**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,DC 20549**

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**FORM 10-Q**

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| **(Mark One)** |
|----------------|
| **x**          |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **     |   | ** ** |
| ** **     |   | **For the quarterly period ended March 31, 2007** |
| ** **     |   | ** ** |
| ** **     |   | **OR** |
| ** **     |   | ** ** |
| **o**          |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **     |   | ** ** |
| ** **     |   | **For the transition period from               to              ** |

 

**Commission file number: 001-32971**

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**FoxChase Bancorp, Inc.**

(Exactname of registrant as specified in its charter) 

| **United States**                                |   | **33-1145559**       |
|--------------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of                 |   | (I.R.S. Employer     |
| incorporation  or organization)             |   | Identification  No.) |
|                                             |   |                 |
| **4390  Davisville Road, Hatboro, Pennsylvania** |   | **19040**            |
| (Address of  principal executive offices)        |   | (Zip Code)           |

 

**(215)682-7400**

(Registrant’stelephone number, including area code) 

**N/A**

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

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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 forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90days.    Yes  x    No  o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. 
| Large accelerated  filer    o | Accelerated  filer    o | Non-accelerated  filer    x |
|---------------------------------------------------|---------------------------------------------|-------------------------------------------------|

 

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

As of May 11, 2007, there were 14,679,750 shares of the registrant’scommon stock outstanding.

 

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**FOX CHASE BANCORP, INC.**

**Table of Contents**
| ** **                         | ** ** | **Page**                                                                                                   |
|------------------------------------|------------|------------------------------------------------------------------------------------------------------------|
| **Part I. Financial  Information** | ** ** | ** **                                                                                                 |
|                               |       |                                                                                                       |   |   |
| Item 1.                            |       | Financial Statements                                                                                       |   | 3 |
|                               |       |                                                                                                       |   |   |
|                               |       | Consolidated  Statements of Condition at March 31, 2007 (unaudited) and December 31, 2006                  |   | 3 |
|                               |       |                                                                                                       |   |   |
|                               |       | Consolidated  Statements of Operations for the Three Months Ended March 31, 2007 and 2006  (unaudited)     |   | 4 |
|                               |       |                                                                                                       |   |   |
|                               |       | Consolidated  Statements of Changes in Equity for the Three Months Ended March 31,  2007  (unaudited) |   | 5 |
|                               |       |                                                                                                       |   |   |
|                               |       | Consolidated  Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006  (unaudited)     |   | 6 |
|                               |       |                                                                                                       |   |   |
|                               |       | Notes to  Unaudited Consolidated Financial Statements                                                      |   | 7 |
|                               |       |                                                                                                       |   |   |
| Item 2.                            |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                |   | 14 |
|                               |       |                                                                                                       |   |   |
| Item 3.                            |       | Quantitative  and Qualitative Disclosures About Market Risk                                                |   | 23 |
|                               |       |                                                                                                       |   |   |
| Item 4.                            |       | Controls and  Procedures                                                                                   |   | 23 |
|                               |       |                                                                                                       |   |   |
| **Part II. Other  Information**    | ** ** | ** **                                                                                                 |
|                               |       |                                                                                                       |   |   |
| Item 1.                            |       | Legal Proceedings                                                                                          |   | 23 |
|                               |       |                                                                                                       |   |   |
| Item 1A.                      |       | Risk  Factors                                                                                              |   | 23 |
|                               |       |                                                                                                       |   |   |
| Item 2.                            |       | Unregistered Sales  of Equity Securities and Use of Proceeds                                               |   | 24 |
|                               |       |                                                                                                       |   |   |
| Item 3.                            |       | Defaults Upon  Senior Securities                                                                           |   | 24 |
|                               |       |                                                                                                       |   |   |
| Item 4.                            |       | Submission of  Matters to a Vote of Security Holders                                                       |   | 24 |
|                               |       |                                                                                                       |   |   |
| Item 5.                            |       | Other Information                                                                                          |   | 24 |
|                               |       |                                                                                                       |   |   |
| Item  6.                           |       | Exhibits                                                                                                   |   | 24 |
|                               |       |                                                                                                       |   |   |
| **Signatures**                     |       |                                                                                                       |
|                                    |            |                                                                                                            |  |  |  |  |

 

2

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**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**FOX CHASE BANCORP, INC**

**Consolidated Statements of Condition**

**(In Thousands, Except Share Data)**
| ** **                                                                                                                                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                      | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| ** **                                                                                                                                      | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                      | ** ** | ** **         | ** ** | ** **            | ** ** |
| Cash and due from banks                                                                                                                         |       | $                  | 2,724      |                  | $          | 3,295 |   |
| Interest-earning demand  deposits in other banks                                                                                                |       | 112,931            |       | 131,146               |       |
| Total cash and  cash equivalents                                                                                                                |       | 115,655            |       | 134,441               |       |
| Investment securities  available-for-sale                                                                                                       |       | 66,404             |       | 70,112                |       |
| Mortgage related  securities available-for-sale                                                                                                 |       | 146,021            |       | 158,320               |       |
| Loans held for sale                                                                                                                             |       | 1,345              |       | 1,194                 |       |
| Loans, net of allowance  for loan losses of $2,949 at March 31, 2007 and December 31, 2006                                                      |       | 376,176            |       | 355,617               |       |
| Federal Home Loan Bank  stock, at cost                                                                                                          |       | 4,193              |       | 4,422                 |       |
| Bank-owned life  insurance                                                                                                                      |       | 11,431             |       | 11,324                |       |
| Premises and equipment                                                                                                                          |       | 14,173             |       | 14,287                |       |
| Accrued interest and  dividends receivable                                                                                                      |       | 3,187              |       | 3,397                 |       |
| Mortgage servicing  rights                                                                                                                      |       | 1,150              |       | 1,177                 |       |
| Deferred tax asset, net                                                                                                                         |       | 795                |       | 1,087                 |       |
| Other assets                                                                                                                                    |       | 1,735              |       | 1,607                 |       |
| ** **                                                                                                                                      |       |               |       |                  |       |
| **Total  Assets**                                                                                                                               |       | $                  | 742,265    |                  | $          | 756,985 |   |
| ** **                                                                                                                                      | ** ** | ** **         | ** ** | ** **            | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                  | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                                                      | ** ** | ** **         | ** ** | ** **            | ** ** |
| **LIABILITIES**                                                                                                                                 | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                                                      | ** ** | ** **         | ** ** | ** **            | ** ** |
| Deposits                                                                                                                                        |       | $                  | 582,059    |                  | $          | 596,534 |   |
| Federal Home Loan Bank  advances                                                                                                                |       | 30,000             |       | 30,000                |       |
| Advances from borrowers  for taxes and insurance                                                                                                |       | 1,748              |       | 2,262                 |       |
| Accrued interest  payable                                                                                                                       |       | 280                |       | 298                   |       |
| Accrued expenses and  other liabilities                                                                                                         |       | 1,604              |       | 2,246                 |       |
| ** **                                                                                                                                      |       |               |       |                  |       |
| **Total  Liabilities**                                                                                                                          |       | 615,691            |       | 631,340               |       |
| ** **                                                                                                                                      |       |               |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                                                                                                                   | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                                                      | ** ** | ** **         | ** ** | ** **            | ** ** |
| Preferred stock ($.01  par value; 1,000,000 shares authorized, none issued and outstanding at March  31, 2007 or December 31, 2006)             |       | —             |       | —                |       |
| Common stock ($.01 par  value; 35,000,000 shares authorized, 14,679,750 shares issued and outstanding  at March 31, 2007 and December 31, 2006) |       | 147                |       | 147                   |       |
| Additional paid-in  capital                                                                                                                     |       | 62,436             |       | 62,365                |       |
| Unearned common stock  held by employee stock ownership plan                                                                                    |       | (5,275             | )          | (5,371                | )          |
| Retained earnings                                                                                                                               |       | 69,838             |       | 69,545                |       |
| Accumulated other  comprehensive loss, net                                                                                                      |       | (572               | )          | (1,041                | )          |
| ** **                                                                                                                                      |       |               |       |                  |       |
| **Total  Stockholders’ Equity**                                                                                                            |       | 126,574            |       | 125,645               |       |
| ** **                                                                                                                                      |       |               |       |                  |       |
| **Total Liabilities and  Stockholders’ Equity**                                                                                            |       | $                  | 742,265    |                  | $          | 756,985 |   |

 

