		$	105,224,565
Average loans outstanding	$	102,605,642		$	105,400,000
Allowance as a percentage of year-end loans		1.15	%		1.22	%
Net charge-offs as a percentage of average loans		1.68	%		0.15	%

Additional details for changes in the allowance for loan by loan portfolio as of March 31, 2012 are as follows:

Allowance for Loan Losses
	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Total
Balance, beginning of year	$	70,422		$	595,828		$	507,536		$	112,515		$	1,286,301
Loan charge-offs		(46,472	)		(769,857	)		(536,533	)		(400,552	)		(1,753,414	)
Recoveries		20,236			1,348			4,172			25,756
Provision for loan losses		(3,670	)		642,863			580,660			382,039			1,601,892
Balance, end of year	$	40,516		$	468,834		$	553,011		$	98,174		$	1,160,535

Additional details for changes in the allowance for loan by loan portfolio as of March 31, 2011 are as follows:

Allowance for Loan Losses
	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Total
Balance, beginning of year	$	100,584		$	681,621		$	125,290		$	91,031		$	998,526
Loan charge-offs		(51,063	)		(92,429	)		(30,914	)		(31,601	)		(206,007	)
Recoveries		8,377			45,305			53,682
Provision for loan losses		20,901			(1,741	)		413,160			7,780			440,100
Balance, end of year	$	70,422		$	595,828		$	507,536		$	112,515		$	1,286,301

F-25

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

6.     LOANS  (Continued)

The Bank prepares an allowance for loan loss model on a quarterly basis to determine the adequacy of the allowance.  Management considers a variety of factors when establishing the allowance, such as the impact of current economic conditions, diversification of the loan portfolio, delinquency statistics, results of independent loan review and related classifications.  The Bank’s historic loss rates and the loss rates of peer financial institutions are also considered.  In evaluating the Bank’s allowance for loan loss, the Bank maintains a loan committee consisting of senior management and the Board of Directors that monitors problem loans and formulates collection efforts and resolution plans for each borrower.  On a monthly basis, the loan committee meets to review each problem loan and determine if there has been any change in collateral value due to changes in market conditions.  Each quarter, when calculating the allowance for loan loss, the loan committee reviews an updated loan impairment analysis on each problem loan to determine if a specific provision for loan loss is warranted.  Management reviews the most recent appraisal on each loan adjusted for holding and selling costs.  In the event there is not a recent appraisal on file, the Bank will use the aged appraisal and apply a discount factor to the appraisal and then adjust the holding and selling costs from the discounted appraisal value.  At March 31, 2012, the Bank maintained an allowance for loan loss ratio of 1.15% to year end loans outstanding.  On a linked basis, non-performing assets have increased by $863,890 over their stated levels at March 31, 2011 representing a non-performing asset to total asset ratio of 7.06% at March 31, 2012 as compared to a non-performing asset to total asset ratio of 6.33% at March 31, 2011.

The Bank’s charge-off policy states that any asset classified loss shall be charged-off within thirty days of such classification unless the asset has already been eliminated from the books by collection or other appropriate entry.  On a quarterly basis, the loan committee will review past due, classified, non-performing and other loans, as it deems appropriate, to determine the collectability of such loans.  If the loan committee determines a loan to be uncollectable, the loan shall be charged to the allowance for loan loss.  In addition, upon reviewing the collectability, the loan committee may determine a portion of the loan to be uncollectable; in which case that portion of the loan deemed uncollectable will be partially charged-off against the allowance for loan loss.

For the year ending March 31, 2012, the Bank experienced seven charge-offs relating to seven loan relationships totaling $447,023 and nineteen partial charge-offs relating to nineteen loan relationships totaling $1,306,391 as compared to charge-offs of six loans representing six relationships totaling $206,006 for the year ended March 31, 2011.

In the ordinary course of business, the Bank has and expects to continue to have transactions, including borrowings, with its officers and directors.  In the opinion of management, transactions with directors were on substantially the same terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Bank.  Officers of the Company are entitled to 1% loan discount, under a Bank-wide employee discount program, from those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Bank.  Loans to such borrowers are summarized as follows:

	March 31,
	2012			2011
Balance, beginning of year	$	575,866		$	1,008,961
Payments		(65,953	)		(433,095	)
Borrowings		74,500
Balance, end of year	$	584,413		$	575,866

F-26

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

7.     LOAN SERVICING

Mortgage loans serviced for others are not included in the accompanying statement of financial condition.  The unpaid principal balances of these loans at March 31, 2012 and 2011 are summarized as follows:

	March 31,
	2012		2011
Mortgage Loan Servicing Portfolio:
Mortgage Partnership
Finance FHLB New York	$	405,618	$	416,553

8.     ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at March 31, 2012 and 2011 consists of the following:

	March 31,
	2012		2011
Loans	$	347,466	$	377,631
Investment securities		57,592		65,867
Mortgage backed securities		12,044		15,026
	$	417,102	$	458,524

9.     PREMISES AND EQUIPMENT

Premises and equipment at March 31, 2012 and 2011 consists of the following:

	March 31,
	2012			2011
Land	$	1,451,203		$	1,451,203
Buildings		6,848,967			6,808,979
Furniture, fixtures and equipment		1,900,900			1,881,320
		10,201,070			10,141,502
Accumulated depreciation		(3,069,090	)		(2,743,487	)
	$	7,131,980		$	7,398,015

Depreciation expense amounted to $325,603 and $343,936 for the years ended March 31, 2012 and 2011, respectively.

10.   FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the Federal Home Loan Bank System.  As a member, the Bank maintains an investment in the capital stock of the Federal Home Loan Bank of New York in an amount not less than 1% of its outstanding home loans or 1/20 of its outstanding notes payable, if any, to the Federal Home Loan Bank of New York, whichever is greater, as calculated December 31 of each year.

F-27

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

11.   DEPOSITS

Deposit account balances at March 31, 2012 and 2011 are summarized as follows:

	March 31, 2012
	Amount		Weighted Average Interest Rate			Percent of Portfolio
Non interest bearing accounts	$	4,673,349		3.84	%
Interest bearing checking accounts		13,086,105		0.32			10.76
Passbook savings accounts		14,491,025		0.20			11.92
Money Market accounts		25,244,199		0.74			20.76
Club accounts		141,683		0.40			0.12
		57,636,361					47.40

	March 31, 2012
	Amount		Weighted Average Interest Rate		Percent of Portfolio
Certificates of Deposits:
0.10% to 0.99%		15,700,425		0.81		12.92
1.00% to 1.99%		35,199,832		1.41		28.95
3.00% to 3.99%		13,050,095		3.18		10.73
4.00% to 4.99%		2,178		4.91
		63,952,530				52.60
	$	121,588,891				100.00	%

	March 31, 2011
	Amount		Weighted Average Interest Rate			Percent of Portfolio
Non interest bearing accounts	$	4,161,255		3.44	%
Interest bearing checking accounts		13,136,424		0.49			10.87
Passbook savings accounts		15,572,055		0.40			12.89
Money Market accounts		23,824,162		0.82			19.71
Club accounts		153,621		0.40			0.13
		56,847,517					47.04
Certificates of Deposits:
0.10% to 0.99%		5,359,163		0.78			4.44
1.00% to 1.99%		34,758,404		1.39			28.76
2.00% to 2.99%		13,226,418		2.50			10.95
3.00% to 3.99%		10,645,784		3.72			8.81
4.00% to 4.99%		5,124		4.82
		63,994,893					52.96
	$	120,842,410					100.00	%

The aggregate amount of time deposits including certificates of deposits with a minimum denomination of $100,000 or more was approximately $19,172,000 and $18,002,000 at March 31, 2012 and 2011, respectively.

F-28

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

11.   DEPOSITS  (Continued)

Scheduled maturities of certificates of deposits at March 31, 2012 and 2011 are as follows:

	March 31,
	2012		2011
2012	$		$	42,877,600
2013		44,502,222		11,984,042
2014		11,872,809		4,797,660
2015		2,459,763		2,249,478
2016		3,752,417		2,086,113
2017		1,365,319
	$	63,952,530	$	63,994,893

The Bank held deposits from officers and directors of approximately $369,000 and $182,000 at March 31, 2012 and 2011, respectively.  These transactions were on the same terms as those prevailing at the time of comparable transactions with other persons.

12.   LINE OF CREDIT FROM ATLANTIC CENTRAL BANKERS BANK

The Bank maintains a line of credit with Atlantic Central Bankers Bank at a rate to be determined by the lender when funds are borrowed.  At March 31, 2012 and 2011, the outstanding balance on the unsecured line of credit was $ -0- and $1,000,000, respectively.

13.   ADVANCES FROM FEDERAL HOME LOAN BANK

As of March 31, 2012, the Bank had a borrowing capacity in a combination of term advances and overnight borrowings of up to $11,125,384 at the FHLB of New York.

Specific repos and other securities, with balances approximating $11,700,000 and $8,100,000 at March 31, 2012 and 2011, respectively, were pledged to the FHLB of New York as collateral.

14.   INCOME TAXES

The Company is subject to federal income tax and New Jersey state income tax.

The Company and subsidiary file a consolidated federal income tax return.  The Company’s consolidated provision for income taxes for the years ended March 31, 2012 and 2011 consists of the following:

	Years Ended March 31,
	2012			2011
Income Tax Expense (benefit)
Current federal tax expense
Federal	$	-0-		$	3,700
State		3,000			3,500
Deferred tax (benefit)
Federal		(196,352	)		224,500
State		(55,700	)		57,383
	$	(249,052	)	$	289,083

F-29

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

14.   INCOME TAXES  (Continued)

Valuation Allowance

Since the year ending March 31, 2007, the Company reported significant cumulative losses and generated substantial net operating losses for federal and state income tax purposes.  To date, the Company has been able to utilize a substantial portion of its federal net operating losses by carrying these losses back five years.  The remaining unused federal net operating losses can be carried forward for a maximum of twenty years.  Due to the extensive carryforward period, among other things, the Company concluded that it was more likely than not that the federal net operating loss carryforwards would eventually be realized.

The consolidated provision for income taxes for the years ended March 31, 2012 and 2011 differs from that computed by applying federal statutory rates to income before federal income tax expense, as indicated in the following analysis:

	Years Ended March 31,
	2012			2011
Expected federal tax provision (benefit) at 34% rate	$	(252,619	)	$	257,356
State income tax effect		3,709			33,861
Bank owned life insurance					(1,938	)
Municipal bond interest		(142	)		(196	)
Income tax (benefit)	$	(249,052	)	$	289,083
Effective tax rate (benefit)		(33.5	%)		38.0	%

A summary of deferred tax assets and liabilities as of March 31, 2012 and 2011 are as follows:

	March 31,
	2012			2011
Deferred tax assets:
Accrued pension costs	$	4,200		$	9,600
Accrued post retirement medical plan		1,700			7,300
Accrued retirement plan		15,700			21,700
Allowance for loan losses		413,100			439,000
Directors’ benefit plans		119,400			111,300
FASB 158 – unrecognized transition costs		28,400			31,400
Net operating loss carryforward		438,700			186,000
Unrealized losses on securities available-for-sale		500
Non accrual interest		44,000			29,000
Total deferred tax assets	$	1,065,200		$	835,800
Deferred tax liabilities:
Accumulated depreciation	$	(72,300	)	$	(87,900	)
Unrealized gains on securities available-for-sale		(1,900	)
Total deferred tax liabilities		(74,200	)		(87,900	)
NET DEFERRED TAX ASSETS	$	991,000		$	747,900

F-30

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

14.   INCOME TAXES  (Continued)

The Company accounts for uncertainties in income taxes in accordance with Financial ASC Topic 740 “Accounting for Uncertainty in Income Taxes”.  ASC Topic 740 prescribes a threshold and measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return.  ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company has determined that there are no significant uncertain tax positions requiring recognition in its financial statements.

In the event the Company is assessed for interest and/or penalties by taxing authorities, such assessed amounts will be classified in the financial statements as income tax expense.  Tax years 2008 through 2011 remain subject to examination by Federal and New Jersey taxing authorities.

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

The Company has federal net operating loss carryforwards of approximately $680,000 and state net operating loss carryforwards of approximately $2,711,000 at March 31, 2012.

15.   EMPLOYEE BENEFITS

Cash/Deferred Profit Sharing Plan

The Bank maintains a cash/deferred profit sharing plan covering all full time employees with one year of service and who are at least twenty-one years of age.  Participants enter the Plan on the 1st of January or 1st of July subsequent to meeting the above requirements.

