Fox Chase Bancorp 10-Q 2011 Q2 Quarterly report

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               

Commission file number: 000-54025

Fox Chase Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	35-2379633
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4390 Davisville Road, Hatboro, Pennsylvania	19040
(Address of principal executive offices)	(Zip Code)

(215) 682-7400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

As of August 1, 2011, there were 14,068,700 shares of the registrant’s common stock outstanding.

FOX CHASE BANCORP, INC.

Table of Contents

		Page No.
Part I. Financial Information
Item 1.	Financial Statements	3
	Consolidated Statements of Condition at June 30, 2011 (unaudited) and December 31, 2010	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)	4
	Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2011 and 2010 (unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
Part II. Other Information
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	(Removed and Reserved)	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FOX CHASE BANCORP, INC.

Consolidated Statements of Condition

(In Thousands, Except Share Data)

	June 30,			December 31,
	2011			2010
	(Unaudited)
ASSETS
Cash and due from banks	$	518		$	156
Interest-earning demand deposits in other banks	51,318			38,158
Total cash and cash equivalents	51,836			38,314
Investment securities available-for-sale	26,012			32,671
Mortgage related securities available-for-sale	273,503			278,632
Mortgage related securities held-to-maturity (fair value of $48,131 at June 30, 2011 and $50,817 at December 31, 2010)	48,412			51,835
Loans, net of allowance for loan losses of $12,436 at June 30, 2011 and $12,443 at December 31, 2010	638,599			642,653
Other real estate owned	3,024			3,186
Federal Home Loan Bank stock, at cost	8,947			9,913
Bank-owned life insurance	13,368			13,138
Premises and equipment	10,624			10,693
Real estate held for investment	1,730			1,730
Accrued interest receivable	4,534			4,500
Mortgage servicing rights, net	403			448
Deferred tax asset, net	464			1,376
Other assets	6,632			6,414
Total Assets	$	1,088,088		$	1,095,503
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits	$	703,285		$	711,763
Federal Home Loan Bank advances	120,559			122,800
Other borrowed funds	50,000			50,000
Advances from borrowers for taxes and insurance	2,239			1,896
Accrued interest payable	577			580
Accrued expenses and other liabilities	1,574			2,760
Total Liabilities	878,234			889,799
STOCKHOLDERS’ EQUITY
Preferred stock ($.01 par value; 1,000,000 shares authorized, none issued and outstanding at June 30, 2011 and December 31, 2010)	—			—
Common stock ($.01 par value; 60,000,000 shares authorized, 14,558,700 shares issued and outstanding at June 30, 2011 and 60,000,000 shares authorized, 14,547,173 shares issued and outstanding at December 31, 2010)	146			145
Additional paid-in capital	134,646			133,997
Common stock acquired by benefit plans	(8,887		)	(9,283		)
Retained earnings	76,212			74,307
Accumulated other comprehensive income, net	7,737			6,538
Total Stockholders’ Equity	209,854			205,704
Total Liabilities and Stockholders’ Equity	$	1,088,088		$	1,095,503

See accompanying notes to the unaudited consolidated financial statements.

3

FOX CHASE BANCORP, INC.

Consolidated Statements of Operations

(Unaudited)

 (In Thousands, Except Per Share Data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010
INTEREST INCOME
Interest and fees on loans	$	8,726		$	9,153	$	17,558		$	17,935
Interest on mortgage related securities	2,665			3,135		5,226			6,747
Interest on investment securities available-for-sale
Taxable	124			96		264			173
Nontaxable	67			84		137			173
Other interest income	25			64		53			163
Total Interest Income	11,607			12,532		23,238			25,191
INTEREST EXPENSE
Deposits	2,242			4,219		4,670			8,797
Federal Home Loan Bank advances	1,153			1,191		2,307			2,408
Other borrowed funds	432			432		859			859
Total Interest Expense	3,827			5,842		7,836			12,064
Net Interest Income	7,780			6,690		15,402			13,127
Provision for loan losses	900			1,075		1,875			1,966
Net Interest Income after Provision for Loan Losses	6,880			5,615		13,527			11,161
NONINTEREST INCOME
Service charges and other fee income	452			251		779			509
Net gain on sale of other real estate owned	20			—		20			—
Income on bank-owned life insurance	116			118		230			233
Other	63			65		89			95
Total other-than-temporary impairment loss	(398		)	—		(398		)	—
Less: Portion of loss recognized in other comprehensive income (before taxes)	197			—		197			—
Net other-than-temporary impairment loss	(201		)	—		(201		)	—
Net gains on sale of investment securities	—			—		—			—
Net investment securities losses	(201		)	—		(201		)	—
Total Noninterest Income	450			434		917			837
NONINTEREST EXPENSE
Salaries, benefits and other compensation	3,214			2,963		6,381			5,946
Occupancy expense	434			440		931			939
Furniture and equipment expense	104			117		207			233
Data processing costs	418			427		838			829
Professional fees	484			355		835			617
Marketing expense	85			95		145			166
FDIC premiums	229			401		512			773
Provision for loss on other real estate owned	100			—		100			34
Other real estate owned expense	25			23		44			29
Other	387			381		785			816
Total Noninterest Expense	5,480			5,202		10,778			10,382
Income Before Income Taxes	1,850			847		3,666			1,616
Income tax provision	593			239		1,163			457
Net Income	$	1,257		$	608	$	2,503		$	1,159
Earnings per share:
Basic	$	0.09		$	0.04	$	0.18		$	0.08
Diluted	$	0.09		$	0.04	$	0.18		$	0.08

See accompanying notes to the unaudited consolidated financial statements.

4

FOX CHASE BANCORP, INC.

Consolidated Statements of Changes in Equity

Six Months Ended June 30, 2011 and 2010

 (In Thousands, Unaudited)

										Common						Accumulated
				Additional						Stock						Other
	Common			Paid in			Treasury			Acquired by			Retained			Comprehensive		Total
	Stock			Capital			Stock			Benefit Plans			Earnings			Income, net		Equity
BALANCE - DECEMBER 31, 2009	$	147		$	64,016		$	(11,814	)	$	(6,862	)	$	71,604		$	6,543	$	123,634
Stock based compensation expense				455														455
Issuance of stock for vested equity
awards				(69		)				86			(17		)			—
Unallocated ESOP shares committed
to employees				6						192								198
Shares allocated in long-term
incentive plan				44														44
Forfeited shares transferred to treasury stock				30			(30		)									—
Corporate Reorganization:
Merger of Fox Chase Mutual Holding Company	(81		)	188														107
Treasury stock retired	(11		)	(11,833		)	11,844											—
Exchange of common stock	(55		)	55														—
Proceeds from stock offering, net of offering expenses	145			81,010														81,155
Purchase of common stock by ESOP										(3,485		)						(3,485		)
Net income													1,159					1,159
Other comprehensive income																3,085		3,085
BALANCE - JUNE 30, 2010	$	145		$	133,902		$	—		$	(10,069	)	$	72,746		$	9,628	$	206,352

								Common						Accumulated
			Additional					Stock						Other
	Common		Paid in			Treasury		Acquired by			Retained			Comprehensive		Total
	Stock		Capital			Stock		Benefit Plans			Earnings			Income, net		Equity
BALANCE - DECEMBER 31, 2010	$	145	$	133,997		$	—	$	(9,283	)	$	74,307		$	6,538	$	205,704
Stock based compensation expense			481													481
Issuance of stock for vested equity
awards			(67		)			84			(17		)			—
Common stock issued for exercise of vested stock options	1		123													124
Unallocated ESOP shares committed
to employees			112					312								424
Net income											2,503					2,503
Dividends paid ($0.04 per share)											(581		)			(581		)
Other comprehensive income														1,199		1,199
BALANCE - JUNE 30, 2011	$	146	$	134,646		$	—	$	(8,887	)	$	76,212		$	7,737	$	209,854

See accompanying notes to the unaudited consolidated financial statements.

5

FOX CHASE BANCORP, INC.

Consolidated Statements of Cash Flows

(In Thousands)

	Six Months Ended June 30,
	2011			2010
	(Unaudited)
Cash Flows From Operating Activities
Net income	$	2,503		$	1,159
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,875			1,966
Provision for loss on other real estate owned	100			34
Depreciation	329			363
Net amortization of securities premiums and discounts	1,680			2,367
Provision (benefit) for deferred income taxes	235			(215		)
Stock benefit plans	905			697
Net gain on sale of other real estate owned	(20		)
Other-than-temporary impairment loss on investments	201			—
Income on bank-owned life insurance	(230		)	(233		)
Decrease in mortgage servicing rights, net	45			127
Increase in accrued interest receivable and other assets	924			965
Increase in accrued interest payable, accrued expenses and other liabilities	(1,189		)	(283		)
Net Cash Provided by Operating Activities	7,358			6,947
Cash Flows from Investing Activities
Investment securities - available-for-sale:
Purchases	—			(10,570		)
Proceeds from maturities, calls and principal repayments	6,700			5,862
Mortgage related securities — available-for-sale:
Purchases	(33,065		)	(17,501		)
Proceeds from maturities, calls and principal repayments	38,783			74,513
Mortgage related securities — held-to-maturity:
Proceeds from maturities, calls and principal repayments	3,100			—
Net decrease (increase) in loans	17,753			(20,573		)
Purchases of loans and loan participations	(18,117		)	(11,423		)
Net decrease in Federal Home Loan Bank stock	966			—
Purchases of premises and equipment	(260		)	(121		)
Proceeds from sales and payments on other real estate owned	1,137			800
Net Cash Provided by Investing Activities	16,997			20,987
Cash Flows from Financing Activities
Net decrease in deposits	(8,478		)	(1,641		)
Increase in advances from borrowers for taxes and insurance	343			440
Principal payments on Federal Home Loan Bank advances	(2,241		)	(12,164		)
Common stock issued for exercise of stock options	124			—
Merger of Fox Chase Mutual Holding Company	—			107
Proceeds from stock offering, net of offering expenses	—			81,155
Purchase of common stock by ESOP	—			(3,485		)
Cash dividends paid	(581		)	—
Net Cash (Used in) Provided by Financing Activities	(10,833		)	64,412
Net Increase in Cash and Cash Equivalents	13,522			92,346
Cash and Cash Equivalents — Beginning	38,314			65,418
Cash and Cash Equivalents — Ending	$	51,836		$	157,764
Supplemental Disclosure of Cash Flow Information
Interest paid	$	7,839		$	12,139
Income taxes paid	$	1,100		$	1,200
Transfers of loans to other real estate owned	$	1,045		$	1,058
Net charge-offs	$	1,882		$	884

See accompanying notes to the unaudited consolidated financial statements.

6

FOX CHASE BANCORP, INC

Notes to the Unaudited Consolidated Financial Statements

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION

Fox Chase Bancorp, Inc. (the “Bancorp”) is a Maryland corporation that was incorporated in March 2010 to be the successor corporation to old Fox Chase Bancorp, Inc. (“Old Fox Chase Bancorp, Inc.”), the former federally chartered stock holding company for Fox Chase Bank (the “Bank”), upon completion of the mutual-to-stock conversion of Fox Chase MHC, the former mutual holding company for the Bank.

The mutual-to-stock conversion was completed on June 29, 2010.  In connection with the conversion, Bancorp sold a total of 8,712,500 shares of common stock at $10.00 per share in a related public offering.  Concurrent with the completion of the offering, shares of Bancorp’s common stock owned by public stockholders were exchanged for 1.0692 shares of Bancorp common stock.  In lieu of fractional shares, Old Fox Chase Bancorp, Inc. shareholders were paid cash.  Additionally, as part of the mutual-to-stock conversion, the Bank’s Employee Stock Ownership Plan (“ESOP”) acquired 348,500 shares, or 4.0% of Bancorp’s issued shares, at $10.00 per share. As a result of the offering and the exchange, as of June 30, 2010, Bancorp had 14,547,173 shares outstanding.  Net proceeds from the conversion and offering, after the loan made to the ESOP, were approximately $77.8 million.

Financial information presented in this Quarterly Report on Form 10-Q is derived in part from the consolidated financial statements of Fox Chase Bancorp, Inc. and subsidiaries on and after June 29, 2010 and from the consolidated financial statements of Old Fox Chase Bancorp, Inc. and subsidiaries prior to June 29, 2010.

Bancorp and the Bank (collectively referred to as the “Company”) provide a wide variety of financial products and services to individuals and businesses through the Bank’s eleven branches in Philadelphia, Richboro, Willow Grove, Warminster, Lahaska, Hatboro, Media and West Chester, Pennsylvania, and Ocean City, Marmora and Egg Harbor Township, New Jersey.  The Bank also has an approximately 45% ownership in Philadelphia Mortgage Advisors, Inc., (“PMA”) a mortgage banker located in Blue Bell, Pennsylvania and Ocean City, New Jersey.  The operations of the Company are managed as a single business segment.  The Company competes with other financial institutions and other companies that provide financial services.

