Alliance Bancorp Inc Of Pennsylvania 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                 

Commission File No.:  001-33189

ALLIANCE BANCORP, INC. OF PENNSYLVANIA

(Exact name of registrant as specified in its charter)

Pennsylvania	56-2637804
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification Number)
541 Lawrence Road
Broomall, Pennsylvania	19008
(Address)	(Zip Code)

(610) 353-2900

(Registrant’s telephone number, including area code)

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

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 (§232.405 of this chapter) during the preceding 12 months (or for such a shorter period that the registrant was required to submit and post such files). Yes o   No o

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

The number of shares outstanding of Common Stock, par value $0.01 per share, of the Registrant as of August 7, 2009, was, 6,846,676.

ALLIANCE BANCORP, INC. OF PENNSYLVANIA

Index

		PAGE
Part I – Financial Information
Item 1.	Financial Statements
	Unaudited Consolidated Statements of Financial Condition as of June 30, 2009 and December 31, 2008	3
	Unaudited Consolidated Statements of Income For the Three and Six Months Ended June 30, 2009 and 2008	4
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2009 and 2008	5
	Unaudited Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2009 and 2008	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4T.	Controls and Procedures	33
Part II – Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other Information	35
Item 6.	Exhibits	35
	Signatures	36

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Part I — Item 1.

Alliance Bancorp, Inc. of Pennsylvania and Subsidiaries

Consolidated Statements of Financial Condition (unaudited)

(Dollar amounts in thousands, except per share data)

	June 30,			December 31,
	2009			2008
Assets
Cash and cash due from depository institutions	$	9,095		$	7,849
Interest bearing deposits with depository institutions	39,272			20,459
Total cash and cash equivalents	48,367			28,308
Investment securities available for sale	28,123			37,814
Mortgage-backed securities available for sale	27,295			31,921
Investment securities held to maturity (fair value - 2009, $25,514; 2008, $23,958)	25,903			24,256
Loans receivable - net of allowance for loan losses - 2009, $3,258; 2008, $3,169	280,942			278,437
Accrued interest receivable	1,952			2,028
Premises and equipment – net	2,568			2,764
Other real estate owned	2,100			—
Federal Home Loan Bank (FHLB) stock-at cost	2,439			2,439
Bank owned life insurance	11,012			10,830
Deferred tax asset, net	4,320			4,328
Prepaid expenses and other assets	1,362			985
Total Assets	$	436,383		$	424,110
Liabilities and Stockholders’ Equity
Liabilities
Non-interest bearing deposits	$	16,265		$	13,610
Interest bearing deposits	328,107			318,091
Total deposits	344,372			331,701
Demand notes issued to the U.S. Treasury	41			198
FHLB advances	37,000			37,000
Accrued expenses and other liabilities	6,472			6,312
Total Liabilities	387,885			375,211
Stockholders’ Equity
Common stock, $.01 par value; shares authorized – 15,000,000; shares issued - 7,225,000, and outstanding - 2009, 6,846,676, 2008, 6,957,676	72			72
Additional paid-in capital	24,029			24,029
Retained earnings - partially restricted	29,284			28,836
Unearned shares held by Employee Stock Ownership Plan (ESOP)	(670		)	(722		)
Accumulated other comprehensive loss	(926		)	(930		)
Treasury stock, at cost: 2009, 378,324 shares; 2008, 267,324 shares	(3,291		)	(2,386		)
Total Stockholders’ Equity	48,498			48,899
Total Liabilities and Stockholders’ Equity	$	436,383		$	424,110

See notes to unaudited consolidated financial statements.

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Alliance Bancorp, Inc. of Pennsylvania and Subsidiaries

Consolidated Statements of Income (unaudited)

(Dollar amounts in thousands, except per share data)

	For the ThreeMonths						For the SixMonths
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
Interest and Fees and Dividend Income
Loans	$	4,250		$	4,325		$	8,530		$	8,680
Mortgage-backed securities	320			372			674			771
Investment securities:
Taxable	326			305			731			618
Tax – exempt	304			275			601			545
Dividends	—			99			—			348
Balances due from depository institutions	38			176			68			472
Total interest and dividend income	5,238			5,552			10,604			11,434
Interest Expense
Deposits	1,856			2,251			3,812			5,004
FHLB advances and other borrowed money	589			589			1,171			1,179
Total interest expense	2,445			2,840			4,983			6,183
Net Interest Income	2,793			2,712			5,621			5,251
Provision for Loan Losses	75			45			150			210
Net Interest Income After Provision for Loan Losses	2,718			2,667			5,471			5,041
Other Income (Loss)
Service charges on deposit accounts	69			87			145			178
Management fees	90			96			180			192
Other fee income	45			42			82			82
Gain on sale of loans	—			2			—			4
Loss on the sale of investment securities	—			(153		)	—			(153		)
Impairment charge on investment securities	—			(266		)	—			(629		)
Increase in cash surrender value of bank owned life insurance	94			92			182			184
Other	1			1			1			1
Total other income (loss)	299			(99		)	590			(141		)
Other Expenses
Salaries and employee benefits	1,504			1,445			2,926			2,839
Occupancy and equipment	462			501			954			990
Advertising and marketing	88			107			145			186
Professional fees	135			134			277			236
Deposit insurance premiums	328			51			450			61
Loan and OREO expense	39			10			54			23
Other noninterest expense	331			369			689			731
Total other expenses	2,887			2,617			5,495			5,066
Income (Loss) Before Income Tax Expense (Benefit)	130			(49		)	566			(166		)
Income Tax Benefit	(83		)	(133		)	(59		)	(292		)
Net Income	$	213		$	84		$	625		$	126
Basic Earnings per Share	$	0.03		$	0.01		$	0.09		$	0.02

See notes to unaudited consolidated financial statements.

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Alliance Bancorp, Inc. of Pennsylvania and Subsidiaries

Consolidated Statements of Changes in Stockholders Equity (unaudited)

(Dollar amounts in thousands, except, per share amounts)

	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Partially Restricted			Unearned Shares Held by ESOP			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Comprehensive Income (Loss)
Balance, January 1, 2008	$	72	$	24,041	$	—		$	28,975		$	(843	)	$	(787	)	$	51,458
ESOP shares committed to be released											30						30
Net income								126									126			$	126
Dividends declared ($0.12 per share)								(379		)							(379		)
Acquisition of Treasury Stock (194,224 shares)					(1,782		)										(1,782		)
Other comprehensive loss – net of tax benefit of $127														(246		)	(246		)	(246		)
Balance, June 30, 2008	$	72	$	24,041	$	(1,782	)	$	28,722		$	(813	)	$	(1,033	)	$	49,207		$	(120	)
Balance, January 1, 2009	$	72	$	24,029	$	(2,386	)	$	28,836		$	(722	)	$	(930	)	$	48,899
ESOP shares committed to be released											52						52
Net income								625									625			$	625
Dividends declared ($0.06 per share)								(177		)							(177		)
Acquisition of Treasury Stock (110,000 shares)					(905		)										(905		)
Other comprehensive income – net of tax expense of $2														4			4			4
Balance, June 30, 2009	$	72	$	24,029	$	(3,291	)	$	29,284		$	(670	)	$	(926	)	$	48,498		$	629

See notes to unaudited consolidated financial statements.