The Bank may contribute up to 10% of the annual compensation of each eligible employee.  The Bank’s contribution to the plan was $-0- for the years ended March 31, 2012 and 2011.

Retirement Incentive Plan

A retired officer of the Bank is covered by a Retirement Incentive Plan that pays him $1,416.67 per month for ten years from the date of retirement at age sixty-five.

To fund the above benefit, the Bank has purchased and is the sole beneficiary of a life insurance policy on the life of the officer.  The cash surrender value of this policy was $147,508and $141,703as of March 31, 2012 and 2011, respectively, and is reflected on the consolidated statement of financial position as Bank-owned life insurance.

Delanco Bancorp, Inc. 2008 Equity Incentive Plan

On May 19, 2008, the Board of Directors adopted, and the stockholders approved on August 18, 2008, the Delanco Bancorp, Inc. 2008 Equity Incentive Plan.

The Board of Directors has reserved a total of 112,141 shares of common stock for issuance upon the grant or exercise of awards made pursuant to the 2008 Plan.  All the Company’s employees, officers, and directors are eligible to participate in the 2008 Plan.  As of March 31, 2012, no awards have been made under the 2008 Plan.

F-31

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

16.   BOARD OF DIRECTORS’ RETIREMENT PLAN

The Bank established a Defined Benefit Retirement Plan for the Bank’s Board of Directors on January 1, 2002.  This plan provides a monthly retirement benefit equal to 4% of the board fees payable as of their retirement date, multiplied by their completed years of service, up to a maximum of 80% of the final fee amount.  Directors must complete at least ten years of service in order to receive a retirement benefit under the plan.  Director retirement benefits are payable in equal monthly installments during the director’s lifetime, unless the director elects to receive a life annuity with the first 129 months guaranteed or a life annuity with either 50% or 100% (joint and survivor benefits) continuing for the spouse’s lifetime after the Director dies.  Under these other options, the retirement benefit is reduced to account for the value of the potential additional payments.

The estimated past service liability that will be amortized from accumulated other comprehensive income into net periodic pension costs over the next fiscal year is $11,684.

Net pension expense was $40,992 and $39,264 for years ended March 31, 2012 and 2011, respectively.  The components of net pension cost are as follows:

	Years Ended March 31,
	2012		2011
Service cost	$	5,044	$	3,712
Interest cost		20,228		20,208
Return on assets		528		152
Net amortization and deferral		15,192		15,192
Net periodic pension cost	$	40,992	$	39,264

The following table presents a reconciliation of the funded status of the defined benefit pension plan at March 31, 2012 and 2011:

	March 31,
	2012		2011
Accumulated benefit obligation	$	408,263	$	345,897
Projected benefit obligation		416,352		349,374
Fair value of plan assets		-0-		-0-
Unfunded projected benefit obligation		416,352		349,374

The following table presents a reconciliation of benefit obligations and plan assets:

	March 31,
	2012			2011
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$	349,374		$	335,542
Service cost		5,044			3,712
Interest cost		20,228			20,208
Actuarial (gain) loss		62,757			7,863
Benefits paid		(21,051	)		(17,951	)
Benefit obligation at end of year	$	416,352		$	349,374

F-32

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

16.   BOARD OF DIRECTORS’ RETIREMENT PLAN (Continued)

	March 31,
	2012			2011
Change in Plan Assets
Fair value of Plan assets at beginning of year	$	-0-		$	-0-
Actual return on Plan assets		-0-			-0-
Employer contributions		21,051			17,951
Benefits paid		(21,051	)		(17,951	)
Fair value of Plan assets at end of year	$	-0-		$	-0-

Actuarial assumptions used in determining pension amounts are as follows:

	Years Ended March 31,
	2012			2011
Discount rate for periodic pension cost		6.00	%		6.25	%
Discount rate for benefit obligation		5.00	%		6.00	%
Rate of increase in compensation levels and social security wage base		2.00	%		4.00	%
Expected long-term rate of return on plan assets		N/A			N/A

17.   EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

In March 2007, the Company established an Employee Stock Ownership Plan (“ESOP”) covering all eligible employees as defined by the ESOP.  The ESOP is a tax-qualified plan, designed to invest in the Company’s common stock, which provides employees with the opportunity to receive a funded retirement benefit based primarily on the value of the Company’s common stock.  The Company accounts for its ESOP in accordance with FASB ASC 718-40-50 (formerly SOP 93-6).

To purchase the Company’s common stock, the ESOP borrowed $640,810 from the Company to purchase 64,081 shares of the Company’s common stock in the Company’s initial public offering.  The ESOP loan is being repaid principally from the Bank’s contributions to the ESOP over a period of up to 20 years.  Dividends declared on common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan.  Compensation expense is recognized in accordance with SOP 93-6.  The number of shares released annually is based upon the ratio that the current principal and interest payment bears to the current and all remaining scheduled future principal and interest payments.

All shares that have not been released for allocation to participants are held in a suspense account by the ESOP for future allocation as the loan is repaid.  Unallocated common stock purchased by the ESOP is recorded as a reduction of stockholders’ equity at cost.  As of March 31, 2012, the Company had allocated a total of 16,020 shares from the suspense account to participants.  The Company recognized compensation expense related to the ESOP of $16,020 and $12,816 for the years ended March 31, 2012 and 2011, respectively.

F-33

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

18.   EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculation for the years ended March 31, 2012 and 2011:

	2012			2011
Numerator:
Net income (loss)	$	(493,944	)	$	467,847
Denominator:
Basic number of shares		1,586,664			1,583,460
Dilutive effect of options		-			-
Diluted number of shares		1,586,664			1,583,460
Earnings (loss) per share:
Basic earnings (loss) per share	$	(0.31	)	$	0.30
Diluted earnings (loss) per share	$	(0.31	)	$	0.30

As of March 31, 2012, the Company did not have any outstanding stock options.

19.   FAIR VALUES OF FINANCIAL INSTRUMENTS

ASC Topic No. 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value under U.S. generally accepted accounting principles, and expands disclosure requirements for fair value measurements.  ASC Topic No. 820 does not require any new fair value measurements.  The adoption of ASC Topic No. 820 did not have a material impact on the Company’s consolidated financial statements.

ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:

Level 1:  Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2:  Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly orindirectly.  Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not consideredto be active, and observable inputs other than quoted prices such as interest rates.

Level 3:  Level 3 inputs are unobservable inputs.

The fair value of securities available for sale are determined by obtaining quoted prices on a nationally recognized securities exchange (Level 1 inputs) of matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input significant to the fair value measurement.

F-34

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

19.   FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Other Unobservable Inputs (Level 3)
March 31, 2012
Available-for-sale securities	$	241,826	NONE	NONE
March 31, 2011
Available-for-sale securities	$	248,062	NONE	NONE

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis at March 31, 2012 and 2011 are as follows:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
March 31, 2012
Impaired loans	$		$	7,388,957	$
Real estate owned				845,669
Total	$	NONE	$	8,234,626	$	NONE
March 31, 2011
Impaired loans	$		$	5,458,468	$
Real estate owned				770,639
Total	$	NONE	$	6,229,107	$	NONE

The fair value of impaired loans and real estate owned with specific allocations of the allowance for loan losses is generallybased on recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

F-35

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

19.   FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies.  However, considerable judgment is required to interpret market data to develop the estimates of fair value.  Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows:

Cash and cash equivalents, accrued interest receivable, and accrued interest payable

The items are generally short-term in nature, and accordingly, the carrying amounts reported in the consolidated statements of financial condition are reasonable approximations of their fair values.

Investment securities

Fair values for investment securities are based on quoted market prices, if available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as residential mortgage, construction, land and consumer.  Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories.

Fair value of performing loans is estimated by discounting cash flows using estimated market discount rates at which similar loans would be made to borrowers and reflect similar credit ratings and interest rate risk for the same remaining maturities.

Fair value for significant nonperforming loans is based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows.

Real estate owned

The carrying amounts approximate the fair value.

Deposits

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, and NOW and money market accounts, is equal to the amount payable on demand.  The fair value of certificates of deposit is based on the discounted value of contractual cash flows.  The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Lines of Credit from Atlantic Central Bankers Bank and Advances from Federal Home Loan Bank

The carrying amounts approximate the fair value.

Accrued interest

The carrying amounts of accrued interest approximate the fair values.

Advanced payments by borrowers for taxes and insurance (escrows)

The carrying amounts of escrow accounts approximate fair value.

F-36

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

19.   FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

Off-balance sheet instruments

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

As required by ASC Topic No. 825-10-65, the estimated fair value of financial instruments at March 31, 2012 and 2011 are as follows:

	March 31, 2012				March 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	6,649,685	$	6,649,685	$	5,662,629	$	5,662,629
Investment securities		17,694,594		17,848,574		15,945,358		15,928,871
Loans - net		99,431,618		103,700,000		103,867,330		107,877,000
FHLB stock		219,100		219,100		274,700		274,700
Accrued interest receivable		417,102		417,102		458,524		458,524
Real estate owned		845,669		845,669		770,639		770,639
Total financial assets	$	125,257,768	$	129,680,130	$	126,979,180	$	130,972,363
Financial Liabilities:
Deposits		121,588,891		122,204,000		120,842,410		122,053,000
Line of credit from ACBB						1,000,000		1,000,000
Advances from FHLB						1,100,000		1,100,000
Advance payments by borrowers for taxes and insurance		399,920		399,920		394,864		394,864
Accrued interest payable		15,912		15,912		22,658		22,658
Total financial liabilities	$	122,004,723	$	122,619,832	$	123,359,932	$	124,570,522
	March 31, 2012				March 31, 2011
	Contract Value		Estimated Fair Value		Contract Value		Estimated Fair Value
Off-balance sheet instruments:
Commitments to extend credit	$	5,337,000	$	5,337,000	$	5,706,000	$	5,706,000

20.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements.  The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments.  The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet.

F-37

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

20.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK  (Continued)

Financial instruments whose contract amount represents credit risk were as follows:

	March 31,
Commitments to Extend Credit	2012		2011
Home equity lines of credit	$	4,319,000	$	4,407,000
Commercial lines of credit		968,000		1,298,000
Consumer lines of credit				1,000
Standby letters of credit		50,000
	$	5,337,000	$	5,706,000

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation.  Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party.  Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.

The Bank has not been required to perform on any financial guarantees during the past two years.  The Bank has not incurred any losses on its commitments in either 2012 or 2011.

21.   COMMITMENTS AND CONTINGENT LIABILITIES

The Company is subject to claims and lawsuits which arise primarily in the ordinary course of business.  It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company.

The Bank had outstanding commitment to originate loans as of March 31, 2012 as follows:

	March 31, 2012
	Fixed-Rate		Variable-Rate	Total
Construction	$	450,000	$	$	450,000

22.   RELATED PARTY TRANSACTIONS

The Company obtained legal services, insurance products and website services from other entities which were affiliated with Directors of the Company.  The aggregate payment for these products and services amounted to $130,551 and $112,049 for the years ended March 31, 2012 and 2011, respectively.

F-38

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

23.   REGULATORY CAPITAL

The Bank is subject to various regulatory capital requirements administered by its primary federal regulator, the Office of the Comptroller of the Currency (OCC).  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 consolidated financial statements.  Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of:  total risk-based capital and Tier I capital to risk-weighted assets (as defined in the regulations), Tier I capital to adjusted total assets (as defined), and tangible capital to adjusted total assets (as defined).   Management believes that, as of March 31, 2012, the Bank met all capital adequacy requirements to which it was subject.