The Company is subject to regulations of certain federal banking agencies.  These regulations can and do change significantly from period to period.  The Company also undergoes periodic examinations by regulatory agencies which may subject them to further changes with respect to asset valuations, amounts of required loan loss allowances and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations.  Pursuant to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), effective July 21, 2011, the regulation and supervision of federal savings institutions, such as the Bank, was transferred from the Office of Thrift Supervision to the Office of the Comptroller of the Currency, the agency that regulates national banks.  As a result, the Office of the Comptroller of the Currency has assumed primary responsibility for examining the Bank and implementing and enforcing many of the laws and regulations applicable to federal savings associations as of July 21, 2011.  The Office of Thrift Supervision was eliminated on July 21, 2011.  In addition, pursuant to the provisions of the Dodd-Frank Act, effective July 21, 2011, savings and loan holding companies, such as the Bancorp, are regulated by the Board of Governors of the Federal Reserve System.

The consolidated financial statements include the accounts of the Bancorp and the Bank. The Bank’s operations include the accounts of its wholly owned subsidiaries, Fox Chase Financial, Inc. and Fox Chase Service Corporation.  Fox Chase Financial, Inc. is a Delaware chartered investment holding company and its sole purpose is to manage and hold investment securities.  Fox Chase Service Corporation is a Pennsylvania chartered company and its purposes are to facilitate the Bank’s investment in PMA and, for regulatory purposes, to hold commercial loans.  At June 30, 2011, Fox Chase Service Corporation held $20.0 million in commercial loans.  The comparative consolidated financial statements for the six months ended June 30, 2010 do not include the transactions and balances of Fox Chase MHC.  All material inter-company transactions and balances have been eliminated in consolidation. Prior period amounts are reclassified, when necessary, to conform with the current year’s presentation.

7

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION (CONTINUED)

During 2011 and 2010, the Bank engaged in certain business activities with PMA.  These activities included providing a warehouse line of credit to PMA, as well as acquiring residential mortgage and home equity loans from PMA. The Bank recorded interest income from PMA on the warehouse line of $85,000 and $122,000 for the six months ended June 30, 2011 and 2010, respectively, as well as loan satisfaction fees, which are recorded in service charges and other fee income, from PMA of $25,000 and $24,000 for the six months ended June 30, 2011 and 2010, respectively.  In addition, the Bank acquired total loans from PMA of $4.4 million and $15.7 million for the six months ended June 30, 2011 and 2010, respectively, which includes the cost of the loans.   During September 2010, the Bank provided PMA a term loan in the amount of $1.2 million which is secured by a residential property owned by PMA.  This loan was paid in full in June 2011.  The Bank recorded interest income from PMA on this term loan of $25,000 and $0 for the six months ended June 30, 2011 and 2010, respectively.

The Company follows accounting principles and reporting practices that are in compliance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose 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 determination of the allowance for loan losses, the valuation and realizability of deferred tax assets and the evaluation of other-than-temporary impairment and valuation of investment securities.

These interim financial statements do not contain all necessary disclosures required by GAAP for complete financial statements and therefore should be read in conjunction with the audited financial statements and the notes thereto included in Fox Chase Bancorp, Inc.’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 14, 2011.   These financial statements include all normal and recurring adjustments which management believes were necessary in order to conform to GAAP.  The results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011 or any other period.

Per Share Information

Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period.  Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.  Unallocated shares in the ESOP and shares purchased to fund the Bancorp’s 2007 Equity Incentive Plan are not included in either basic or diluted earnings per share.  Unvested shares in the Bancorp’s long-term incentive plan are not included in basic earnings per share. As a result of the mutual-to-stock conversion, all share information for periods prior to June 30, 2010 has been revised to reflect the 1.0692 exchange rate.

8

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION (CONTINUED)

The following table presents the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net income	$	1,257,000		$	608,000		$	2,503,000		$	1,159,000
Weighted-average common shares outstanding (1)	14,552,714			14,550,018			14,550,154			14,550,478
Average common stock acquired by stock benefit plans:
Unvested shares — long-term incentive plan	—			(7,582		)	—			(7,582		)
ESOP shares unallocated	(724,466		)	(445,070		)	(732,676		)	(446,360		)
Shares purchased by trust	(165,984		)	(211,941		)	(167,888		)	(213,446		)
Weighted-average common shares used to calculate basic earnings per share	13,662,264			13,885,425			13,649,590			13,883,090
Dilutive effect of:
Unvested shares — long-term incentive plans	—			7,582			—			7,582
Restricted stock awards	40,319			16,338			36,250			5,993
Stock option awards	68,351			1,492			39,296			—
Weighted-average common shares used to calculate diluted earnings per share	13,770,934			13,910,837			13,725,136			13,896,665
Earnings per share-basic	$	0.09		$	0.04		$	0.18		$	0.08
Earnings per share-diluted	$	0.09		$	0.04		$	0.18		$	0.08
Outstanding common stock equivalents having no dilutive effect	717,350			789,515			750,475			801,352

(1) Excludes treasury stock for 2010.  No treasury shares were held by the Company as of June 30, 2011.

9

NOTE 2 — INVESTMENT AND MORTGAGE RELATED SECURITIES

The amortized cost and fair value of securities available-for-sale and held-to-maturity as of June 30, 2011 and December 31, 2010 are summarized as follows:

	June 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			OTTI			Fair
	Cost		Gains		Losses			in AOCI			Value
	(In Thousands)
Available-for-Sale Securities:
Obligations of U.S. government agencies	$	6,457	$	93	$	—		$	—		$	6,550
State and political subdivisions	3,057		16		—			—			3,073
Corporate securities	16,196		199		(6		)	—			16,389
	25,710		308		(6		)	—			26,012
Private label residential mortgage related security	349		—					(197		)	152
Private label commercial mortgage related securities	9,102		234		—			—			9,336
Agency residential mortgage related securities	252,318		11,697		—			—			264,015
Total mortgage related securities	261,769		11,931		—			(197		)	273,503
Total available-for-sale securities	$	287,479	$	12,239	$	(6	)	$	(197	)	$	299,515
Held-to-Maturity Securities:
Agency residential mortgage related securities	$	48,412	$	76	$	(357	)	$	—		$	48,131
Total mortgage related securities	48,412		76		(357		)	—			48,131
Total held-to-maturity securities	$	48,412	$	76	$	(357	)	$	—		$	48,131

	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			OTTI			Fair
	Cost		Gains		Losses			in AOCI			Value
	(In Thousands)
Available-for-Sale Securities:
Obligations of U.S. government agencies	$	6,489	$	32	$	—		$	—		$	6,521
State and political subdivisions	7,240		65		(26		)	—			7,279
Corporate securities	18,674		221		(24		)	—			18,871
	32,403		318		(50		)	—			32,671
Private label residential mortgage related security	559		55		—			(448		)	166
Private label commercial mortgage related securities	11,385		382		—			—			11,767
Agency residential mortgage related securities	256,796		10,057		(154		)	—			266,699
Total mortgage related securities	268,740		10,494		(154		)	(448		)	278,632
Total available-for-sale securities	$	301,143	$	10,812	$	(204	)	$	(448	)	$	311,303
Held-to-Maturity Securities:
Agency residential mortgage related securities	$	51,835	$	19	$	(1,037	)	$	—		$	50,817
Total mortgage related securities	51,835		19		(1,037		)	—			50,817
Total held-to-maturity securities	$	51,835	$	19	$	(1,037	)	$	—		$	50,817

10

NOTE 2 - INVESTMENT AND MORTGAGE RELATED SECURITIES (CONTINUED)

The following tables show gross unrealized losses and fair value of securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2011 and December 31, 2010 (Dollars in thousands):

	June 30, 2011
	Less than 12 Months					12 Months or More					Total
								Unrealized
								Losses
								Plus
	Fair		Unrealized			Fair		OTTI			Fair		Unrealized
	Value		Losses			Value		in AOCI			Value		Losses
Available-for-Sale Securities:
Obligations of U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
State and political subdivisions	—		—			—		—			—		—
Corporate securities	2,994		(6		)	—		—			2,994		(6		)
	2,994		(6		)	—		—			2,994		(6		)
Private label residential mortgage related security	—		—			152		(197		)	152		(197		)
Private label commercial mortgage related securities	—		—			—		—			—		—
Agency residential mortgage related securities	—		—			—		—			—		—
Total mortgage related securities	—		—			152		(197		)	152		(197		)
Total available-for-sale securities	$	2,994	$	(6	)	$	152	$	(197	)	$	3,146	$	(203	)
Held-to-Maturity Securities:
Agency residential mortgage related securities	28,574		(357		)	—		—			28,574		(357		)
Total mortgage related securities	28,574		(357		)	—		—			28,574		(357		)
Total held-to-maturity securities	$	28,574	$	(357	)	$	—	$	—		$	28,574	$	(357	)
Total Temporarily Impaired Securities	$	31,568	$	(363	)	$	152	$	(197	)	$	31,720	$	(560	)

	December 31, 2010
	Less than 12 Months					12 Months or More					Total
								Unrealized
								Losses
								Plus
	Fair		Unrealized			Fair		OTTI			Fair		Unrealized
	Value		Losses			Value		in AOCI			Value		Losses
Available for Sale:
State and political subdivisions	$	831	$	(26	)	$	—	$	—		$	831	$	(26	)
Corporate securities	3,968		(24		)	—		—			3,968		(24		)
	4,799		(50		)	—		—			4,799		(50		)
Private label residential mortgage related security	—		—			166		(393		)	166		(393		)
Private label commercial mortgage related securities	—		—			—		—			—		—
Agency residential mortgage related securities	21,254		(154		)	—		—			21,254		(154		)
Total mortgage related securities	21,254		(154		)	166		(393		)	21,420		(547		)
Total available-for-sale securities	$	26,053	$	(204	)	$	166	$	(393	)	$	26,219	$	(597	)
Held to Maturity:
Agency residential mortgage related securities	46,645		(1,037		)	—		—			46,645		(1,037		)
Total mortgage related securities	46,645		(1,037		)	—		—			46,645		(1,037		)
Total held-to-maturity securities	$	46,645	$	(1,037	)	$	—	$	—		$	46,645	$	(1,037	)
Total Temporarily Impaired Securities	$	72,698	$	(1,241	)	$	166	$	(393	)	$	72,864	$	(1,634	)

11

NOTE 2 - INVESTMENT AND MORTGAGE RELATED SECURITIES (CONTINUED)

The Company held a private label residential mortgage related security which had an amortized cost, prior to the identified credit related impairment, of $707,000 at June 30, 2011 and $716,000 at December 31, 2010.  During the second quarter of 2009, management’s analysis indicated that the security was other-than-temporarily impaired in the amount of $605,000, of which $157,000 was recognized on the Company’s statement of operations and $448,000 was recognized in the Company’s statement of condition in other comprehensive income (before taxes).

During the second quarter of 2011, management determined that there was additional credit impairment of $201,000 which was recognized in the Company’s statement of operations. The additional credit impairment was primarily due to an increase in estimated loss severity at default on the underlying residential mortgage collateral. At June 30, 2011 and December 31, 2010, after other-than-temporary credit impairment charges, the private label residential mortgage related security had an amortized cost of $349,000 and $559,000, respectively, and a fair value of $152,000 and $166,000, respectively, with a remaining net unrealized loss, including other-than-temporary impairment in accumulated other comprehensive income, of $197,000 and $393,000, respectively. The remaining unrealized loss is not considered an other-than-temporary credit impairment, as management does not have the intention to sell this security and it is not more likely than not that the security will be required to be sold before recovery of its amortized cost.

The Company held three private label commercial mortgage backed securities (“CMBS”) with an amortized cost of $9.1 million at June 30, 2011 and $11.4 million at December 31, 2010. The three CMBS were in an unrealized gain position with a total unrealized gain of $234,000 and $382,000 at June 30, 2011 and December 31, 2010, respectively.  The three CMBS securities are rated AAA.

The Company evaluates current characteristics of each of these private label securities such as fair value, cash flows of the underlying properties, delinquency and foreclosure levels, credit enhancement and projected losses on a quarterly basis. It is possible that the underlying collateral of these securities will perform worse than current expectations, which may lead to adverse changes in cash flows on these securities and potential future other-than-temporary impairment losses. Events that may trigger material declines in fair values for these securities in the future would include but are not limited to deterioration of credit metrics, significantly higher levels of default and severity of loss on the underlying collateral, deteriorating credit enhancement and loss coverage ratios, or further illiquidity.

There are ten securities with a temporary impairment at June 30, 2011, eight of which have a rating of AAA. The securities rated less than AAA are: (1) one corporate security with a total fair value of $3.0 million with a rating of A and (2) one private label collateralized mortgage obligation, which was discussed above, with a fair value of $152,000 and a rating of B-.

