** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

 

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**FORM 10-Q**

 

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** **

**(MarkOne)**
| **x**  | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**          |
|--------|------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                             |
|   | **For  the quarterly period ended March 31, 2008**                                                          |
|   |                                                                                                             |
|   | **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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**Fox Chase Bancorp, Inc.**

(Exact name ofregistrant as specified in its charter)

 

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

 

**(215) 682-7400**

(Registrant’stelephone number, including area code)

 

**N/A**

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

 

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

 

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

 

Large Accelerated Filer o     Accelerated Filer x

Non-Accelerated Filer o     Smaller Reporting Company o

(Do not check if asmaller reporting company)

 

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 2, 2008,there were 14,321,550 shares of the registrant’s common stock outstanding.

 

 

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**FOXCHASE BANCORP, INC.**

 

**Table of Contents**

 
| ** **                             | **Page  No.**                                                                                               |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------|
| **Part I. Financial Information** | ** **                                                                                                  |
|                                   |                                                                                                        |   |
| Item 1.                                | Financial Statements                                                                                        | 3 |
|                                   |                                                                                                        |   |
|                                   | Consolidated  Statements of Condition at March 31, 2008 (unaudited) and  December 31, 2007        | 3 |
|                                   |                                                                                                        |   |
|                                   | Consolidated  Statements of Operations for the Three Months Ended March 31, 2008 and  2007 (unaudited) | 4 |
|                                   |                                                                                                        |   |
|                                   | Consolidated  Statements of Changes in Equity for the Three Months Ended March 31,  2008 (unaudited)   | 5 |
|                                   |                                                                                                        |   |
|                                   | Consolidated  Statements of Cash Flows for the Three Months Ended March 31, 2008 and  2007 (unaudited) | 6 |
|                                   |                                                                                                        |   |
|                                   | Notes to Unaudited Consolidated Financial Statements                                                        | 7 |
|                                   |                                                                                                        |   |
| Item 2.                                | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                 | 17 |
|                                   |                                                                                                        |   |
| Item 3.                                | Quantitative and Qualitative Disclosures About Market  Risk                                                 | 25 |
|                                   |                                                                                                        |   |
| Item 4.                                | Controls and Procedures                                                                                     | 25 |
|                                   |                                                                                                        |   |
| **Part II. Other Information**    | ** **                                                                                                  |
|                                   |                                                                                                        |   |
| Item  1.                               | Legal  Proceedings                                                                                          | 25 |
|                                   |                                                                                                        |   |
| Item 1A.                          | Risk  Factors                                                                                               | 25 |
|                                   |                                                                                                        |   |
| Item 2.                                | Unregistered Sales of Equity Securities and Use of  Proceeds                                                | 26 |
|                                   |                                                                                                        |   |
| Item 3.                                | Defaults Upon Senior Securities                                                                             | 26 |
|                                   |                                                                                                        |   |
| Item 4.                                | Submission of Matters to a Vote of Security Holders                                                         | 26 |
|                                   |                                                                                                        |   |
| Item  5.                               | Other  Information                                                                                          | 26 |
|                                   |                                                                                                        |   |
| Item 6.                                | Exhibits                                                                                                    | 26 |
|                                   |                                                                                                        |   |
| **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,  2008** | ** ** | **December 31,  2007** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                             | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
|                                                                                                                                                                                                   |       |                     |       |                        |       |
| **ASSETS**                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Cash and due  from banks                                                                                                                                                                               |       | $                        | 2,692      |                        | $          | 3,307 |   |
| Interest-earning  demand deposits in other banks                                                                                                                                                       |       | 8,990                    |       | 7,968                       |       |
| Money market  funds                                                                                                                                                                                    |       | 70,687                   |       | 20,000                      |       |