***See accompanying notes to the unaudited consolidated financialstatements.***

3

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**FOX CHASE BANCORP, INC**

**Consolidated Statements of Operations**

**(In Thousands, Except Per Share Data)**
| ** **                                               | ** ** | **Three Months Ended March 31** | ** ** |
|----------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                               | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| ** **                                               | ** ** | **(Unaudited)**                                     | ** ** |
| **INTEREST  INCOME**                                     | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Interest and fees on loans                               |       | $                                                   | 5,548      |   | $ | 5,425 |   |
| Interest on mortgage related securities                  |       | 1,818                                               |       | 1,886 |   |
| Interest on investment securities  available-for-sale:   |       |                                                |       |   |   |
| Taxable                                                  |       | 453                                                 |       | 910 |   |
| Nontaxable                                               |       | 245                                                 |       | 206 |   |
| Dividend income                                          |       | 66                                                  |       | 193 |   |
| Other interest income                                    |       | 1,457                                               |       | 263 |   |
| **Total Interest Income**                                |       | 9,587                                               |       | 8,883 |   |
| ** **                                               |       |                                                |       |   |   |
| **INTEREST  EXPENSE**                                    | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Deposits                                                 |       | 4,870                                               |       | 4,485 |   |
| Federal Home Loan Bank advances                          |       | 366                                                 |       | 366 |   |
| **Total Interest Expense**                               |       | 5,236                                               |       | 4,851 |   |
| ** **                                               |       |                                                |       |   |   |
| **Net Interest Income**                                  |       | 4,351                                               |       | 4,032 |   |
| Provision for loan losses                                |       | —                                              |       | — |   |
| **Net Interest Income after Provision for Loan  Losses** |       | 4,351                                               |       | 4,032 |   |
| ** **                                               |       |                                                |       |   |   |
| **NONINTEREST  INCOME**                                  | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Service charges and other fee income                     |       | 216                                                 |       | 194 |   |
| Net gain (loss) on sale of:                              |       |                                                |       |   |   |
| Loans                                                    |       | 57                                                  |       | (12 | ) |
| Assets acquired through foreclosure                      |       | —                                              |       | 85 |   |
| Securities                                               |       | —                                              |       | (17 | ) |
| Income on bank-owned life insurance                      |       | 107                                                 |       | 104 |   |
| Other                                                    |       | 56                                                  |       | 74 |   |
| **Total Noninterest Income**                             |       | 436                                                 |       | 428 |   |
| ** **                                               |       |                                                |       |   |   |
| **NONINTEREST  EXPENSE**                                 | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Salaries, benefits and other compensation                |       | 2,417                                               |       | 2,095 |   |
| Occupancy expense                                        |       | 381                                                 |       | 349 |   |
| Furniture and equipment expense                          |       | 229                                                 |       | 184 |   |
| Data processing costs                                    |       | 373                                                 |       | 329 |   |
| Professional fees                                        |       | 492                                                 |       | 480 |   |
| Marketing expense                                        |       | 121                                                 |       | 82 |   |
| FDIC premiums                                            |       | 20                                                  |       | 341 |   |
| Other                                                    |       | 424                                                 |       | 326 |   |
| **Total Noninterest Expense**                            |       | 4,457                                               |       | 4,186 |   |
| **Income Before Income Taxes**                           |       | 330                                                 |       | 274 |   |
| Income tax provision                                     |       | 37                                                  |       | 6 |   |
| **Net Income**                                           |       | $                                                   | 293        |   | $ | 268 |   |
| Earnings per share (1):                                  |       |                                                |       |   |   |
| Basic                                                    |       | $                                                   | 0.02       |   | $ | — |   |
| Diluted                                                  |       | $                                                   | 0.02       |   | $ | — |   |

 

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(1) Due to thetiming of the Bank’s reorganization into the mutual holding company form andthe completion of the Company’s initial public offering on September 29, 2006,earnings per share information for the three months ended March 31, 2006 is notapplicable.

***See accompanying notes to the unaudited consolidatedfinancial statements.***

4

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**FOX CHASE BANCORP, INC**

**Consolidated Statements of Changes in Equity**

**ThreeMonths Ended March 31, 2007**

**(In Thousands, Unaudited)**
| ** **                                                                      | ** ** | ** ** | ** ** | ** **       | ** ** | **Unearned**        | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|------------------|------------|---------------------|------------|--------------|------------|-------------------|------------|------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** **       | ** ** | **Common**          | ** ** | ** **   | ** ** | **Other**         | ** ** | ** ** | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | **Additional**   | ** ** | **Stock held** | ** ** | ** **   | ** ** | **Comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                      | ** ** | **Common** | ** ** | **Paid in** | ** ** | **by**              | ** ** | **Retained** | ** ** | **Income/**       | ** ** | **Total**  | ** ** |
| ** **                                                                      | ** ** | **Stock**  | ** ** | **Capital**      | ** ** | **ESOP**            | ** ** | **Earnings** | ** ** | **(Loss)**        | ** ** | **Equity** | ** ** |
| ** **                                                                      |       |       |       |             |       |                |       |         |       |              |       |       |       |
| **BALANCE  - DECEMBER 31, 2006**                                                |       | $          | 147        |             | $          | 62,365              |       | $            | (5,371     | )                 | $          | 69,545     |       | $ | (1,041 | ) | $ | 125,645 |   |
| Unallocated ESOP  shares committed to employees                                 |       | —     |       | 35               |       | 96                  |       | —       |       | —            |       | 131        |       |
| Shares allocated  in long-term incentive plan                                   |       | —     |       | 36               |       | —              |       | —       |       | —            |       | 36         |       |
| Net income                                                                      |       | —     |       | —           |       | —              |       | 293          |       | —            |       | 293        |       |
| Net change in  unrealized losses on securities available-for-sale, net of taxes |       | —     |       | —           |       | —              |       | —       |       | 469               |       | 469        |       |
| **BALANCE – MARCH 31, 2007**                                               |       | $          | 147        |             | $          | 62,436              |       | $            | (5,275     | )                 | $          | 69,838     |       | $ | (572 | ) | $ | 126,574 |   |

 

***See accompanying notes to theunaudited consolidated financial statements*****.**

5

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**FOX CHASEBANCORP, INC**

**Consolidated Statements of Cash Flows**

**(In Thousands)**
| ** **                                                                               | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| ** **                                                                               | ** ** | **(Unaudited)**                                      | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**                                                |       |                                                 |       |   |   |
| Net income                                                                               |       | $                                                    | 293        |   | $ | 268 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:       |       |                                                 |       |   |   |
| Depreciation                                                                             |       | 260                                                  |       | 233 |   |
| Net amortization of securities premiums and  discounts                                   |       | 86                                                   |       | 284 |   |
| Provision for deferred income taxes                                                      |       | 43                                                   |       | 139 |   |
| Shares committed to be released to the ESOP                                              |       | 131                                                  |       | — |   |
| Shares earned in the long-term incentive plan                                            |       | 36                                                   |       | — |   |
| Origination of loans held for sale                                                       |       | (5,557                                               | )          | (5,706 | ) |
| Proceeds from sale of loans held for sale                                                |       | 5,422                                                |       | 3,340 |   |
| Net realized (gains) on sales of assets acquired  through foreclosure and fixed assets   |       | —                                               |       | (85 | ) |
| Net loss on sale and impairment of securities                                            |       | —                                               |       | 17 |   |
| Net loss (gain) on sales of loans and loans held for  sale                               |       | (57                                                  | )          | 12 |   |
| Earnings on investment in bank-owned life insurance                                      |       | (107                                                 | )          | (104 | ) |
| Decrease (increase) in mortgage servicing rights                                         |       | 27                                                   |       | (1 | ) |
| Decrease in accrued interest and dividends  receivable and other assets                  |       | 109                                                  |       | 107 |   |
| Increase (decrease) in accrued interest payable,  accrued expenses and other liabilities |       | (660                                                 | )          | (105 | ) |
| **Net Cash Provided by (Used in) Operating  Activities**                                 |       | 26                                                   |       | (1,601 | ) |
| ** **                                                                               |       |                                                 |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**                                                |       |                                                 |       |   |   |
| ** **                                                                               |       |                                                 |       |   |   |
| Investment securities available for sale securities:                                     | ** ** |                                                 |       |   |   |
| Purchases                                                                                | ** ** | (89                                                  | )          | (27,371 | ) |
| Proceeds from sales                                                                      | ** ** | —                                               |       | 17,205 |   |
| Proceeds from maturities, calls and principal  repayments                                | ** ** | 4,012                                                |       | 21,300 |   |
| Mortgage related securities - AFS:                                                       | ** ** |                                                 |       |   |   |
| Purchases                                                                                | ** ** | —                                               |       | (27,102 | ) |
| Proceeds from maturities, calls and principal  repayments                                | ** ** | 12,716                                               |       | 15,308 |   |
| Net (increase) decrease in loans                                                         | ** ** | (6,774                                               | )          | 10,664 |   |
| Purchase of loan participations                                                          | ** ** | (13,771                                              | )          | — |   |
| Net decrease in Federal Home Loan Bank stock                                             | ** ** | 229                                                  |       | 180 |   |
| Purchases of premises and equipment                                                      | ** ** | (146                                                 | )          | (721 | ) |
| Proceeds from sales of assets acquired through foreclosure                               | ** ** | —                                               |       | 192 |   |
| **Net Cash Provided by (Used in) Investing  Activities**                                 | ** ** | (3,823                                               | )          | 9,655 |   |
| ** **                                                                               | ** ** |                                                 |       |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES**                                                | ** ** |                                                 |       |   |   |
|                                                                                     | ** ** |                                                 |       |   |   |
| Net decrease in deposits                                                                 | ** ** | (14,475                                              | )          | (26,415 | ) |
| Decrease in advances from borrowers for taxes and  insurance                             | ** ** | (514                                                 | )          | (471 | ) |
| **Net Cash Used in Financing Activities**                                                | ** ** | (14,989                                              | )          | (26,886 | ) |
|                                                                                     |       |                                                 |       |   |   |
| **Net Increase in Cash and Cash Equivalents**                                            | ** ** | (18,786                                              | )          | (18,832 | ) |
|                                                                                     |       |                                                 |       |   |   |
| **CASH  AND CASH EQUIVALENTS – BEGINNING**                                          | ** ** | 134,441                                              |       | 46,086 |   |
| ** **                                                                               |       |                                                 |       |   |   |
| **CASH  AND CASH EQUIVALENTS – ENDING**                                             | ** ** | $                                                    | 115,655    |   | $ | 27,254 |   |
| **SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION**                                    | ** ** |                                                 |       |   |   |
| Interest paid                                                                            | ** ** | $                                                    | 5,446      |   | $ | 4,846 |   |
| Income taxes  paid                                                                       | ** ** | $                                                    | —     |   | $ | 170 |   |

 

***See accompanyingnotes to the unaudited consolidated financial statements.***

6

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**FOX CHASEBANCORP, INC**

**Notes to the Unaudited ConsolidatedFinancial Statements**

**NOTE1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION**

FoxChase Bancorp, Inc. (the “Company”) was organized on September 29, 2006 underthe laws of the United States for the purpose of being a holding company forFox Chase Bank (the “Bank”), a stock savings bank also organized under the lawsof the United States. On September 29, 2006, the Company completed its initialpublic offering in which it sold 6,395,835 shares, or 43.57%, of itsoutstanding common stock to the public, including 575,446 shares purchased bythe Fox Chase Bank Employee Stock Ownership Plan (the “ESOP”). An additional8,148,915 shares, or 55.51% of the Company’s outstanding stock, were issued toFox Chase MHC, the Company’s federally chartered mutual holding company. Netproceeds of the offering totaled $56.6 million. Additionally, the Companycontributed $150,000 in cash and issued 135,000 shares, or 0.92% of itsoutstanding common stock, to the Fox Chase Bank Charitable Foundation.