The only security that has been impaired greater than twelve months as of June 30, 2011 and as of December 31, 2010 is the private label residential mortgage related security.

There were no gross realized gains or losses during the three or six months ended June 30, 2011 and 2010.

12

NOTE 2 - INVESTMENT AND MORTGAGE RELATED SECURITIES (CONTINUED)

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at June 30, 2011 and December 31, 2010 by contractual maturity are as follows:

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
June 30, 2011
Due in one year or less	$	8,210	$	8,299	$	—	$	—
Due after one year through five years	15,305		15,506		—		—
Due after five years through ten years	1,756		1,767		—		—
Due after ten years	439		440		—		—
Total mortgage related securities	261,769		273,503		48,412		48,131
	$	287,479	$	299,515	$	48,412	$	48,131

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
December 31, 2010
Due in one year or less	$	3,674	$	3,692	$	—	$	—
Due after one year through five years	23,420		23,649		—		—
Due after five years through ten years	3,046		3,079		—		—
Due after ten years	2,263		2,251		—		—
Total mortgage related securities	268,740		278,632		51,835		50,817
	$	301,143	$	311,303	$	51,835	$	50,817

Securities with a carrying value of $9.1 million and $10.2 million at June 30, 2011 and December 31, 2010, respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.

Securities with a carrying value of $61.0 million and $58.7 million, at June 30, 2011 and December 31, 2010, respectively, were pledged as collateral for $50.0 million in borrowed funds.   See Note 6.

13

NOTE 3 - LOANS

The composition of net loans at June 30, 2011, and December 31, 2010 is provided below (in thousands).

	June 30,			December 31,
	2011			2010
Real estate loans:
One-to four family	$	219,486		$	238,612
Multi-family and commercial	249,481			231,843
Construction	23,428			31,190
	492,395			501,645
Consumer loans	50,613			55,169
Commercial and industrial loans	107,860			98,064
Total loans	650,868			654,878
Deferred loan origination costs, net	167			218
Allowance for loan losses	(12,436		)	(12,443		)
Net loans	$	638,599		$	642,653

The following table presents changes in the allowance for loan losses (in thousands):

	Six Months Ended						Year Ended
	June 30,						December 31,
	2011			2010			2010
Balance, beginning	$	12,443		$	10,605		$	10,605
Provision for loan losses	1,875			1,966			6,213
Loans charged off	(2,103		)	(891		)	(4,402		)
Recoveries	221			7			27
Balance, ending	$	12,436		$	11,687		$	12,443

The following tables present changes in the allowance for loan losses by loan segment for the six months ended June 30, 2011 and the year ended December 31, 2010:

	For the Period Ended June 30, 2011
	One- to Four- Family Loans			Multi-family and Commercial Real Estate Loans			Construction Loans			Consumer Loans			Commercial and Industrial Loans			Unallocated		Total
	(In thousands)
Balance, beginning	$	1,990		$	4,287		$	3,260		$	665		$	2,044		$	197	$	12,443
Provision for loan losses	249			1,201			(301		)	(7		)	719			14		1,875
Loans charged off	(310		)	(250		)	(1,240		)	(3		)	(300		)	—		(2,103		)
Recoveries	9			167			43			2			—			—		221
Balance, ending	$	1,938		$	5,405		$	1,762		$	657		$	2,463		$	211	$	12,436

14

NOTE 3 - LOANS (CONTINUED)

	For the Year Ended December 31, 2010
	One- to Four- Family Loans			Multi-family and Commercial Real Estate Loans		Construction Loans			Consumer Loans			Commercial and Industrial Loans			Unallocated		Total
	(In thousands)
Balance, beginning	$	1,455		$	3,476	$	3,782		$	707		$	1,064		$	121	$	10,605
Provision for loan losses	1,938			800		1,468			456			1,475			76		6,213
Loans charged off	(1,403		)	—		(1,990		)	(514		)	(495		)	—		(4,402		)
Recoveries	—			11		—			16			—			—		27
Balance, ending	$	1,990		$	4,287	$	3,260		$	665		$	2,044		$	197	$	12,443

The recorded investment in impaired loans was $30.0 million at June 30, 2011 and $39.1 million at December 31, 2010. The recorded investment in impaired loans with an allowance for loan losses was $29.0 million at June 30, 2011 and $35.6 million at December 31, 2010. The related allowance for loan losses associated with these loans was $4.6 million at June 30, 2011 and $5.2 million at December 31, 2010. For the six months ended June 30, 2011 the average recorded investment in these impaired loans was $35.4 million and for the year ended December 31, 2010, the average recorded investment in these impaired loans was $42.0 million. The interest income recognized on these impaired loans was $426,000 for the six months ended June 30, 2011 and $399,000 for the year ended December 31, 2010.

The following tables set forth the breakdown of impaired loans by loan segment as of June 30, 2011 and December 31, 2010.

June 30, 2011

									Impaired		Impaired
					Other		Total		Loans		Loans
	Nonperforming		Accruing		Impaired		Impaired		with		without
	Loans		TDRs		Loans		Loans		Allowance		Allowance
	(in thousands)
Real estate loans:
One- to four-family	$	7,232	$	—	$	—	$	7,232	$	7,232	$	—
Multi-family and commercial	4,088		6,030		—		10,118		9,780		338
Construction	6,689		3,509		—		10,198		9,879		319
Consumer loans	374		—		—		374		313		61
Commercial and industrial	296		1,782		—		2,078		1,782		296
Total	$	18,679	$	11,321	$	—	$	30,000	$	28,986	$	1,014

December 31, 2010

									Impaired		Impaired
					Other		Total		Loans		Loans
	Nonperforming		Accruing		Impaired		Impaired		with		without
	Loans		TDRs		Loans		Loans		Allowance		Allowance
	(in thousands)
Real estate loans:
One- to four-family	$	10,813	$	1,007	$	—	$	11,820	$	11,820	$	—
Multi-family and commercial	6,180		1,359		—		7,539		4,050		3,489
Construction	9,279		3,441		3,894		16,614		16,614		—
Consumer loans	365		—		—		365		303		62
Commercial and industrial	—		2,810		—		2,810		2,810		—
Total	$	26,637	$	8,617	$	3,894	$	39,148	$	35,597	$	3,551

15

NOTE 3 - LOANS (CONTINUED)

A troubled debt restructuring (“TDR”) of $2.1 million is excluded from the accruing TDR column above as of June 30, 2011 and December 31, 2010 as it is included in the nonaccrual loans and total impaired loans.

A $3.9 million loan that was classified as impaired at December 31, 2010 is no longer considered impaired at June 30, 2011 nor is it classified as a TDR as the loan was renegotiated with no concession to the borrower and management has determined that the borrower is not experiencing financial difficulty.

The following tables set forth the allowance for loan loss for impaired loans and general allowance by loan segment as of June 30, 2011 and December 31, 2010.

June 30, 2011

	Allowance for Loan Losses
	Impaired Loans
					Other		Total
	Nonperforming		Accruing		Impaired		Impaired
	Loans		TDRs		Loans		Loans		General		Total
	(in thousands)
Real estate loans:
One- to four-family	$	1,513	$	—	$	—	$	1,513	$	425	$	1,938
Multi-family and commercial	374		914		—		1,288		4,117		5,405
Construction	1,104		263		—		1,367		395		1,762
Consumer loans	303		—		—		303		354		657
Commercial and industrial	—		134		—		134		2,329		2,463
Unallocated	—		—		—		—		211		211
Total allowance for loan losses	$	3,294	$	1,311	$	—	$	4,605	$	7,831	$	12,436

December 31, 2010

	Allowance for Loan Losses
	Impaired Loans
					Other		Total
	Nonperforming		Accruing		Impaired		Impaired
	Loans		TDRs		Loans		Loans		General		Total
	(in thousands)
Real estate loans:
One- to four-family	$	1,537	$	2	$	—	$	1,539	$	451	$	1,990
Multi-family and commercial	195		70		—		265		4,022		4,287
Construction	2,447		258		195		2,900		360		3,260
Consumer loans	294		—		—		294		371		665
Commercial and industrial	—		196		—		196		1,848		2,044
Unallocated	—		—		—		—		197		197
Total allowance for loan losses	$	4,473	$	526	$	195	$	5,194	$	7,249	$	12,443

Loans on which the accrual of interest has been discontinued amounted to $18.7 million at June 30, 2011 and $26.6 million at December 31, 2010. If interest on such loans had been recorded in accordance with contractual terms, interest income would have increased by $661,000 and $1.5 million for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively. There were no loans past due 90 days or more and still accruing interest at June 30, 2011 or December 31, 2010. There were $13.4 million and $10.7 million of loans classified as troubled debt restructurings as of June 30, 2011 and December 31, 2010, respectively.

16

NOTE 3 - LOANS (CONTINUED)

The following table sets forth past due loans by segment as of June 30, 2011 and December 31, 2010.

	At June 30,				At December 31,
	2011				2010
	30-59		60-89		30-59		60-89
	Days		Days		Days		Days
	Past Due		Past Due		Past Due		Past Due
	(In thousands)				(In thousands)
One- to four-family real estate	$	1,000	$	295	$	96	$	144
Multi-family and commercial real estate	—		30		4,735
Construction real estate	—		—		—		—
Consumer	127		78		170		—
Commercial and industrial	451		39		—		—
Total	$	1,578	$	442	$	5,001	$	144

There are three classifications for problem loans: substandard, doubtful and loss. “Substandard loans” 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. “Doubtful loans” have the weaknesses of substandard loans 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. A loan classified “loss” is considered uncollectible and of such little value that continuance as a loan of the institution is not warranted. The Company also maintains a “special mention” category, described as loans 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. If we classify a loan as loss, we allocate an amount equal to 100% of the portion of the loan classified loss.

The following tables set forth criticized and classified loans by segment as of June 30, 2011 and December 31, 2010.

	At June 30, 2011
	One- to Four- Family Loans		Multi-family and Commercial Real Estate Loans		Construction Loans		Consumer Loans		Commercial and Industrial Loans		Total
	(In thousands)
Special mention loans	$	—	$	19,847	$	—	$	—	$	668	$	20,515
Substandard loans	7,232		9,165		13,686		373		6,567		37,023
Doubtful loans	—		—		—		—		—		—
Total criticized and classified loans	$	7,232	$	29,012	$	13,686	$	373	$	7,235	$	57,538

	At December 31, 2010
	One- to Four- Family Loans		Multi-family and Commercial Real Estate Loans		Construction Loans		Consumer Loans		Commercial and Industrial Loans		Total
	(In thousands)
Special mention loans	$	—	$	19,889	$	114	$	—	$	1,099	$	21,102
Substandard loans	10,812		6,745		16,614		365		5,937		40,473
Doubtful loans	—		—		—		—		—		—
Total criticized and classified loans	$	10,812	$	26,634	$	16,728	$	365	$	7,036	$	61,575

17

NOTE 3 - LOANS (CONTINUED)

As of June 30, 2011 and December 31, 2010, the Bank had one interest rate swap in the notional amount of $1.1 million to hedge a 15-year fixed rate loan, which was earning interest at 7.43%. The Company is receiving a variable rate payment of one-month LIBOR plus 2.24% and pays fixed rate payments of 7.43%. The swap matures in April 2022 and had a fair value loss position of $161,000 at June 30, 2011 and $161,000 at December 31, 2010.

NOTE 4 — MORTGAGE SERVICING ACTIVITY

Loans serviced for others are not included in the accompanying consolidated statements of condition. The unpaid principal balances of these loans were $59.1 million and $81.7 million at June 30, 2011 and 2010, respectively, and $65.7 million at December 31, 2010.

The following summarizes mortgage servicing rights for the six months ended June 30, 2011 and 2010 (in thousands):

							Net
	Servicing			Valuation			Carrying
	Rights			Allowance			Value
Balance at December 31, 2010	$	579		$	(131	)	$	448
Additions	—			12			12
Amortization	(57		)	—			(57		)
Balance at June 30, 2011	$	522		$	(119	)	$	403
Balance at December 31, 2009	$	768		$	(85	)	$	683
Reductions	—			(65		)	(65		)
Amortization	(62		)	—			(62		)
Balance at June 30, 2010	$	706		$	(150	)	$	556

At June 30, 2011, June 30, 2010 and December 31, 2010, the fair value of the mortgage servicing rights (“MSRs”) was $414,000, $570,000 and $462,000, respectively. The difference between fair value and carrying value is due to one tranche of mortgage servicing rights having a fair value greater than carrying value.  The fair value at these dates was determined using a third-party valuation model that calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience and current interest rates. The discount rate used to determine the present value of future net servicing income is the required rate of return the market would expect for an asset with similar risk. Both assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change.