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Alliance Bancorp, Inc. of Pennsylvania and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(Dollar amounts in thousands)

	For the Six Months
	Ended June 30,
	2009			2008
Cash Flow From Operating Activities
Net income	$	625		$	126
Adjustments to reconcile net income to cash provided by operating activities:
Provision for:
Loan losses	150			210
Depreciation and amortization	284			348
Gain on sale of loans	—			(4		)
Loss on the sale of investment securities	—			153
Impairment charge on investment securities	—			629
ESOP shares committed to be released	52			30
Origination of loans held for sale	—			(1,328		)
Deferred tax expense (benefit)	6			(324		)
Proceeds from loans sold in the secondary market	—			1,197
Changes in assets and liabilities which provided (used) cash:
Accrued expenses and other liabilities	160			5
Prepaid expenses and other assets	(377		)	(572		)
Increase in cash surrender value of bank owned life insurance	(182		)	(184		)
Accrued interest receivable	76			28
Net cash provided by operating activities	794			315
Cash Flow From Investing Activities
Purchase of investment securities-available for sale	(14,000		)	(13,000		)
Purchase of investment securities-held to maturity	(2,585		)	(2,635		)
Loans originated and acquired	(28,002		)	(35,887		)
Proceeds from maturities and calls of investment securities	24,421			15,620
Proceeds from the sale of investment securities-available for sale	—			15,406
Purchase of FHLB Stock	—			(136		)
Principal repayments of:
Loans	23,247			23,117
Mortgage-backed securities	4,840			4,356
Purchase of premises and equipment	(88		)	(210		)
Net cash provided by investing activities	7,833			6,631
Cash Flow From Financing Activities
Dividends paid	(177		)	(379		)
Increase (decrease) in deposits	12,671			(6,425		)
Purchase of treasury stock	(905		)	(1,782		)
(Increase) Decrease in demand notes issued to the U.S. Treasury	(157		)	61
Net cash provided by (used in) financing activities	11,432			(8,525		)
Increase (decrease) in Cash and Cash Equivalents	20,059			(1,579		)
Cash and Cash Equivalents, Beginning of Year	28,308			42,079
Cash and Cash Equivalents, End of Year	$	48,367		$	40,500
Supplemental Disclosures of Cash Flow Information-
Cash paid during the period for:
Interest	$	4,991		$	6,222
Income taxes	$	100		$	300
Supplemental Schedule of Noncash and Financial Investing Activities:
Other real estate acquired in settlement of loans	$	2,100		$	—

See notes to unaudited consolidated financial statements.

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ALLIANCE BANCORP, INC OF PENNSYLVANIA AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(1) Organization and Basis of Presentation

On January 30, 2007, Alliance Bank (the “Bank”) completed its reorganization to a mid-tier holding company structure and the sale by the mid-tier company, Alliance Bancorp, Inc. of Pennsylvania (“Alliance Bancorp” or the “Company”) of shares of its common stock.  In the reorganization and offering, the Company sold 1,807,339 shares of common stock at a purchase price of $10.00 per share and issued 5,417,661 shares of common stock in exchange for former outstanding shares of the Bank.  Each share of the Bank’s common stock was converted into 2.09945 shares of the Company’s common stock.  The offering resulted in approximately $16.5 million in net proceeds to the Company.

As a result of the reorganization and offering, Alliance Mutual Holding Company (the “Holding Company”) owned 55% of the outstanding common stock of Alliance Bancorp and minority public stockholders owned the remaining 45% of the outstanding common stock of Alliance Bancorp.  Following purchases of treasury stock, at June 30, 2009, the Holding Company owns 58.1% of the outstanding common stock of Alliance Bancorp and the minority public shareholders own the remaining 41.9%.  The Holding Company is a federally chartered mutual holding company.  The Holding Company and the Company are subject to regulation and supervision of the Office of Thrift Supervision.

The Bank is a community oriented savings bank headquartered in Broomall, Pennsylvania.  The Bank operates a total of nine banking offices located in Delaware and Chester Counties, which are suburbs of Philadelphia.  The Bank’s primary business consists of attracting deposits from the general public and using those funds, together with borrowed funds, to originate loans to its customers and invest in securities such as United States (“U.S.”) Government and agency securities, mortgage-backed securities and municipal obligations.

The Bank is primarily engaged in attracting deposits from the general public through its branch offices and using such deposits primarily to (i) originate and purchase loans secured by first liens on single-family (one-to-four units) residential and commercial real estate properties and (ii) invest in securities issued by the U.S. Government and agencies thereof, municipal and corporate debt securities and certain mutual funds.  The Bank derives its income principally from interest earned on loans, mortgage-backed securities and investments and, to a lesser extent, from fees received in connection with the origination of loans and for other services.  The Bank’s primary expenses are interest expense on deposits and borrowings and general operating expenses.

The Bank is subject to regulation by the Pennsylvania Department of Banking (the “Department”), as its chartering authority and primary regulator, and by the Federal Deposit Insurance Corporation (the “FDIC”), which insures the Bank’s deposits up to applicable limits.

The accompanying unaudited consolidated financial statements of Alliance Bancorp, Inc. of Pennsylvania include the accounts of the Company, the Bank and Alliance Delaware Corporation.  The Bank is a wholly owned subsidiary of the Company and Alliance Delaware Corporation is a wholly owned subsidiary of Alliance Bank.  Intercompany accounts and transactions have been eliminated in consolidation.

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Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (US GAAP).  The statement of financial condition at December 31, 2008, has been derived from audited financial statements but does not include all information and footnotes required by US GAAP for complete financial statements.  In the opinion of management, all adjustments consisting of normal recurring adjustments or accruals, which are necessary for a fair presentation of the consolidated financial statements, have been included.  The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results which may be expected for the year ending December 31, 2009 or any other period.  All significant intercompany accounts and transactions have been eliminated. For comparative purposes, prior years’ consolidated financial statements have been reclassified to conform to report classifications of the current year. The reclassifications had no effect on net income.  The unaudited consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The Company has evaluated events and transactions occurring subsequent to June 30, 2009, for items that should potentially be recognized or disclosed in these financial statements.  The evaluation was conducted through August 10, 2009, the date these financial statements were issued.

(2) Related Party Transactions

The Bank maintains a lease agreement with the Holding Company for one of its office locations.    The initial lease term expires in September 2015 and the Bank has paid $10,500 and $21,000 during both the three and six months ended June 30, 2009 and June 30, 2008, respectively. In addition, the Bank maintains a management fee agreement with the Holding Company which provides for the sharing of certain public company related expenses.  Such expenses include salaries and benefits, insurance expenses, professional fees and directors’ fees.  The Bank has received management fees amounting to $90,000 and $180,000 for the three and six months ended June 30, 2009 and $96,000 and $192,000 for the three and six month periods ended June 30, 2008, respectively.

(3) Commitments and Contingencies

Standby letters of credit are conditional commitments issued by the Bank to guarantee performance of a customer to a third party.  The amount of credit risk involved in issuing letters of credit in the event of nonperformance by the other party is the contract amount.  The maximum exposure related to these commitments at June 30, 2009 was $1.3 million which was secured by real estate, cash, and marketable securities.