TheCompany’s primary business is holding the common stock of the Bank and making aloan to the ESOP.  Fox Chase Bancorp,Inc. is authorized to pursue other business activities permissible by laws andregulations for other savings and loan holding companies.

TheCompany provides a wide variety of financial products and services toindividuals and businesses through its eleven branches in Philadelphia,Richboro, Willow Grove, Warminster, Lahaska, Hatboro, Media and Exton,Pennsylvania, and Ocean City, Marmora and Egg Harbor Township, New Jersey. Theoperations of the Company are managed as a single business segment. The Companycompetes with other financial institutions and other companies that providefinancial services.

TheCompany and Bank are subject to regulations of certain federal bankingagencies. These regulations can and do change significantly from period toperiod. The Company and Bank also undergo periodic examinations by regulatoryagencies which may subject it to further changes with respect to assetvaluations, amounts of required loss allowances and operating restrictionsresulting from the regulators’ judgments based on information available to themat the time of their examinations.

Theconsolidated financial statements include the accounts of the Company and itswholly owned subsidiary, the Bank. The Bank’s operations include the accountsof its wholly owned subsidiary, Fox Chase Financial, Inc. Fox Chase Financial,Inc. is a Delaware chartered investment holding company and its sole purpose isto manage and hold investment securities. The consolidated financial statementsinclude the Company beginning on September 29, 2006. The consolidated financialstatements and related notes include only the activity and balances of the Bankand its subsidiary through September 29, 2006. The financial statements do notinclude the transactions and balances of Fox Chase MHC. All materialinter-company transactions and balances have been eliminated in consolidation.Prior period amounts are reclassified, when necessary, to conform with thecurrent year’s presentation. The statement of cash flows has been revised toreflect the correction of certain immaterial errors identified by the Company.

The Companyfollows accounting principles and reporting practices which are in compliancewith U.S. generally accepted accounting principles (“GAAP”). The preparation ofthe financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates. Materialestimates that are particularly susceptible to significant change in the nearterm relate to the determination of the allowance for loan losses, thevaluation and realizability of deferred tax assets and the evaluation of otherthan temporary impairment of investments. These financial statements do notcontain all necessary disclosures required by GAAP and therefore should be readin conjunction with the audited financial statements and the notes theretoincluded in Fox Chase Bancorp, Inc.’sAnnual Report on Form 10-K, filed with the Securities and Exchange Commissionon March 29, 2007.  Thesefinancial statements include all adjustments which management believes werenecessary in order to conform to GAAP. The results for the three months endedMarch 31, 2007 are not necessarily indicative of the results that may beexpected for the year ending December 31, 2007.

7

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**PerShare Information**

**The Company follows the provisions of SFAS No. 128, “EarningsPer Share.” Basic earnings per share exclude dilution and are computed bydividing income available to common stockholders by the weighted-average commonshares outstanding during the period. Diluted earnings per share take intoaccount the potential dilution that could occur if securities or othercontracts to issue common stock were exercised and converted into common stock.**

**Earnings per share (“EPS”), basic and diluted, were $0.02for the three months ended March 31, 2007. Earnings per share were notcalculated at March 31, 2006 since the Company did not complete its initialpublic offering until September 29, 2006.**

**The following table presents the reconciliation of thenumerators and denominators of the basic and diluted EPS computations.**
|                                                                              | ** ** | **Three**             | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                   | ** ** | **Months Ended** | ** ** |
| ** **                                                                   | ** ** | **March 31,**    | ** ** |
| ** **                                                                   | ** ** | **2007**              | ** ** |
| Net income                                                                   |       | $                     | 293,000    |   |
|                                                                         |       |                  |       |
| Weighted-average  common shares outstanding                                  |       | 14,679,750            |       |
| Average common  stock acquired by stock benefit plans:                       |       |                  |       |
| Unvested shares –  long-term incentive plan                             |       | (38,867               | )          |
| ESOP shares unallocated, net                                                 |       | (533,780              | )          |
|                                                                         |       |                  |       |
| Weighted-average  common shares used to calculate basic earnings per share   |       | 14,107,103            |       |
|                                                                         |       |                  |       |
| Dilutive effect  of shares in long-term incentive plan                       |       | 38,867                |       |
|                                                                         |       |                  |       |
| Weighted-average common shares used to calculate  diluted earnings per share |       | 14,145,970            |       |
|                                                                         |       |                  |       |
| Earnings per  share-basic                                                    |       | $                     | 0.02       |   |
| Earnings per  share-diluted                                                  |       | $                     | 0.02       |   |

 

**NOTE 2 -INVESTMENT AND MORTGAGE RELATED SECURITIES**

The amortized cost and fair value of securitiesavailable-for-sale as of March 31, 2007 and December 31, 2006 aresummarized as follows:
|                                          | ** ** | **March 31, 2007** | ** ** |
|------------------------------------------|------------|------------------------------|------------|
| ** **                               | ** ** | **Amortized  Cost**          | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                               | ** ** | **(In Thousands)**      | ** ** |
| Obligations of  U.S. government agencies |       | $                            | 42,357     |   | $ | 25 |   | $ | (282 | ) | $ | 42,100 |   |
| State and  political subdivisions        |       | 24,126                       |       | 135 |   | (42 | ) | 24,219 |   |
| Equity  securities                       |       | 89                           |       | — |   | (4 | ) | 85 |   |
|                                     |       | 66,572                       |       | 160 |   | (328 | ) | 66,404 |   |
|                                     |       |                         |       |   |   |   |   |   |   |
| Mortgage related  securities             |       | 146,561                      |       | 349 |   | (889 | ) | 146,021 |   |
|                                     |       |                         |       |   |   |   |   |   |   |
| **Total securities**                     |       | $                            | 213,133    |   | $ | 509 |   | $ | (1,217 | ) | $ | 212,425 |   |

 

8

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| ** **                               | ** ** | **December 31, 2006** | ** ** |
|------------------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **Amortized  Cost**             | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                               | ** ** | **(In Thousands)**         | ** ** |
| Obligations of  U.S. government agencies |       | $                               | 42,344     |   | $ | 4 |   | $ | (470 | ) | $ | 41,878 |   |
| State and  political subdivisions        |       | 24,126                          |       | 141 |   | (48 | ) | 24,219 |   |
| Corporate debt securities                |       | 4,017                           |       | — |   | (2 | ) | 4,015 |   |
|                                     |       | 70,487                          |       | 145 |   | (520 | ) | 70,112 |   |
|                                     |       |                            |       |   |   |   |   |   |   |
| Mortgage related  securities             |       | 159,369                         |       | 299 |   | (1,348 | ) | 158,320 |   |
|                                     |       |                            |       |   |   |   |   |   |   |
| **Total securities**                     |       | $                               | 229,856    |   | $ | 444 |   | $ | (1,868 | ) | $ | 228,432 |   |

 

The following tables show gross unrealized losses and fair value ofsecurities, aggregated by security category and length of time that individualsecurities have been in a continuous unrealized loss position, at March 31,2007 and December 31, 2006:
|                                          | ** ** | **March 31, 2007**           | ** ** |
|------------------------------------------|------------|----------------------------------------|------------|
| ** **                               | ** ** | **Less than 12 Months** | ** ** | **12 Months or More** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | **Fair  Value**                        | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** |
| ** **                               | ** ** | **(In Thousands)**                | ** ** |
| Obligations of  U.S. government agencies |       | $                                      | —     |   | $ | — |   | $ | 32,780 |   | $ | (282 | ) | $ | 32,780 |   | $ | (282 | ) |
| State and political  subdivisions        |       | 1,846                                  |       | (5 | ) | 2,712 |   | (37 | ) | 4,558 |   | (42 | ) |
| Equity  securities                       |       | 85                                     |       | (4 | ) | — |   | — |   | 85 |   | (4 | ) |
| Mortgage related  securities             |       | 14,772                                 |       | (60 | ) | 62,201 |   | (829 | ) | 76,973 |   | (889 | ) |
|                                     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| **Total  securities**                    |       | $                                      | 16,703     |   | $ | (69 | ) | $ | 97,693 |   | $ | (1,148 | ) | $ | 114,396 |   | $ | (1,217 | ) |

 
|                                          | ** ** | **December 31, 2006**        | ** ** |
|------------------------------------------|------------|----------------------------------------|------------|
| ** **                               | ** ** | **Less than 12 Months** | ** ** | **12 Months or More** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | **Fair  Value**                        | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** |
| ** **                               | ** ** | **(In Thousands)**                | ** ** |
| Obligations of  U.S. government agencies |       | $                                      | 9,265      |   | $ | (19 | ) | $ | 29,614 |   | $ | (451 | ) | $ | 38,879 |   | $ | (470 | ) |
| State and  political subdivisions        |       | 2,632                                  |       | (8 | ) | 2,708 |   | (40 | ) | 5,340 |   | (48 | ) |
| Corporate debt  securities               |       | —                                 |       | — |   | 4,015 |   | (2 | ) | 4,015 |   | (2 | ) |
| Mortgage related  securities             |       | 52,588                                 |       | (249 | ) | 69,023 |   | (1,099 | ) | 121,611 |   | (1,348 | ) |
|                                     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| **Total securities**                     |       | $                                      | 64,485     |   | **$         (276)** |   | **$    105,360** |   | $ | (1,592) |   | $ | 169,845 |   | **$      (1,868)** |   |
|                                          |            |                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