NOTE 5 - DEPOSITS

Deposits and their respective weighted average interest rate at June 30, 2011 and December 31, 2010 consist of the following (dollars in thousands):

	June 30,				December 31,
	2011				2010
	Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount
Noninterest-bearing demand accounts	—	%	94,511		—	%	$	70,990
NOW accounts	0.29		43,830		0.30		40,505
Money market accounts	0.47		133,185		0.47		148,904
Savings and club accounts	0.31		72,341		0.05		54,921
Certificates of deposit	2.28		359,418		2.44		396,443
	1.30	%	$	703,285	1.48	%	$	711,763

18

NOTE 6 — BORROWINGS

Pursuant to collateral agreements with the Federal Home Loan Bank of Pittsburgh (the “FHLB”), advances are secured by qualifying first mortgage loans, qualifying fixed-income securities, FHLB stock and an interest-bearing demand deposit account with the FHLB. As of June 30, 2011, the Bank had $172.2 million in qualifying collateral pledged against its advances.

Maturity Date	Amount		Interest Rate		Call Date	Rate if Called
	(in thousands)
August 2011	$	20,000	4.89	%
August 2011	10,000		4.87	%
July 2013	9,289		4.10	%
December 2013	5,000		2.80	%	September 2011	LIBOR + 1.04%
January 2015	16,270		3.49	%
December 2015	5,000		3.06	%	December 2011	LIBOR + 1.12%
November 2017	15,000		3.62	%	August 2011	LIBOR + 0.10%
November 2017	15,000		3.87	%	November 2011	LIBOR + 0.10%
December 2017	20,000		2.83	%	September 2011	LIBOR + 0.11%
December 2018	5,000		3.15	%	December 2012	LIBOR + 1.14%
	$	120,559

For the borrowings which have “Call Dates” disclosed in the above table, if the borrowing is called, the Bank has the option to either pay off the borrowing without penalty or the borrowing’s fixed rate resets to a variable LIBOR based rate, as noted in the above table. Subsequent to the call date, the borrowings are callable by the FHLB quarterly. Accordingly, the contractual maturities above may differ from actual maturities.

The borrowing that matures in July 2013 has a five year contractual maturity with principal and interest being paid monthly utilizing a 25 year amortization period. The borrowing that matures in January 2015 is a seven year contractual maturity with principal and interest being paid monthly.

The Bank had a maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh of approximately $389.6 million at June 30, 2011. Additionally, the Bank had a maximum borrowing capacity of $66.7 million with the Federal Reserve Bank of Philadelphia through the Discount Window at June 30, 2011.

As a member of the FHLB of Pittsburgh, the Bank is required to acquire and hold shares of capital stock in the FHLB of Pittsburgh in the amount of at least equal to 4.60% of its advances plus 0.35% of the Bank’s “eligible assets,” as such term is defined by the FHLB; and a maximum amount of 6.00% of its advances plus 1.0% of the Bank’s “eligible assets.”  As of June 30, 2011, the Company’s minimum stock obligation was $7.9 million and maximum stock obligation was $13.9 million.

The FHLB of Pittsburgh ceased paying a dividend on its common stock during the first quarter of 2009 and has not paid a dividend through June 30, 2011.

Other Borrowed Funds

Other borrowed funds obtained from large commercial banks totaled $50.0 million at June 30, 2011.  These borrowings contractually mature with dates ranging from November 2014 through November 2018 and may be called by the lender based on the underlying agreements.  Subsequent to the call date, these borrowings are callable by the lender quarterly. Accordingly, the contractual maturities above may differ from actual maturities.

19

NOTE 6 — BORROWINGS (CONTINUED)

Maturity	Interest
Date	Rate		Call Date	Amount
				(in thousands)
November 2014	3.60	%	August 2011	$	20,000
September 2018	3.40	%	September 2012	10,000
September 2018	3.20	%	September 2012	5,000
October 2018	3.15	%	October 2011	5,000
October 2018	3.27	%	October 2011	5,000
November 2018	3.37	%	November 2013	5,000
				$	50,000

Mortgage backed securities with a fair value of $61.0 million at June 30, 2011 were pledged as collateral for these other borrowed funds.

NOTE 7 — STOCK BASED COMPENSATION

During the six months ended June 30, 2011, the Company recorded $481,000 of stock based compensation expense in connection with the 2007 Equity Incentive Plan, comprised of stock option expense of $201,000 and restricted stock expense of $280,000.

The following is a summary of the Bancorp’s stock option activity and related information for the 2007 Equity Incentive Plan for the six months ended June 30, 2011:

			Weighted
	Number of		Average
	Stock		Exercise
	Options		Price
Outstanding at December 31, 2010	692,178		$	10.97
Granted	24,500		12.94
Exercised	(11,527	)	10.87
Forfeited	(12,361	)	10.42
Outstanding at June 30, 2011	692,790		$	11.05
Exercisable at June 30, 2011	361,617		$	11.18

The following is a summary of the Company’s unvested options as of June 30, 2011 and changes therein during the six months then ended:

			Weighted
	Number of		Average
	Stock		Grant Date
	Options		Fair Value
Unvested at December 31, 2010	343,997		$	2.90
Granted	24,500		4.60
Exercised	—		—
Vested	(27,959	)	2.40
Forfeited	(9,365	)	2.69
Unvested at June 30, 2011	331,173		$	3.07

Expected future expense relating to the 331,173 non-vested options outstanding as of June 30, 2011 is $707,000 over a weighted average period of 2.3 years.

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NOTE 7 — STOCK BASED COMPENSATION (CONTINUED)

During the six months ended June 30, 2011, the Company determined the fair value of the options granted in 2011 was $4.60.  This value was based on the following assumptions:

Expected dividend yield	1.90	%
Expected volatility	40.00	%
Risk-free interest rate	2.51	%
Expected option life in years	6.50

The following is a summary of the status of the Company’s restricted stock as of June 30, 2011 and changes therein during the six months then ended:

			Weighted
	Number of		Average
	Restricted		Grant Date
	Shares		Fair Value
Unvested at December 31, 2010	117,431		$	10.92
Granted	14,090		12.94
Vested	(6,887	)	9.75
Forfeited	(791	)	11.31
Unvested at June 30, 2011	123,843		$	11.21

Expected future compensation expense relating to the 123,843 restricted shares at June 30, 2011 is $965,000 over a weighted average period of 2.3 years.

NOTE 8 — FAIR VALUE

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period ends, and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2011 and December 31, 2010:

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate their fair value.

Investment and Mortgage Related Securities—Available-for-Sale and Held-to-Maturity

Fair values for investment securities and mortgage related securities are obtained from a third party pricing service and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. If quoted market prices are not available for comparable securities, fair value is based on quoted bids for the security or comparable securities.

Loans Held for Sale

The fair values of mortgage loans originated and intended for sale in the secondary market are based on current quoted market prices.

21

NOTE 8 — FAIR VALUE (CONTINUED)

Loans Receivable, Net

For variable-rate loans that reprice frequently and that entail no significant changes in credit risk, fair values are based on carrying values. To determine the fair values of loans that are not impaired, we employ discounted cash flow analyses that use interest rates and terms similar to those currently being offered to borrowers. This methodology is consistent with the guidance in ASC 825-10-55 “Financial Instruments,” and we believe our disclosures provide fair value that is more indicative of an entry price. We do not record loans at fair value on a recurring basis, except one loan associated with the interest rate swap. We record fair value adjustments to loans on a nonrecurring basis to reflect full and partial charge-offs due to impairment. For impaired loans, we use a variety of techniques to measure fair value, such as using the current appraised value of the collateral, discounting the contractual cash flows, and analyzing market data that we may adjust due to specific characteristics of the loan or collateral.

Federal Home Loan Bank Stock

The fair value of the Federal Home Loan Bank stock is assumed to equal its cost, since the stock is nonmarketable but redeemable at its par value.

Mortgage Servicing Rights

The fair value of the MSRs for these periods was determined using a third-party valuation model that calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates.

Accrued Interest Receivable and Accrued Interest Payable

The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposit Liabilities

Fair values for demand deposits (including NOW accounts), savings and club accounts and money market deposits are, by definition, equal to the amount payable on demand at the reporting date. Fair values of fixed-maturity certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on similar instruments with similar maturities. This methodology is consistent with the guidance in ASC 825-10-55 “Financial Instruments,” and we believe our disclosures provide fair value that is more indicative of an entry price.

Federal Home Loan Bank Advances and Other Borrowed Funds

Fair value of Federal Home Loan Bank advances and other borrowed funds are estimated using projected discounted cash flow analyses, based on rates currently available to the Bank for advances with similar terms, and remaining maturities and call features, where applicable.

Off-Balance Sheet Financial Instruments

Fair value of commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account market interest rates, the remaining terms and present credit worthiness of the counterparties.

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NOTE 8 — FAIR VALUE (CONTINUED)

The estimated fair values of the Company’s financial instruments at June 30, 2011 and December 31, 2010 were as follows (in thousands):

	June 30,				December 31,
	2011				2010
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	51,836	$	51,836	$	38,314	$	38,314
Available for sale securities:
Investment securities available-for-sale	26,012		26,012		32,671		32,671
Private label residential mortgage related security	152		152		166		166
Private label commercial mortgage related securities	9,336		9,336		11,767		11,767
Agency residential mortgage related securities	264,015		264,015		266,699		266,699
Held to maturity securities:
Agency mortgage related securities	48,412		48,131		51,835		50,817
Loans receivable, net	638,599		638,804		642,653		643,967
Federal Home Loan Bank stock	8,947		8,947		9,913		9,913
Accrued interest receivable	4,534		4,534		4,500		4,500
Mortgage servicing rights	403		418		448		462
Financial liabilities:
Savings and club accounts	72,341		72,341		54,921		54,921
Demand, NOW and money market deposits	271,526		271,526		260,399		260,399
Certificates of deposit	359,418		363,787		396,443		401,222
Federal Home Loan Bank advances	120,559		126,826		122,800		129,522
Other borrowed funds	50,000		53,768		50,000		53,851
Accrued interest payable	577		577		580		580
Off-balance sheet instruments	—		1,545		—		1,238

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NOTE 8 — FAIR VALUE (CONTINUED)

The Company determines the fair value of certain financial instruments using three levels of input:

Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2—Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Valuations are observed from unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company classified three types of financial instruments as Level 3 as of June 30, 2011. The first instrument is a private label collateralized mortgage obligation (“CMO”), the fair value of which, unlike U.S. agency mortgage related securities, is more difficult to determine because they are not actively traded in securities markets. The second type of instrument includes three private label commercial mortgage backed securities (“CMBS”), the fair value of which is also more difficult to determine because they are not actively traded in securities markets. The third instrument is a loan, which was recorded at fair value when the Company adopted ASC Topic 820 “Fair Value Measurements and Disclosures,” since lending credit risk is not an observable input for this individual commercial loan (see Note 3). The net unrealized loss, including other-than-temporary impairment in accumulated other comprehensive income, in the private label CMO was $197,000 at June 30, 2011 and $393,000 at December 31, 2010. As of June 30, 2011, all of the securities in the private label CMBS portfolio were at an unrealized gain position. All CMBS securities were also at unrealized gain position on December 31, 2010.   The unrealized gain on the loan was $161,000 at both June 30, 2011 and December 31, 2010.

The following tables, which set forth the Company’s fair value measurements included in the financial statements at June 30, 2011 and December 31, 2010, include (1) investment securities and mortgage related securities available-for-sale; (2) the two financial instruments, associated with the interest rate swap agreement as discussed in Note 3; (3) tranches of MSRs where fair value is less than carrying value and are recorded at fair value; (4) partially charged-off loans and (5) other real estate owned.

The following measures were made on a recurring basis as of June 30, 2011 and December 31, 2010:

				Fair Value Measurements at Reporting Date Using
				Quoted Prices in		Significant			Significant
				Active Markets		Other			Other
				for Identical		Observable			Unobservable
	As of			Assets		Inputs			Inputs
Description	June 30, 2011			(Level 1)		(Level 2)			(Level 3)
	(In Thousands)
Available for Sale Securities:
Obligations of U.S. government agencies	$	6,550		$	—	$	6,550		$	—
State and political subdivisions	3,073			—		3,073			—
Corporate securities	16,389			—		16,389			—
Private label residential mortgage related security	152			—		—			152
Private label commercial mortgage related securities	9,336			—		—			9,336
Agency residential mortgage related securities	264,015			—		264,015			—
Loan (1)	1,211			—		—			1,211
Swap contract (1)	(161		)	—		(161		)	—
Total	$	300,565		$	—	$	289,866		$	10,699

(1)Such financial instruments are recorded at fair value as further described in Note 3.