As of March 31, 2012, the most recent notification from the OCC, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.  To remain categorized as well capitalized, the Bank would have to maintain minimum total risk-based, Tier I risk-based, Tier I leverage and Tangible Capital to adjusted total assets ratios as disclosed in the table below.  There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

The Bank’s actual and required capital amounts and ratios as of March 31, 2012 and 2011 are as follows:

	Actual					For Capital Adequacy Purposes and to Be Adequately Capitalized Under the Prompt Corrective Action Provisions
	Amount		Ratio			Amount			Ratio
As of March 31, 2012:
Total Risk-Based Capital
(to Risk-Weighted Assets)	$	11,615,000		14.13	%	≥	$	6,576,160	≥	8.0	%
Tier I Capital
(to Risk-Weighted Assets)		10,586,000		12.88	%	≥		3,288,080	≥	4.0	%
Tier I Capital
(to Adjusted Total Assets)		10,586,000		7.93	%	≥		5,342,400	≥	4.0	%
Tangible Capital
(to Adjusted Total Assets)		10,586,000		7.93	%	≥		2,003,400	≥	1.5	%

	Actual					For Capital Adequacy Purposes and to Be Adequately Capitalized Under the Prompt Corrective Action Provisions
	Amount		Ratio			Amount			Ratio
As of March 31, 2011:
Total Risk-Based Capital
(to Risk-Weighted Assets)	$	12,579,000		14.52	%	≥	$	6,932,240	≥	8.0	%
Tier I Capital
(to Risk-Weighted Assets)		11,795,000		13.61	%	≥		3,466,120	≥	4.0	%
Tier I Capital
(to Adjusted Total Assets)		11,795,000		8.67	%	≥		5,443,720	≥	4.0	%
Tangible Capital
(to Adjusted Total Assets)		11,795,000		8.67	%	≥		2,041,395	≥	1.5	%

F-39

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

23.   REGULATORY CAPITAL  (Continued)

Federal regulations place certain restrictions on dividends paid by the Bank to the Company.  The total amount of dividends that may be paid at any date is generally limited to the earnings of the Bank year to date plus retained earnings for the prior two fiscal years, net of any prior capital distributions.  In addition, dividends paid by the Bank to the Company would be prohibited if the distribution would cause the Bank’s capital to be reduced below the applicable minimum capital requirements.

24.   CEASE AND DESIST ORDER

On March 17, 2010, the Bank entered into a Stipulation and Consent to the Issuance of Order to Cease and Desist with the Office of Thrift Supervision (the “OTS”), whereby the Bank consented to the issuance of an Order to Cease and Desist (the “Order”) promulgated by the OTS, without admitting or denying that grounds exist for the OTS to initiate an administrative proceeding against the Bank.

The Order requires the Bank to take the following actions:

· maintain (i) a tier 1 (core) capital to adjusted total assets ratio of at least 6.0% and (ii) a total risk-based capital to risk-weighted assets ratio of at least 10.0% after the funding of an adequate allowance for loan and lease losses;

· if the Bank fails to meet these capital ratio requirements at any time, within 15 days thereafter prepare a written contingency plan detailing actions to be taken, with specific time frames, providing for (i) a merger with another federally insured depository institution or holding company thereof, or (ii) voluntary liquidation;

· prepare a problem asset plan that will include strategies, targets and timeframes to reduce the Bank’s level of criticized assets and nonperforming loans;

· within 30 days after the end of each quarter, beginning with the quarter ending June 30, 2010, prepare a quarterly written status report that will include the requirements contained in the Order;

· prepare an updated business plan that will include the requirements contained in the Order and that also will include strategies to restructure the Bank’s operations, strengthen and improve the Bank’s earnings, reduce expenses and achieve positive core income and consistent profitability;

· restrict quarterly asset growth to an amount not to exceed net interest credited on deposit liabilities for the prior quarter without the prior non-objection of the OTS;

· refrain from making, investing in or purchasing any new commercial loans without the prior non-objection of the OTS (the Bank may refinance, extend or otherwise modify any existing commercial loans, so long as no new loan proceeds are advanced as part of the transaction);

· cease to accept, renew or roll over any brokered deposit or act as a deposit broker, without the prior written waiver of the Federal Deposit Insurance Corporation;

· not make any severance or indemnification payments without complying with regulatory requirements regarding such payments; and

· comply with prior regulatory notification requirements for any changes in directors or senior executive officers.

The Order, which replaces the Supervisory Agreement previously entered into between the Bank and the OTS, will remain in effect until terminated, modified, or suspended in writing by the OCC, successor to the OTS.

F-40

Delanco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

25.   SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this report and determined that there were no recognized or non-recognized subsequent events to report.

F-41

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Delanco Bancorp, Inc. Registration Statement No. 333-155621 on Form S-8 of our report dated June 8, 2012 relating to our audit of the consolidated financial statements of Delanco Bancorp, Inc. and subsidiaries as of March 31, 2012 appearing in the Annual Report on Form 10-K originally filed with the Securities and Exchange Commission on June 29, 2012.

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

Certified Public Accountants

Philadelphia, Pennsylvania

June 27, 2012

EX-31.1

Exhibit 31.1

Certification

I, James E. Igo, certify that:

1. I have reviewed this annual report on Form 10-K of Delanco Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 29, 2012	/s/ James E. Igo
	James E. Igo
	Chairman, President and Chief Executive Officer

EX-31.2

 Exhibit 31.2

 Certification

I, Eva Modi, certify that:

1. I have reviewed this annual report on Form 10-K of Delanco Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 29, 2012	/s/ Eva Modi
	Eva Modi
	Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Delanco Bancorp, Inc. (the “Company”) on Form 10-K for the fiscal year ended March 31, 2012, as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in this Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company as of and for the periods covered by this Report.

By:	/s/ James E. Igo
	James E. Igo
	Chairman, President and Chief Executive Officer
	June 29, 2012

/s/ Eva Modi

Eva Modi

Chief Financial Officer

June 29, 2012

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Note 18 - Earnings Per Share

12 Months Ended

Mar. 31, 2012

Earnings Per Share [Text Block]

18.   EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculation for the years ended March 31, 2012 and 2011:

	2012			2011
Numerator:
Net income (loss)	$	(493,944	)	$	467,847
Denominator:
Basic number of shares		1,586,664			1,583,460
Dilutive effect of options		-			-
Diluted number of shares		1,586,664			1,583,460
Earnings (loss) per share:
Basic earnings (loss) per share	$	(0.31	)	$	0.30
Diluted earnings (loss) per share	$	(0.31	)	$	0.30

As of March 31, 2012, the Company did not have any outstanding stock options.

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Note 2 - Summary of Significant Accounting Policies

12 Months Ended

Mar. 31, 2012

Significant Accounting Policies [Text Block]

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles (“GAAP”) and predominant practices within the banking industry. The consolidated financial statements of the Company include the accounts of Delanco Federal Savings Bank and its subsidiary, Delanco Financial Services Corporation. Intercompany balances and transactions are eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the allowance for losses on loans, the valuation of foreclosed real estate and the evaluation of income taxes. In connection with the determination of the estimated losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties.

A majority of the Bank’s loan portfolio consists of single-family residential and commercial loans in Southern New Jersey and Southeastern Pennsylvania. Accordingly, the ultimate collectibility of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions.

While management uses available information to recognize losses on loans and foreclosed real estate, further reductions in the carrying amounts of loans and foreclosed assets may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans and foreclosed real estate. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans and foreclosed real estate may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Investment Securities

Securities Held-to-Maturity: Securities that management has the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts that are recognized in interest income using methods approximating the interest method over the period to maturity. Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by issuers of the securities. Mortgage-backed securities are carried at unpaid principal balances, adjusted for unamortized premiums and unearned discounts. Premiums and discounts are amortized using methods approximating the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments.

Securities Available-for-Sale: Available-for-sale securities consist of investment securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are included in other comprehensive income. Realized gains (losses) on available-for-sale securities are included in other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method. The amortization of premiums and the accretion of discounts are recognized in interest income using methods approximating the interest method over the period of maturity.

Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans and Allowance for Loan Losses

The Bank grants mortgage, commercial, consumer and lines of credit loans to customers. A substantial portion of the loan portfolio is represented by mortgage and commercial loans in Southern New Jersey and Southeastern Pennsylvania. The ability of the Bank’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas.

Loans are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees and unearned discounts.

Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method. Amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The recognition of income on a loan is discontinued and previously accrued interest is reversed, when interest or principal payments become ninety (90) days past due unless, in the opinion of management, the outstanding interest remains collectible. Past due status is determined based on contractual terms. Interest is subsequently recognized only as received until the loan is returned to accrual status. A loan is restored to accrual status when all interest and principal payments are current and the borrower has demonstrated to management the ability to make payments of principal and interest as scheduled. The Bank’s practice is to charge off any loan or portion of a loan when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the depreciation of the underlying collateral, the loan’s classification as a loss by regulatory examiners, or for other reasons.

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general, and unallocated components. The specific component relates to loans that are classified as doubtful, substandard, or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a customer’s financial difficulties, the Bank grants a concession for other than an insignificant period of time to the customer that the Bank would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Bank strives to identify customers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Bank grants the customer new terms that provide for a reduction of either interest or principal, the Bank measures any impairment on the restructuring as previously noted for impaired loans.

Bank-Owned Life Insurance

The Bank owns a life insurance policy on the life of a retired member of the Board of Directors. The cash surrender value of the policy is recorded as an asset of the bank and changes in this value are reflected in non-interest income. Death benefit proceeds in excess of the policy’s cash surrender value will be recognized as income upon receipt. There are no policy loans offset against the cash surrender value or restrictions on the use of the proceeds.

Premises and Equipment

Land is carried at cost. Other premises and equipment are recorded at cost less accumulated depreciation. Office buildings and improvements are depreciated using the straight line method using useful lives ranging from 3 to 40 years. Furniture, fixtures and equipment are depreciated using the straight line method with useful lives ranging from 3 to 10 years. Charges for maintenance and repairs are expensed as incurred.

Real Estate Owned

Real estate owned is comprised of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Real estate owned is recorded at the lower of the carrying value of the loan or the fair value of the property, net of estimated selling costs. Costs relating to the development or improvement of the properties are capitalized while expenses related to the operation and maintenance of properties are recorded as an expense as incurred. Gains or losses upon dispositions are reflected in earnings as realized. The Company had $845,669 and $770,639 in real estate owned at March 31, 2012 and 2011, respectively. The Company recorded $36,382 and $27,472 loss on sale of real estate owned for the years ended March 31, 2012 and 2011, respectively.

Income Taxes

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards and differences between the basis of available-for-sale securities, allowance for loan losses, estimated losses on real estate owned, accumulated depreciation, and accrued employee benefits for financial and income tax reporting.

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

Statements of Cash Flows

The Company considers all cash and amounts due from depository institutions and interest-bearing deposits in other banks to be cash equivalents for purposes of the statements of cash flows.

Advertising Costs

Advertising costs are expensed as incurred.  Advertising expenses totaled $24,729 and $25,068 for the years ended March 31, 2012 and 2011, respectively respectively.

Employee Stock Ownership Plan (“ESOP”)

The Company accounts for its ESOP based on guidance by FASB ASC 718-40-50 (formerly SOP 93-6). Shares are released to participants proportionately as the loan is repaid. If the Company declares a dividend, the dividends on the allocated shares would be recorded as dividends and charged to retained earnings. Dividends declared on common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan. Allocation of shares to the ESOP participants is contingent upon the repayment of the loan to the Company.

Earnings Per Share

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

Reclassifications

Certain reclassifications have been made to the 2011 financial statement presentation to correspond to the current year’s format. Total equity and net income are unchanged due to these reclassifications.

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Note 22 - Related Party Transactions

12 Months Ended

Mar. 31, 2012

Related Party Transactions Disclosure [Text Block]

22.   RELATED PARTY TRANSACTIONS

The Company obtained legal services, insurance products and website services from other entities which were affiliated with Directors of the Company.  The aggregate payment for these products and services amounted to $130,551 and $112,049 for the years ended March 31, 2012 and 2011, respectively.

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Note 21 - Commitments and Contingent Liabilities

12 Months Ended

Mar. 31, 2012

Commitments and Contingencies Disclosure [Text Block]

21.   COMMITMENTS AND CONTINGENT LIABILITIES

The Company is subject to claims and lawsuits which arise primarily in the ordinary course of business.  It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company.

The Bank had outstanding commitment to originate loans as of March 31, 2012 as follows:

	March 31, 2012
	Fixed-Rate		Variable-Rate	Total
Construction	$	450,000	$	$	450,000

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Note 23 - Regulatory Capital

12 Months Ended

Mar. 31, 2012

Regulatory Capital [Text Block]

23.   REGULATORY CAPITAL

The Bank is subject to various regulatory capital requirements administered by its primary federal regulator, the Office of the Comptroller of the Currency (OCC).  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 consolidated financial statements.  Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of:  total risk-based capital and Tier I capital to risk-weighted assets (as defined in the regulations), Tier I capital to adjusted total assets (as defined), and tangible capital to adjusted total assets (as defined).   Management believes that, as of March 31, 2012, the Bank met all capital adequacy requirements to which it was subject.