| Total cash and  cash equivalents                                                                                                                                                                       |       | 82,369                   |       | 31,275                      |       |
| Investment  securities available-for-sale                                                                                                                                                              |       | 20,920                   |       | 91,159                      |       |
| Mortgage related  securities available-for-sale                                                                                                                                                        |       | 264,156                  |       | 205,145                     |       |
| Loans, net of  allowance for loan losses of $3,540 and $3,376 at March 31, 2008 and  December 31, 2007, respectively                                                                         |       | 458,464                  |       | 447,035                     |       |
| Federal Home  Loan Bank stock, at cost                                                                                                                                                                 |       | 7,621                    |       | 5,875                       |       |
| Bank-owned life  insurance                                                                                                                                                                             |       | 11,873                   |       | 11,762                      |       |
| Premises and  equipment                                                                                                                                                                                |       | 14,253                   |       | 14,466                      |       |
| Accrued interest  receivable                                                                                                                                                                           |       | 3,428                    |       | 3,360                       |       |
| Mortgage  servicing rights                                                                                                                                                                             |       | 1,032                    |       | 1,066                       |       |
| Deferred tax  asset, net                                                                                                                                                                               |       | 120                      |       | 410                         |       |
| Other assets                                                                                                                                                                                           |       | 1,181                    |       | 1,366                       |       |
| **Total  Assets**                                                                                                                                                                                      |       | $                        | 865,417    |                        | $          | 812,919 |   |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                         | ** ** | ** **               | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **LIABILITIES**                                                                                                                                                                                        | ** ** | ** **               | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Deposits                                                                                                                                                                                               |       | $                        | 597,982    |                        | $          | 585,560 |   |
| Federal Home  Loan Bank advances                                                                                                                                                                       |       | 119,368                  |       | 80,000                      |       |
| Other borrowed  funds                                                                                                                                                                                  |       | 20,000                   |       | 20,000                      |       |
| Advances from  borrowers for taxes and insurance                                                                                                                                                       |       | 2,077                    |       | 2,374                       |       |
| Accrued interest  payable                                                                                                                                                                              |       | 579                      |       | 504                         |       |
| Accrued expenses  and other liabilities                                                                                                                                                                |       | 1,999                    |       | 2,110                       |       |
| **Total  Liabilities**                                                                                                                                                                                 |       | 742,005                  |       | 690,548                     |       |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **STOCKHOLDERS’  EQUITY**                                                                                                                                                                         | ** ** | ** **               | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Preferred stock  ($.01 par value; 1,000,000 shares authorized, none issued and outstanding at  March 31, 2008 or December 31, 2007)                                                          |       | —                   |       | —                      |       |
| Common stock  ($.01 par value; 35,000,000 shares authorized, 14,679,750 shares issued;  14,321,550 and 14,352,750 shares outstanding at March 31, 2008 and  December 31, 2007, respectively) |       | 147                      |       | 147                         |       |
| Additional  paid-in capital                                                                                                                                                                            |       | 63,154                   |       | 62,909                      |       |
| Treasury stock  (at cost, 358,200 and 327,000 shares at March 31, 2008 and December 31,  2007, respectively)                                                                                 |       | (4,276                   | )          | (3,924                      | )          |
| Common stock  acquired by benefit plans                                                                                                                                                                |       | (8,636                   | )          | (8,732                      | )          |
| Retained  earnings                                                                                                                                                                                     |       | 71,820                   |       | 71,475                      |       |
| Accumulated  other comprehensive income, net                                                                                                                                                           |       | 1,203                    |       | 496                         |       |
| **Total  Stockholders’ Equity**                                                                                                                                                                   |       | 123,412                  |       | 122,371                     |       |
| ** **                                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **Total  Liabilities and Stockholders’ Equity**                                                                                                                                                   |       | $                        | 865,417    |                        | $          | 812,919 |   |