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NOTE 8 — FAIR VALUE (CONTINUED)

				Fair Value Measurements at Reporting Date Using
				Quoted Prices in		Significant			Significant
				Active Markets		Other			Other
	As of			for Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
Description	2010			(Level 1)		(Level 2)			(Level 3)
	(In Thousands)
Available for Sale Securities:
Obligations of U.S. government agencies	$	6,521		$	—	$	6,521		$	—
State and political subdivisions	7,279			—		7,279			—
Corporate securities	18,871			—		18,871			—
Private label residential mortgage related security	166			—		—			166
Private label commercial mortgage related securities	11,767			—		—			11,767
Agency residential mortgage related securities	266,699			—		266,699			—
Loan (1)	1,241			—		—			1,241
Swap contract (1)	(161		)	—		(161		)	—
Total	$	312,383		$	—	$	299,209		$	13,174

(1)Such financial instruments are recorded at fair value as further described in Note 3.

The following measures were made on a non-recurring basis as of June 30, 2011 and December 31, 2010:

The loans were partially charged off at June 30, 2011 and December 31, 2010.  The loans’ fair values are based on Level 3 inputs, which are either an appraised value or a sales agreement, less costs to sell. These amounts do not include fully charged-off loans, because we carry fully charged-off loans at zero on our balance sheet. Also, measurements for impaired loans that are determined using a present value technique are not considered fair value measurements under the standard and, therefore, are not included.

For other real estate owned, we used Level 3 inputs, which consist of appraisals. Other real estate owned is recorded on our balance sheet at fair value, net of costs to sell, when we obtain control of the property.

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
Description	Balance		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
As of June 30, 2011
Loans	$	4,297	$	—	$	—	$	4,297
Mortgage servicing rights	366		—		366		—
Other real estate owned	3,024		—		—		3,024
Total	$	7,687	$	—	$	366	$	7,321
As of December 31, 2010
Loans	$	6,119	$	—	$	—	$	6,119
Mortgage servicing rights	405		—		405		—
Other real estate owned	3,186		—		—		3,186
Total	$	9,710	$	—	$	405	$	9,305

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NOTE 8 — FAIR VALUE (CONTINUED)

The following tables include a roll forward of the financial instruments which fair value is determined using Significant Other Unobservable Inputs (Level 3) for the periods of January 1, 2010 to June 30, 2010 and January 1, 2011 to June 30, 2011.

Six-Months Ended June 30, 2011

	Private Label			Private Label
	Residential			Commercial
	Mortgage			Mortgage
	Security			Securities			Loan			Total
	(In thousands)
Beginning balance, January 1, 2011	$	166		$	11,767		$	1,241		$	13,174
Purchases	—			—			—			—
Payments received	(9		)	(2,275		)	(31		)	(2,315		)
Premium amortization, net	—			(8		)	—			(8		)
Increase (decrease) in unrealized gain (loss)	(5		)	(148		)	1			(152		)
Reclassification to Level 3	—			—			—			—
Ending balance, June 30, 2011	$	152		$	9,336		$	1,211		$	10,699

Six-Months Ended June 30, 2010

	Private Label			Private Label
	Residential			Commercial
	Mortgage			Mortgage
	Security			Securities			Loan			Total
	(In thousands)
Beginning balance, January 1, 2010	$	195		$	17,833		$	1,259		$	19,287
Purchases	—			—			—			—
Payments received	(37		)	(1,948		)	(24		)	(2,009		)
Discount accretion, net	—			99			—			99
Increase (decrease) in unrealized gain (loss)	32			258			62			352
Reclassification to Level 3	—			—			—			—
Ending balance, June 30, 2010	$	190		$	16,242		$	1,297		$	17,729

There were no purchases, sales, issuances or settlements in any Level 3 asset during the six months ended June 30, 2011 or the year ended December 31, 2010.  Additionally, there were no transfers made between levels during the six months ended June 30, 2011 or the year ended December 31, 2010.

The Company utilizes one external pricing service (“primary pricing service”) as the provider of pricing on the investment portfolio on a quarterly basis. We generally obtain one quote per investment security. We review the estimates of fair value provided by the pricing service to determine if they are representative of fair value based upon our general knowledge of market conditions and relative changes in interest rates and the credit environment. The Company made no adjustments to the values obtained from the primary pricing service. The Company evaluates the appropriateness of the identified Level 1, 2 or 3 classifications on a recurring basis.

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NOTE 9 - COMPREHENSIVE INCOME

Comprehensive income for the three and six months ended June 30, 2011, and 2010 is as follows (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010
Net income	$	1,257		$	608	$	2,503		$	1,159
Other comprehensive income:
Unrealized holding gains arising during the period, net of tax for the three months ended June 30, 2011 and 2010, of $884 and $1,342, respectively, and for the six months ended June 30, 2011 and 2010, of $744 and $1,760, respectively)	1,606			2,377		1,329			3,085
Non-credit related unrealized loss on other-than temporary impaired securities (net of taxes of $(67) for three and six months ended June 30, 2011)	(130		)	—		(130		)	—
Other comprehensive income	1,476			2,377		1,199			3,085
Comprehensive income	$	2,733		$	2,985	$	3,702		$	4,244

NOTE 10 — ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (ASU) 2010-06—Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. The ASU amends Subtopic 820-10 with new disclosure requirements and clarification of existing disclosure requirements. New disclosures required include the amount of significant transfers in and out of Levels 1 and 2 fair value measurements and the reasons for the transfers. In addition, the reconciliation for Level 3 activity will be required on a gross rather than net basis. The ASU provides additional guidance related to the level of disaggregation in determining classes of assets and liabilities and disclosures about inputs and valuation techniques. The amendments are effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the reconciliation for Level 3 activity on a gross basis, which was effective for fiscal years beginning after December 15, 2010. The Company adopted this ASU effective January 1, 2010.  Effective January 1, 2011 the Company adopted the requirements to provide the reconciliation for Level 3 activity on a gross basis.  The reconciliation was not shown as there were no purchases, sales, issuances or settlements in any Level 3 asset during the six months ended June 30, 2011.  This ASU did not have a material effect on the Company’s financial position or results of operations.

Accounting Standards Update (ASU) No. 2010-18 — Effect of a Loan Modification When the Loan Is Part of a Pool that is Accounted for as a Single Asset, a consensus of the FASB Emerging Issues Task Force (Issue No. 09-I).  This ASU amends FASB ASC Subtopic 310-30, Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality, so that modifications of loans that are accounted for within a pool under that Subtopic do not result in the removal of the loans from the pool even if the modifications of the loans would otherwise be considering a troubled debt restructuring.  A one-time election to terminate accounting for loans in a pool, which may be made on a pool-by-pool basis, is provided upon adoption of the new guidance.  An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change.  The amendments are effective prospectively for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  Early adoption is permitted.  This ASU has no effect on the Company’s financial position or results of operations as the Company did not modify any loans that were pooled for accounting purposes as of December 31, 2010 or as of June 30, 2011.

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NOTE 10 — ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Accounting Standards Update (ASU) No. 2010-20 — Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  This ASU requires significant new disclosures about the allowance for credit losses and the credit quality of financing receivables. The requirements are intended to enhance transparency regarding credit losses and the credit quality of loan and lease receivables. Under this statement, allowance for credit losses and fair value are to be disclosed by portfolio segment, while credit quality information, impaired financing receivables and nonaccrual status are to be presented by class of financing receivable.  Disclosure of the nature and extent, the financial impact and segment information of troubled debt restructurings will also be required.  The disclosures are to be presented at the level of disaggregation that management uses when assessing and monitoring the portfolio’s risk and performance. Disclosures related to period-end information (e.g., credit quality information and the ending financing receivables balance segregated by impairment method) are effective in all interim and annual reporting periods ending on or after December 15, 2010. Disclosures of activity that occurs during a reporting period (e.g., modifications and the rollforward of allowance for credit losses by portfolio segment) are effective in interim or annual periods beginning on or after December 15, 2010.  The Company has complied with the disclosures required as of December 31, 2010 and June 30, 2011.

Accounting Standards Update (ASU) No. 2011-01— Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No 2010-20.  The amendments in ASU 2011-01 temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, for public entities. As a result of ASU No. 2011-02, the provisions of ASU No. 2011-01 are effective for the Company’s reporting period ending September 30, 2011.  The adoption of ASU No. 2011-01 is not expected to have a material impact on the Company’s financial position or results of operations.

Accounting Standards Update (ASU) No. 2011-02 A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. The provisions of ASU No. 2011-02 provide additional guidance related to determining whether a creditor has granted a concession, include factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibit creditors from using the borrower’s effective rate test to evaluate whether a concession has been granted to the borrower, and add factors for creditors to use in determining whether a borrower is experiencing financial difficulties.  A provision in ASU No. 2011-02 also ends the FASB’s deferral of the additional disclosures about troubled debt restructurings as required by ASU No. 2010-20.  The provisions of ASU No. 2011-02 are effective for the Company’s reporting period ending September 30, 2011.  The adoption of ASU No. 2011-02 is not expected to have a material impact on the Company’s financial position or results of operations.

Accounting Standards Update (ASU) No. 2011-03, Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.  This ASU 2011 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 removes from the assessment of effective control (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance guidance related to that criterion. ASU 2011-03 will be effective for the Company on January 1, 2012 and is not expected to have a material impact on the Company’s financial position or results of operations.

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

Forward-Looking Statements

This quarterly report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’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 the Company and its subsidiary include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, changes in real estate market values in the Company’s market area, changes in relevant accounting principles and guidelines and the inability of third party service providers to perform their functions.  Additional factors that may affect our results are discussed in the sections titled “Risk Factors” in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 14, 2011, in the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9, 2011 and its other Securities and Exchange Commission reports.

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These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider the following to be our critical accounting policies: allowance for loan losses, valuation and other-than-temporary impairment of investment securities, and deferred income taxes.

Allowance for Loan Losses. The allowance for loan losses is maintained at a level representing management’s best estimate of known and inherent losses in the loan portfolio, based on management’s evaluation of the portfolio’s collectability. The allowance is established through the provision for loan losses, which is charged against income. Management estimates the allowance balance required using loss experience in particular segments of the portfolio, trends in industry charge-offs by particular segments, the size and composition of the loan portfolio, trends and absolute levels of nonperforming loans, trends and absolute levels of classified and criticized loans, trends and absolute levels in delinquent loans and troubled debt restructurings, trends and absolute levels within different risk ratings, and changes in existing general economic and business conditions affecting our lending areas and the national economy.

Additionally, for loans identified by management as impaired, management will provide a reserve based on the expected discounted cash flows of the loan, or for loans determined to be collateral dependent, a reserve is established based on appraised value less costs to sell. 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 impaired 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. 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 actual conditions differ substantially from the assumptions used in making the evaluation. Further, current weak economic conditions, such as high unemployment and depressed real estate values, have increased the uncertainty inherent in these estimates and assumptions. In addition, the Office of the Comptroller of the Currency, 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 negatively affect earnings.

Valuation and Other-Than-Temporary Impairment of Investment Securities. Investment securities are reviewed quarterly to determine whether the fair value is below the current carrying value. When the fair value of any of our investment securities has declined below its current carrying value, management is required to assess whether the decline is other-than-temporary. A review of other-than-temporary impairment requires us to make certain judgments regarding the nature of the decline, and the probability, extent and timing of a valuation recovery and Fox Chase Bancorp’s intent to sell the security or if it is more likely than not that the security will be required to be sold before recovery of its amortized cost. Pursuant to these requirements, we assess valuation declines to determine the extent to which such changes are attributable to (1) fundamental factors specific to the issuer, such as financial condition, business prospects or other factors, or (2) market-related factors, such as required market yields, interest rates or equity market declines. If the decline in the market value of a security is determined to be other-than-temporary, the credit portion of the impairment is written down through earnings and the non-credit portion is an adjustment to other comprehensive income. See Note 2 to the consolidated financial statements for a schedule that shows gross unrealized losses, fair value of securities aggregated by security category and length of time that individual securities have been in continuous unrealized loss position at June 30, 2011 and December 31, 2010, and Note 8 for a discussion related to the determination of fair value.

29

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. 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. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.

Comparison of Financial Condition at June 30, 2011 and December 31, 2010

Total assets decreased $7.4 million, or 0.7%, to $1.09 billion at June 30, 2011, compared to $1.10 billion at December 31, 2010. Cash and cash equivalents increased $13.5 million from December 31, 2010 to June 30, 2011 as the Company had excess liquidity due to calls, maturities and paydowns of securities as well as a decrease in loans, offset by a decrease in deposits. Loans decreased $4.1 million from December 31, 2010 to June 30, 2011. During the six months ended June 30, 2011, the Bank’s multi-family and commercial real estate portfolio increased $17.6 million and the commercial and industrial portfolio increased $9.8 million as a result of new loan originations by the Bank’s commercial lending teams. In addition, the Bank’s commercial construction portfolio decreased $7.8 million, primarily due to the payment in full of a $5.7 million construction loan, and payments and charge-offs related to nonperforming commercial construction loans of $1.5 million and $1.2 million, respectively.  One-to four-family real estate loans decreased $19.1 million and consumer loans decreased $4.6 million due to our decision to reduce new originations on these types of loans as a result of the current economic environment.  Mortgage related securities available-for-sale decreased $5.1 million, as cash repayments of $38.5 million were greater than purchases of $33.1 million during the six months ended June 30, 2011. Investment related securities available-for-sale and mortgage related securities held-to-maturity decreased $6.7 million and $3.4 million, respectively, primarily due to bond calls and principal payments.