As of March 31, 2012, the most recent notification from the OCC, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.  To remain categorized as well capitalized, the Bank would have to maintain minimum total risk-based, Tier I risk-based, Tier I leverage and Tangible Capital to adjusted total assets ratios as disclosed in the table below.  There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

The Bank’s actual and required capital amounts and ratios as of March 31, 2012 and 2011 are as follows:

	Actual					For Capital Adequacy Purposes and to Be Adequately Capitalized Under the Prompt Corrective Action Provisions
	Amount		Ratio			Amount			Ratio
As of March 31, 2012:
Total Risk-Based Capital
(to Risk-Weighted Assets)	$	11,615,000		14.13	%	≥	$	6,576,160	≥	8.0	%
Tier I Capital
(to Risk-Weighted Assets)		10,586,000		12.88	%	≥		3,288,080	≥	4.0	%
Tier I Capital
(to Adjusted Total Assets)		10,586,000		7.93	%	≥		5,342,400	≥	4.0	%
Tangible Capital
(to Adjusted Total Assets)		10,586,000		7.93	%	≥		2,003,400	≥	1.5	%

	Actual					For Capital Adequacy Purposes and to Be Adequately Capitalized Under the Prompt Corrective Action Provisions
	Amount		Ratio			Amount			Ratio
As of March 31, 2011:
Total Risk-Based Capital
(to Risk-Weighted Assets)	$	12,579,000		14.52	%	≥	$	6,932,240	≥	8.0	%
Tier I Capital
(to Risk-Weighted Assets)		11,795,000		13.61	%	≥		3,466,120	≥	4.0	%
Tier I Capital
(to Adjusted Total Assets)		11,795,000		8.67	%	≥		5,443,720	≥	4.0	%
Tangible Capital
(to Adjusted Total Assets)		11,795,000		8.67	%	≥		2,041,395	≥	1.5	%

Federal regulations place certain restrictions on dividends paid by the Bank to the Company.  The total amount of dividends that may be paid at any date is generally limited to the earnings of the Bank year to date plus retained earnings for the prior two fiscal years, net of any prior capital distributions.  In addition, dividends paid by the Bank to the Company would be prohibited if the distribution would cause the Bank’s capital to be reduced below the applicable minimum capital requirements.

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Note 24 - Cease and Desist Order

12 Months Ended

Mar. 31, 2012

Legal Matters and Contingencies [Text Block]

24.   CEASE AND DESIST ORDER

On March 17, 2010, the Bank entered into a Stipulation and Consent to the Issuance of Order to Cease and Desist with the Office of Thrift Supervision (the “OTS”), whereby the Bank consented to the issuance of an Order to Cease and Desist (the “Order”) promulgated by the OTS, without admitting or denying that grounds exist for the OTS to initiate an administrative proceeding against the Bank.

The Order requires the Bank to take the following actions:

· maintain (i) a tier 1 (core) capital to adjusted total assets ratio of at least 6.0% and (ii) a total risk-based capital to risk-weighted assets ratio of at least 10.0% after the funding of an adequate allowance for loan and lease losses;

· if the Bank fails to meet these capital ratio requirements at any time, within 15 days thereafter prepare a written contingency plan detailing actions to be taken, with specific time frames, providing for (i) a merger with another federally insured depository institution or holding company thereof, or (ii) voluntary liquidation;

· prepare a problem asset plan that will include strategies, targets and timeframes to reduce the Bank’s level of criticized assets and nonperforming loans;

· within 30 days after the end of each quarter, beginning with the quarter ending June 30, 2010, prepare a quarterly written status report that will include the requirements contained in the Order;

· prepare an updated business plan that will include the requirements contained in the Order and that also will include strategies to restructure the Bank’s operations, strengthen and improve the Bank’s earnings, reduce expenses and achieve positive core income and consistent profitability;

· restrict quarterly asset growth to an amount not to exceed net interest credited on deposit liabilities for the prior quarter without the prior non-objection of the OTS;

· refrain from making, investing in or purchasing any new commercial loans without the prior non-objection of the OTS (the Bank may refinance, extend or otherwise modify any existing commercial loans, so long as no new loan proceeds are advanced as part of the transaction);

· cease to accept, renew or roll over any brokered deposit or act as a deposit broker, without the prior written waiver of the Federal Deposit Insurance Corporation;

· not make any severance or indemnification payments without complying with regulatory requirements regarding such payments; and

· comply with prior regulatory notification requirements for any changes in directors or senior executive officers.

The Order, which replaces the Supervisory Agreement previously entered into between the Bank and the OTS, will remain in effect until terminated, modified, or suspended in writing by the OCC, successor to the OTS.

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Note 1 - Nature of Operations

12 Months Ended

Mar. 31, 2012

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.     NATURE OF OPERATIONS

Delanco Bancorp, Inc. (the “Company”) is a federally-chartered subsidiary holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, Delanco Federal Savings Bank (the “Bank”), and its wholly-owned inactive subsidiary, Delanco Financial Services Corporation.  The Company is majority owned by Delanco MHC, a federally chartered mutual holding company.  Delanco MHC has virtually no operations or assets other than an investment in the Company, and is not included in these financial statements.  The Bank provides a variety of financial services to individual and business customers located primarily in Southern New Jersey and Southeastern Pennsylvania.  The Bank’s primary source of revenue is from single-family residential and commercial loans.  The Bank is subject to regulation by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

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Note 25 - Subsequent Events

12 Months Ended

Mar. 31, 2012

Subsequent Events [Text Block]

25.   SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this report and determined that there were no recognized or non-recognized subsequent events to report.

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Consolidated Statements of Financial Condition (USD $)	Mar. 31, 2012	Mar. 31, 2011
Cash and amount due from depository institutions	$ 569,884	$ 658,449
Interest-bearing deposits in other banks	6,079,801	5,004,180
Total cash and cash equivalents	6,649,685	5,662,629
Investment securities
Securities held-to-maturity (fair value of $17,606,748 and $15,680,809 at March 31, 2012 and 2011, respectively)	17,457,498	15,696,063
Securities available-for-sale (amortized cost of $237,096 and $249,295 at March 31, 2012 and 2011, respectively)	241,826	248,062
Total investment securities	17,699,324	15,944,125
Loans, net of allowance for loan losses of $1,160,535 and $1,286,301 at March 31, 2012 and 2011, respectively	99,431,618	103,867,330
Accrued interest receivable	417,102	458,524
Premises and equipment, net	7,131,980	7,398,015
Federal Home Loan Bank stock, at cost	219,100	274,700
Deferred income taxes	991,000	747,900
Bank-owned life insurance	147,508	141,703
Prepaid and refundable income taxes	160,250
Real estate owned	845,669	770,639
Other assets	615,383	906,834
Total Assets	134,308,619	136,172,399
Deposits
Non-interest bearing deposits	4,673,349	4,161,255
Interest-bearing deposits	116,915,542	116,681,155
Total deposits	121,588,891	120,842,410
Line of credit from Atlantic Central Bankers Bank		1,000,000
Advances from Federal Home Loan Bank		1,100,000
Accrued interest payable	15,912	22,658
Advance payments by borrowers for taxes and insurance	399,920	394,864
Other liabilities	560,432	599,146
Total liabilities	122,565,155	123,959,078
Stockholders’ Equity
Preferred stock, $.01 par value, 3,000,000 shares authorized; None issued	0	0
Common stock, $.01 par value, 7,000,000 shares authorized; 1,634,725 shares issued and outstanding as of March 31, 2012 and 2011	16,347	16,347
Additional paid-in capital	6,590,557	6,606,577
Retained earnings, substantially restricted	5,656,867	6,150,811
Unearned common stock held by employee stock ownership plan	(480,608)	(512,648)
Accumulated other comprehensive loss	(39,699)	(47,766)
Total stockholders’ equity	11,743,464	12,213,321
Total Liabilities and Stockholders’ Equity	$ 134,308,619	$ 136,172,399

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Consolidated Statements of Changes in Stockholders' Equity (Parentheticals) (USD $)	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Common Stock Held By ESOP [Member]
Common stock transferred to ESOP for services, shares (in Shares)	3,204.05	3,204.05
Accumulated Other Comprehensive Income (Loss) [Member]
Deferred income taxes, change in unrealized gain	2,385	(1,478)
Deferred income taxes, postretirement benefit plan	2,993

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Note 15 - Employee Benefits

12 Months Ended

Mar. 31, 2012

Compensation and Employee Benefit Plans [Text Block]

15.   EMPLOYEE BENEFITS

Cash/Deferred Profit Sharing Plan

The Bank maintains a cash/deferred profit sharing plan covering all full time employees with one year of service and who are at least twenty-one years of age.  Participants enter the Plan on the 1st of January or 1st of July subsequent to meeting the above requirements.

The Bank may contribute up to 10% of the annual compensation of each eligible employee.  The Bank’s contribution to the plan was $-0- for the years ended March 31, 2012 and 2011.

Retirement Incentive Plan

A retired officer of the Bank is covered by a Retirement Incentive Plan that pays him $1,416.67 per month for ten years from the date of retirement at age sixty-five.

To fund the above benefit, the Bank has purchased and is the sole beneficiary of a life insurance policy on the life of the officer.  The cash surrender value of this policy was $147,508and $141,703as of March 31, 2012 and 2011, respectively, and is reflected on the consolidated statement of financial position as Bank-owned life insurance.

Delanco Bancorp, Inc. 2008 Equity Incentive Plan

On May 19, 2008, the Board of Directors adopted, and the stockholders approved on August 18, 2008, the Delanco Bancorp, Inc. 2008 Equity Incentive Plan.

The Board of Directors has reserved a total of 112,141 shares of common stock for issuance upon the grant or exercise of awards made pursuant to the 2008 Plan.  All the Company’s employees, officers, and directors are eligible to participate in the 2008 Plan.  As of March 31, 2012, no awards have been made under the 2008 Plan.

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Note 17 - Employee Stock Ownership Plan (ESOP)

12 Months Ended

Mar. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

17.   EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

In March 2007, the Company established an Employee Stock Ownership Plan (“ESOP”) covering all eligible employees as defined by the ESOP.  The ESOP is a tax-qualified plan, designed to invest in the Company’s common stock, which provides employees with the opportunity to receive a funded retirement benefit based primarily on the value of the Company’s common stock.  The Company accounts for its ESOP in accordance with FASB ASC 718-40-50 (formerly SOP 93-6).

To purchase the Company’s common stock, the ESOP borrowed $640,810 from the Company to purchase 64,081 shares of the Company’s common stock in the Company’s initial public offering.  The ESOP loan is being repaid principally from the Bank’s contributions to the ESOP over a period of up to 20 years.  Dividends declared on common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan.  Compensation expense is recognized in accordance with SOP 93-6.  The number of shares released annually is based upon the ratio that the current principal and interest payment bears to the current and all remaining scheduled future principal and interest payments.

All shares that have not been released for allocation to participants are held in a suspense account by the ESOP for future allocation as the loan is repaid.  Unallocated common stock purchased by the ESOP is recorded as a reduction of stockholders’ equity at cost.  As of March 31, 2012, the Company had allocated a total of 16,020 shares from the suspense account to participants.  The Company recognized compensation expense related to the ESOP of $16,020 and $12,816 for the years ended March 31, 2012 and 2011, respectively.