** **

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

 

3

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**FOX CHASE BANCORP, INC**

**Consolidated Statements of Operations**

**(In Thousands, Except Per Share Data)**

 
| ** **                                                  | ** ** | **Three Months Ended March 31,** | ** ** |
|-------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                                                  | ** ** | **(Unaudited)**                                      | ** ** |
|                                                        |       |                                                 |       |   |   |
| **INTEREST  INCOME**                                        |       |                                                 |       |   |   |
| Interest and  fees on loans                                 |       | $                                                    | 7,128      |   | $ | 5,548 |   |
| Interest on  money market funds                             |       | 275                                                  |       | — |   |
| Interest on  mortgage related securities available-for-sale |       | 2,904                                                |       | 1,818 |   |
| Interest on  investment securities available-for-sale:      |       |                                                 |       |   |   |
| Taxable                                                     |       | 651                                                  |       | 453 |   |
| Nontaxable                                                  |       | 168                                                  |       | 245 |   |
| Dividend income                                             |       | 58                                                   |       | 66 |   |
| Other interest  income                                      |       | 70                                                   |       | 1,457 |   |
| **Total  Interest Income**                                  |       | 11,254                                               |       | 9,587 |   |
|                                                        |       |                                                 |       |   |   |
| **INTEREST  EXPENSE**                                       |       |                                                 |       |   |   |
| Deposits                                                    |       | 5,107                                                |       | 4,870 |   |
| Federal Home  Loan Bank advances                            |       | 1,030                                                |       | 366 |   |
| Other borrowed  funds                                       |       | 182                                                  |       | — |   |
| **Total  Interest Expense**                                 |       | 6,319                                                |       | 5,236 |   |
|                                                        |       |                                                 |       |   |   |
| **Net  Interest Income**                                    |       | 4,935                                                |       | 4,351 |   |
| Provision for  loan losses                                  |       | 175                                                  |       | — |   |
| **Net  Interest Income after Provision for Loan Losses**    |       | 4,760                                                |       | 4,351 |   |
|                                                        |       |                                                 |       |   |   |
| **NONINTEREST  INCOME**                                     |       |                                                 |       |   |   |
| Service charges  and other fee income                       |       | 191                                                  |       | 216 |   |
| Net gain on sale  of:                                       |       |                                                 |       |   |   |
| Securities  available-for-sale                              |       | 70                                                   |       | — |   |
| Loans                                                       |       | 3                                                    |       | 57 |   |
| Income on  bank-owned life insurance                        |       | 111                                                  |       | 107 |   |
| Other                                                       |       | 18                                                   |       | 56 |   |
| **Total  Noninterest Income**                               |       | 393                                                  |       | 436 |   |
|                                                        |       |                                                 |       |   |   |
| **NONINTEREST  EXPENSE**                                    |       |                                                 |       |   |   |
| Salaries,  benefits and other compensation                  |       | 2,798                                                |       | 2,417 |   |
| Occupancy  expense                                          |       | 486                                                  |       | 399 |   |
| Furniture and  equipment expense                            |       | 216                                                  |       | 232 |   |
| Data processing  costs                                      |       | 393                                                  |       | 373 |   |
| Professional  fees                                          |       | 313                                                  |       | 474 |   |
| Marketing  expense                                          |       | 95                                                   |       | 121 |   |
| FDIC premiums                                               |       | 30                                                   |       | 20 |   |
| Other                                                       |       | 391                                                  |       | 421 |   |
| **Total  Noninterest Expense**                              |       | 4,722                                                |       | 4,457 |   |
| **Income  Before Income Taxes**                             |       | 431                                                  |       | 330 |   |
| Income tax  provision                                       |       | 86                                                   |       | 37 |   |
| **Net  Income**                                             |       | $                                                    | 345        |   | $ | 293 |   |
| Earnings per  share:                                        |       |                                                 |       |   |   |
| Basic                                                       |       | $                                                    | 0.03       |   | $ | 0.02 |   |
| Diluted                                                     |       | $                                                    | 0.03       |   | $ | 0.02 |   |

 

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

 