Deposits decreased $8.5 million, or 1.2%, from $711.8 million at December 31, 2010 to $703.3 million at June 30, 2011. Certificates of deposit decreased $37.0 million, or 9.3%, and money market accounts decreased $15.7 million, or 10.6%, from December 31, 2010 to June 30, 2011. These decreases were offset by increases in noninterest-bearing demand accounts of $23.5 million, or 33.1%, savings and club accounts of $17.4 million, or 31.7%, and NOW accounts of $3.3 million, or 8.2%, from December 31, 2010 to June 30, 2011. The decrease in certificates of deposit relates primarily to customer redemptions associated with certificates of deposit obtained during a pricing promotion offered in the first quarter of 2009. Specifically, during the first quarter of 2011, approximately $23.6 million of certificates of deposit with a rate of 3.50% matured.  This is the last maturity of certificates of deposit associated with the Bank’s first quarter 2009 certificate of deposit promotion.  The Bank did not offer any certificates of deposit promotions during the first half of 2011.  The decrease in money market deposits was primarily due to the Bank maintaining its money market rates at the midpoint of the market and not offering any promotional money market offers during the first half of 2011. The increase in savings and club accounts was primarily due to the introduction of the Fox Chase Advantage Savings product during the second quarter of 2011 which offered an introductory rate of 1.25% for three months for new deposits.  The increase in noninterest-bearing demand accounts was primarily due to deposits obtained from the Bank’s commercial borrowing relationships. Federal Home Loan Bank advances decreased $2.2 million, or 1.8%, from $122.8 million at December 31, 2010 to $120.6 million at June 30, 2011 due to principal amortization on two advances.

Stockholders’ equity increased $4.2 million to $209.9 million at June 30, 2011 compared to $205.7 million at December 31, 2010 primarily due to net income of $2.5 million for the six months ended June 30, 2011, an increase of $1.2 million in other comprehensive income, stock-based compensation of $905,000 and issuance of common stock related to exercised stock options of $124,000, offset by dividends paid totaling $581,000.

Comparison of Operating Results for the Three and Six Months Ended June 30, 2011 and 2010

General. Net income increased $649,000, or 106.7%, to $1.3 million for the three months ended June 30, 2011, compared to $608,000 for the three months ended June 30, 2010. The increase in net income was due to an increase in net interest income of $1.1 million and a decrease of $175,000 in the provision for loan losses and an increase in noninterest income of $16,000 offset by an increase of $354,000 in income tax expense and an increase of $278,000 in noninterest expense.

30

Net income increased $1.3 million, or 116.0%, to $2.5 million for the six months ended June 30, 2011, compared to $1.2 million for the six months ended June 30, 2010. The increase in net income was due to an increase in net interest income of $2.3 million, a decrease of $91,000 in the provision for loan losses and an increase in noninterest income of $80,000 offset by an increase of $706,000 in income tax expense and an increase of $396,000 in noninterest expense.

Net Interest Income. Net interest income increased $1.1 million, or 16.3%, to $7.8 million for the three months ended June 30, 2011 compared to $6.7 million for the same period in 2010 primarily due to a decrease in interest expense of $2.0 million offset by a $925,000 decrease in total interest income. The decrease in interest expense was primarily due to a decrease in average total interest-bearing liabilities of $186.3 million and a decrease in the average cost of interest-bearing liabilities from 2.43% to 1.98%.  The decrease in the average balance was primarily due to a $191.9 million decrease in the average balances of money market accounts and certificates of deposit.  The decrease in the average cost of interest-bearing liabilities was primarily due to a reduction in overall interest rate environment during 2010 and 2011, which led to a reduction in the cost of interest-bearing deposits from 2.16% to 1.50% due to maturities of higher rate certificates of deposit and reduced rates on other deposit products. The average balance of noninterest-bearing deposits increased $23.0 million, or 33.6%, to $91.5 million for the three months ended June 30, 2011 compared to $68.5 million for the same period in 2010, primarily due to deposits obtained from the Bank’s commercial borrowing relationships.  The decrease in interest income was primarily due to a decrease in average interest-earning assets from a reduction in mortgage related securities and residential and consumer loans.  In addition, the yield on interest-earning assets decreased from 4.44% to 4.40%, primarily related to a reduction in yield on mortgage related securities from 3.45% to 3.24% due to new purchases having lower yields than the existing portfolio, a reduction in the yield on residential loans from 5.26% to 4.97% and a reduction in yield on the interest-earning demand deposits from 0.37% to 0.23%.

Net interest income increased $2.3 million, or 17.3%, to $15.4 million for the six months ended June 30, 2011 compared to $13.1 million for the same period in 2010 primarily due to a decrease in interest expense of $4.2 million offset by a $1.9 million decrease in interest income. The decrease in interest expense was primarily due to a decrease in average total interest-bearing liabilities of $180.5 million and a decrease in the average cost of interest-bearing liabilities from 2.51% to 2.00%.  The decrease in the average balance was primarily due to a $181.1 million decrease in the average balances of money market accounts and certificates of deposit.  The decrease in the average cost of interest-bearing liabilities was primarily due to a reduction in the overall interest rate environment during 2010 and 2011, which led to a reduction in the cost of interest-bearing deposits from 2.26% to 1.54% due to maturities of higher rate certificates of deposit and reduced rates on other deposit products. The average balance of noninterest-bearing deposits increased $25.1 million, or 39.0%, to $89.3 million for the six months ended June 30, 2011 compared to $64.3 million for the same period in 2010, primarily due to deposits obtained from the Bank’s commercial borrowing relationships.  The decrease in interest income was primarily due to a decrease in average interest-earning assets from a reduction in mortgage related securities and residential and consumer loans.  In addition, the yield on interest-earning assets decreased from 4.47% to 4.38%, primarily related to a reduction in yield on mortgage related securities from 3.56% to 3.17% due to new purchases having lower yields than the existing portfolio.

The following table summarizes average balances and average yields and costs of interest-earning assets and interest-bearing liabilities for the three and six months ended June 30, 2011 and 2010. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.

31

	Three Months Ended June 30,														Six Months Ended June 30,
	2011							2010							2011							2010
	Average					Yield/		Average					Yield/		Average					Yield/		Average					Yield/
	Balance			Interest		Cost		Balance			Interest		Cost		Balance			Interest		Cost		Balance			Interest		Cost
	(Dollars in thousands)														(Dollars in thousands)
Assets:
Interest-earning assets:
Interest-earning demand deposits	$	43,479		$	25	0.23	%	$	68,782		$	64	0.37	%	$	46,078		$	53	0.23	%	$	64,692		$	163	0.51	%
Mortgage related securities
Available-for-sale	279,944			2,426		3.47	%	363,683			3,135		3.45	%	279,876			4,753		3.40	%	379,380			6,747		3.56	%
Held-to-maturity	49,495			239		1.93	%	—			—		—		50,297			473		1.88	%	—			—		—
Total mortgage related securities	329,439			2,665		3.24	%	363,683			3,135		3.45	%	330,173			5,226		3.17	%	379,380			6,747		3.56	%
Taxable securities	32,032			124		1.54	%	23,892			96		1.62	%	32,938			264		1.60	%	22,318			173		1.55	%
Nontaxable securities	5,271			67		5.07	%	8,477			84		3.97	%	6,098			137		4.50	%	8,704			173		3.99	%
Loans (1):
Residential loans	225,578			2,802		4.97	%	266,570			3,506		5.26	%	230,629			5,773		5.01	%	267,719			7,087		5.29	%
Commercial loans	361,571			5,157		5.64	%	327,047			4,677		5.66	%	359,347			10,212		5.65	%	316,389			8,862		5.57	%
Consumer loans	51,598			767		5.95	%	65,361			970		5.94	%	52,692			1,573		5.97	%	66,662			1,986		5.96	%
Total Loans	638,747			8,726		5.43	%	658,978			9,153		5.52	%	642,668			17,558		5.45	%	650,770			17,935		5.50	%
Allowance for loan losses	(12,926		)	—				(11,058		)	—				(12,859		)	—				(10,954		)	—
Net loans	625,821			8,726				647,920			9,153				629,809			17,558				639,816			17,935
Total interest-earning assets	1,036,042			11,607		4.40	%	1,112,754			12,532		4.44	%	1,045,096			23,238		4.38	%	1,114,910			25,191		4.47	%
Noninterest-earning assets	40,702							50,614							41,117							47,231
Total assets	$	1,076,744						$	1,163,368						$	1,086,213						$	1,162,141
Liabilities and equity:
Interest-bearing liabilities:
NOW and money market deposit accounts	$	171,988		184		0.43	%	$	223,518		448		0.80	%	$	176,778		378		0.43	%	$	221,076		974		0.89	%
Savings accounts	66,120			39		0.23	%	56,138			11		0.08	%	60,771			46		0.15	%	54,124			30		0.11	%
Certificates of deposit	362,297			2,019		2.24	%	502,658			3,760		3.00	%	374,433			4,246		2.29	%	511,214			7,793		3.07	%
Total interest-bearing deposits	600,405			2,242		1.50	%	782,314			4,219		2.16	%	611,982			4,670		1.54	%	786,414			8,797		2.26	%
FHLB advances	121,268			1,153		3.76	%	125,675			1,191		3.75	%	121,824			2,307		3.77	%	127,888			2,408		3.75	%
Other borrowed funds	50,000			432		3.42	%	50,000			432		3.42	%	50,000			859		3.42	%	50,000			859		3.42	%
Total borrowings	171,268			1,585		3.66	%	175,675			1,623		3.66	%	171,824			3,166		3.67	%	177,888			3,267		3.65	%
Total interest-bearing liabilities	771,673			3,827		1.98	%	957,989			5,842		2.43	%	783,806			7,836		2.00	%	964,302			12,064		2.51	%
Noninterest-bearing deposits	91,511							68,519							89,324							64,265
Other noninterest-bearing liabilities	4,956							8,592							5,441							6,834
Total liabilities	868,140							1,035,100							878,571							1,035,401
Stockholders’ equity	201,636							120,334							200,916							119,063
Accumulated comprehensive income	6,968							7,934							6,726							7,677
Total stockholder’s equity	208,604							128,268							207,642							126,740
Total liabilities and stockholders’ equity	$	1,076,744						$	1,163,368						$	1,086,213						$	1,162,141
Net interest income				$	7,780						$	6,690						$	15,402						$	13,127
Interest rate spread						2.42	%						2.01	%						2.38	%						1.96	%
Net interest margin						2.95	%						2.37	%						2.90	%						2.31	%
Average interest-earning assets to average interest-bearing liabilities						134.26	%						116.16	%						133.34	%						115.62	%

(1) Nonperforming loans are included in average balance computations

32

Rate/Volume Analysis.  The following table sets 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 current volume).  The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).  The net column represents the sum of the prior columns.  For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

	Three Months Ended									Six Months Ended
	June 30, 2011									June 30, 2011
	Compared to									Compared to
	Three Months Ended									Six Months Ended
	June 30, 2010									June 30, 2010
	Increase (Decrease)									Increase (Decrease)
	Due to									Due to
	Rate			Volume			Net			Rate			Volume			Net
Interest and dividend income:
Interest-earning demand deposits	$	(15	)	$	(24	)	$	(39	)	$	(63	)	$	(47	)	$	(110	)
Mortgage related securities
Available-for-sale	13			(722		)	(709		)	(225		)	(1,769		)	(1,994		)
Held-to-maturity	—			239			239			—			473			473
Total mortgage related securities	13			(483		)	(470		)	(225		)	(1,296		)	(1,521		)
Taxable securities	(6		)	34			28			8			83			91
Nontaxable securities	14			(31		)	(17		)	16			(52		)	(36		)
Loans:
Residential loans	(164		)	(540		)	(704		)	(332		)	(982		)	(1,314		)
Commercial loans	(15		)	495			480			147			1,203			1,350
Consumer loans	1			(204		)	(203		)	4			(417		)	(413		)
Total loans	(178		)	(249		)	(427		)	(181		)	(196		)	(377		)
Total interest-earning assets	(172		)	(753		)	(925		)	(445		)	(1,508		)	(1,953		)
Interest Expense:
NOW and money market deposits	(161		)	(103		)	(264		)	(401		)	(195		)	(596		)
Savings accounts	26			2			28			12			4			16
Certificates of deposit	(691		)	(1,050		)	(1,741		)	(1,462		)	(2,085		)	(3,547		)
Total interest-bearing deposits	(826		)	(1,151		)	(1,977		)	(1,851		)	(2,276		)	(4,127		)
FHLB advances	3			(41		)	(38		)	—			(101		)	(101		)
Other borrowed funds	—			—			—			—			—			—
Total borrowings	3			(41		)	(38		)	—			(101		)	(101		)
Total interest-bearing liabilities	(823		)	(1,192		)	(2,015		)	(1,851		)	(2,377		)	(4,228		)
Net change in net interest income	$	651		$	439		$	1,090		$	1,406		$	869		$	2,275

33

Provision for Loan Losses. The Company recorded a provision for loan losses of $900,000 and $1.9 million for the three and six months ended June 30, 2011, respectively compared to $1.1 million and $2.0 million for the three and six months ended June 30, 2010, respectively. The decrease in the provision for the three and six months ended June 30, 2011 was primarily due to the decline in the Company’s nonperforming assets as outlined in the following table.