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Net income (loss)	$ (493,944)	$ 467,847
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of ESOP	16,020	12,816
Deferred income tax (benefit)	(240,996)	282,610
Depreciation	325,603	343,936
Amortization of premiums and discounts, net	(2,859)	(43,447)
Income from bank owned life insurance	(5,805)	(5,699)
Provision for loan losses	1,601,892	440,100
Changes in operating assets and liabilities (Increase) decrease in:
Accrued interest receivable	41,422	34,158
Other assets	291,451	296,842
Prepaid and refundable income taxes	(160,250)	11,822
Real estate owned	(75,030)	221,295
Increase (decrease) in:
Accrued interest payable	(6,746)	(22,922)
Other liabilities	(38,714)	45,152
Net cash provided by operating activities	1,252,044	2,084,510
Cash Flows from Investing Activities
Proceeds from sale of securities available-for-sale	12,199	6,404
Purchases of securities held-to-maturity	(19,000,000)	(12,894,320)
Proceeds from maturities and principal repayments of securities held-to-maturity	17,241,424	13,601,302
Redemption of Federal Home Loan Bank stock	55,600	(68,000)
Net decrease in loans	2,833,820	2,317,646
Purchases of premises and equipment	(59,568)	(17,983)
Net cash provided by investing activities	1,083,475	2,945,049
Cash Flows from Financing Activities
Net increase (decrease) in deposits	746,481	(6,321,172)
Net increase (decrease) in advance payments by borrowers for taxes and insurance	5,056	(29,427)
(Payments) borrowing on line of credit from Atlantic Central Bankers Bank	(1,000,000)	1,000,000
(Payments on) advances from Federal Home Loan Bank	(1,100,000)	1,100,000
Net cash used in financing activities	(1,348,463)	(4,250,599)
Net Increase in Cash and Cash Equivalents	987,056	778,960
Cash and Cash Equivalents, Beginning of Year	5,662,629	4,883,669
Cash and Cash Equivalents, End of Year	6,649,685	5,662,629
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest	1,438,264	1,912,576
Cash paid during the year for income taxes	161,920	3,540
Loans transferred to real estate owned	620,685	578,966
Total increase (decrease) in unrealized gain on securities available-for-sale, net of tax	$ 3,578	$ (2,218)

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Consolidated Statements of Financial Condition (Parentheticals) (USD $)	Mar. 31, 2012	Mar. 31, 2011
Securities held-to-maturity, fair value (in Dollars)	$ 17,606,748	$ 15,680,809
Securities available-for-sale, amortized cost (in Dollars)	237,096	249,295
Allowance for loan losses (in Dollars)	$ 1,160,535	$ 1,286,301
Preferred stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	3,000,000	3,000,000
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares issued	1,634,725	1,634,725
Common stock, shares outstanding	1,634,725	1,634,725

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Note 10 - Federal Home Loan Bank Stock

12 Months Ended

Mar. 31, 2012

Investment Holdings [Text Block]

10.   FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the Federal Home Loan Bank System.  As a member, the Bank maintains an investment in the capital stock of the Federal Home Loan Bank of New York in an amount not less than 1% of its outstanding home loans or 1/20 of its outstanding notes payable, if any, to the Federal Home Loan Bank of New York, whichever is greater, as calculated December 31 of each year.

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Document And Entity Information (USD $)	12 Months Ended
	Mar. 31, 2012	Jun. 29, 2012	Sep. 30, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Delanco Bancorp, Inc
Document Type	10-K
Current Fiscal Year End Date	--03-31
Entity Common Stock, Shares Outstanding		1,634,725
Entity Public Float			$ 8,200,000
Amendment Flag	false
Entity Central Index Key	0001382413
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

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Note 11 - Deposits

12 Months Ended

Mar. 31, 2012

Deposit Liabilities Disclosures [Text Block]

11.   DEPOSITS

Deposit account balances at March 31, 2012 and 2011 are summarized as follows:

	March 31, 2012
	Amount		Weighted Average Interest Rate			Percent of Portfolio
Non interest bearing accounts	$	4,673,349		3.84	%
Interest bearing checking accounts		13,086,105		0.32			10.76
Passbook savings accounts		14,491,025		0.20			11.92
Money Market accounts		25,244,199		0.74			20.76
Club accounts		141,683		0.40			0.12
		57,636,361					47.40

	March 31, 2012
	Amount		Weighted Average Interest Rate		Percent of Portfolio
Certificates of Deposits:
0.10% to 0.99%		15,700,425		0.81		12.92
1.00% to 1.99%		35,199,832		1.41		28.95
3.00% to 3.99%		13,050,095		3.18		10.73
4.00% to 4.99%		2,178		4.91
		63,952,530				52.60
	$	121,588,891				100.00	%

	March 31, 2011
	Amount		Weighted Average Interest Rate			Percent of Portfolio
Non interest bearing accounts	$	4,161,255		3.44	%
Interest bearing checking accounts		13,136,424		0.49			10.87
Passbook savings accounts		15,572,055		0.40			12.89
Money Market accounts		23,824,162		0.82			19.71
Club accounts		153,621		0.40			0.13
		56,847,517					47.04
Certificates of Deposits:
0.10% to 0.99%		5,359,163		0.78			4.44
1.00% to 1.99%		34,758,404		1.39			28.76
2.00% to 2.99%		13,226,418		2.50			10.95
3.00% to 3.99%		10,645,784		3.72			8.81
4.00% to 4.99%		5,124		4.82
		63,994,893					52.96
	$	120,842,410					100.00	%

The aggregate amount of time deposits including certificates of deposits with a minimum denomination of $100,000 or more was approximately $19,172,000 and $18,002,000 at March 31, 2012 and 2011, respectively.

Scheduled maturities of certificates of deposits at March 31, 2012 and 2011 are as follows:

	March 31,
	2012		2011
2012	$		$	42,877,600
2013		44,502,222		11,984,042
2014		11,872,809		4,797,660
2015		2,459,763		2,249,478
2016		3,752,417		2,086,113
2017		1,365,319
	$	63,952,530	$	63,994,893

The Bank held deposits from officers and directors of approximately $369,000 and $182,000 at March 31, 2012 and 2011, respectively.  These transactions were on the same terms as those prevailing at the time of comparable transactions with other persons.

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Consolidated Statements of Operations (USD $)	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Loans	$ 5,338,028	$ 6,061,439
Investment securities	553,237	631,675
Total interest income	5,891,265	6,693,114
Interest Expense
Interest-bearing checking accounts	54,092	83,730
Passbook and money market accounts	269,568	341,974
Certificates of deposits	1,107,622	1,463,898
Advances from Federal Home Loan Bank	236	52
Total interest expense	1,431,518	1,889,654
Net interest income	4,459,747	4,803,460
Provision for loan losses	1,601,892	440,100
Net interest income after provision for loan losses	2,857,855	4,363,360
Non-Interest Income
Service charges	145,301	134,655
Income from bank-owned life insurance	5,805	5,699
Rental income	21,958	6,733
Other	13,642	13,934
Net loss on sale of real estate owned	(36,382)	(27,472)
Total non-interest income	150,324	133,549
Non-Interest Expense
Salaries and employee benefits	1,583,294	1,579,165
Advertising	24,730	25,068
Office supplies, telephone and postage	97,549	90,070
Loan expense	203,126	(10,311)
Occupancy expense	648,635	718,731
Federal insurance premiums	282,555	381,252
Real estate owned – impairment losses	104,316	87,900
Data processing expenses	215,240	195,821
ATM expenses	24,810	21,844
Bank charges and fees	77,425	89,651
Insurance and surety bond premium	80,170	71,061
Dues and subscriptions	25,863	26,912
Professional fees	208,175	245,287
Real estate owned expenses	56,368	65,990
Other	118,919	151,538
Total non-interest expense	3,751,175	3,739,979
Income (Loss) Before Income Tax Expense (Benefit)	(742,996)	756,930
Income tax expense (benefit)	(249,052)	289,083
Net Income (Loss)	$ (493,944)	$ 467,847
Income (loss) per share
Basic (in Dollars per share)	$ (0.31)	$ 0.30
Diluted (in Dollars per share)	$ (0.31)	$ 0.30
Weighted average shares outstanding
Basic (in Shares)	1,586,664	1,583,460
Diluted (in Shares)	1,586,664	1,583,460

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Note 5 - Investment Securities

12 Months Ended

Mar. 31, 2012

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

5.     INVESTMENT SECURITIES

Investment securities have been classified according to management’s intent.  The amortized cost of securities and their approximate fair values as of March 31, 2012 and 2011 are as follows:

	Held-to-Maturity
	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Federal Home Loan Bank Bonds	$	3,944,679	$	5,438	$	(8,455	)	$	3,941,662
Federal Farm Credit Bonds		3,000,000		2,330		(25,440	)		2,976,890
Federal Home Loan Mortgage Corporation Bonds		1,499,258				(6,153	)		1,493,105
Federal National Mortgage Association		5,997,304		25,730		(33,549	)		5,989,485
Municipal Bond		104,320							104,320
		14,545,561		33,498		(73,597	)		14,505,462
Mortgage-Backed Securities:
Federal Home Loan Mortgage Corporation		1,429,534		89,059		(1,932	)		1,516,661
Federal National Mortgage Association		1,146,163		90,220		(243	)		1,236,140
Government National Mortgage Corporation		336,240		13,238		(993	)		348,485
		2,911,937		192,517		(3,168	)		3,101,286
Total	$	17,457,498	$	226,015		(76,765	)	$	17,606,748

	Held-to-Maturity
	March 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Federal Home Loan Bank Bonds	$	4,746,159	$	110	$	(162,712	)	$	4,583,557
Federal Farm Credit Bonds		1,000,133				(22,093	)		978,040
Federal Home Loan Mortgage Corporation Bonds		999,137				(14,417	)		984,720
Federal National Mortgage Association		2,000,000		2,915		(43,495	)		1,959,420
Municipal Bond		144,320							144,320
		8,889,749		3,025		(242,717	)		8,650,057

	Held-to-Maturity
	March 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair  Value
Mortgage-Backed Securities:
Federal Home Loan Mortgage Corporation		2,027,616		71,849					2,099,465
Federal National Mortgage Association		4,358,582		138,772		(80	)		4,497,274
Government National Mortgage Corporation		420,116		13,902		(5	)		434,013
		6,806,314		224,523		(85	)		7,030,752
Total	$	15,696,063	$	227,548		(242,802	)	$	15,680,809

	Available-for-Sale
	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses	Fair  Value
Mutual Fund Shares	$	237,096	$	4,730	$	$	241,826

	Available-for-Sale
	March 31, 2011
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses			Fair  Value
Mutual Fund Shares	$	249,295	$	$	(1,233	)	$	248,062

The following is a summary of maturities of securities held-to-maturity and available-for-sale as of March 31, 2012 and 2011.

	March 31, 2012
	Held-to-maturity				Available-for-sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	104,450	$	104,450	$		$
After one year through five years		510,271		531,593
After five years through ten years		3,444,444		3,449,467
After ten years		13,398,333		13,521,238
Equity securities						237,096		241,826
	$	17,457,498	$	17,606,748	$	237,096	$	241,826

	March 31, 2011
	Held-to-maturity				Available-for-sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	2,020,308	$	2,035,189	$		$
After one year through five years		1,880,356		1,898,902
After five years through ten years		6,754,359		6,605,651
After ten years		5,041,040		5,141,067
Equity securities						249,295		248,062
	$	15,696,063	$	15,680,809	$	249,295	$	248,062

The amortized cost and fair value of mortgage-backed securities are presented in the held-to-maturity category by contractual maturity in the preceding table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties.

Information pertaining to securities with gross unrealized losses at March 31, 2012 and 2011, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than 12 Months					12 Months or Greater		Total
March 31, 2012	Fair Value		Gross Unrealized Losses			Fair Value	Gross Unrealized Losses	Value		Unrealized Losses
Federal Home Loan Bank Bonds	$	2,000,000	$	(8,455	)	$	$	$	2,000,000	$	(8,455	)
Federal Farm Credit Bonds		2,500,000		(25,440	)				2,500,000		(25,440	)
Federal Home Loan Mortgage Corporation		1,499,258		(6,153	)				1,499,258		(6,153	)
Federal National Mortgage Association		4,497,304		(33,549	)				4,497,304		(33,549	)
		10,496,562		(73,597	)				10,496,562		(73,597	)
Mortgage-Backed Securities:
Federal Home Loan Mortgage Corporation		374,299		(1,932	)				374,299		(1,932	)
Federal National Mortgage Association		345,832		(243	)				345,832		(243	)
Government National Mortgage Association		39,060		(993	)				39,060		(993	)
		759,191		(3,168	)				759,191		(3,168	)
Total	$	11,255,753	$	(76,765	)	$	$	$	11,255,753	$	(76,765	)

	Less Than 12 Months					12 Months or Greater		Total
March 31, 2011	Fair Value		Gross Unrealized Losses			Fair Value	Gross Unrealized Losses	Value		Unrealized Losses
Federal Home Loan Bank Bonds	$	4,582,352	$	(162,712	)	$	$	$	4,582,352	$	(162,712	)
Federal Farm Credit Bonds		978,040		(22,093	)				978,040		(22,093	)
Federal Home Loan Mortgage Corporation		984,720		(14,417	)				984,720		(14,417	)
Federal National Mortgage Association		1,456,505		(43,495	)				1,456,505		(43,495	)
Municipal Bond
		8,001,617		(242,717	)				8,001,617		(242,717	)

	Less Than 12 Months					12 Months or Greater					0Total
March 31, 2011	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Value		Losses Unrealized
Mortgage-Backed Securities:
Federal National Mortgage Association		146,243		(80	)							146,243		(80	)
Government National Mortgage Association		580		(5	)							580		(5	)
		146,823		(85	)							146,823		(85	)
Mutual Fund Shares							247,637		(1,233	)		247,637		(1,233	)
Total	$	8,148,440	$	(242,802	)	$	247,637	$	(1,233	)	$	8,396,077	$	(244,035	)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2012, the twenty-six debt securities with unrealized losses have depreciated 0.68% from the Bank’s amortized cost basis.  These unrealized losses relate principally to current interest rates for similar types of securities.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.  As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary.