(4) Segment Information

The Company has one reportable segment, “Community Banking.”  All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others.  For example, lending is dependent upon the ability of the Company to fund itself with deposits and other borrowings and manage interest rate

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and credit risk.  Accordingly, all significant operating decisions are based upon analysis of the Company as one segment or unit.

(5) Dividend Restriction

The Holding Company held 3,973,750 shares, or 58.1%, of the Company’s issued and outstanding common stock, and the minority public shareholders held 41.9% of outstanding stock at June 30, 2009. The Holding Company has filed a notice with the Office of Thrift Supervision (“OTS”) to waive its right to receive cash dividends during the 2009 calendar year. The Company paid a cash dividend on May 22, 2009 to all public shareholders.

The Holding Company has waived receipt of past dividends paid by the Company. The dividends waived are considered as a restriction on the retained earnings of the Company. As of June 30, 2009 and December 31, 2008, the aggregate retained earnings restricted for cash dividends waived were $1,947,138 and $1,708,713, respectively.

(6) Recent Accounting Pronouncements.

In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”.  This FSP amends SFAS 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan.  The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009.  The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4).  FASB Statement 157, Fair Value Measurements, defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 provides additional guidance on determining when the volume and level of activity for the asset or liability has significantly decreased. The FSP also includes guidance on identifying circumstances when a transaction may not be considered orderly.

FSP FAS 157-4 provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with Statement 157.

This FSP clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the

9

entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The FSP provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  An entity early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments.  The adoption of this FSP did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2).   FSP FAS 115-2 and FAS 124-2 clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated recovery in fair value to avoid recognizing an other-than-temporary impairment. This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that an other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, FSP FAS 115-2 and FAS 124-2 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  An entity early adopting FSP FAS 115-2 and FAS 124-2 must also early adopt FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.  The adoption of this FSP did not have a material impact on the Company’s consolidated financial statements.

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140.  This statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a

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transferor’s continuing involvement in transferred financial assets.  Specifically, among other aspects, SFAS 166 amends Statement of Financial Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FIN 46(R) to variable interest entities that are qualifying special-purpose entities.  It also modifies the financial-components approach used in SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009.  The Company has not determined the effect that the adoption of SFAS 166 will have on our consolidated financial position or results of operations.

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

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162.   SFAS 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, to establish the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United States.  SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company does not expect the adoption of this standard to have an impact on our consolidated financial position or results of operations.

(7) Earnings Per Share

There are no convertible securities which would affect the net income (numerator) in calculating earnings per share.  Basic earnings per share data are based on the weighted-average number of shares outstanding during each period.  At the present time the Company’s capital structure has no potential dilutive securities.

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The following table sets forth the composition of the weighted average shares (denominator) used in the basic earnings per share computation.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2009			2008			2009			2008
Net Income	$	213,000		$	84,000		$	625,000		$	126,000
Weighted average shares outstanding	6,882,357			7,038,177			6,908,427			7,098,228
Average unearned ESOP shares	(67,419		)	(82,053		)	(68,859		)	(82,805		)
Weighted average shares outstanding – basic	6,814,938			6,956,124			6,839,569			7,015,423
Basic earnings per share	$	0.03		$	0.01		$	0.09		$	0.02

(8) Employee Stock Ownership Plan

The Bank has an Employee Stock Ownership Plan (“ESOP”) for the benefit of employees who meet the eligibility requirements as defined in the ESOP.  The ESOP purchased 90,333 shares of common stock in the offering completed on January 30, 2007 using the proceeds of a loan from the Company.  The Bank makes quarterly payments of principal and interest over a term of 8 years, which was reduced from the original term of 15 years, at a rate of 8.25% to the Company.  The loan is secured by the shares of the stock purchased.

As the debt is repaid, shares are released from the collateral and allocated to qualified employees.  As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations.  The compensation expense for the three and six months ended June 30, 2009 was $22,000 and $52,000, respectively.  For the three months ended June 30, 2009 shares released for allocation, average unearned ESOP shares, and total ESOP shares were 2,879, 67,419, and 90,333, respectively.  For the six months ended June 30, 2009 shares released for allocation, average unearned ESOP shares, and total ESOP shares were 5,757, 68,859, and 90,333, respectively.  For the three months ended June 30, 2008 shares released for allocation, average unearned ESOP shares, and total ESOP shares were 1,506, 82,053, and 90,333, respectively.  For the six months ended June 30, 2008 shares released for allocation, average unearned ESOP shares, and total ESOP shares were 3,011, 82,805, and 90,333, respectively.

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(9) Retirement Plans

The Bank has a defined benefit pension plan which covers all full-time employees meeting certain eligibility requirements.  As required under SFAS No. 158 the net pension costs included the following components:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2009			2008			2009			2008
Net Periodic Benefit Cost
Service Cost	$	73,969		$	77,171		$	147,938		$	154,342
Interest Cost	61,440			58,727			122,880			117,454
Expected Return on Plan Assets	(57,073		)	(71,976		)	(114,146		)	(143,952		)
Amortization of Transition Obligation	—			438			—			876
Amortization of Prior Service Cost	3,171			3,171			6,342			6,342
Amortization of (Gain)/Loss	26,493			5,219			52,986			10,438
Net Periodic Benefit Cost	$	108,000		$	72,750		$	216,000		$	145,500

The Bank has a Nonqualified Retirement and Death Benefit Agreement (the “Agreement”) with certain officers of the Bank.  The purpose of the Agreement is to provide the officers with supplemental retirement benefits equal to a specified percentage of final compensation and a pre-retirement death benefit if the officer does not attain the specific age requirement.  A summary of the interim information required under SFAS No. 158 for the Agreement is as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2009		2008		2009		2008
Net Periodic Benefit Cost
Service Cost	$	8,779	$	8,779	$	17,558	$	17,558
Interest Cost	55,294		55,485		110,588		110,970
Amortization of Prior Service Cost	—		58,163		—		116,326
Amortization of (Gain)/Loss	7,927		7,911		15,854		15,822
Net Periodic Benefit Cost	$	72,000	$	130,338	$	144,000	$	260,676

(10) Fair Value Accounting

In September of 2006, the FASB issued Statement No. 157, Fair Value Measurement (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements.  SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements.

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to validation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of fair value hierarchy under SFAS 157 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

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Level 2:	Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3:	Prices or valuation techniques that require inputs that are both significant to fair value measurement and unobservable (i.e. support with little or no market value activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s assets and liabilities carried at fair value.

Investment and Mortgage Backed Securities

The Bank classifies and accounts for debt and equity securities as follows:

·Securities Held to Maturity - Securities held to maturity are stated at cost, adjusted for unamortized purchase premiums and discounts, based on the positive intent and the ability to hold these securities to maturity considering all reasonably foreseeable conditions and events.

·Securities Available for Sale - Securities available for sale, carried at fair value, are those securities management might sell in response to changes in market interest rates, increases in loan demand, changes in liquidity needs and other conditions.  Unrealized gains and losses, net of tax, are reported as a net amount in other comprehensive income (loss) until realized.