9

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**NOTE 3 - LOANS**

The composition of net loans at March 31, 2007, andDecember 31, 2006 is provided below (in thousands).
|                                      | ** ** | **March 31,  207** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                           | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| Real estate  loans:                  |       |                    |       |                        |       |
| One-to four-family                   |       | $                       | 208,068    |                        | $          | 209,463 |   |
| Multi-family and commercial          |       | 43,287                  |       | 41,720                      |       |
| Construction                         |       | 19,225                  |       | 11,568                      |       |
|                                 |       | 270,580                 |       | 262,751                     |       |
|                                 |       |                    |       |                        |       |
| Consumer loans:                      |       |                    |       |                        |       |
| Home equity                          |       | 70,622                  |       | 73,456                      |       |
| Automobile                           |       | 848                     |       | 1,030                       |       |
| Lines of credit                      |       | 9,620                   |       | 10,468                      |       |
| Other                                |       | 140                     |       | 148                         |       |
|                                 |       | 81,230                  |       | 85,102                      |       |
| Commercial loans                     |       | 27,847                  |       | 11,155                      |       |
| **Total Loans**                      |       | 379,657                 |       | 359,008                     |       |
| Unearned loan  origination fees, net |       | (532                    | )          | (442                        | )          |
| Allowance for  loan losses           |       | (2,949                  | )          | (2,949                      | )          |
| **Net Loans**                        |       | $                       | 376,176    |                        | $          | 355,617 |   |

 

The following table presents changes in theallowance for loan losses (in thousands):
|                                   | ** ** | **Three Months  Ended  March 31,** | ** ** | **Year  Ended  December 31,** | ** ** |
|-----------------------------------|------------|----------------------------------------------|------------|------------------------------------|------------|
| ** **                        | ** ** | **2007**                                     | ** ** | **2006**                           | ** ** | **2006** | ** ** |
| ** **                        | ** ** | **(Unaudited)**                              | ** ** | ** **                         | ** ** |
| Allowance at  beginning of period |       | $                                            | 2,949      |                               | $          | 8,349 |   | $ | 8,349 |   |
| Credit for loan losses            |       | —                                       |       | —                             |       | (5,394 | ) |
| Loans charged off                 |       | (1                                           | )          | —                             |       | (8 | ) |
| Recoveries                        |       | 1                                            |       | —                             |       | 2 |   |
| Allowance at end of  period       |       | $                                            | 2,949      |                               | $          | 8,349 |   | $ | 2,949 |   |

 

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**NOTE 4 – MORTGAGE SERVICINGACTIVITY**

Loans serviced for othersare not included in the accompanying consolidated statements of condition. Theunpaid principal balances of these loans were $127,281,000 and $137,016,000 atMarch 31, 2007 and 2006, respectively, and $130,294,000 at December 31,2006.

The following summarizesmortgage servicing rights for the three months ended March 31, 2007 and 2006and the year ended December 31, 2006 (in thousands):
|                                       | ** ** | **Three Months  Ended  March 31,** | ** ** | **Years  Ended  December 31,** | ** ** |
|---------------------------------------|------------|----------------------------------------------|------------|-------------------------------------|------------|
| ** **                            | ** ** | **2007**                                     | ** ** | **2006**                            | ** ** | **2006** | ** ** |
| ** **                            | ** ** | **(Unaudited)**                              | ** ** |
| Balance,  beginning                   |       | $                                            | 1,177      |                                | $          | 1,168 |   | $ | 1,168 |   |
| Mortgage servicing rights capitalized |       | 2                                            |       | 26                                  |       | 178 |   |
| Mortgage servicing rights amortized   |       | (29                                          | )          | (25                                 | )          | (169 | ) |
| Balance, ending                       |       | $                                            | 1,150      |                                | $          | 1,169 |   | $ | 1,177 |   |

 

For the periods ended March31, 2007; March 31, 2006 and December 31, 2006, the fair value of themortgage servicing rights (“MSRs”) was $1,546,000 (unaudited), $1,307,000(unaudited) and $1,623,000, respectively. The fair value of the MSRs for theseperiods was determined using a third-party valuation model that calculates thepresent value of estimated future servicing income. The model incorporatesassumptions that market participants use in estimating future net servicingincome, including estimates of prepayment speeds and discount rates. Mortgageloan prepayment speed is the annual rate at which borrowers are forecasted torepay their mortgage loan principal and is based on historical experience. Thediscount rate used to determine the present value of future net servicingincome - another key assumption in the model - is the required rate of returnthe market would expect for an asset with similar risk. Both assumptions can,and generally will, change quarterly valuations as market conditions andinterest rates change.

**NOTE 5 -DEPOSITS**

Deposits and their respective weighted averageinterest rate at March 31, 2007 and December 31, 2006 consist of thefollowing (dollars in thousands):
| ** **                            | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **Weighted  Average  Rate**  | ** ** | **Amount**                      | ** ** | **Weighted  Average  Rate** | ** ** | **Amount** | ** ** |
| ** **                            | ** ** | **(Unaudited)**              | ** ** |
| Non-interest  bearing demand accounts |       | —                       | %          | $                               | 42,364     |   | — | % | $ | 41,429 |   |
| NOW accounts                          |       | 1.78                         |       | 45,142                          |       | 1.80 |   | 50,717 |   |
| Money market  accounts                |       | 3.96                         |       | 32,297                          |       | 3.92 |   | 29,770 |   |
| Savings and club  accounts            |       | 0.74                         |       | 62,099                          |       | 0.74 |   | 64,338 |   |
| Certificates of  deposit              |       | 4.56                         |       | 400,157                         |       | 4.43 |   | 410,280 |   |
|                                  |       | 3.57                         | %          | $                               | 582,059    |   | 3.47 | % | $ | 596,534 |   |

 

11

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**NOTE 6 – FEDERAL HOME LOAN BANKADVANCES**

Pursuantto collateral agreements with the Federal Home Loan Bank of Pittsburgh (the “FHLB”),advances are secured by qualifying first mortgage loans, qualifyingfixed-income securities, FHLB stock and an interest-bearing demand depositaccount with the FHLB. As of March 31, 2007, the Bank has $34,500,000 inqualifying collateral pledged against its advances.
| Maturity Date | ** ** | **Interest Rate** | ** ** | **Strike Rate** | ** ** | **Amount**              | ** ** |
|--------------------|------------|------------------------|------------|----------------------|------------|-------------------------|------------|
| ** **         | ** ** | ** **             | ** ** | ** **           | ** ** | **(in thousands)** | ** ** |
| August 2011        |       | 4.89                   | %          | 7.50                 | %          | $                       | 20,000     |   |
| August 2011        |       | 4.87                   | %          | 7.50                 | %          | 10,000                  |       |
| ** **         | ** ** | ** **             |       |                 |       | $                       | 30,000     |   |

 

If theComparative Rate Index (three-month LIBOR) is greater than or equal to theStrike Rate 15 calendar days prior to the 1st Possible Conversion Date or any subsequentPossible Conversion Date, the FHLB will notify the Bank 10 calendar days priorto conversion to an adjustable-rate Advance equal to three-month LIBOR (5.35%at March 31, 2007) plus .2175% on a quarterly basis. The Bank has the option torepay these advances at each of the option dates without penalty. Accordingly,the contractual maturities above may differ from actual maturities.

The Bankhas a maximum borrowing capacity with the FHLB of approximately $433.1 millionat December 31, 2006, the latest date available.

**NOTE 7 -COMPREHENSIVE INCOME (LOSS)**

Comprehensive income (loss) for the three monthsended March 31, 2007, and 2006 is as follows (in thousands):
|                                                                                                                                                                  | ** ** | **Three Months  Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                                                       | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                       | ** ** | **(Unaudited)**                              | ** ** |
| Net income                                                                                                                                                       |       | $                                            | 293        |   | $ | 268 |   |
|                                                                                                                                                             |       |                                         |       |   |   |
| Other  comprehensive gain (loss):                                                                                                                                |       |                                         |       |   |   |
| Unrealized holding gains (losses) arising during the  period, net of tax expense (benefit) (three months 3/31/07 and 3/31/06-$249  and $(273), respectively)     |       | 469                                          |       | (529 | ) |
| Less: Reclassification adjustment for gains (losses)  included in net income (loss), net of taxes (three months 3/31/07 and 3/31/06  -$0 and $(6), respectively) |       | —                                       |       | (11 | ) |
| Other comprehensive (loss) income                                                                                                                                |       | 469                                          |       | (518 | ) |
| Comprehensive  income (losses)                                                                                                                                   |       | $                                            | 762        |   | $ | (250 | ) |

 

**NOTE 8 –RECENT ACCOUNTING PRONOUNCEMENTS**

In March 2006, theFASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, anamendment of SFAS No. 140.” SFAS No. 156 amends SFAS No. 140 with respect tothe accounting for separately recognized servicing assets and servicingliabilities by requiring an entity to recognize a servicing asset or liabilityeach time it undertakes an obligation to service a financial asset by enteringinto a servicing contract; requires all separately recognized servicing assetsand liabilities to be initially measured at fair value, if practical; andpermits an entity to choose either of the following methods by which it willsubsequently measure each class of separately recognized servicing assets andliabilities:

1.               *Amortizationmethod* - Amortize the servicing assets or liabilities in proportionto and over the period of estimated net servicing income or loss and assessservicing assets and liabilities for impairment or increase obligation based onthe fair value at each reporting period.

2.               *Fairvalue measurement method*- Measure servicing assets or liabilitiesat fair value at each reporting date and report changes in fair value in earningsin the period in which the change occurs.

12

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**SFAS No. 156 is effective for fiscal years beginning afterSeptember 15, 2006. Earlier adoption is permitted as of the beginning of anentity’s fiscal year, provided the entity has not yet issued its financialstatements, including interim financial statements, for any period of thatfiscal year. The Company’s adoption of this statement does not have a materialimpact on its results of operations or financial position.**

In June 2006, FASB issued Financial InterpretationNo. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – aninterpretation of SFAS Statement No. 109. FIN 48 provides guidance on financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return. According to the Interpretation, a tax position isrecognized if it is more likely than not that the tax position will besustained upon examination, including resolution of any related appeals orlitigation processes, based on the technical merits of the position. If the taxposition meets more-likely-than-not recognition threshold, the position ismeasured to determine the amount of benefit to recognize and should be measuredat the largest amount of benefit that is greater than 50% likely of beingrealized upon ultimate settlement. FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure and transition. The provisions of FIN 48 are effective forfiscal years beginning after December 15, 2006. Effective January 1, 2007, theCompany adopted FIN 48. As of January 1, 2007, the Company had no materialunrecognized tax benefits or accrued interest and penalties. The Company’spolicy is to account for interest as a component of interest expense andpenalties as a component of other expense. Federal and state tax years 2003through 2006 were open for examination as of January 1, 2007.