The Bank has pledged FFCB bond with a market value of approximately $503,000 and FHLMC mortgage-backed securities of $28,000 at March 31, 2012 and 2011, respectively, to the New Jersey Commissioner of Banking and Insurance under the provisions of the Government Unit Deposit Protection Act that enables the Bank to act as a public depository.

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Note 4 - Restrictions on Cash and Due From Banks

12 Months Ended

Mar. 31, 2012

Cash and Cash Equivalents Disclosure [Text Block]

4.     RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain reserve funds in vault cash or on deposit with the Federal Reserve Bank.  The Bank’s vault cash satisfied the required reserve at March 31, 2012 and 2011.

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Note 16 - Board of Directors' Retirement Plan

12 Months Ended

Mar. 31, 2012

Pension and Other Postretirement Benefits Disclosure [Text Block]

16.   BOARD OF DIRECTORS’ RETIREMENT PLAN

The Bank established a Defined Benefit Retirement Plan for the Bank’s Board of Directors on January 1, 2002.  This plan provides a monthly retirement benefit equal to 4% of the board fees payable as of their retirement date, multiplied by their completed years of service, up to a maximum of 80% of the final fee amount.  Directors must complete at least ten years of service in order to receive a retirement benefit under the plan.  Director retirement benefits are payable in equal monthly installments during the director’s lifetime, unless the director elects to receive a life annuity with the first 129 months guaranteed or a life annuity with either 50% or 100% (joint and survivor benefits) continuing for the spouse’s lifetime after the Director dies.  Under these other options, the retirement benefit is reduced to account for the value of the potential additional payments.

The estimated past service liability that will be amortized from accumulated other comprehensive income into net periodic pension costs over the next fiscal year is $11,684.

Net pension expense was $40,992 and $39,264 for years ended March 31, 2012 and 2011, respectively.  The components of net pension cost are as follows:

	Years Ended March 31,
	2012		2011
Service cost	$	5,044	$	3,712
Interest cost		20,228		20,208
Return on assets		528		152
Net amortization and deferral		15,192		15,192
Net periodic pension cost	$	40,992	$	39,264

The following table presents a reconciliation of the funded status of the defined benefit pension plan at March 31, 2012 and 2011:

	March 31,
	2012		2011
Accumulated benefit obligation	$	408,263	$	345,897
Projected benefit obligation		416,352		349,374
Fair value of plan assets		-0-		-0-
Unfunded projected benefit obligation		416,352		349,374

The following table presents a reconciliation of benefit obligations and plan assets:

	March 31,
	2012			2011
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$	349,374		$	335,542
Service cost		5,044			3,712
Interest cost		20,228			20,208
Actuarial (gain) loss		62,757			7,863
Benefits paid		(21,051	)		(17,951	)
Benefit obligation at end of year	$	416,352		$	349,374

	March 31,
	2012			2011
Change in Plan Assets
Fair value of Plan assets at beginning of year	$	-0-		$	-0-
Actual return on Plan assets		-0-			-0-
Employer contributions		21,051			17,951
Benefits paid		(21,051	)		(17,951	)
Fair value of Plan assets at end of year	$	-0-		$	-0-

Actuarial assumptions used in determining pension amounts are as follows:

	Years Ended March 31,
	2012			2011
Discount rate for periodic pension cost		6.00	%		6.25	%
Discount rate for benefit obligation		5.00	%		6.00	%
Rate of increase in compensation levels and social security wage base		2.00	%		4.00	%
Expected long-term rate of return on plan assets		N/A			N/A

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Note 12 - Line of Credit From Atlantic Central Bankers Bank

12 Months Ended

Mar. 31, 2012

Debt Disclosure [Text Block]

12.   LINE OF CREDIT FROM ATLANTIC CENTRAL BANKERS BANK

The Bank maintains a line of credit with Atlantic Central Bankers Bank at a rate to be determined by the lender when funds are borrowed.  At March 31, 2012 and 2011, the outstanding balance on the unsecured line of credit was $ -0- and $1,000,000, respectively.

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Note 8 - Accrued Interest Receivable

12 Months Ended

Mar. 31, 2012

Other Assets Disclosure [Text Block]

8.     ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at March 31, 2012 and 2011 consists of the following:

	March 31,
	2012		2011
Loans	$	347,466	$	377,631
Investment securities		57,592		65,867
Mortgage backed securities		12,044		15,026
	$	417,102	$	458,524

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Note 6 - Loans

12 Months Ended

Mar. 31, 2012

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

6.     LOANS

The Bank monitors and assesses the credit risk of its loan portfolio using the classes set forth below.  These classes also represent the segments by which the Bank monitors the performance of its loan portfolio and estimates its allowance for loan losses.

Residential real estate loans consist of loans secured by one to four family residences located in the Bank’s market area. The Bank has originated one to four family residential mortgage loans in amounts up to 80% of the lesser of the appraised value or selling price of the mortgaged property without requiring mortgage insurance.  A mortgage loan originated by the Bank, for owner occupied property, whether fixed rate or adjustable rate, can have a term of up to 30 years.  Non-owner occupied property, whether fixed rate or adjustable rate, can have a term of up to 30 years.  Adjustable rate loan terms limit the periodic interest rate adjustment and the minimum and maximum rates that may be charged over the term of the loan based on the type of loan.

Commercial real estate loans are generally originated in amounts up to the lower of 80% of the appraised value or cost of the property and are secured by improved property such as multi-family dwelling units, office buildings, retail stores, warehouses, church buildings and other non-residential buildings, most of which are located in the Bank’s market area.  Commercial real estate loans are generally made with fixed interest rates which mature or reprice in 5 to 7 years with principal amortization of up to 25 years.

Commercial loans include short and long-term business loans and commercial lines of credit for the purposes of providing working capital, supporting accounts receivable, purchasing inventory and acquiring fixed assets.  The loans generally are secured by these types of assets as collateral and /or by personal guarantees provided by principals of the borrowers.

Construction loans will be made only if there is a permanent mortgage commitment in place.  Interest rates on commercial construction loans are typically in line with normal commercial mortgage loan rates, while interest rates on residential construction loans are slightly higher than normal residential mortgage loan rates.  These loans usually are adjustable rate loans and generally have terms of up to one year.

Consumer loans include installment loans and home equity loans, secured by first or second mortgages on homes owned or being purchased by the loan applicant.  Home equity term loans and credit lines are credit accommodations secured by either a first or second mortgage on the borrower’s residential property.  Interest rates charged on home equity term loans are generally fixed; interest on credit lines is usually a floating rate related to the prime rate.  The Bank generally requires a loan to value ratio of less than or equal to 80% of the appraised value, including any outstanding prior mortgage balance.

Loans at March 31, 2012 and 2011 are summarized as follows:

	March 31,
	2012			2011
Residential (one to four family) real estate	$	70,191,726		$	70,309,907
Multi-family and commercial real estate		17,130,030			19,872,062
Commercial		1,480,322			1,736,420
Home equity		9,986,541			11,906,354
Consumer		1,046,744			1,025,664
Construction		838,841			374,158
Total loans		100,674,204			105,224,565
Net deferred loan origination fees		(82,051	)		(70,934	)
Allowance for loan losses		(1,160,535	)		(1,286,301	)
		(1,242,586	)		(1,357,235	)
Loans, net	$	99,431,618		$	103,867,330

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act) made extensive changes tothe regulation of the Bank.  Under the Dodd-Frank Act, the Office of Thrift Supervision (OTS) was eliminated and responsibility for the supervision and regulation of federal savings associations such as the Bank was transferred to the Office of the Comptroller of the Currency (OCC) on July 21, 2011.  Under the authority issued to the OTS and now assumed by the OCC under the Home Owners Loan Act (HOLA) in 12 U.S.C. 1462 et seg. Subpart A, Section 560.93, the Bank is subject to a loans-to-one borrower limitation of 15% of capital funds.  At March 31, 2012, the loans-to-one-borrower limitation was $1.9 million; this excluded an additional 10% of adjusted capital funds or approximately $1.1 million, which may be loaned if collateralized by readily marketable securities.  At March 31, 2012, there were no loans outstanding or committed to any one borrower, which individually or in the aggregate exceeded the Bank’s loans-to-one-borrower limitations of 15% of capital funds.

A summary of the Bank’s credit quality indicators is as follows:

Pass – A credit which is assigned a rating of Pass shall exhibit some or all of the following characteristics:

a.  Loans that present an acceptable degree of risk associated with the financing being considered as measured against earnings and balance sheet trends, industry averages, etc.  Actual and projected indicators and market conditions provide satisfactory evidence that the credit will perform as agreed.

b.  Loans to borrowers that display acceptable financial conditions and operating results.  Debt service capacity is demonstrated and future prospects are considered good.

c.  Loans to borrowers where a comfort level is achieved by the strength of the cash flows from the business or project and the strength and quantity of the collateral or security position (i.e.; receivables, inventory and other readily marketable securities) as supported by a current valuation and/or the strong capabilities of a guarantor.

Special Mention – Loans on which the credit risk requires more than ordinary attention by the Loan Officer.  This may be the result of some erosion in the borrower’s financial condition, the economics of the industry, the capability of management, orchanges in the original transaction.  Loans which are currently sound yet exhibit potentially unacceptable credit risk or deteriorating long term prospects, will receive this classification.  Loans which deviate from loan policy or regulations will not generally be classified in this category, but will be separately reported as an area of concern.

Classified – Classified loans include those considered by the Bank to be substandard, doubtful or loss.

An asset is considered “substandard” if it involves more than an acceptable level of risk due to a deteriorating financial condition, unfavorable history of the borrower, inadequate payment capacity, insufficient security or other negative factors within the industry, market or management.  Substandard loans have clearly defined weaknesses which can jeopardize the timely payment of the loan.

Assets classified as “doubtful” exhibit all of the weaknesses defined under the substandard category but with enough risk to present a high probability of some principal loss on the loan, although not yet fully ascertainable in amount.

Assets classified as “loss” are those considered uncollectible or of little value, even though a collection effort may continue after the classification and potential charge-off.

Non-Performing Loans

Non-performing loans consist of non-accrual loans (loans on which the accrual of interest has ceased), loans over ninety days delinquent and still accruing interest, renegotiated loans and impaired loans.  Loans are generally placed on non-accrual status if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more, unless the collateral is considered sufficient to cover principal and interest and the loan is in the process of collection.