Purchase premiums and discounts are amortized to income over the life of the related security using the interest method.  The adjusted cost of a specific security sold is the basis for determining the gain or loss on the sale.

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The following table shows the fair value and unrealized losses on investments, aggregated by investment category and the length of time that individual securities have been continuous unrealized loss position.

					June 30, 2009
	Less than 12 Months				12 Months or Longer						Total
			Gross				Gross		Total		Gross
			Unrealized		Fair		Unrealized		Fair		Unrealized
	Fair Value		Losses		Value		Losses		Value		Losses
					(Dollars in Thousands)
Securities Available for Sale
U.S. Government obligations	$	10,882	$	118	$	—	$	—	$	10,882	$	118
Mortgage-backed securities	—		—		1,642		17		1,642		17
Total securities available for sale	$	10,882	$	118	$	1,642	$	17	$	12,524	$	135
Securities Held to Maturity
Municipal obligations	$	9,570	$	326	$	3,695	$	350	$	13,265	$	676

					December 31, 2008
	Less than 12 Months				12 Months or Longer						Total
			Gross				Gross		Total		Gross
			Unrealized				Unrealized		Fair		Unrealized
	Fair Value		Losses		Fair Value		Losses		Value		Losses
					(Dollars in Thousands)
Securities Available for Sale
U.S. Government obligations	$	1,987	$	13	$	—	$	—	$	1,987	$	13
Mortgage-backed securities	2,594		70		4,407		86		7,001		156
Total securities available for sale	$	4,581	$	83	$	4,407	$	86	$	8,988	$	169
Securities Held to Maturity
Municipal obligations	$	9,192	$	443	$	1,559	$	162	$	10,751	$	605

The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

As of June 30, 2009 management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates particularly given the negligible inherent credit risk associated with these securities. These investment securities are comprised of securities that are rated investment grade by at least one bond credit rating service.

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Although the fair value will fluctuate as market interest rates move, management believes that these fair values will recover as the underlying portfolios mature and are reinvested in market rate yielding investments. As of June 30, 2009, there were 7 U.S. government obligations, 6 mortgage-backed securities, and 21 municipal obligations, which were in an unrealized loss position.  The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature. Management does not believe any individual unrealized loss as of June 30, 20 09 represents an other-than-temporary impairment.

The fair value of securities available for sale and held to maturity are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.  For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3).  In the absence of such evidence, management’s best estimate is used.  Management’s best estimate consists of both internal and external support on certain Level 3 investments.  Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

Investment Securities Available for Sale and Held to Maturity

The amortized cost, gross unrealized gains and losses, and the fair values of investment securities available for sale and held to maturity are shown below.  Where applicable, the maturity distribution and the fair value of investment securities, by contractual maturity, are shown.  Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Dollars in Thousands

	June 30, 2009
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
Available for Sale
Obligations of U.S. Government agencies:
Due 1 year or less	$	999	$	12	—			$	1,011
Due after 1 year through 5 years	1,000		6		—			1,006
Due after 5 years through 10 years	13,995		185		$	(62	)	14,118
Due after 10 years	11,969		74		(56		)	11,988
Total	$	27,964	$	277	$	(118	)	$	28,123

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	June 30, 2008
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
Held to Maturity
Municipal Obligations:
Due after 5 years through 10 years	$	8,116	$	125	$	(51	)	$	8,190
Due after 10 years	17,787		161		(625		)	17,324
Total	$	25,903	$	286	$	(675	)	$	25,514

Dollars in Thousands

	December 31, 2008
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
Available for Sale
Obligations of U.S. Government agencies:
Due 1 year or less	$	998	$	34	—			$	1,032
Due after 1 year through 5 years	1,000		22		—			1,022
Due after 5 years through 10 years	17,988		239		$	(11	)	18,216
Due after 10 years	17,462		84		(2		)	17,544
Total	$	37,448	$	379	$	(13	)	$	37,814

	December 31, 2008
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
Held to Maturity
Municipal Obligations:
Due after 5 years through 10 years	$	7,639	$	100	$	(68	)	$	7,671
Due after 10 years	16,617		207		(537		)	16,287
Total	$	24,256	$	307	$	(605	)	$	23,958

Included in obligations of U.S. Government agencies at June 30, 2009 and December 31, 2008, were $15.9 and $17.0 million, respectively, of structured notes.   These structured notes were comprised of step-up bonds that provide the U.S. Government agency with the right, but not the obligation, to call the bonds on certain dates. Investment securities with an aggregate carrying value of $4.1 million and $4.0 million were pledged as collateral for certain deposits at June 30, 2009 and December 31, 2008, respectively.

Impaired Loans

Impaired loans are those that are accounted for under FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan (“SFAS 114”), in which the Bank has measured impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds.  These assets are included as Level 3 fair values, based upon the

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lowest level of input that is significant to the fair value measurements.

Other Real Estate Owned

OREO assets are adjusted to fair value less estimated selling costs upon transfer of the loans to OREO.  Subsequently, OREO assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  There assets are included as level 3 fair values.

Federal Home Loan Bank Stock

Federal Home Loan Bank (“FHLB”) Stock, which represents required investment in the common stock of a correspondent bank, is carried at cost. In December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend payments and the repurchase of capital stock.

Management evaluates the FHLB stock for impairment in accordance with Statement of Position (SOP) 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others.  Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value.  The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB stock as of June 30, 2009.

The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2009, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

Description	Total		(Level 1)Quoted Prices in Active Markets for Identical Assets		(Level 2)SignificantOtherObservableInputs		(Level 3)SignificantUnobservableInputs
Investment securities available for sale	$	28,123	$	—	$	28,123	$	—
Mortgage backed securities available for sale	27,295		—		27,295		—
Total	$	55,418	$	—	$	55,418	$	—

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For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2009 are as follows:

Description	Total		(Level 1) Quoted Prices in Active  Markets for  Identical Assets		(Level 2)  Significant  Other  Observable Inputs		(Level 3)SignificantUnobservable  Inputs
Impaired loans	$	12,479	$	—	$	—	$	12,479

For non-financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2009 are as follows:

Description	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2)  Significant  Other  Observable  Inputs		(Level 3)SignificantUnobservable  Inputs
Other real estate owned	$	2,100	$	—	$	—	$	2,100

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2008 are as follows:

Description	Total		(Level 1)Quoted Prices in  Active Markets for Identical Assets		(Level 2)SignificantOtherObservableInputs		(Level 3)SignificantUnobservableInputs
Investment securities available for sale	$	37,814	$	—	$	37,814	$	—
Mortgage backed securities available for sale	31,921		—		31,921		—
Total	$	69,735	$	—	$	69,735	$	—

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2008 are as follows:

Description	Total		(Level 1) Quoted  Prices in Active  Markets for  Identical Assets		(Level 2) Significant  Other  Observable  Inputs		(Level 3)SignificantUnobservable  Inputs
Impaired loans	$	2,589	$	—	$	—	$	2,589

At December 31, 2008 there we no non-financial assets measured at fair value on a nonrecurring basis.