In September 2006, the FASB issued SFASNo. 157, Fair Value Measurement. This statement defines fair value,establishes a framework for measuring fair value in generally acceptedaccounting principles and expands disclosures about fair value measurements. Thisstatement applies under other accounting pronouncements that require or permitfair value measurements, the Board having previously concluded in thoseaccounting pronouncements that fair value is the relevant measurementattribute. Accordingly, this statement does not require any new fair valuemeasurements.

SFAS No. 157 is effective for fiscal years beginningafter November 15, 2007. Earlier adoption is encouraged, provided that thereporting entity has not yet issued financial statements for that fiscal year,including financial statements for an interim period within that fiscal year. TheCompany is evaluating this statement and has not yet determined the impact onits results of operations or financial position, if any.  The Company has determined that it will notearly adopt this statement.

The FASB has recentlyapproved the Emerging Issues Task Force (“EITF”) Issue No. 06-4 “Accounting forDeferred Compensation and Postretirement Benefit Aspects of EndorsementSplit-Dollar Life Insurance Arrangements.” In this issue, the EITF concludedthat an endorsement split dollar life insurance policy does not effectivelysettle an employer’s obligation to provide the post retirement benefit that thepolicy was designed to provide. Therefore, some current expense recognition mayneed to be made for any endorsement split dollar plans with post retirementbenefits.

This guidance applies toall post retirement endorsement split dollar arrangements. This will not impactsplit dollar plans that only provide pre-retirement death benefits.

The accrual forthe liability would be calculated in one of two ways:

·                  the actuarialpresent value of the future death benefit or

·                  thecost of insurance of the policy during the postretirement period.

**Compliancewith this EITF must be applied to fiscal years beginning after December 15,2007 (January 1, 2008 for calendar year entities). It can be made through acumulative—effect adjustment to retained earnings in the year of adoption or asa change in accounting principles through retrospective application to allprior periods. The Company has not determined if this Statement will have amaterial impact on its consolidated financial statements upon adoption.**

**In February 2007, the FASB issued SFAS No. 159, “The FairValue Option for Financial Assets and Financial Liabilities—Including anAmendment of FASB Statement No. 115 (SFAS 159).” SFAS 159 permits entities tochoose to measure many financial instruments and certain other items at fairvalue and amends SFAS 115 to, among other things, require certain disclosuresfor amounts for which the fair value option is applied. Additionally, thisStatement provides that an entity may reclassify held-to-maturity andavailable-for-sale securities to the trading account when the fair value optionis elected for such securities, without calling into question the intent tohold other securities to maturity in the future. This Statement is effective asof the beginning of an entity’s first fiscal year that begins after November15, 2007. Early adoption is permitted as of the beginning of a fiscal year thatbegins on or before November 15, 2007, provided the entity also elects to applythe provisions of SFAS 157. The Company is reviewing the impact of SFAS No. 159and the impact, if any, on its consolidated financial statements.  The Company has determined that it will notearly adopt this statement.**

13

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At its September2006 meeting, the EITF reached a final consensus on Issue 06-05, “**Accounting for Purchasesof Life Insurance — Determining the Amount That Could be Realized in Accordancewith FASB Technical Bulletin No. 85-4***.*” Issue 06-05 concludes that in determining the amount that could berealized under an insurance contract accounted for under FASB TechnicalBulletin No. 85-4, “Accounting for Purchases of Life Insurance,” thepolicyholder should (1) consider any additional amounts included in thecontractual terms of the policy; (2) assume the surrender value on a individual-lifeby individual-life policy basis; and (3) not discount the cash surrendervalue component of the amount that could be realized when contractualrestrictions on the ability to surrender a policy exist. Issue 06-05should be adopted through either (1) a change in accounting principle through acumulative-effect adjustment to retained earnings as of the beginning ofthe year of adoption or (2) a change in accounting principle throughretrospective application to all prior periods. Issue 06-05 is effectivefor fiscal years beginning after December 15, 2006. The application of Issue06-05 is not expected to have a material effect on the Company’sfinancial position or results of operations.

**NOTE 9- LEGAL PROCEEDINGS**

The Company iscommonly subject to various pending and threatened legal actions which involveclaims for monetary relief. Based upon information presently available to theCompany, it is the Company’s opinion that any legal and financialresponsibility arising from such claims will not have a material adverse effecton the Company’s results of operations.

OnApril 28, 2006, Gregory S. Cipa, the former President and Chief ExecutiveOfficer of Fox Chase Bank, filed a complaint against Fox Chase Bank in theCivil Division of the Court of Common Pleas of Bucks County, Pennsylvania. InMay 2006, Fox Chase Bank moved the case to federal court, answered thecomplaint and filed a counterclaim. In November 2006, Mr. Cipa amended hiscomplaint, and now alleges Fox Chase Bank breached its contract with him andviolated its state statutory obligations by failing to pay Mr. Cipa certainemployment benefits which he claims to have earned while serving as thePresident and Chief Executive Officer of Fox Chase Bank. Mr. Cipa seeksmonetary damages in excess of $900,000 and the payment of litigation costs. Theparties completed discovery and filed motions for summary judgment that havenot yet been ruled upon. Fox Chase Bank believes this action is without meritand intends to vigorously pursue its defenses.

**NOTE 10- SUBSEQUENTEVENTS**

In April 2007,the Bank moved its operations center to leased space and sold its previousoperations center to a third party. This sale will result in a pretax gain ofapproximately $850,000. Additionally, in April 2007, the Bank purchased abuilding for approximately $1.4 million in West Chester, Pennsylvania which isexpected to open as a full-service branch location in the summer of 2007 afterrenovations.

**Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operation**

**Forward-Looking Statements**

This quarterly reportcontains forward-looking statements that are based on assumptions and maydescribe future plans, strategies and expectations of the Company. Theseforward-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 plansor strategies is inherently uncertain. Factors which could have a materialadverse effect on the operations of the Company and its subsidiary include, butare not limited to, changes in interest rates, national and regional economicconditions, legislative and regulatory changes, monetary and fiscal policies ofthe U.S. government, including policies of the U.S. Treasury and the FederalReserve Board, the quality and composition of the loan or investmentportfolios, demand for loan products, deposit flows, competition, demand forfinancial services in the Company’s market area, changes in real estate marketvalues in the Company’s market area, changes in relevant accounting principlesand guidelines and the inability of third party service providers to performtheir functions. Additional factors that may affect our results are discussedin the section titled “Risk Factors” in the Company’s Annual Report on Form10-K, filed with the Securities and Exchange Commission on March 29, 2007.

These risks anduncertainties should be considered in evaluating forward-looking statements andundue reliance should not be placed on such statements. Except as required byapplicable law or regulation, the Company does not undertake, and specificallydisclaims any obligation, to release publicly the result of any revisions thatmay be made to any forward-looking statements to reflect events orcircumstances after the date of the statements or to reflect the occurrence ofanticipated or unanticipated events.

14

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**CriticalAccounting Policies**

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

***Allowance for Loan Losses.*** Theallowance for loan losses is maintained at a level representing management’sbest estimate of known and inherent losses in the loan portfolio, based onmanagement’s evaluation of the portfolio’s collectibility. The allowance isestablished through the provision for loan losses, which is charged againstincome. Determining the amount of the allowance for loan losses necessarilyinvolves a high degree of judgment. Among the material estimates required toestablish the allowance are: loss exposure at default; the amount and timing offuture cash flows on impacted loans; value of collateral; and determination ofloss factors to be applied to the various elements of the portfolio. All ofthese estimates are susceptible to significant change. Management reviews thelevel of the allowance on a quarterly basis and establishes the provision forloan losses based upon an evaluation of the portfolio, past loss experience,current economic conditions and other relevant factors related to thecollectibility of the loan portfolio. Although we believe that we use the bestinformation available to establish the allowance for loan losses, futureadjustments to the allowance may be necessary if economic conditions differsubstantially from the assumptions used in making the evaluation. In addition,the Office of Thrift Supervision, as an integral part of its examinationprocess, periodically reviews our allowance for loan losses. Such agency mayrequire us to recognize adjustments to the allowance based on its judgmentsabout information available to it at the time of its examination. A large losscould deplete the allowance and require increased provisions to replenish theallowance, which would negatively affect earnings.

***Deferred Income Taxes.*** We use theasset and liability method of accounting for income taxes as prescribed inStatement of Financial Accounting Standards No. 109, “Accounting forIncome Taxes.” Under this method, deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases. If current available information raises doubt as tothe realization of the deferred tax assets, a valuation allowance isestablished. Deferred tax assets and liabilities are measured using enacted taxrates expected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. We exercise significantjudgment in evaluating the amount and timing of recognition of the resultingtax liabilities and assets. These judgments require us to make projections offuture taxable income. The judgments and estimates we make in determining ourdeferred tax assets, which are inherently subjective, are reviewed on acontinual basis as regulatory and business factors change. Any reduction inestimated future taxable income may require us to record a valuation allowanceagainst our deferred tax assets. A valuation allowance would result inadditional income tax expense in the period, which would negatively affectearnings.

***Other-Than-Temporary Impairment of Securities***.Statement of Financial Accounting Standards No. 115, “Accounting forCertain Investments in Debt and Equity Securities,” and FASB Staff Position FAS115-1and 124-1 “The Meaning of Other Than Temporary Impairment and ItsApplication to Certain Investments,” require companies to perform periodicreviews of individual securities in their investment portfolios to determinewhether a decline in the value of a security is other than temporary. A reviewof other-than-temporary impairment requires companies to make certain judgmentsregarding the nature of the decline, its effect on the financial statements andthe probability, extent and timing of a valuation recovery and the company’sintent and ability to hold the security. Pursuant to these requirements, weassess valuation declines to determine the extent to which such changes areattributable to (1) fundamental factors specific to the issuer, such asfinancial condition, business prospects or other factors, or(2) market-related factors, such as interest rates or equity market declines.If the decline in the market value of a security is determined to be other thantemporary, we reduce the book value of such security to its current marketvalue, recognizing the decline as a realized loss on the income statement.