The following table represents loans by credit quality indicator at March 31, 2012:

	Pass		Special Mention Loans		Classified Loans		Non- Performing Loans		Total
Residential real estate	$	66,519,655	$	482,187	$	201,373	$	2,988,511	$	70,191,726
Multi-family and commercial real estate		11,245,514		248,424		1,381,066		4,255,026		17,130,030
Commercial		1,184,731		261,371		34,220				1,480,322
Home equity		9,986,541								9,986,541
Consumer		1,046,744								1,046,744
Construction		785,602		53,239						838,841
	$	90,768,787	$	1,045,221	$	1,616,659	$	7,243,537	$	100,674,204

The following table represents past-due loans as of March 31, 2012:

	30-89 Days Past Due and Still Accruing			90 Days or More Past Due and Still Accruing			Total Past Due and Still Accruing			Accruing Current Balances			Non- Accrual Balances			Total Loan Balances
Residential real estate	$	1,262,391		$			$	1,262,391		$	65,940,824		$	2,988,511		$	70,191,726
Multi-family and commercial real estate		1,204,668						1,204,668			11,670,336			4,255,026			17,130,030
Commercial		220,673						220,673			1,259,649						1,480,322
Home equity		41,983						41,983			9,944,558						9,986,541
Consumer		41,438						41,438			1,005,306						1,046,744
Construction											838,841						838,841
Total Loans	$	2,771,153		$			$	2,771,153		$	90,659,514		$	7,243,537		$	100,674,204
Percentage of Total Loans		2.75	%		N/A	%		2.75	%		90.05	%		7.20	%		100.0	%

The following table represents loans by credit quality indicator at March 31, 2011:

	Pass		Special Mention Loans		Classified Loans		Non- Performing Loans		Total
Residential real estate	$	61,096,650	$		$		$	1,778,502	$	62,875,152
Multi-family and commercial real estate		14,626,607		665,019		4,201,080		2,373,864		21,866,570
Commercial		1,294,682		360,796		34,471		46,471		1,736,420
Home equity		16,152,592						1,194,009		17,346,601
Consumer		1,014,946						10,718		1,025,664
Construction		374,158								374,158
	$	94,559,635	$	1,025,815	$	4,235,551	$	5,403,564	$	105,224,565

The following table represents past-due loans as of March 31, 2011:

	30-89 Days Past Due and Still Accruing			90 Days or More Past Due and Still Accruing			Total Past Due and Still Accruing			Accruing Current Balances			Non- Accrual Balances			Total Loan
Residential real estate	$	873,156		$			$	873,156		$	60,223,494		$	1,778,502		$	62,875,152
Multi-family and commercial
real estate		959,912						959,912			18,532,794			2,373,864			21,866,570
Commercial		320,098						320,098			1,369,851			46,471			1,736,420
Home equity		304,426						304,426			15,848,166			1,194,009			17,346,601
Consumer		20,386						20,386			994,560			10,718			1,025,664
Construction											374,158						374,158
Total Loans	$	2,477,978		$			$	2,477,978		$	97,343,023		$	5,403,564		$	105,224,565
Percentage of Total Loans		2.35	%		N/A	%		2.35	%		92.51	%		5.14	%		100.0	%

Impaired loans are measured based on the present value of expected future discounted cash flows, the fair value of the loan or the fair value of the underlying collateral if the loan is collateral dependent. The recognition of interest income on impaired loans is the same for non-accrual loans discussed above. At March 31, 2012, the Bank had 25 loan relationships totaling $7,243,537 in non-accrual loans as compared to 23 relationships totaling $5,403,564 at March 31, 2011. At March 31,2012,the Bank had no impaired loan relationships in which impaired loans had a related allowance for credit losses. The average balance of impaired loans totaled $8,476,876 for 2012 as compared to $5,444,577 for 2011, and interest income recorded on impaired loans during the year ended March 31, 2012 totaled $152,910 as compared to $154,440 for March 31, 2011.

The following table represents data on impaired loans at March 31, 2012 and 2011:

	March 31,
	2012		2011
Impaired loans for which a valuation allowance has been provided	$	-0-	$	2,881,997
Impaired loans for which no valuation allowance has been provided		8,630,741		2,576,471
Total loans determined to be impaired	$	8,630,741	$	5,458,468
Allowance for loans losses related to impaired loans	$	-0-	$	502,247
Average recorded investment in impaired loans	$	8,545,736	$	5,444,577
Cash basis interest income recognized on impaired loans	$	152,910	$	154,440

The following table presents impaired loans by portfolio class at March 31, 2012:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with a valuation allowance:
Residential real estate	$		$		$		$		$
Multi-family and commercial real estate
Commercial
Home equity
Consumer
Construction
Subtotal	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with no valuation allowance:
Residential real estate	$	3,357,392	$	3,343,613	$		$	3,442,636	$	66,366
Multi-family and commercial real estate		5,287,128		5,287,128				4,852,947		86,544
Commercial								19,363
Home equity								111,121
Consumer								119,669
Construction
Subtotal	$	8,644,520	$	8,630,741	$	-0-	$	8,545,736	$	152,910
Total impaired loans:
Residential real estate	$	3,357,392	$	3,343,613	$		$	3,442,636	$	66,366
Multi-family and commercial real estate		5,287,128		5,287,128				4,852,947		86,544
Commercial								19,363
Home equity								111,121
Consumer								119,669
Construction
Total	$	8,644,520	$	8,630,741	$	-0-	$	8,545,736	$	152,910

The following table presents impaired loans by portfolio class at March 31, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with a valuation allowance:
Residential real estate	$	985,636	$	937,455	$	211,001	$	972,411	$
Multi-family and commercial real estate		1,438,858		1,438,858		209,000		1,439,056		40,238
Commercial		46,471		46,471		46,471		41,471		1,554
Home equity		403,257		403,257		28,000		403,257
Consumer		7,775		7,775		7,775		7,775
Construction
Subtotal	$	2,881,997	$	2,833,816	$	502,247	$	2,863,970	$	41,792

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While On Impaired Status
Impaired loans with no valuation allowance:
Residential real estate	$	847,770	$	841,046	$		$	849,738	$	33,577
Multi-family and commercial real estate		935,007		935,007				935,702		51,262
Commercial
Home equity		790,752		790,752				791,193		27,529
Consumer		2,942		2,942				3,974		280
Construction
Subtotal	$	2,576,471	$	2,569,747	$		$	2,580,607	$	112,648
Total impaired loans:
Residential real estate	$	1,833,406	$	1,778,501	$	211,001	$	1,822,149	$	33,577
Multi-family and commercial real estate		2,373,865		2,373,865		209,000		2,374,758		91,500
Commercial		46,471		46,471		46,471		41,471		1,554
Home equity		1,194,009		1,194,009		28,000		1,194,450		27,529
Consumer		10,717		10,717		7,775		11,749		280
Construction
Total	$	5,458,468	$	5,403,563	$	502,247	$	5,444,577	$	154,440

	March 31,
	2012			2011
Non-accrual loans:
Residential real estate	$	2,988,511		$	2,972,510
Multi-family and commercial real estate		4,255,026			2,373,865
Commercial		46,471
Consumer		10,717
Construction
Total non-accrual loans		7,243,537			5,403,563
Impaired loans		1,387,204			2,438,318
Total non-performing loans		8,630,741			7,841,881
Real estate owned		845,669			770,639
Total non-performing assets	$	9,476,410		$	8,612,520
Non-performing loans as a percentage of loans		8.57	%		4.99	%
Non-performing assets as a percentage of loans and real estate owned		9.34	%		8.19	%
Non-performing assets as a percentage of total assets		7.06	%		6.33	%

During the year ended March 31, 2012, the Bank experienced a $1,840,000 net increase in non-accrual loans.  Thischangereflects the downgrading of eight loan relationships to non-accrual status totaling $3.3 million during the year ended March 31, 2012.  The downgraded loans consisted of four relationships representing residential mortgage and home equityloans totaling $797 thousand and four commercial relationships representing six loans totaling $2.5 million, partially offsetby the return of two loan relationships consisting of two loans totaling $186 thousand to an accruing basis, the transfer to real estate owned of one relationship consisting of one loan totaling $326 thousand, the payoff of one relationship consisting of one loan totaling $42 thousand and by total charge-offs of three loan relationships representing three loans in the amount of $57 thousand and the partial charge-off of 11 relationships consisting of 11 loans by $870 thousand.

The following table sets forth with respect to the Bank’s allowance for losses on loans:

	March 31,
	2012			2011
Balance at beginning of year	$	1,286,301		$	998,526
Provision:
Commercial		(3,670	)		20,901
Commercial real estate		642,863			(1,741	)
Residential real estate		580,660			413,160
Consumer		382,039			7,780
Total Provision	$	1,601,892		$	440,100

	March 31,
	2012			2011
Charge-Offs:
Commercial		816,329			143,491
Residential real estate		536,533			30,914
Consumer		400,552			31,601
Recoveries		(25,756	)		(53,681	)
Total Net Charge-Offs		1,727,658			152,325
Balance at end of year	$	1,160,535		$	1,286,301
Year-end loans outstanding	$	100,674,204		$	105,224,565
Average loans outstanding	$	102,605,642		$	105,400,000
Allowance as a percentage of year-end loans		1.15	%		1.22	%
Net charge-offs as a percentage of average loans		1.68	%		0.15	%

Additional details for changes in the allowance for loan by loan portfolio as of March 31, 2012 are as follows:

Allowance for Loan Losses
	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Total
Balance, beginning of year	$	70,422		$	595,828		$	507,536		$	112,515		$	1,286,301
Loan charge-offs		(46,472	)		(769,857	)		(536,533	)		(400,552	)		(1,753,414	)
Recoveries		20,236			1,348			4,172			25,756
Provision for loan losses		(3,670	)		642,863			580,660			382,039			1,601,892
Balance, end of year	$	40,516		$	468,834		$	553,011		$	98,174		$	1,160,535

Additional details for changes in the allowance for loan by loan portfolio as of March 31, 2011 are as follows:

Allowance for Loan Losses
	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Total
Balance, beginning of year	$	100,584		$	681,621		$	125,290		$	91,031		$	998,526
Loan charge-offs		(51,063	)		(92,429	)		(30,914	)		(31,601	)		(206,007	)
Recoveries		8,377			45,305			53,682
Provision for loan losses		20,901			(1,741	)		413,160			7,780			440,100
Balance, end of year	$	70,422		$	595,828		$	507,536		$	112,515		$	1,286,301

The Bank prepares an allowance for loan loss model on a quarterly basis to determine the adequacy of the allowance.  Management considers a variety of factors when establishing the allowance, such as the impact of current economic conditions, diversification of the loan portfolio, delinquency statistics, results of independent loan review and related classifications.  The Bank’s historic loss rates and the loss rates of peer financial institutions are also considered.  In evaluating the Bank’s allowance for loan loss, the Bank maintains a loan committee consisting of senior management and the Board of Directors that monitors problem loans and formulates collection efforts and resolution plans for each borrower.  On a monthly basis, the loan committee meets to review each problem loan and determine if there has been any change in collateral value due to changes in market conditions.  Each quarter, when calculating the allowance for loan loss, the loan committee reviews an updated loan impairment analysis on each problem loan to determine if a specific provision for loan loss is warranted.  Management reviews the most recent appraisal on each loan adjusted for holding and selling costs.  In the event there is not a recent appraisal on file, the Bank will use the aged appraisal and apply a discount factor to the appraisal and then adjust the holding and selling costs from the discounted appraisal value.  At March 31, 2012, the Bank maintained an allowance for loan loss ratio of 1.15% to year end loans outstanding.  On a linked basis, non-performing assets have increased by $863,890 over their stated levels at March 31, 2011 representing a non-performing asset to total asset ratio of 7.06% at March 31, 2012 as compared to a non-performing asset to total asset ratio of 6.33% at March 31, 2011.

The Bank’s charge-off policy states that any asset classified loss shall be charged-off within thirty days of such classification unless the asset has already been eliminated from the books by collection or other appropriate entry.  On a quarterly basis, the loan committee will review past due, classified, non-performing and other loans, as it deems appropriate, to determine the collectability of such loans.  If the loan committee determines a loan to be uncollectable, the loan shall be charged to the allowance for loan loss.  In addition, upon reviewing the collectability, the loan committee may determine a portion of the loan to be uncollectable; in which case that portion of the loan deemed uncollectable will be partially charged-off against the allowance for loan loss.

For the year ending March 31, 2012, the Bank experienced seven charge-offs relating to seven loan relationships totaling $447,023 and nineteen partial charge-offs relating to nineteen loan relationships totaling $1,306,391 as compared to charge-offs of six loans representing six relationships totaling $206,006 for the year ended March 31, 2011.

In the ordinary course of business, the Bank has and expects to continue to have transactions, including borrowings, with its officers and directors.  In the opinion of management, transactions with directors were on substantially the same terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Bank.  Officers of the Company are entitled to 1% loan discount, under a Bank-wide employee discount program, from those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Bank.  Loans to such borrowers are summarized as follows:

	March 31,
	2012			2011
Balance, beginning of year	$	575,866		$	1,008,961
Payments		(65,953	)		(433,095	)
Borrowings		74,500
Balance, end of year	$	584,413		$	575,866

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Note 7 - Loan Servicing

12 Months Ended

Mar. 31, 2012

Transfers and Servicing of Financial Assets [Text Block]

7.     LOAN SERVICING

Mortgage loans serviced for others are not included in the accompanying statement of financial condition.  The unpaid principal balances of these loans at March 31, 2012 and 2011 are summarized as follows:

	March 31,
	2012		2011
Mortgage Loan Servicing Portfolio:
Mortgage Partnership
Finance FHLB New York	$	405,618	$	416,553

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Note 9 - Premises and Equipment

12 Months Ended

Mar. 31, 2012

Property, Plant and Equipment Disclosure [Text Block]

9.     PREMISES AND EQUIPMENT

Premises and equipment at March 31, 2012 and 2011 consists of the following:

	March 31,
	2012			2011
Land	$	1,451,203		$	1,451,203
Buildings		6,848,967			6,808,979
Furniture, fixtures and equipment		1,900,900			1,881,320
		10,201,070			10,141,502
Accumulated depreciation		(3,069,090	)		(2,743,487	)
	$	7,131,980		$	7,398,015

Depreciation expense amounted to $325,603 and $343,936 for the years ended March 31, 2012 and 2011, respectively.