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The estimated fair values of the Company’s financial instruments were as follows:

	June 30, 2009				December 31, 2008
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
			(In thousands)
Assets:
Cash and due from banks	$	9,095	$	9,095	$	7,849	$	7,849
Interest bearing deposits at banks	39,272		39,272		20,459		20,459
Investment securities	54,026		53,637		62,070		61,772
Mortgage-backed securities	27,295		27,295		31,921		31,921
Loans receivable	280,942		281,620		278,437		275,903
FHLB stock	2,439		2,439		2,439		2,439
Accrued interest receivable	1,952		1,952		2,028		2,028
Liabilities:
NOW and MMDA deposits (1)	$	84,627	$	84,627	$	84,380	$	84,380
Other savings deposits	40,836		40,836		39,378		39,378
Certificate accounts	218,909		224,385		207,943		210,852
FHLB advances & other borrowed money	37,041		38,335		37,198		39,199
Accrued interest payable	212		212		220		220
Off balance sheet instruments	—		—		—		—

(1) Includes non-interest bearing accounts

(12) Comprehensive Income (Loss)

Total comprehensive income (loss) includes all changes in stockholders equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s other comprehensive income (loss) is comprised of unrealized holding gains and losses on securities available-for-sale and the effects of changes in the liability for retirement plans.

The table below provides a reconciliation of the components of other comprehensive income (loss) to the disclosure provided in the statement of changes in stockholders’ equity.

The components of other comprehensive income (loss), net of taxes, were as follows for the following fiscal periods:

(Dollars in Thousands)

				Tax
	Before			Benefit			Net of
	Tax			(Expense)			Tax
For the three month period ended June 30, 2009:
Unrealized losses on available for sale securities
Unrealized holding losses arising during period	$	(214	)	$	73		$	(141	)
Change in unrealized gain on available for sale securities	(214		)	73			(141		)
Change in liability in retirement plans	—			—			—
Other comprehensive income	$	(214	)	$	73		$	(141	)
For the three month period ended June 30, 2008:
Unrealized gains on available for sale securities
Unrealized holding gains arising during period	$	(98	)	$	35		$	(63	)
Plus: reclassification adjustment for net losses arising during the period	153			(52		)	101
Less: reclassification for impairment charge included in net loss	(992		)	336			(656		)
Change in unrealized loss on available for sale securities	(937		)	319			(618		)
Change in liability in retirement plans	—			—			—
Other comprehensive loss	$	(937	)	$	319		$	(618	)

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(Dollars in Thousands)

				Tax
	Before			Benefit			Net of
	Tax			(Expense)			Tax
For the six month period ended June 30, 2009:
Unrealized gains on available for sale securities
Unrealized holding gains arising during period	$	6		$	(2	)	$	4
Change in unrealized gain on available for sale securities	6			(2		)	4
Change in liability in retirement plans	—			—			—
Other comprehensive income	$	6		$	(2	)	$	4
For the six month period ended June 30, 2008:
Unrealized gains on available for sale securities
Unrealized holding gains arising during period	$	103		$	(34	)	$	69
Plus: reclassification adjustment for net losses arising during the period	153			(52		)	101
Less: reclassification for impairment charge included in net loss	(629		)	213			(416		)
Change in unrealized loss on available for sale securities	(373		)	127			(246		)
Change in liability in retirement plans	—			—			—
Other comprehensive loss	$	(373	)	$	127		$	(246	)

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Part I – Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Alliance Bancorp, Inc. of Pennsylvania (the “Company”) may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the exhibits hereto and thereto), in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company’s control).  The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements.  The following factors, among others, could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that the foregoing list of important factors is not exclusive.  Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this report.  The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

General

The Company’s profitability is highly dependent on net interest income.  The components that drive net interest income are the amounts of interest-earning assets and interest-bearing liabilities along with rates earned or paid on such rate sensitive instruments.  The Company manages interest rate exposure by attempting to match asset maturities with liability maturities.  In

22

addition to managing interest rate exposure, the Company also considers the credit risk, prepayment risk and extension risk of certain assets.  The Company maintains asset quality by utilizing comprehensive loan underwriting standards and collection efforts as well as originating or purchasing primarily secured or guaranteed assets.

The Company’s profitability is also affected by fee income, gain or loss on the sale of other real estate owned, general and administrative expenses, provisions for loan losses, other real estate owned expenses, and income taxes.

Critical Accounting Policies

In reviewing and understanding financial information for the Company, you are encouraged to read and understand the significant accounting policies used in preparing our consolidated financial statements included elsewhere herein.  These policies are described in Note 2 of the notes to the consolidated financial statements in the December 31, 2008 annual report to stockholders.  The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America (US GAAP) and to general practices within the banking industry.  Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available.  These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the periods presented.  The following accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results.  These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

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

While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance.  Historically, our estimates of the allowance for loan losses have not required significant adjustments from management’s initial estimates.  In

23

addition, the Department and the FDIC, as an integral part of their examination processes, periodically review our allowance for loan losses.  The Department and the FDIC may require the recognition of adjustments to the allowance for loan losses based on their judgment of information available to them at the time of their examinations.  To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for loan losses may be required that would adversely impact earnings in future periods.

Income Taxes. Management makes estimates and judgments to calculate various tax liabilities and determine the recoverability of our deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenues and expenses.  As of June 30, 2009, the Company carried $645,000 in deferred tax assets from the loss on the sale and impairment charges taken on certain mutual funds.  The Company must generate capital gains within a certain time period to realize the tax benefit from these capital losses.  We also estimate a deferred tax asset valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.  These estimates and judgments are inherently subjective.  Historically, our estimates and judgments to calculate our deferred tax accounts have not required significant revision to our initial estimates.

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

Other than Temporary Impairment of Investment Securities and Mortgage Backed Securities.  The Company is required to perform periodic reviews of individual securities in its investment portfolio to determine whether a decline in the fair value of a security below its amortized cost is other than temporary.  A review of other than temporary impairment requires management to make certain judgments regarding the nature of the decline, its effect on the consolidated financial statements and the probability, extent and timing of a valuation recovery and the Company’s intent and ability to hold the security until market recovery.  Management evaluates securities for other than temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions warrant such evaluations.  The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.  As of June 30, 2009 management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates particularly given the negligible inherent credit risk

24

associated with these securities. These investment securities are comprised of securities that are rated investment grade by at least one bond credit rating service.

Comparison of Financial Condition at June 30, 2009 and December 31, 2008

Total assets increased $12.3 million or 2.9% to $436.4 million at June 30, 2009 compared to $424.1 million at December 31, 2008.  This increase was primarily due to a $20.1 million or 70.9% increase in total cash and cash equivalents and a $2.5 million or 0.9% increase in loans receivable, net of allowance for loan losses.  The increase was partially offset by a $9.7 million or 25.6% decrease in investment securities available for sale and a $4.6 million or 14.5% decrease in mortgage backed securities available for sale.  The increase in total cash and cash equivalents was primarily attributed to an increase in customer deposits as well as the decrease in investment securities available for sale that resulted from certain securities being called by the issuers and the decrease in mortgage backed securities available for sale which was due to normal principal repayments.

Total liabilities increased $12.7 million or 3.4% to $387.9 million at June 30, 2009 compared to $375.2 million at December 31, 2008.  This increase was due to a $12.7 million or 3.8% increase in total deposits.  Management believes the increase in deposits was primarily attributable to consumers seeking more stable investments, such as insured deposits, given the current economic environment.