**Comparison of Financial Condition at March 31, 2007 andDecember 31, 2006**

Total assets decreased $14.7million, or 1.9%, to $742.3 million at March 31, 2007, compared to $757.0million at December 31, 2006. The reduction in assets was primarily due to an$18.8 million decrease in cash and cash equivalents, which was used to fund theincrease of $20.6 million in loans. During the three months ended March 31,2007, the Company purchased $13.8 million of commercial, construction andcommercial real estate loan participations from other financial institutions.Mortgage related securities decreased $12.3 million from December 31, 2006 toMarch 31, 2007 due primarily to principal payments. Investment securitiesavailable-for-sale also decreased $3.7 million as the remaining corporate bondsheld by the Company matured in the first quarter.

Deposits decreased $14.5million, or 2.4%, from $596.5 at December 31, 2006 to $582.1 million at March31, 2007, primarily certificates of deposit and NOW accounts, as the Bank’sfunding needs decreased due to the decrease in assets.  Additionally, the

15

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Bank is located in a highlycompetitive deposit market, which combined with the flat yield curve, hascreated a difficult climate for gathering deposits cost effectively.

Stockholders’equity increased $1.0 million to $126.6 million at March 31, 2007 compared to$125.6 million at December 31, 2006 primarily due to a decrease in unrealizedlosses on securities available for sale of $469,000 and net income of $293,000for the period.

**Comparison of Operating Results for the Three Months EndedMarch 31, 2007 and 2006**

***General.***Netincome increased $25,000, or 9.3%, for the three months ended March 31, 2007compared to the three months ended March 31, 2006, primarily due to a $704,000increase in interest income offset by an increase in deposit expense of$385,000, an increase of $271,000 in other noninterest expense and an increasein tax expense of $31,000.

***Net Interest Income*****.**Netinterest income increased $319,000, or 7.9%, to $4.4 million for the threemonths ended March 31, 2007 compared the same period in 2006 primarily due toan increase in the average yield on earning assets from 4.86% to 5.39% and adecrease in the average balance of interest-bearing liabilities. These changeswere offset by a decrease in the average balance of interest-earning assets of$14.7 million and an increase in the average yield on interest-bearingliabilities from 3.00% to 3.70%. The decrease in the average balance of earningassets was primarily due to decreases in mortgage-backed and taxablesecurities. The decrease in the average balance of interest bearing liabilitieswas primarily due to decreases in deposit accounts.

16

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Thefollowing table summarizes average balances and average yields and costs ofinterest-earning assets and interest-bearing liabilities for the three monthsended March 31, 2007 and 2006. Yields are not presented on a tax-equivalentbasis. Any adjustments necessary to present yields on a tax-equivalent basisare insignificant. (See also nonperforming loan table). 
|                                                                          | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                               | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| ** **                                                               | ** ** | ** **                                           | ** ** | **Interest** | ** ** | ** ** | ** ** | ** ** | ** ** | **Interest** | ** ** | ** ** | ** ** |
| ** **                                                               | ** ** | **Average**                                          | ** ** | **and** | ** ** | **Yield/** | ** ** | **Average** | ** ** | **and** | ** ** | **Yield/** | ** ** |
| ** **                                                               | ** ** | **Balance**                                          | ** ** | **Dividends** | ** ** | **Cost** | ** ** | **Balance** | ** ** | **Dividends** | ** ** | **Cost** | ** ** |
| ** **                                                               | ** ** | **(Dollars in thousands)**                 | ** ** |
|                                                                     |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| **Assets:**                                                              |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                                |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                                         |       | $                                                    | 113,803    |   | $ | 1,457 |   | 5.12 | % | $ | 21,781 |   | $ | 263 |   | 4.83 | % |
| Mortgage-backed securities                                               |       | 152,549                                              |       | 1,818 |   | 4.77 |   | 193,958 |   | 1,886 |   | 3.89 |   |
| Taxable  securities                                                      |       | 47,457                                               |       | 519 |   | 4.38 |   | 124,472 |   | 1,103 |   | 3.54 |   |
| Nontaxable  securities                                                   |       | 24,143                                               |       | 245 |   | 4.06 |   | 21,346 |   | 206 |   | 3.86 |   |
| Loans                                                                    |       | 373,287                                              |       | 5,548 |   | 5.95 |   | 369,771 |   | 5,425 |   | 5.87 |   |
| Allowance for  loan losses                                               |       | (2,970                                               | )          | — |   | — |   | (8,349 | ) | — |   | — |   |
| Net loans                                                                |       | 370,317                                              |       | — |   | 5.95 |   | 361,422 |   | — |   | 5.87 |   |
| Total interest-earning assets                                            |       | 708,269                                              |       | 9,587 |   | 5.39 |   | 722,979 |   | 8,883 |   | 4.86 |   |
| Noninterest-earning  assets                                              |       | 36,132                                               |       |   |   |   |   | 38,783 |   |   |   |   |   |
| Total assets                                                             |       | $                                                    | 744,401    |   |   |   |   |   | $ | 761,762 |   |   |   |   |   |
| ** **                                                               |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and equity:**                                              |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                           |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| NOW and money market deposit accounts                                    |       | $                                                    | 76,111     |   | 395 |   | 2.11 |   | $ | 108,924 |   | 381 |   | 1.42 |   |
| Savings accounts                                                         |       | 63,142                                               |       | 114 |   | 0.73 |   | 77,094 |   | 134 |   | 0.70 |   |
| Certificates of  deposit                                                 |       | 404,481                                              |       | 4,361 |   | 4.37 |   | 440,144 |   | 3,970 |   | 3.66 |   |
| Total  interest-bearing deposits                                         |       | 543,734                                              |       | 4,870 |   | 3.63 |   | 626,162 |   | 4,485 |   | 2.90 |   |
|                                                                     |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| FHLB advances                                                            |       | 30,000                                               |       | 366 |   | 4.88 |   | 30,000 |   | 366 |   | 4.88 |   |
| Total  interest-bearing liabilities                                      |       | 573,734                                              |       | 5,236 |   | 3.70 |   | 656,162 |   | 4,851 |   | 3.00 |   |
|                                                                     |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing  liabilities                                         |       | 39,896                                               |       |   |   |   |   | 33,379 |   |   |   |   |   |
| Other  non-interest bearing liabilities                                  |       | 5,695                                                |       |   |   |   |   | 8,329 |   |   |   |   |   |
| Total liabilities                                                        |       | 619,325                                              |       |   |   |   |   | 697,870 |   |   |   |   |   |
|                                                                     |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Total stockholders’ equity                                          |       | $                                                    | 125,076    |   |   |   |   |   | $ | 63,892 |   |   |   |   |   |
|                                                                     |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders’ equity                          |       | $                                                    | 744,401    |   |   |   |   |   | $ | 761,762 |   |   |   |   |   |
| Net interest  income                                                     |       |                                                 |       | $ | 4,351 |   |   |   |   |   | $ | 4,032 |   |   |   |
| Interest rate  spread                                                    |       |                                                 |       |   |   | 1.69 | % |   |   |   |   | 1.86 | % |
| Net interest  margin                                                     |       |                                                 |       |   |   | 2.45 | % |   |   |   |   | 2.21 | % |
| Average  interest-earning assets to average interest-bearing liabilities |       |                                                 |       |   |   | 123.45 | % |   |   |   |   | 110.18 | % |

 

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(1)                       Nonperformingloans are included in average balance computations

17

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Thefollowing table summarizes changes in interest income and interest expense forthe three months ended March 31, 2007, and 2006. 
|                                       | ** ** | **Three Months  Ended March 31,** | ** ** | ** ** | ** ** |
|---------------------------------------|------------|--------------------------------------------------|------------|------------|------------|
| ** **                            | ** ** | **2007**                                         | ** ** | **2006**   | ** ** | **% Change** | ** ** |
| ** **                            | ** ** | **(Dollars in thousands)**             | ** ** | ** ** | ** ** |
| Interest income:                      |       |                                             |       |       |       |   |   |
| Loans                                 |       | $                                                | 5,548      |       | $          | 5,425 |   | 2.27 | % |
| Mortgage related securities           |       | 1,818                                            |       | 1,886      |       | (3.61 | ) |
| Investment securities                 |       | 698                                              |       | 1,116      |       | (37.45 | ) |
| Dividend income                       |       | 66                                               |       | 193        |       | (65.80 | ) |
| Other interest-earning assets         |       | 1,457                                            |       | 263        |       | 453.99 |   |
| Total interest income                 |       | 9,587                                            |       | 8,883      |       | 7.93 | % |
|                                  |       |                                             |       |       |       |   |   |
| Interest  expense:                    |       |                                             |       |       |       |   |   |
| NOW and money market deposit accounts |       | $                                                | 395        |       | $          | 381 |   | 3.67 | % |
| Savings accounts                      |       | 114                                              |       | 134        |       | (14.93 | ) |
| Certificates of deposit               |       | 4,361                                            |       | 3,970      |       | 9.85 |   |
| Total interest-bearing deposits       |       | 4,870                                            |       | 4,485      |       | 8.58 |   |
| FHLB advances                         |       | 366                                              |       | 366        |       | — |   |
| Total interest expense                |       | 5,236                                            |       | 4,851      |       | 7.94 |   |
| Net interest income                   |       | $                                                | 4,351      |       | $          | 4,032 |   | 7.91 | % |

 

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***Provision for Loan Losses*.** The Bankdid not record a provision for loan losses in either of the three monthsperiods ending March 31, 2007 and 2006 as the decrease in nonperforming loanswas offset by loan growth, particularly commercial, commercial real estate andconstruction loans, which carry a higher risk of default than one-to-fourfamily loans.