4

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**FOX CHASE BANCORP, INC**

**Consolidated Statements of Changes inEquity**

**Three Months Ended March 31,2008**

**(In Thousands, Unaudited)**

 
| ** **                                      | ** ** | **Common  Stock** | ** ** | **Additional  Paid in  Capital** | ** ** | **Treasury  Stock** | ** ** | **Common  Stock  Acquired****by  Benefit Plans** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income,  Net** | ** ** | **Total  Equity** | ** ** |
|-------------------------------------------------|------------|-------------------|------------|----------------------------------|------------|---------------------|------------|--------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------|------------|-------------------|------------|
| **BALANCE  - DECEMBER 31, 2007**                |       | $                 | 147        |                             | $          | 62,909              |       | $                                                | (3,924     | )                      | $          | (8,732                                              | )          | $                 | 71,475     |   | $ | 496 |   | $ | 122,371 |   |
| Purchase of  treasury stock                     |       |              |       |                             |       | (352                | )          |                                             |       |                   |       |                                                |       | (352              | )          |
| Stock based  compensation expense               |       |              |       | 208                              |       |                |       |                                             |       |                   |       |                                                |       | 208               |       |
| Unallocated ESOP  shares committed to employees |       |              |       | 11                               |       |                |       | 96                                               |       |                   |       |                                                |       | 107               |       |
| Shares allocated  in long-term incentive plan   |       |              |       | 26                               |       |                |       |                                             |       |                   |       |                                                |       | 26                |       |
| Net income                                      |       |              |       |                             |       |                |       |                                             |       | 345                    |       |                                                |       | 345               |       |
| Other  comprehensive income                     |       |              |       |                             |       |                |       |                                             |       |                   |       | 707                                                 |       | 707               |       |
| **BALANCE  – MARCH 31, 2008**         |       | $                 | 147        |                             | $          | 63,154              |       | $                                                | (4,276     | )                      | $          | (8,636                                              | )          | $                 | 71,820     |   | $ | 1,203 |   | $ | 123,412 |   |

 

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

 

5

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**FOXCHASE BANCORP, INC**

**Consolidated Statements of Cash Flows**

**(In Thousands)**

 
|                                                                               | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
|                                                                               | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
|                                                                               | ** ** | **(Unaudited)**                                      | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES                                              |       |                                                 |       |   |   |
| Net income                                                                         |       | $                                                    | 345        |   | $ | 293 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                                 |       |   |   |
| Provision for  loan losses                                                         |       | 175                                                  |       | — |   |
| Depreciation                                                                       |       | 247                                                  |       | 260 |   |
| Net amortization  of securities premiums and discounts                             |       | 253                                                  |       | 86 |   |
| Provision  (credit) for deferred income taxes                                      |       | (80                                                  | )          | 43 |   |
| Shares committed  to be released to the ESOP                                       |       | 107                                                  |       | 131 |   |
| Shares earned in  the long-term incentive plan                                     |       | 26                                                   |       | 36 |   |
| Stock based  compensation expense                                                  |       | 208                                                  |       | — |   |
| Origination of  loans held for sale                                                |       | (497                                                 | )          | (5,557 | ) |
| Proceeds from  sale of loans held for sale                                         |       | 502                                                  |       | 5,422 |   |
| Net gain on  sales of securities                                                   |       | (70                                                  | )          | — |   |
| Net gain on  sales of loans                                                        |       | (3                                                   | )          | (57 | ) |
| Earnings on  investment in bank-owned life insurance                               |       | (111                                                 | )          | (107 | ) |
| Decrease in  mortgage servicing rights                                             |       | 34                                                   |       | 27 |   |
| Decrease in  accrued interest receivable and other assets                          |       | 115                                                  |       | 109 |   |
| Decrease in  accrued interest payable, accrued expenses and other liabilities      |       | (33                                                  | )          | (660 | ) |
| **Net  Cash Provided by Operating Activities**                                     |       | 1,218                                                |       | 26 |   |
|                                                                               |       |                                                 |       |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES                                              |       |                                                 |       |   |   |
| Investment  securities available-for-sale:                                         |       |                                                 |       |   |   |
| Purchases                                                                          |       | (12,360                                              | )          | (89 | ) |
| Proceeds from  sales                                                               |       | 72,398                                               |       | — |   |
| Proceeds from  maturities, calls and principal repayments                          |       | 10,265                                               |       | 4,012 |   |
| Mortgage related  securities available-for-sale:                                   |       |                                                 |       |   |   |
| Purchases                                                                          |       | (93,883                                              | )          | — |   |
| Proceeds from  sales                                                               |       | 18,653                                               |       | — |   |
| Proceeds from  maturities, calls and principal repayments                          |       | 17,046                                               |       | 12,716 |   |
| Net increase in  loans                                                             |       | (7,629                                               | )          | (6,774 | ) |
| Purchase of loan  participations                                                   |       | (3,975                                               | )          | (13,771 | ) |
| Net (increase)  decrease in Federal Home Loan Bank stock                           |       | (1,746)                                              |       | 229 |   |
| Purchases of  premises and equipment                                               |       | (34                                                  | )          | (146 | ) |
| **Net  Cash Used in Investing Activities**                                         |       | (1,265                                               | )          | (3,823 | ) |
| ** **                                                                         |       |                                                 |       |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES                                              |       |                                                 |       |   |   |
| Net increase  (decrease) in deposits                                               |       | 12,422                                               |       | (14,475 | ) |
| Decrease in  advances from borrowers for taxes and insurance                       |       | (297                                                 | )          | (514 | ) |
| Purchase of  treasury stock                                                        |       | (352                                                 | )          | — |   |
| Principal  payments on Federal Home Loan Bank advances                             |       | (632                                                 | )          | — |   |
| Federal Home  Loan Bank advances                                                   |       | 40,000                                               |       | — |   |
| **Net  Cash Provided by (Used in) Financing Activities**                           |       | 51,141                                               |       | (14,989 | ) |
| ** **                                                                         | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| **Net  Increase (Decrease) in Cash and Cash Equivalents**                          |       | 51,094                                               |       | (18,786 | ) |
|                                                                               | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| CASH AND CASH  EQUIVALENTS – BEGINNING                                        |       | 31,275                                               |       | 134,441 |   |
|                                                                               | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| CASH AND CASH  EQUIVALENTS – ENDING                                           |       | $                                                    | 82,369     |   | $ | 115,655 |   |
| SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION                                  |       |                                                 |       |   |   |
| Interest paid                                                                      |       | $                                                    | 6,251      |   | $ | 5,446 |   |
| Income taxes  paid                                                                 |       | $                                                    | 283        |   | $ | — |   |