Stockholders’ equity decreased $401,000 to $48.5 million as of June 30, 2009 compared to $48.9 million at December 31, 2008. Beginning January of 2009, the Company commenced a 292,612 share repurchase program and has repurchased 111,000 shares at an average price of $8.15 per share through June 30, 2009, which decreased stockholders’ equity by $905,000.  The decrease was partially offset by net income of $625,000 for the six months ended June 30, 2009.

Nonperforming assets, which consist of nonaccruing loans, accruing loans 90 days or more delinquent and other real estate owned (OREO) (which includes real estate acquired through, or in lieu of, foreclosure) increased to $11.2 million or 2.57% of total assets at June 30, 2009 from $7.0  million or 1.65% of total assets at December 31, 2008.  This increase was primarily due to the placement of a $3.9 million residential real estate construction loan on nonaccrual.  This loan is secured by 18 substantially completed condominium units, 2 of which have been sold and settled, located near center city Philadelphia.  At June 30, 2009, the $11.2 million of nonperforming assets consisted of $1.7 million of accruing loans 90 days or more delinquent, $7.4 million of nonaccrual loans, and $2.1 million in OREO.  At June 30, 2009, the $7.4 million of nonaccrual loans consisted of two single family real estate loans totaling $1.4 million, ten commercial real estate loans totaling $1.8 million, one real estate construction loan in the amount of $3.9 million, and one commercial business loan in the amount of $248,000.  The amount of specific reserves related to nonaccrual loans was $249,000 as of June 30, 2009.  Management continues to aggressively pursue the collection and resolution of all delinquent loans.

At June 30, 2009 and December 31, 2008, the allowance for loan losses amounted to $3.3 million and $3.2 million, respectively.  At June 30, 2009, the allowance for loan losses amounted to 35.7% of nonperforming loans and 1.15% of total loans receivable, as compared to 45.3% and 1.13%, respectively, at December 31, 2008.  The decrease in the allowance for loan losses to

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total nonperforming loans was due to our analysis of the underlying real estate collateral securing these loans which warranted little in additional reserves in most cases.

Although management uses the best information available to make determinations with respect to the provisions for loan losses, additional provisions for loan losses may be required to be established in the future should economic or other conditions change substantially.  In addition, the Department and the FDIC, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses.  Such agencies may require the Bank to recognize additions to such allowance based on their judgments about information available to them at the time of their examination.

Comparison of Results of Operations for the Three and Six Months ended June 30, 2009 and June 30, 2008

General.  Net income increased $129,000 or 152.6% to $213,000 or $0.03 per share for the three months ended June 30, 2009 as compared to $84,000 or $0.01 per share for the same period in 2008.  The increase in net income was primarily due to the prior year $266,000 impairment charge on certain mutual funds and a $153,000 loss on the sale of certain mutual funds recorded during the three month period in 2008, and a increase in net interest income of $81,000 or 3.0% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.  These items were partially offset by an increase in other expenses which included an increase of $277,000 or 543.1% in deposit insurance premiums for the three months ended June 30, 2009 when compared to the same period in 2008.

Net income increased $499,000 or 396.0% to $625,000 or $0.09 per share for the six months ended June 30, 2009 as compared to $126,000 or $0.02 per share for the same period in 2008.  The increase in net income was primarily due to the prior year $629,000 impairment charge on certain mutual funds and a $153,000 loss on the sale of certain mutual funds recorded during the six month period in 2008, and a increase in net interest income of $370,000 or 7.0% for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.  These items were partially offset by an increase in other expenses which included an increase of $389,000 or 637.7% in deposit insurance premiums for the six months ended June 30, 2009, including a $195,000 charge for an FDIC special assessment payable on September 30, 2009, when compared to the same period in 2008.

Net Interest Income.  Net interest income is determined by the interest rate spread (i.e., the difference between the yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities.  Net interest income increased $81,000 or 3.0% during the three months ended June 30, 2009 as compared to the same period in 2008.  This increase was the result of a $395,000 decrease in interest expense primarily due to a 57 basis point or 17.4% decrease in the average rates paid on interest bearing liabilities.  The increase was partially offset by a $314,000 decrease in interest income as a result of a 44 basis point or 7.9% decrease in the average rates earned on interest earning assets and a $14.6 million or 4.2% increase in the average balance of interest bearing liabilities.  As a result, the interest rate spread increased 13 basis points from 2.32% for the three months ended June 30, 2008 to 2.45% for the three months ended June 30, 2009.

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Net interest income increased $370,000 or 7.0% during the six months ended June 30, 2009 as compared to the same period in 2008.  This increase was the result of a $1.2 million decrease in interest expense primarily due to a 76 basis point or 21.5% decrease in the average rates paid on interest bearing liabilities.  The increase was partially offset by an $830,000 decrease in interest income as a result of a 43 basis point or 7.5% decrease in the average rates earned on interest earning assets and an $8.8 million or 2.5% increase in the average balance of interest bearing liabilities.  As a result, the interest rate spread increased 33 basis points from 2.16% for the six months ended June 30, 2008 to 2.49% for the six months ended June 30, 2009.

Interest Income.  Interest income decreased $314,000 or 5.7% to $5.2 million for the three months ended June 30, 2009, compared to the same period in 2008.  The decrease was due to a $138,000 or 78.4% decrease in interest income on balances due from depository institutions, a $52,000 or 14.0% decrease on interest income on mortgage backed securities, a $49,000 or 7.2% decrease in interest income from investment securities, and a $75,000 or 1.7% decrease in interest income on loans.  The decrease in interest income on balances due from depository institutions was due to a 165 basis point or 80.9% decrease in rates earned on balances due from depository institutions, partially offset by a $4.1 million or 11.9% increase in the average balance of the balances due from depository institutions.  The decrease in interest income on mortgage backed securities was due to a $3.7 million or 11.2% decrease in the average balance of the mortgage backed securities and a 15 basis point or 3.3% decrease in rates earned on mortgage backed securities.  The decrease in interest earned on investment securities was due to a $1.4 million or 2.5% decrease in the average balance in investment securities and a 23 basis point or 4.8% decrease in rates earned on investment securities.  The decrease in interest earned on loans was due to a 33 basis point or 5.2% decrease in rates earned on loans, partially offset by a $10.0 million increase in the average balance of the loans.

Interest income decreased $830,000 or 7.3% to $10.6 million for the six months ended June 30, 2009, compared to the same period in 2008.  The decrease was due to a $404,000 or 85.6% decrease in interest income on balances due from depository institutions, a $97,000 or 12.6% decrease on interest income on mortgage backed securities, a $179,000 or 12.6% decrease in interest income from investment securities, and a $150,000 or 1.7% decrease in interest income on loans.  The decrease in interest income on balances due from depository institutions was due to a 220 basis point or 84.0% decrease in rates earned on balances due from depository institutions and a $3.5 million or 9.8% decrease in the average balance of the balances due from depository institutions.  The decrease in interest income on mortgage backed securities was due to a $3.8 million or 11.3% decrease in the average balance of the mortgage backed securities and a 7 basis point or 1.5% decrease in rates earned on mortgage backed securities.  The decrease in interest earned on investment securities was due to a $6.4 million or 10.1% decrease in the average balance in investment securities and a 9 basis point or 1.9% decrease in rates earned on investment securities.  The decrease in interest earned on loans was due to a 45 basis point or 6.9% decrease in rates earned on loans, partially offset by a $14.8 million or 5.5% increase in the average balance of the loans.