The following table provides information with respect to our nonperforming assets at the dates indicated:

	At June 30,			At December 31,
	2011			2010
	(Dollars in thousands)
Nonperforming Loans:
One- to four-family real estate	$	7,232		$	10,813
Multi-family and commercial real estate	4,088			6,180
Construction	6,689			9,279
Consumer	374			365
Commercial and industrial	296			—
Total	18,679			26,637
Accruing loans past due 90 days or more	—			—
Total of nonperforming loans and accruing loans 90 days or more past due	$	18,679		$	26,637
Other real estate owned	3,024			3,186
Total nonperforming assets	$	21,703		$	29,823
Total nonperforming loans and accruing loans past due 90 days or more to total loans	2.87		%	4.07		%
Total nonperforming loans to total assets	1.72			2.43
Total nonperforming assets to total assets	1.99			2.72
Impaired Loans:
Nonperforming loans	$	18,679		$	26,637
Accruing troubled debt restructurings	11,321			8,617
Other impaired loans	—			3,894
Total impaired loans	$	30,000		$	39,148

34

The following table sets forth our nonaccrual loans by state and loan segment at June 30, 2011 and December 31, 2010.

June 30, 2011

				Multi Family
	One- to Four-			and									Commercial
	Family Real Estate			Commercial Real Estate			Construction			Consumer			and Industrial			Total
	Number			Number			Number			Number			Number			Number
	of			of			of			of			of			of
	Loans	Amount		Loans	Amount		Loans	Amount		Loans	Amount		Loans	Amount		Loans	Amount
	(Dollars in thousands)
Pennsylvania	7	$	5,782	3	$	978	2	$	2,392	3	$	21	1	$	296	16	$	9,469
New Jersey	5	1,450		2	1,865		2	4,297		2	353		—	—		11	7,965
Delaware	—	—		1	1,245		—	—		—	—		—	—		1	1,245
Total	12	$	7,232	6	$	4,088	4	$	6,689	5	$	374	1	$	296	28	$	18,679

December 31, 2010

				Multi Family
	One- to Four-			and									Commercial
	Family Real Estate			Commercial Real Estate			Construction			Consumer			and Industrial			Total
	Number			Number			Number			Number			Number			Number
	of			of			of			of			of			of
	Loans	Amount		Loans	Amount		Loans	Amount		Loans	Amount		Loans	Amount		Loans	Amount
	(Dollars in thousands)
Pennsylvania	7	$	5,735	2	$	658	2	$	2,866	1	$	10	—	$	—	12	$	9,269
New Jersey	7	5,078		5	5,522		2	6,413		2	355		—	—		16	17,368
Delaware	—	—		—	—		—	—		—	—		—	—		—	—
Total	14	$	10,813	7	$	6,180	4	$	9,279	3	$	365	—	$	—	28	$	26,637

The following table provides a rollforward of our nonperforming assets, by loan segment and assets acquired through foreclosure, from December 31, 2010 to June 30, 2011.

													Transfer
	At		Additional							Net			To Other			At
	December		Non-		Return to		Payments			Charge-offs/			Real			June
	31,		Performing		Accrual		Received,			Valuation			Estate			30,
	2010		Assets, Net		Status		Net			Allowances			Owned			2011
	(Dollars in thousands)
Nonperforming loans
One- to four-family real estate	$	10,813	$	149	$	—	$	(3,232	)	$	(310	)	$	(188	)	$	7,232
Multi-family and commercial real estate	6,180		2,041		—		(3,188		)	(88		)	(857		)	4,088
Construction	9,279		182		—		(1,532		)	(1,240		)	—			6,689
Consumer	365		12		—		(3		)	—			—			374
Commercial and industrial	—		596		—		—			(300		)	—			296
Total	26,637		2,980		—		(7,955		)	(1,938		)	(1,045		)	18,679
Other real estate owned	3,186		10				(1,117		)	(100		)	1,045			3,024
Total nonperforming assets	$	29,823	$	2,990	$	—	$	(9,072	)	$	(2,038	)	$	—		$	21,703

35

At June 30, 2011, nonperforming assets were comprised of the following:

·Four construction loans for residential developments, the largest of which was a $2.5 million loan collateralized by a condominium project in Atlantic County, New Jersey. The three other nonaccrual construction loans totaled $4.2 million at June 30, 2011 and are collateralized by (1) a residential housing development in Cape May County, New Jersey; (2) land and improvements associated with a residential housing development in Chester County, Pennsylvania; and  (3) a single family home residential development in Montgomery County, Pennsylvania.

·Six multi-family and commercial real estate loan relationships, the largest of which was a $1.5 million loan secured by a hotel in Cape May County, New Jersey.

·Twelve one-to four-family loans, the largest of which is a $4.9 million loan secured by a residential home in Montgomery County, Pennsylvania.

·Five consumer loans, each of which is secured by a second or third mortgage position.

·One commercial and industrial loan secured by the cash flows and assets of a business located in Delaware County, Pennsylvania.

·Five properties in other real estate owned, the largest of which is a single family residential development located in Atlantic County, New Jersey with a carrying value of $1.8 million.  The four other real estate owned properties totaled $1.2 million at June 30, 2011 and are collateralized by (1) a single family residential home in Atlantic County, New Jersey; (2) a single family residential home in Cape May County, New Jersey; (3) a condominium project located in Philadelphia County, Pennsylvania and (4) a commercial property in Atlantic County, New Jersey.

The allowance for loan losses consists of an allowance on impaired loans and a general valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the losses on the entire portfolio.

The following table provides information about delinquencies in our loan portfolio at the dates indicated.

	At June 30,				At December 31,
	2011				2010
	30-59		60-89		30-59		60-89
	Days		Days		Days		Days
	Past Due		Past Due		Past Due		Past Due
	(In thousands)				(In thousands)
One- to four-family real estate	$	1,000	$	295	$	96	$	144
Multi-family and commercial real estate	—		30		4,735
Construction real estate	—		—		—		—
Consumer	127		78		170		—
Commercial and industrial	451		39		—		—
Total	$	1,578	$	442	$	5,001	$	144

At June 30, 2011, delinquent loans were comprised of sixteen different loan relationships. The largest delinquent loan was a $736,000 loan secured by a residential property located in Cape May County, New Jersey.  This loan was not delinquent at December 31, 2010 and was paid in full in July 2011.

Total delinquent loans decreased by $3.1 million to $2.0 million at June 30, 2011 as compared to $5.1 million at December 31, 2010.  The decrease was primarily due to a $4.7 million commercial real estate loan, which was also classified as a TDR at March 31, 2011 (see following paragraphs discussing TDRs), performing under its restructured terms, offset by a $1.1 million increase in residential delinquencies, a $35,000 increase in consumer loans and a $490,000 increase in commercial and industrial loans during the six months ended June 30, 2011.

A TDR exists if a borrower is experiencing financial difficulties and the Bank grants the borrower a concession that it would not otherwise grant to collect a loan.  At June 30, 2011, the Bank had TDRs totaling $13.4 million compared to TDRs totaling $14.2 million at March 31, 2011 and $10.7 million at December 31, 2010. Of these amounts, $2.1 million related to a

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construction loan, which is classified as a nonperforming asset.  At June 30, 2011, the remaining $11.3 million in TDRs related to five commercial relationships which are on accrual status as the borrowers have a demonstrated history of making payment as contractually due and have provided evidence which supports their ability to make payments.

Four of the commercial loans classified as a TDR at June 30, 2011, totaling $6.6 million, were classified as TDRs during 2010.  These loans were classified as TDRs because they matured during 2010 and, while the Bank did not lower the interest rate, it extended the loans with uncertainty as to whether the borrowers could obtain similar financing from another financial institution at the time of the extension, thus representing the granting of a financial concession.

One of the commercial loans classified as a TDR at June 30, 2011, totaling $4.7 million, was classified as a TDR during the three months ended March 31, 2011.  The loan was classified as a TDR as the Bank agreed to restructure the terms of the loan, which included reducing payments to interest only for a period of nine months and reducing the rate for the term of the interest only period. This loan is secured by partially owner occupied commercial property located in Chester County, Pennsylvania.  As of June 30, 2011, this loan is performing in accordance with its restructured terms and is no longer reported as delinquent.

The decrease in “Other impaired loans” from December 31, 2010 to June 30, 2011 is a result of the Bank modifying a $3.9 million construction loan, which has a total commitment of $5.5 million, during the quarter ended June 30, 2011.  The loan is secured by land and homes in a retirement community in Delaware, and was classified as impaired at December 31, 2010 and March 31, 2011 as the loan matured in February 2011 and it was unlikely the borrower would be able to pay the loan off in full, as contractually due at maturity. This loan is on accrual status as of June 30, 2011 as the borrower (1) has demonstrated a history of making payments as contractually due and is current as of June 30, 2011, (2) has provided evidence supporting the ability to make payments for the foreseeable future, and (3) a recent appraisal indicates the borrower has equity in the underlying property.  Additionally, the Bank evaluated the renegotiated loan and determined that the modification did not represent a TDR as the borrower is not considered to be experiencing financial difficulty and was not granted a concession.

Noninterest Income. The following table summarizes noninterest income for the three and six months ended June 30, 2011 and 2010.

	Three Months										Six Months
	Ended June 30,					$			%		Ended June 30,					$			%
	2011			2010		Change			Change		2011			2010		Change			Change
	(Dollars in thousands)
Service charges and other fee income	$	452		$	251	$	201		80.1	%	$	779		$	509	$	270		53.0	%
Net gain on sale of other real estate owned	20			—		20			100.0		20			—		20			100.0
Income on bank-owned life insurance	116			118		(2		)	(1.7	)	230			233		(3		)	(1.3	)
Other	63			65		(2		)	(3.1	)	89			95		(6		)	(6.3	)
Total other than temporary impairment loss	(398		)	—		(398		)	(100.0	)	(398		)	—		(398		)	(100.0	)
Less: Portion of loss recognized in other comprehensive income (before taxes)	197			—		197			100.0		197			—		197			100.0
Net other-than-temporary impairment loss	(201		)	—		(201		)	(100.0	)	(201		)	—		(201		)	(100.0	)
Net gains on sale of investment securities	—			—		—			—		—			—		—			—
Net investment securities losses	(201		)	—		(201		)	(100.0	)	(201		)	—		(201		)	(100.0	)
Total Noninterest Income	$	450		$	434	$	16		3.7	%	$	917		$	837	$	80		9.6	%

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Service charges and other fee income increased $201,000, or 80.1% for the three months ended June 30, 2011 compared to the same period in 2010, primarily due to an increase in commercial loan fees of $114,000, cash management fees of $39,000 and loan servicing income of $65,000.  The increase in commercial loan fees was primarily due to an increase in commercial customer fees, which included an increase in unused lines and letters of credit fees of $53,000 and an increase in international banking transaction fees of $61,000.  The increase in cash management fees was due to an increase in commercial customer usage.  Loan servicing income increased primarily due to a lower valuation adjustment on the Bank’s mortgage servicing rights.  These increases were offset by decreases in other fees such as warehouse line of credit fees and late charges. These increases were also offset by an other-than-temporary credit impairment loss recognized on a private label residential mortgage related security of $201,000 during the second quarter of 2011.