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Note 14 - Income Taxes

12 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Text Block]

14.   INCOME TAXES

The Company is subject to federal income tax and New Jersey state income tax.

The Company and subsidiary file a consolidated federal income tax return.  The Company’s consolidated provision for income taxes for the years ended March 31, 2012 and 2011 consists of the following:

	Years Ended March 31,
	2012			2011
Income Tax Expense (benefit)
Current federal tax expense
Federal	$	-0-		$	3,700
State		3,000			3,500
Deferred tax (benefit)
Federal		(196,352	)		224,500
State		(55,700	)		57,383
	$	(249,052	)	$	289,083

Valuation Allowance

Since the year ending March 31, 2007, the Company reported significant cumulative losses and generated substantial net operating losses for federal and state income tax purposes.  To date, the Company has been able to utilize a substantial portion of its federal net operating losses by carrying these losses back five years.  The remaining unused federal net operating losses can be carried forward for a maximum of twenty years.  Due to the extensive carryforward period, among other things, the Company concluded that it was more likely than not that the federal net operating loss carryforwards would eventually be realized.

The consolidated provision for income taxes for the years ended March 31, 2012 and 2011 differs from that computed by applying federal statutory rates to income before federal income tax expense, as indicated in the following analysis:

	Years Ended March 31,
	2012			2011
Expected federal tax provision (benefit) at 34% rate	$	(252,619	)	$	257,356
State income tax effect		3,709			33,861
Bank owned life insurance					(1,938	)
Municipal bond interest		(142	)		(196	)
Income tax (benefit)	$	(249,052	)	$	289,083
Effective tax rate (benefit)		(33.5	%)		38.0	%

A summary of deferred tax assets and liabilities as of March 31, 2012 and 2011 are as follows:

	March 31,
	2012			2011
Deferred tax assets:
Accrued pension costs	$	4,200		$	9,600
Accrued post retirement medical plan		1,700			7,300
Accrued retirement plan		15,700			21,700
Allowance for loan losses		413,100			439,000
Directors’ benefit plans		119,400			111,300
FASB 158 – unrecognized transition costs		28,400			31,400
Net operating loss carryforward		438,700			186,000
Unrealized losses on securities available-for-sale		500
Non accrual interest		44,000			29,000
Total deferred tax assets	$	1,065,200		$	835,800
Deferred tax liabilities:
Accumulated depreciation	$	(72,300	)	$	(87,900	)
Unrealized gains on securities available-for-sale		(1,900	)
Total deferred tax liabilities		(74,200	)		(87,900	)
NET DEFERRED TAX ASSETS	$	991,000		$	747,900

The Company accounts for uncertainties in income taxes in accordance with Financial ASC Topic 740 “Accounting for Uncertainty in Income Taxes”.  ASC Topic 740 prescribes a threshold and measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return.  ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company has determined that there are no significant uncertain tax positions requiring recognition in its financial statements.

In the event the Company is assessed for interest and/or penalties by taxing authorities, such assessed amounts will be classified in the financial statements as income tax expense.  Tax years 2008 through 2011 remain subject to examination by Federal and New Jersey taxing authorities.

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

The Company has federal net operating loss carryforwards of approximately $680,000 and state net operating loss carryforwards of approximately $2,711,000 at March 31, 2012.

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Note 19 - Fair Values of Financial Instruments

12 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Text Block]

19.   FAIR VALUES OF FINANCIAL INSTRUMENTS

ASC Topic No. 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value under U.S. generally accepted accounting principles, and expands disclosure requirements for fair value measurements.  ASC Topic No. 820 does not require any new fair value measurements.  The adoption of ASC Topic No. 820 did not have a material impact on the Company’s consolidated financial statements.

ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:

Level 1:  Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2:  Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly orindirectly.  Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not consideredto be active, and observable inputs other than quoted prices such as interest rates.

Level 3:  Level 3 inputs are unobservable inputs.

The fair value of securities available for sale are determined by obtaining quoted prices on a nationally recognized securities exchange (Level 1 inputs) of matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input significant to the fair value measurement.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Other Unobservable Inputs (Level 3)
March 31, 2012
Available-for-sale securities	$	241,826	NONE	NONE
March 31, 2011
Available-for-sale securities	$	248,062	NONE	NONE

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis at March 31, 2012 and 2011 are as follows:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
March 31, 2012
Impaired loans	$		$	7,388,957	$
Real estate owned				845,669
Total	$	NONE	$	8,234,626	$	NONE
March 31, 2011
Impaired loans	$		$	5,458,468	$
Real estate owned				770,639
Total	$	NONE	$	6,229,107	$	NONE

The fair value of impaired loans and real estate owned with specific allocations of the allowance for loan losses is generallybased on recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies.  However, considerable judgment is required to interpret market data to develop the estimates of fair value.  Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows:

Cash and cash equivalents, accrued interest receivable, and accrued interest payable

The items are generally short-term in nature, and accordingly, the carrying amounts reported in the consolidated statements of financial condition are reasonable approximations of their fair values.

Investment securities

Fair values for investment securities are based on quoted market prices, if available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as residential mortgage, construction, land and consumer.  Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories.

Fair value of performing loans is estimated by discounting cash flows using estimated market discount rates at which similar loans would be made to borrowers and reflect similar credit ratings and interest rate risk for the same remaining maturities.

Fair value for significant nonperforming loans is based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows.

Real estate owned

The carrying amounts approximate the fair value.

Deposits

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, and NOW and money market accounts, is equal to the amount payable on demand.  The fair value of certificates of deposit is based on the discounted value of contractual cash flows.  The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Lines of Credit from Atlantic Central Bankers Bank and Advances from Federal Home Loan Bank

The carrying amounts approximate the fair value.

Accrued interest

The carrying amounts of accrued interest approximate the fair values.

Advanced payments by borrowers for taxes and insurance (escrows)

The carrying amounts of escrow accounts approximate fair value.

Off-balance sheet instruments

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

As required by ASC Topic No. 825-10-65, the estimated fair value of financial instruments at March 31, 2012 and 2011 are as follows:

	March 31, 2012				March 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	6,649,685	$	6,649,685	$	5,662,629	$	5,662,629
Investment securities		17,694,594		17,848,574		15,945,358		15,928,871
Loans - net		99,431,618		103,700,000		103,867,330		107,877,000
FHLB stock		219,100		219,100		274,700		274,700
Accrued interest receivable		417,102		417,102		458,524		458,524
Real estate owned		845,669		845,669		770,639		770,639
Total financial assets	$	125,257,768	$	129,680,130	$	126,979,180	$	130,972,363
Financial Liabilities:
Deposits		121,588,891		122,204,000		120,842,410		122,053,000
Line of credit from ACBB						1,000,000		1,000,000
Advances from FHLB						1,100,000		1,100,000
Advance payments by borrowers for taxes and insurance		399,920		399,920		394,864		394,864
Accrued interest payable		15,912		15,912		22,658		22,658
Total financial liabilities	$	122,004,723	$	122,619,832	$	123,359,932	$	124,570,522
	March 31, 2012				March 31, 2011
	Contract Value		Estimated Fair Value		Contract Value		Estimated Fair Value
Off-balance sheet instruments:
Commitments to extend credit	$	5,337,000	$	5,337,000	$	5,706,000	$	5,706,000

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Consolidated Statements of Changes in Stockholders' Equity (USD $)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Common Stock Held By ESOP [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Comprehensive Income [Member]	Total
BALANCES, MARCH 31, 2010 at Mar. 31, 2010	$ 16,347	$ 6,625,801	$ 5,682,964	$ (544,688)	$ (45,548)		$ 11,734,876
BALANCES, MARCH 31, 2010 (in Shares) at Mar. 31, 2010	1,634,725
Net income (loss)			467,847			467,847	467,847
Net change in unrealized gain (loss) on securities available- for-sale, net of deferred taxes					(2,218)	(2,218)	(2,218)
Comprehensive income (loss)						465,629
Common stock transferred to ESOP for services		(19,224)		32,040			12,816
Balance at Mar. 31, 2011	16,347	6,606,577	6,150,811	(512,648)	(47,766)		12,213,321
Balance (in Shares) at Mar. 31, 2011	1,634,725						1,634,725
Net income (loss)			(493,944)			(493,944)	(493,944)
Net change in unrealized gain (loss) on securities available- for-sale, net of deferred taxes					3,578	3,578	3,578
Postretirement benefit plan adjustments – net of deferred taxes of $2,993					4,489	4,489	4,489
Comprehensive income (loss)						(485,877)
Common stock transferred to ESOP for services		(16,020)		32,040			16,020
Balance at Mar. 31, 2012	$ 16,347	$ 6,590,557	$ 5,656,867	$ (480,608)	$ (39,699)		$ 11,743,464
Balance (in Shares) at Mar. 31, 2012	1,634,725						1,634,725

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Note 3 - Recent Accounting Pronouncements

12 Months Ended

Mar. 31, 2012

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

3.     RECENT ACCOUNTING PRONOUNCEMENTS

Below is a discussion of recent accounting pronouncements. Recent pronouncements not discussed below were deemed to not be applicable to the Company.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): The amendments in this update supersede certain pending paragraphs in ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to deliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private and nonprofit entities. The amendments in this update are effective for public entities for fiscal years, and interim annual periods within those years, beginning after December 15, 2011, consistent with ASU 2011-05. The Company will adopt the provisions of this guidance in its first fiscal quarter ending June 30, 2012.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet, Disclosure about Offsetting Assets and Liabilities (Topic210): The objective of this update is to provide enhanced disclosures that will enable users of its financial statements toevaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhancement disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they offset in accordance with either Section 210-20-45 or Sections 815-10-45. These amendments are effective for annual periods beginning on or after January 3, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

In December 2011, the FASB issued ASU 2011-10, Property, Plant and Equipment (Topic 360): The objective of this updateis to resolve the diversity in practice about whether the guidance in the Subtopic 360-20, Property, Plant and Equipment –Real Estate Sales, applies to a parent that ceases to have a controlling financial interest (as described in Subtopic 810-10 Consolidation – Overall) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. This update does not address whether the guidance in Subtopic 360-20 would apply to other circumstances when parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

In June 2011, the FASB issued ASU 2011-05,Comprehensive Income (Topic 220):Presentation of Comprehensive Income. This ASU amends theFASB Accounting Standards Codification(Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholder’s equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company will adopt the provisions of this guidance in its first fiscal quarter ending June 30, 2012.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to achieve Common FairValue Measurement (Topic 820) and Disclosure Requirement in U.S. GAAP and IFRSs. This ASU represents the convergedguidance of the FASB and the IASB (the “Boards”) on fair value measurement. The collective efforts of the Boards and their staff, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurement, including a consistent meaning of the term “fair value”. The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments in this update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

In April 2011, the FASB issued ASU 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Controlfor Repurchase Agreements. The ASU is intended to improve financial reporting of repurchase agreements (“repos”) andother agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments to the Codification in this ASU are intended to improve the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to purchase or redeem the financial assets. The amendments in this update apply to all entities, both public and nonpublic. This ASU is effective for the first interim or annual periods beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modification of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company does not anticipate any material impact to the consolidated financial statements related to this guidance.

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Note 20 - Financial Instruments With Off-Balance Sheet Risk

12 Months Ended

Mar. 31, 2012

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

20.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements.  The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments.  The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet.

Financial instruments whose contract amount represents credit risk were as follows:

	March 31,
Commitments to Extend Credit	2012		2011
Home equity lines of credit	$	4,319,000	$	4,407,000
Commercial lines of credit		968,000		1,298,000
Consumer lines of credit				1,000
Standby letters of credit		50,000
	$	5,337,000	$	5,706,000

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation.  Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party.  Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.

The Bank has not been required to perform on any financial guarantees during the past two years.  The Bank has not incurred any losses on its commitments in either 2012 or 2011.

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Note 13 - Advances From Federal Home Loan Bank

12 Months Ended

Mar. 31, 2012

Federal Home Loan Bank Advances, Disclosure [Text Block]

13.   ADVANCES FROM FEDERAL HOME LOAN BANK

As of March 31, 2012, the Bank had a borrowing capacity in a combination of term advances and overnight borrowings of up to $11,125,384 at the FHLB of New York.

Specific repos and other securities, with balances approximating $11,700,000 and $8,100,000 at March 31, 2012 and 2011, respectively, were pledged to the FHLB of New York as collateral.