Interest Expense.  Interest expense decreased $395,000 or 13.9% to $2.4 million for the three months ended June 30, 2009, compared to the same period in 2008.  This decrease was due to a decrease of $395,000 or 17.6% in interest expense on deposits.  The decrease in interest expense

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on deposits was due to a 21.3% or 62 basis point decrease in the average rate paid, partially offset by a $14.6 million or 4.7% increase in the average balance outstanding.

Interest expense decreased $1.2 million or 1.9% to $5.0 million for the six months ended June 30, 2009, compared to the same period in 2008.  This decrease was primarily due to a decrease of $1.2 million or 23.8% in interest expense on deposits.  The decrease in interest expense on deposits was due to a 25.9% or 83 basis point decrease in the average rate paid, partially offset by an $8.8 million or 2.8% increase in the average balance of deposits.

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Average Balances, Net Interest Income and Yields Earned and Rates Paid.  The following average balance sheet table sets forth for the periods indicated, information on the Company regarding:  (i) the total dollar amounts of interest income on interest-earning assets and the resulting average yields; (ii) the total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs; (iii) net interest income; (iv) interest rate spread; (v) net interest-earning assets (interest-bearing liabilities); (vi) the net yield earned on interest-earning assets; and (vii) the ratio of total interest-earning assets to total interest-bearing liabilities.  Information is based on average daily balances during the periods presented.

Average Balance Sheet

Three Months Ended June 30,

	2009						2008
	Average						Average
(Dollars in Thousands)	Balance		Interest		Rate		Balance		Interest		Rate
Interest-earning assets:
Loans receivable (1) (2) (3) (4)	$	282,700	$	4,250	6.01	%	$	272,732	$	4,325	6.34	%
Mortgage-backed securities (3) (4)	28,867		320		4.43		32,521		372		4.58
Investment securities (4) (5)	55,434		630		4.55		56,854		679		4.78
Other interest-earning assets	38,673		38		0.39		34,557		176		2.04
Total interest-earning assets	405,674		5,238		5.16		396,664		5,552		5.60
Noninterest-earning assets	26,318						22,825
Total assets	$	431,992					$	419,489
Interest-bearing liabilities:
Deposits	$	323,999	1,856		2.29		$	309,392	2,251		2.91
FHLB advances and other borrowings	37,047		589		6.36		37,079		589		6.35
Total interest-bearing liabilities	361,046		2,445		2.71		346,471		2,840		3.28
Noninterest-bearing Liabilities	21,922						23,308
Total liabilities	382,968						369,779
Stockholders’ equity	49,024						49,710
Total liabilities and stockholders’ equity	$	431,992					$	419,489
Net interest-earning assets	$	44,628					$	50,193
Net interest income/interest rate spread			$	2,793	2.45	%			$	2,712	2.32	%
Net yield on interest-earning assets (4)					2.75	%					2.73	%

(1)           Includes loans held for sale.

(2)           Nonaccrual loans and loan fees have been included.

(3)           Net interest income divided by interest-earning assets.

(4)           The indicated yields are not reflected on a tax equivalent basis.

(5)           Includes dividend income.

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Average Balance Sheet

Six Months Ended June 30,

	2009							2008
	Average							Average
(Dollars in Thousands)	Balance			Interest		Rate		Balance		Interest		Rate
Interest-earning assets:
Loans receivable (1) (2) (3) (4)	$		282,827	$	8,530	6.03	%	$	267,985	$	8,680	6.48	%
Mortgage-backed securities (3) (4)	30,070			674		4.48		33,884		771		4.55
Investment securities (4) (5)	56,767			1,332		4.69		63,170		1,511		4.78
Other interest-earning assets	32,503			68		0.42		36,038		472		2.62
Total interest-earning assets	402,167			10,604		5.27		401,077		11,434		5.70
Noninterest-earning assets	26,105							21,939
Total assets	$		428,272					$	423,016
Interest-bearing liabilities:
Deposits	$		321,304	3,812		2.37		$	312,469	5,004		3.20
FHLB advances and other borrowings	37,051			1,171		6.32		37,079		1,179		6.36
Total interest-bearing liabilities	358,355			4,983		2.78		349,548		6,183		3.54
Noninterest-bearing Liabilities	20,945							22,904
Total liabilities	379,300							372,452
Stockholders’ equity	48,972							50,564
Total liabilities and stockholders’ equity	$		428,272					$	423,016
Net interest-earning assets	$	43,812						$	51,529
Net interest income/interest rate spread				$	5,621	2.49	%			$	5,251	2.16	%
Net yield on interest-earning assets (4)						2.80	%					2.62	%

(1)           Includes loans held for sale.

(2)           Nonaccrual loans and loan fees have been included.

(3)           Net interest income divided by interest-earning assets.

(4)           The indicated yields are not reflected on a tax equivalent basis.

(5)           Includes dividend income.

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Provision for Loan Losses.  The provision for loan losses amounted to $75,000 and $45,000 for the three months ended June 30, 2009 and 2008, respectively.  The provision for loan losses amounted to $150,000 and $210,000 for the six months ended June 30, 2009 and 2008, respectively.  The decrease for the six month period in the provision for loan losses was primarily due to a partial charge-off in the first quarter of 2008 in the amount of $100,000 on a commercial loan.  Such provisions were primarily to maintain a reserve level deemed appropriate by management in light of factors such as the level of nonperforming loans and the current economic environment.

Other Income (Loss).  Other income (loss) was $299,000 for the three months ended June 30, 2009 as compared to a loss of $99,000 for the same period in 2008.  The increase was primarily the result of the Company identifying impairment charges related to its remaining investment in certain mutual funds as other than temporary and recording a $266,000 pretax loss against operating income in the second quarter of 2008.  Also, in April 2008, the Company sold approximately $15.5 million of the mutual funds and recorded a pretax loss on the sale of securities of $153,000.  The remaining mutual funds were sold to Alliance Mutual Holding Company in the third quarter of 2008 at fair value.  The increase in other income (loss) was partially offset by an $18,000 or 20.9% decrease in service charges on deposit accounts, and a $6,000 or 6.3% decrease in management fees.

Other income (loss) was $590,000 for the six months ended June 30, 2009 as compared to a loss of $141,000 for the same period in 2008.  The increase was primarily the result of the Company identifying impairment charges related to its investment in certain mutual funds as other than temporary and recording a $629,000 pretax loss against operating income during the six month period ended June 30, 2008.  Also, in April 2008, the Company sold approximately $15.5 million of the mutual funds and recorded a pretax loss on the sale of securities of $153,000.  The remaining mutual funds were sold to Alliance Mutual Holding Company in the third quarter of 2008 at fair value.  The increase in other income (loss) was partially offset by a $33,000 or 18.5% decrease in service charges on deposit accounts, and a $12,000 or 6.3% decrease in management fees.