Service charges and other fee income increased $270,000, or 53.0% for the six months ended June 30, 2011 compared to the same period in 2010, primarily due to an increase in commercial loan fees of $152,000, cash management fees of $90,000 and loan servicing income of $49,000.  The increase in commercial loan fees was primarily due to an increase in commercial customer fees, which included an increase in unused lines and letters of credit fees of $93,000 and an increase in international banking transaction fees of $61,000.  The increase in cash management fees was due to an increase in commercial customer usage.  Loan servicing income increased primarily due to a lower valuation adjustment on the Bank’s mortgage servicing rights.  These increases were also offset by decreases in other fees such as warehouse line of credit fees and late charges. These increases were also offset by an other-than-temporary credit impairment loss recognized on a private label residential mortgage related security in the amount of $201,000 during the second quarter of 2011.

Noninterest Expense. The following table summarizes noninterest expense for the three and six months ended June 30, 2011 and 2010.

	Three Months									Six Months
	Ended June 30,				$			%		Ended June 30,				$			%
	2011		2010		Change			Change		2011		2010		Change			Change
	(Dollars in thousands)
Salaries, benefits and other compensation	$	3,214	$	2,963	$	251		8.5	%	$	6,381	$	5,946	$	435		7.3	%
Occupancy expense	434		440		(6		)	(1.4	)	931		939		(8		)	(0.9	)
Furniture and equipment expense	104		117		(13		)	(11.1	)	207		233		(26		)	(11.2	)
Data processing costs	418		427		(9		)	(2.1	)	838		829		9			1.1
Professional fees	484		355		129			36.3		835		617		218			35.3
Marketing expense	85		95		(10		)	(10.5	)	145		166		(21		)	(12.7	)
FDIC premiums	229		401		(172		)	(42.9	)	512		773		(261		)	(33.8	)
Provision for loss on other real estate owned	100		—		100			100.0		100		34		66			194.1
Other real estate owned expense	25		23		2			8.7		44		29		15			51.7
Other	387		381		6			1.6		785		816		(31		)	(3.8	)
Total Noninterest Expense	$	5,480	$	5,202	$	278		5.3	%	$	10,778	$	10,382	$	396		3.8	%

Noninterest expense increased $278,000 for the three months ended June 30, 2011 primarily due to the following:  Salaries, benefits and other compensation increased $251,000 primarily as a result of incremental employee benefit costs as the Company increased employee stock ownership benefits for employees in conjunction with the Bank’s mutual-to-stock conversion in the second quarter of 2010 and higher incentive compensation accruals.  Professional fees increased $129,000 primarily due to incremental legal costs associated with the Bank’s nonperforming assets.  Provision for loss on other real estate owned increased $100,000 as a result of an additional impairment on one property owned by the Bank.  FDIC premiums decreased $172,000 due to lower deposit balances, a lower assessment rate as well as the FDIC implementing a new assessment base beginning April 1, 2011, which provided a $60,000 benefit to the Bank during the three months ended June 30, 2011.

Noninterest expense increased $396,000 for the six months ended June 30, 2011 primarily due to the following:  Salaries, benefits and other compensation increased $435,000 primarily as a result of incremental employee benefit costs as the Company increased employee stock ownership benefits for employees in conjunction with the Bank’s mutual-to-stock conversion in the second quarter of 2010 and higher incentive compensation accruals.  Professional fees increased $218,000 primarily due to incremental legal costs associated with the Bank’s nonperforming assets.  Provision for loss on other real estate owned increased $66,000 as a result of an additional impairment on one property owned by the Bank.  FDIC premiums decreased $261,000 due to lower deposit balances, a lower assessment rate as well as the FDIC implementing a new assessment base beginning April 1, 2011, which provided a $60,000 benefit to the Bank during the six months ended June 30, 2011.

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Income Taxes. The income tax provision for the three and six months ended June 30, 2011 was $593,000 and $1.2 million, respectively compared to $239,000 and $457,000 for the three and six months ended June 30, 2010, respectively. The Bancorp’s effective income tax rate was 32.1% and 31.7% for the three and six months ended June 30, 2011, respectively, compared to 28.2% and 28.3% for the three and six months ended June 30, 2010, respectively. The increase in the effective tax rate is due to tax exempt income representing a smaller relative portion of pre-tax income during the three and six months ended June 30, 2011 as compared to the same periods in 2010.

Liquidity and Capital Management

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 and sales, securities repayments, maturities and sales and funds available from the FHLB and Federal Reserve Bank. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loans and securities sales and prepayments are greatly influenced by general interest rates, economic conditions and competition.

The following table presents certain of our contractual obligations as of June 30, 2011 and December 31, 2010.

			Payments Due by Period
					One to
			Less Than		Three		Three to		More Than
Contractual Obligations	Total		One Year		Years		Five Years		Five Years
	(In thousands)
At June 30, 2011
Operating lease obligations (1)	$	532	$	492	$	40	$	—	$	—
FHLB advances and other borrowings (2)	195,636		39,620		31,820		34,093		90,103
Other long-term obligations (3)	4,022		1,713		2,309		—		—
Total	$	200,190	$	41,825	$	34,169	$	34,093	$	90,103
At December 31, 2010
Operating lease obligations (1)	$	748	$	473	$	275	$	—	$	—
FHLB advances and other borrowings (2)	201,046		40,347		32,220		36,943		91,536
Other long-term obligations (3)	4,876		1,785		3,091		—		—
Total	$	206,670	$	42,605	$	35,586	$	36,943	$	91,536

(1)Represents lease obligations for operations center, one loan production office and equipment.

(2)   Includes principal and projected interest payments.

(3)Represents obligations to the Company’s third party data processing provider and other vendors.

We regularly adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand; (2) expected deposit flows; (3) cash flows on our investments; (4) yields available on interest-earning deposits and securities; and (5) the objectives of our asset/liability management policy. We use a variety of measures to assess our liquidity needs, which are provided to our Asset/Liability Management Committee on a regular basis. Our policy is to maintain net liquidity of at least 50% of our funding obligations over the next month. Additionally, our policy is to maintain an amount of cash and short-term marketable securities equal to at least 15% of net deposits and liabilities that will mature in one year or less.

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 June 30, 2011, cash and cash equivalents totaled $51.8 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $299.5 million at June 30, 2011.   In addition, at June 30, 2011, we had the ability to borrow a total of approximately $389.6 million from the FHLB of which we had $120.6 million outstanding.  As of June 30, 2011, the Bank also had a maximum borrowing capacity of $66.7 million with the Federal Reserve Bank of Philadelphia, through the Discount Window.  At June 30, 2011, we had $206.0 million in loan commitments outstanding, which consisted of $1.4 million of mortgage loan commitments, $21.2 million in home equity and consumer loan commitments, $170.7 million in commercial loan commitments and $12.7 million in standby letters of credit.

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Certificates of deposit due within one year of June 30, 2011 totaled $189.9 million, representing 52.8% of certificates of deposit at June 30, 2011, an increase from 44.6% at December 31, 2010. We believe the large percentage of certificates of deposit that mature within one year reflect customers’ hesitancy to invest their funds for long periods in the current low interest rate environment. Depending on the liquidity position of the Company, we may implement marketing and pricing strategies that we believe will help retain a significant portion of these maturities, as needed. 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 June 30, 2012.

Our primary investing activities are the origination of loans and the purchase and sale of securities. Our primary financing activities consist of activity in deposit accounts and borrowed funds. Deposit flows are affected by the overall levels 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 and to increase core deposit relationships. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

The following table presents our primary investing and financing activities during the periods indicated and does not include loans originated and held for sale.

	Six Months
	Ended			Year Ended
	June 30, 2011			December 31, 2010
	(In thousands)
Investing activities:
Loan originations	$	(253,208	)	$	(396,841	)
Other decreases in loans	270,961			405,707
Purchase of loans	(4,495		)	(18,724		)
Purchase of loan participations	(13,622		)	(9,064		)
Security purchases	(33,065		)	(118,616		)
Security sales	—			36,480
Security maturities, calls and principal repayments	48,583			139,062
Financing activities:
Changes in deposits	(8,478		)	(146,514		)
Net decrease in FHLB advances	(2,241		)	(14,365		)
Issuance of stock for vested options	124			—
Cash dividends paid	(581		)	—
Merger of Fox Chase MHC	—			107
Net Proceeds from common stock offering	—			81,169
Purchase of common stock for ESOP	—			(3,485		)

The Bancorp is a separate entity and apart from the Bank and must provide for its own liquidity. As of June 30, 2011, the Bancorp had $42.1 million in cash and cash equivalents compared to $42.6 million as of December 31, 2010.  Substantially all of the Bancorp’s cash and cash equivalents were obtained from proceeds it retained from its initial public offering in 2006 as well as the Bank’s mutual-to-stock conversion completed in June 2010.  In addition to its operating expenses, Bancorp may utilize its cash position for the payment of dividends or to repurchase common stock, subject to applicable restrictions.  Bancorp paid a cash dividend of $.02 per outstanding share of common stock during both the first and second quarters of 2011.

The Bancorp can receive dividends from the Bank.  Payment of such dividends to the Bancorp 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 Bancorp believes that such restriction will not have an impact on the Bancorp’s ability to meet its ongoing cash obligations.

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Capital Management. The Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency (and prior to its elimination on July 21, 2011, the Office of Thrift Supervision), 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 June 30, 2011, the Bank exceeded all of regulatory capital requirements and was considered a “well capitalized” institution under regulatory guidelines.

The following table presents the Bank’s capital ratios and the minimum capital requirements to be considered ‘‘well capitalized” under applicable regulatory guidelines as of June 30, 2011 and December 31, 2010:

	Ratio		Minimum to be Well Capitalized
June 30, 2011:
Total risk-based capital (to risk-weighted assets)	24.18	%	³10.0	%
Tier 1 capital (to risk-weighted assets)	23.19	%	³ 6.0	%
Tier 1 capital (to adjusted assets)	14.01	%	³ 5.0	%

	Ratio		Minimum to be Well Capitalized
December 31, 2010:
Total risk-based capital (to risk-weighted assets)	23.76	%	³10.0	%
Tier 1 capital (to risk-weighted assets)	22.53	%	³ 6.0	%
Tier 1 capital (to adjusted assets)	13.60	%	³ 5.0	%

Total stockholders’ equity to total assets was 19.3% at June 30, 2011 and 18.8% at December 31, 2010.  As a result of the mutual-to-stock conversion completed in June 2010, the Company has significant capital.  The Company’s financial condition and results of operations have been enhanced by the capital from the offering, resulting in increased net interest earning assets.  However, the large increase in equity resulting from the capital raised in the conversion has and will likely continue to have an adverse impact on our return on equity until such funds can be deployed into higher yielding assets. The Company may use capital management tools such as cash dividends and share repurchases as well as improving operating income to increase its return on equity.  The Company paid a cash dividend of $0.02 per common share during both the first and second quarters 2011.

On April 27, 2011, the Board of Directors approved a 10% stock repurchase plan.  Such plan began on June 30, 2011, as permitted, after the one-year anniversary of the Company’s mutual-to-stock conversion to a public company.  No shares were repurchased on June 30, 2011.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with US 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, letters of credit and lines of credit.

For the period ended June 30, 2011, 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 3. Quantitative and Qualitative Disclosures About Market Risk.

At June 30, 2011, there has not been any material change to the market risk disclosure from that contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

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Item 4. 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.  In addition, no change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2011 that has materially affected, or is reasonably likely to materially effect, Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. 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 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under the section “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 14, 2011, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, as filed with the SEC on May 9, 2011, which could materially affect our business, financial condition and/or operating results.  As of June 30, 2011, the risk factors of the Company have not changed materially from those reported in the Form 10-K and Form 10-Q, except as described above.  The risks described in the Form 10-K and the Form 10-Q are not the only risks that we face.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

On April 27, 2011, the Company announced a repurchase program under which, beginning on June 30, 2011, it would repurchase up to 10% of the then-outstanding shares of the Company’s common stock (1,455,038 shares) from time to time, depending on market conditions.  The repurchase program would continue until it is completed or terminated by the Company’s Board of Directors.  As of June 30, 2011, the Company had not repurchased any shares under the new program.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

3.1	Articles of Incorporation of Fox Chase Bancorp, Inc. (1)
3.2	Bylaws of Fox Chase Bancorp, Inc. (1)
4.0	Stock Certificate of Fox Chase Bancorp, Inc. (1)
10.0	Fox Chase Bank Executive Incentive Compensation Plan
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 of Chief Executive Officer and Chief Financial Officer
101.0*	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text.
	(1)Incorporated by reference to this document from the exhibits to the Company’s Registration Statement on Form S-1 as initially filed with the Securities and Exchange Commission on March 12, 2010. *Furnished, not filed.

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SIGNATURES

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

	FOX CHASE BANCORP, INC.
Dated: August 5, 2011	By:	/s/ Thomas M. Petro
		Thomas M. Petro
		President and Chief Executive Officer
		(principal executive officer)
Dated: August 5, 2011	By:	/s/ Roger S. Deacon
		Roger S. Deacon
		Chief Financial Officer
		(principal financial and accounting officer)

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