Thefollowing table provides information with respect to the Bank’s nonperformingassets at the dates indicated. We did not have any troubled debt restructuringsat the dates presented. 
| ** **                                                             | ** ** | **At March 31,  2007**     | ** ** | **At December 31,  2006** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                                             | ** ** | **(Dollars in thousands)** | ** ** |
| Nonaccrual  loans:                                                     |       |                                 |       |                                |       |
| One- to four-family                                                    |       | $                                    | 114        |                                | $          | 284 |   |
| Consumer                                                               |       | 44                                   |       | —                              |       |
| Multi-family and commercial real estate                                |       | —                               |       | —                              |       |
| Total                                                                  |       | 158                                  |       | 284                                 |       |
| Accruing loans  past due 90 days or more:                              |       |                                 |       |                                |       |
| Multi-family and commercial real estate                                |       | —                               |       | 2,941                               |       |
| Total                                                                  |       | —                               |       | 2,941                               |       |
| Total of nonaccrual loans and accruing loans 90 days  or more past due |       | $                                    | 158        |                                | $          | 3,225 |   |
| Real estate  owned                                                     |       | —                               |       | —                              |       |
| Total nonperforming assets                                             |       | $                                    | 158        |                                | $          | 3,225 |   |
| Total  nonperforming loans to total loans                              |       | 0.04                                 | %          | 0.90                                | %          |
| Total  nonperforming loans to total assets                             |       | 0.02                                 |       | 0.43                                |       |
| Total nonperforming  assets to total assets                            |       | 0.02                                 |       | 0.43                                |       |

 

Nonperforming assets totaled $158,000, or 0.02% oftotal assets, at March 31, 2007 compared to $3.2 million, or 0.43% of totalassets, at December 31, 2006.  During thethree months ended December 31, 2006, a loan totaling $2.9 million went pastits contractual maturity and was included in the accruing loans past due 90days or more category of nonperforming assets. The Bank extended the maturity on this loan in the first quarter of 2007and therefore removed it from the total nonperforming assets, accounting for amajority of the $3.1 million decrease in nonperforming assets.  This loan remains current on all requiredpayments under the extension agreement and is secured by real estate.  Additionally, the property is under anagreement of sale and expected to be sold in 2007. 

***Noninterest Income*.**Thefollowing table summarizes other income for the three months ended March 31,2007, and 2006. 
|                                                       | ** ** | **Three Months  Ended March 31,** | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------------------|------------|------------|------------|
| ** **                                            | ** ** | **2007**                                         | ** ** | **2006**   | ** ** | **% Change** | ** ** |
| ** **                                            | ** ** | **(Dollars in thousands)**             | ** ** | ** ** | ** ** |
| Service charges                                       |       | $                                                | 216        |       | $          | 194 |   | 11.34 | % |
| Net gain (loss)  on sale of:                          |       |                                             |       |       |       |   |   |
| Loans                                                 |       | 57                                               |       | (12        | )          | 575.00 |   |
| Assets acquired through foreclosure                   |       | —                                           |       | 85         |       | (100.00 | ) |
| Fixed assets                                          |       | —                                           |       | —     |       | — |   |
| Securities  (losses) gains and impairment losses, net |       | —                                           |       | (17        | )          | 100.00 |   |
| Income on  bank-owned life insurance                  |       | 107                                              |       | 104        |       | 2.88 |   |
| Other                                                 |       | 56                                               |       | 74         |       | (24.32 | ) |
| Total                                                 |       | $                                                | 436        |       | $          | 428 |   | 1.87 | % |

 

19

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The noninterest incomefor the three months ended March 31, 2007 compared to 2006 remained relativelyflat.  The increases in gains on sales ofloans and service charges were offset by the previous period gain on sale of aforeclosed property.  The gains on salesof loans increased as the loans sold in the secondary market increased from$3.3 million in 2006 to $5.4 million in 2007.

***Noninterest Expense*.**The following table summarizes noninterest expense for the three months endedMarch 31, 2007, and 2006. 
|                                            | ** ** | **Three Months  Ended March 31,** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|------------|------------|
| ** **                                 | ** ** | **2007**                                         | ** ** | **2006**   | ** ** | **% Change** | ** ** |
| ** **                                 | ** ** | **(Dollars in thousands)**             | ** ** | ** ** | ** ** |
| Salaries,  benefits and other compensation |       | $                                                | 2,417      |       | $          | 2,095 |   | 15.37 | % |
| Occupancy  expense                         |       | 381                                              |       | 349        |       | 9.17 |   |
| Furniture and  equipment expense           |       | 229                                              |       | 184        |       | 24.46 |   |
| Data processing  costs                     |       | 373                                              |       | 329        |       | 13.37 |   |
| Professional  fees                         |       | 492                                              |       | 480        |       | 2.50 |   |
| Marketing  expense                         |       | 121                                              |       | 82         |       | 47.56 |   |
| FDIC premiums                              |       | 20                                               |       | 341        |       | (94.13 | ) |
| Other operating  expenses                  |       | 424                                              |       | 326        |       | 30.06 |   |
| Total                                      |       | $                                                | 4,457      |       | $          | 4,186 |   | 6.47 | % |

 

Noninterest expense increased by $271,000, or 6.5%,between the three months ended March 31, 2007 and 2006.  The two largest changes period over periodwere an increase in salaries and benefits and a decrease in Federal DepositInsurance Corporation insurance premiums. Salaries and benefits costs rose $322,000 between three month periodsdue to the hiring of a team of experienced commercial lenders and commercialcredit staff in the spring of 2006 and the adoption of an Employee StockOwnership Plan in September 2006 in conjunction with the Bank’s conversion to apublic entity.  Federal Deposit InsuranceCorporation premiums decreased $321,000 for the three months March 31, 2007compared to 2006. The reduction in the levels of premiums was primarily due tothe lifting of the Bank’s Cease and Desist order on June 28, 2006 and, to alesser extent, to changes made by the FDIC in the way it assesses financialinstitutions.  The majority of remainingincreases in operating expenses were related to the addition of the Marmora,New Jersey branch office and the opening of two loan production offices inMedia and Exton, Pennsylvania in the second quarter of 2006.  Additionally, marketing costs increasedbetween periods due to additional expenditures to market and promote the Bank’scommercial lending and deposit initiatives.

***Income Taxes*.**The income tax provision for the three months ended March 31, 2007 was$37,000 compared to $6,000 for the three months ended March 31, 2006.   The Company’s effective income tax rate was11.2% and 2.2% for the three-month periods ended March 31, 2007 and 2006,respectively.  These rates reflect theCompany’s levels of tax-exempt income for both periods relative to the overalllevel of taxable income.

**Liquidityand Capital Management**

***LiquidityManagement.*** Liquidity is the ability to meet current andfuture financial obligations of a short-term nature. Our primary sources offunds consist of deposit inflows, loan sales and repayments, maturities andsales of securities and proceeds from the stock offering. While maturities andscheduled amortization of loans and securities are predictable sources offunds, deposit flows and loan prepayments are greatly influenced by generalinterest rates, economic conditions and competition. 

20

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The followingtable presents certain of our contractual obligations as of March 31, 2007 andDecember 31, 2006.
|                                  | ** ** | ** **              | ** ** | **Payments Due by period** | ** ** |
|----------------------------------|------------|-------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations** | ** ** | **Total**               | ** ** | **Less than  One Year**         | ** ** | **One to  Three Years** | ** ** | **Three to  Five Years** | ** ** | **More Than  Five Years** | ** ** |
| ** **                       | ** ** | **(In thousands)** | ** ** |
|                             |       |                    |       |                                      |       |   |   |   |   |   |   |
| **At  March 31, 2007**           |       |                    |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations (1) |       | $                       | 2,345      |                                      | $          | 381 |   | $ | 892 |   | $ | 914 |   | $ | 158 |   |
| FHLB advances                    |       | 36,550                  |       | 1,488                                     |       | 2,978 |   | 32,084 |   | — |   |
| Other long-term  obligations (2) |       | 4,430                   |       | 1,705                                     |       | 2,725 |   | — |   | — |   |
| Total                            |       | $                       | 43,325     |                                      | $          | 3,574 |   | $ | 6,595 |   | $ | 32,998 |   | $ | 158 |   |
|                             |       |                    |       |                                      |       |   |   |   |   |   |   |
| **At  December 31, 2006**        |       |                    |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations (1) |       | $                       | 158        |                                      | $          | 120 |   | $ | 38 |   | $ | — |   | $ | — |   |
| FHLB advances                    |       | 36,922                  |       | 1,487                                     |       | 2,979 |   | 32,456 |   | — |   |
| Other long-term  obligations (2) |       | 4,995                   |       | 1,754                                     |       | 3,238 |   | 3 |   | — |   |
| Total                            |       | $                       | 42,075     |                                      | $          | 3,361 |   | $ | 6,255 |   | $ | 32,459 |   | $ | — |   |

 

----

(1)          Represents leaseobligation for commercial loan processing offices.

(2)          Represents obligationsto the Company’s third party data processing provider.

We regularly adjust our investments in liquid assetsbased upon our assessment of: (1) expected loan demands; (2) expecteddeposit flows; (3) yields available on interest-earning deposits andsecurities; and (4) the objectives of our asset/liability managementpolicy. We use a variety of measures to assess our liquidity needs, which areprovided to our Asset/Liability Management Committee on a regular basis. Ourpolicy is to maintain net liquidity of at least 50% of our funding obligationsover the next month. Additionally, our policy is to maintain an amount of cashand short-term marketable securities equal to at least 15% of net deposits andliabilities 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 andinvesting activities during any given period. At March 31, 2007, cash and cashequivalents totaled $115.7 million. Securities classified asavailable-for-sale, which provide additional sources of liquidity, totaled$212.4 million at March 31, 2007. In addition, at December 31, 2006, the latestdate available, we had the ability to borrow a total of approximately $433.1million from the Federal Home Loan Bank of Pittsburgh. On March 31, 2007, wehad $30.0 million of borrowings outstanding. 