Other Expenses. Other expenses increased $270,000 or 10.3% to $2.9 million for the three months ended June 30, 2009 compared to the same period in 2008.  The increase was primarily due to a $277,000 or 543.1% increase in deposit insurance premiums which includes a $195,000 charge for the FDIC special assessment the Company has accrued.  In May 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on the Bank’s assets less Tier 1 capital, with a cap of 10 basis points times deposits as of June 30, 2009, payable on September 30, 2009.    The final rule also permits the FDIC to levy additional 5 basis point special assessments if needed in the third and fourth quarters of 2009.  Also contributing to the increase in other expense was a $59,000 or 4.1% increase in salaries and employee benefits and a $29,000 or 290.0% increase in loan and OREO expense.  The increase in other expenses was partially offset by a $39,000 or 7.9% decrease in occupancy and equipment expense, a $19,000 or 17.8% decrease in advertising and marketing expense and a $38,000 or 10.3% decrease in other noninterest expense.

Other expenses increased $429,000 or 8.5% to $5.5 million for the six months ended June 30,

31

2009 compared to the same period in 2008.  The increase was primarily due to a $389,000 or 637.7% increase in deposit insurance premiums which includes $195,000 charge for the FDIC special assessment the Company has accrued.  Also contributing to the increase in other expense was an $87,000 or 3.6% increase in salaries and employee benefits and a $31,000 or 134.8% increase in loan and OREO expense.  The increase in other expenses was partially offset by a $36,000 or 3.6% decrease in occupancy and equipment expense and a $41,000 or 22.0% decrease in advertising and marketing expense and a $42,000 or 5.7% decrease in other noninterest expense.

Income Tax Benefit. Income tax benefit amounted to $(83,000) and $(133,000) for the three months ended June 30, 2009 and 2008, respectively, resulting in effective tax rates of (63.8)% and (271.4)%, respectively.  The decrease in income tax benefit was primarily due to a higher amount of income (loss) before income tax expense (benefit).

Income tax benefit amounted to $(59,000) and $(292,000) for the six months ended June 30, 2009 and 2008, respectively, resulting in effective tax rates of (10.4)% and (175.9)%, respectively.  The decrease in income tax benefit was primarily due to a higher amount of income (loss) before income tax expense (benefit).

Liquidity and Capital Resources

Liquidity, represented by cash and cash equivalents, is a product of its cash flows from operations. The primary sources of funds are deposits, borrowings, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, sales of loans, maturities and calls of investment securities and other short-term investments and income from operations.  Changes in the cash flows of these instruments are greatly influenced by economic conditions and competition.  Management attempts to balance supply and demand by managing the pricing of its loan and deposit products while maintaining a level of growth consistent with the conservative operating philosophy of the management and board of directors.  Any excess funds are invested in overnight and other short-term interest-earning accounts.  Cash flows are generated through the retail deposit market, its traditional funding source, for use in investing activities.  In addition, the borrowings such as Federal Home Loan Bank advances may be utilized for liquidity or profit enhancement.  At June 30, 2009, the Company had $37.0 million of outstanding advances and approximately $124.2 million of additional borrowing capacity from the FHLB of Pittsburgh.  Further, the Company has access to the Federal Reserve Bank discount window.  At June 30, 2009 no such funds were outstanding.

The primary use of funds is to meet ongoing loan and investment commitments, to pay maturing savings certificates and savings withdrawals and expenses related to general operations of the Company.  At June 30, 2009, the total approved loan commitments outstanding amounted to $12.9 million.  At the same date, commitments under unused lines of credit amounted to $31.3 million.  Certificates of deposit scheduled to mature in one year or less at June 30, 2009 totaled $182.2 million.  Management believes that a significant portion of maturing deposits will remain with the Company.  For the quarter ended June 30, 2009, there were no material changes in contractual obligations that were outside of the ordinary course of business.  Management anticipates that it will continue to have sufficient cash flows to meet its current and future commitments.

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Impact of Inflation and Changing Prices

The unaudited condensed consolidated financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation.  Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature.  As a result, interest rates generally have a more significant impact on a financial institution’s performance than does the effect of inflation.

Part I - - Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

Part I - - Item 4T.

CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report.  Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are designed to ensure that financial information required to be disclosed by the Company in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

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

Part II - Other Information

Item 1.  Legal Proceedings

The Company is involved in legal proceedings and litigation arising in the ordinary course of business. However, there can be no assurance that any of the outstanding legal proceedings and litigation to which the Company is a party will not be decided adversely to the Company’s interests and have a material adverse effect on the consolidated financial statements.

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Item 1A. Risk Factors

Not Applicable

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

(a) — (b)    Not Applicable

(c)           The following table sets forth information with respect to purchases made by or  on behalf of the Company of shares of common stock of the Company during the indicated periods.

Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
April 2009	—	—		—	242,612
May  2009	31,000	$	8.42	31,000	211,612
June  2009	30,000	8.58		30,000	181,612
Totals	61,000	$	8.50	61,000	181,612

(1)           All shares were repurchased under the Company’s announced repurchase program. On January 29, 2009, the Company announced a program to repurchase up to 292,612 shares, or 10% of the outstanding common stock other than shares owned by Alliance Mutual Holding Company.  The program will expire in twelve months, or on January 29, 2010, and all shares are to be purchased in the open market or in privately negotiated transactions, as in the opinion of management, market conditions warrant.

Item 3.   Defaults Upon Senior Securities

Not Applicable

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

The Company’s Annual Meeting of Stockholders was held on April 22, 2009.

(a)At the Annual Meeting, Messrs. Cotter, Hecht, and Raggi were elected as directors for a three year term expiring in 2012.  In addition, Messrs. Carr,

34

Cirucci, Flatley, Meier, Rainer, Stonier, and Woolard will continue as directors after the Annual Meeting.

(b)There were 6,617,614 shares of Common Stock of the Company eligible to be voted at the Annual Meeting and 6,543,614 shares were represented at the meeting by the holders thereof, which constituted a quorum.  The items voted upon at the Annual Meeting and the vote for each proposal were as follows:

1.Election of Directors:

Nominees for three year terms

	FOR	WITHHELD
J. William Cotter, Jr.	6,491,286	52,328
William H. Hecht	6,491,286	52,328
John A. Raggi	6,491,286	52,328

2.Proposal to ratify the appointment of Beard Miller Company LLP as independent auditor for the year ending December 31, 2009:

FOR	AGAINST	ABSTAIN
6,509,094	33,998	522

Item 5.  Other Information

None

Item 6.  Exhibits

(a)The following exhibits are filed herewith:

Ex. No.	Description
31.1	Section 302 Certification of Chief Executive Officer
31.2	Section 302 Certification of Chief Financial Officer
32.1	Section 906 Certification of Chief Executive Officer
32.2	Section 906 Certification of Chief Financial Officer

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SIGNATURES

Under the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALLIANCE BANCORP, INC. OF PENNSYLVANIA

Date: August 10, 2009	By:	/s/ Dennis D. Cirucci
		Dennis D. Cirucci, President
		and Chief Executive Officer
Date: August 10, 2009	By:	/s/ Peter J. Meier
		Peter J. Meier, Executive Vice President and Chief Financial Officer

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