At March 31, 2007, we had $85.1 million in loancommitments outstanding, which consisted of $3.7 million of mortgage loancommitments, $23.4 million in unused home equity lines of credit, $1.3 inconsumer loans and $56.7 in commercial loans commitments. Certificates ofdeposit due within one year of March 31, 2007 totaled $225.1 million, or 56.3%,of total certificates of deposit. We believe the large percentage ofcertificates of deposit that mature within one year reflects customers’hesitancy to invest their funds for long periods in the current low interestrate environment. If these maturing deposits do not remain with us, we will berequired to seek other sources of funds, including other certificates ofdeposit and borrowings. Depending on market conditions, we may be required topay higher rates on such deposits or other borrowings than we currently pay onthe certificates of deposit due on or before March 31, 2007. We believe,however, based on past experience, that a significant portion of thesecertificates of deposit will remain with us. We have the ability to attract andretain deposits by adjusting the interest rates offered. 

Our primary investing activities are the originationand sale of loans and the purchase and sale of securities. Our primaryfinancing activities consist of activity in deposit accounts. Deposit flows areaffected by the overall level of interest rates, the interest rates andproducts offered by us and our local competitors and other factors. Wegenerally manage the pricing of our deposits to be competitive and to increasecore deposit relationships. Occasionally, we offer promotional rates on certaindeposit products to attract deposits. 

21

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The following table presents our primary investing andfinancing activities during the periods indicated and does not include loansoriginated and held for sale. 
|                                                        | ** ** | **Three Months Ended  March 31,  2007** | ** ** | **Year Ended  December 31,  2006** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------|------------|
| Investing activities:                                  |       |                                                   |       |                                         |       |
| Loan originations                                      |       | $                                                      | (34,050    | )                                            | $          | (120,515 | ) |
| Other decreases in loans                               |       | 27,276                                                 |       | 137,512                                      |       |
| Loan sales                                             |       | —                                                 |       | 4,000                                        |       |
| Loan purchases                                         |       | (13,771                                                | )          | (4,788                                       | )          |
| Security purchases                                     |       | (89                                                    | )          | (60,207                                      | )          |
| Security sales                                         |       | —                                                 |       | 17,205                                       |       |
| Security maturities, calls and principal repayments    |       | 16,728                                                 |       | 145,471                                      |       |
| Financing  activities:                                 |       |                                                   |       |                                         |       |
| Increase (decrease) in deposits                        |       | (14,475                                                | )          | (85,773                                      | )          |
| Proceeds from  stock issuance, net of conversion costs |       | —                                                 |       | 62,348                                       |       |
|                                                        |            |                                                        |            |                                              |            |  |  |

 

***Capital Management.***The Bank is subject to various regulatory capital requirements administered bythe Office of Thrift Supervision, including a risk-based capital measure. Therisk-based capital guidelines include both a definition of capital and aframework for calculating risk-weighted assets by assigning balance sheetassets and off-balance sheet items to broad risk categories. At March 31, 2007,the Bank exceeded all of regulatory capital requirements and was considered a “wellcapitalized” institution under regulatory guidelines. 

Thefollowing table presents the Bank’s capital ratios and the minimum capitalrequirements to be considered ‘‘well capitalized” by the OTS as of March 31,2007 and December 31, 2006: 
| ** **                                          | ** ** | **Ratio** | ** ** | **Minimum  to be Well  Capitalized** | ** ** |
|-----------------------------------------------------|------------|-----------|------------|------------------------------------------------|------------|
| **March  31, 2007:**                                |       |      |       |                                           |       |
| Tier 1 capital  (to adjusted assets)                |       | 27.03     | %          | 310.0                                     | %          |
| Tier 1 capital  (to risk-weighted assets)           |       | 26.22     | %          | 3 6.0                                     | %          |
| Total risk-based  capital (to risk-weighted assets) |       | 12.81     | %          | 3 5.0                                     | %          |
|                                                |       |      |       |                                           |       |
| **December  31, 2006:**                             |       |      |       |                                           |       |
| Tier 1 capital  (to adjusted assets)                |       | 27.62     | %          | 310.0                                     | %          |
| Tier 1 capital  (to risk-weighted assets)           |       | 26.79     | %          | 3 6.0                                     | %          |
| Total risk-based  capital (to risk-weighted assets) |       | 12.49     | %          | 3  5.0                                    | %          |

 

As a result of Fox Chase Bancorp’s initial publicstock offering, the Bank’s capital was increased $30.0 million in September2006. The remaining proceeds of the offering were retained by Fox Chase Bancorpto be used for general corporate purposes.  The capital ratios above reflect this infusion of capital as well asreductions in the levels of assets since December 31, 2005.

The capital from the offering significantly increasedour liquidity and capital resources. Over time, this initial level of liquidity will be reduced as netproceeds from the stock offering continue to be used for general corporatepurposes, including the funding of lending activities.  The Company’s financial condition and resultsof operations will be enhanced by the capital from the offering, resulting inincreased net interest-earning assets and net income.  However, the large increase in equityresulting from the capital raised in the offering will have an adverse impacton our return on equity.  The Company mayuse capital management tools such as cash dividends and share repurchases.  However, under Office of Thrift Supervisionregulations, we are not allowed to repurchase any shares during the first yearfollowing the offering, except to fund restricted stock awards understock-based benefit plans, unless extraordinary circumstances exist and wereceive regulatory approval.  The Companyhas not yet granted any restricted stock awards or stock options, but isseeking stockholder approval for a long-term equity incentive plan at itsupcoming annual meeting of stockholders to be held on May 22, 2007.

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**Off-Balance Sheet Arrangements**

In the normal course of operations, we engage in a varietyof financial transactions that, in accordance with U.S. generally acceptedaccounting principles, are not recorded in our financial statements. Thesetransactions involve, to varying degrees, elements of credit, interest rate andliquidity risk. Such transactions are used primarily to manage customers’requests for funding and take the form of loan commitments, letters of creditand lines of credit. 

For the period ended March 31, 2007, we engaged in nooff-balance sheet transactions reasonably likely to have a material effect onour financial condition, results of operations or cash flows. 

**Item 3.Quantitative and Qualitative Disclosures About Market Risk.**

There has not been any material change to the marketrisk disclosure from that contained in the Company’s Annual Report on Form 10-Qfor the year ended December 31, 2006. 

**Item 4.Controls and Procedures**

The Company’s management, including the Company’sprincipal executive officer and principal financial officer, have evaluated theeffectiveness of the Company’s “disclosure controls and procedures,” as suchterm is defined in Rule 13a-15(e) promulgated under the Securities Exchange Actof 1934, as amended (the “Exchange Act”). 

Based upon their evaluation, the principal executiveofficer and principal financial officer concluded that, as of the end of theperiod covered by this report, the Company’s disclosure controls and procedureswere effective for the purpose of ensuring that the information required to bedisclosed in the reports that the Company files or submits under the ExchangeAct with the Securities and Exchange Commission (the “SEC”) (1) isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and (2) is accumulated and communicated tothe Company’s management, including its principal executive and principalfinancial officers, as appropriate to allow timely decisions regarding requireddisclosure. In addition, based on that evaluation, no change in the Company’sinternal control over financial reporting occurred during the quarter endedMarch 31, 2007 that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting. 

**PART II.OTHER INFORMATION**

**Item 1.Legal Proceedings**

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

On April 28, 2006,Gregory S. Cipa, the former President and Chief Executive Officer of Fox ChaseBank, filed a complaint against Fox Chase Bank in the Civil Division of theCourt of Common Pleas of Bucks County, Pennsylvania.  In May 2006, Fox Chase Bank moved the case tofederal court, answered the complaint and filed a counterclaim. In November2006, Mr. Cipa amended his complaint, and now alleges Fox Chase Bankbreached its contract with him and violated its state statutory obligations byfailing to pay Mr. Cipa certain employment benefits which he claims to haveearned while serving as the President and Chief Executive Officer of Fox ChaseBank.  Mr. Cipa seeks monetarydamages in excess of $900,000 and the payment of litigation costs.  The parties completed discovery and filedmotions for summary judgment that have not yet been ruled upon.  Fox Chase Bank believes this action iswithout merit and intends to vigorously pursue its defenses.

**Item 1A.Risk Factors**

As of March 31,2007, the risk factors of the Company have not changed materially from thosereported in the Annual Report on Form 10-K. In addition to the other information set forth in this report, youshould carefully consider the factors discussed in Part I, “Item 1A. RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2006, which could materially affect our business, financial condition or futureresults.  The risks described in ourAnnual Report on Form 10-K are not the only risks that we face.  Additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial also maymaterially adversely affect our business, financial condition and/or operatingresults.

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**Item 2. Unregistered Sales ofEquity Securities and Use of Proceeds**

None.   

**Item 3.Defaults upon Senior Securities**

Notapplicable. 

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

Notapplicable. 

**Item 5.Other Information**

Notapplicable. 

**Item 6.Exhibits**
| 3.1    |   | Charter of Fox Chase Bancorp, Inc. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2    |   | Bylaws of Fox Chase Bancorp, Inc. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.1    |   | Stock Certificate of Fox Chase Bancorp, Inc. (1)                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|        |
|   |   | *                 Management contract or compensatory plan, contract or  arrangement.

(1)          Incorporated  by reference in this document to the exhibits to the Company’s Registration  Statement on Form S-1 (File No. 333-134160), as amended, initially filed with  the Securities and Exchange Commission on May 16, 2006. |

 

 

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized. 
|                     |   | FOX CHASE BANCORP, INC. |
|---------------------|--------|-------------------------|
|                |   |                    |   |   |
| Dated: May 14, 2007 |   | By:                     | /s/ Thomas M. Petro |
|                |   |                    | Thomas M. Petro |   |
|                |   |                    | President and Chief Executive Officer |
|                |   |                    | (principal executive officer) |   |
|                |   |                    |   |   |
| Dated: May 14, 2007 |   | By:                     | /s/ Jerry D. Holbrook |
|                |   |                    | Jerry D. Holbrook |   |
|                |   |                    | Chief Financial Officer and Secretary |
|                |   |                    | (principal accounting and financial officer) |

 

 

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