 

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

 

6

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**FOX CHASE BANCORP, INC**

**Notes to the Unaudited ConsolidatedFinancial Statements**

** **

**NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION**

** **

FoxChase Bancorp, Inc. (the “Bancorp”) was organized on September 29,2006 under the laws of the United States for the purpose of being a holdingcompany for Fox Chase Bank (the “Bank”), a stock savings bank also organizedunder the laws of the United States.  On September 29,2006, the Bancorp completed its initial public offering in which it sold6,395,835 shares, or 43.57%, of its outstanding common stock to the public,including 575,446 shares purchased by the Fox Chase Bank Employee StockOwnership Plan (the “ESOP”).  Anadditional 8,148,915 shares, or 55.51% of the Bancorp’s outstanding stock, wereissued to Fox Chase MHC, the Bancorp’s federally chartered mutual holdingcompany. Net proceeds of the offering totaled $56.6 million.  Additionally, the Bancorp contributed$150,000 in cash and issued 135,000 shares, or 0.92% of its outstanding common stock,to the Fox Chase Bank Charitable Foundation.

 

TheBancorp’s primary business has been that of holding the common stock of theBank and making a loan to the ESOP.   FoxChase Bancorp, Inc. is authorized to pursue other business activitiespermissible by laws and regulations for other savings and loan holdingcompanies.

 

TheBancorp and the Bank (collectively referred to as the “Company”) provide a widevariety of financial products and services to individuals and businessesthrough the Bank’s eleven branches in Philadelphia, Richboro, Willow Grove,Warminster, Lahaska, Hatboro, Media and West Chester, Pennsylvania, and OceanCity, Marmora and Egg Harbor Township, New Jersey.  The operations of the Company are managed asa single business segment.  The Companycompetes with other financial institutions and other companies that providefinancial services.

 

TheCompany is subject to regulations of certain federal banking agencies.  These regulations can and do changesignificantly from period to period.  TheCompany also undergoes periodic examinations by regulatory agencies which maysubject them to further changes with respect to asset valuations, amounts ofrequired loss allowances and operating restrictions resulting from theregulators’ judgments based on information available to them at the time oftheir examinations.

 

Theconsolidated financial statements include the accounts of the Bancorp 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 Delawarechartered investment holding company and its sole purpose is to manage and holdinvestment securities.  The financialstatements do not include the transactions and balances of Fox Chase MHC.  All material inter-company transactions andbalances have been eliminated in consolidation. Prior period amounts arereclassified, when necessary, to conform with the current year’s presentation.

 

TheCompany follows accounting principles and reporting practices which are incompliance with U.S. generally accepted accounting principles (“GAAP”). Thepreparation of the financial statements in conformity with GAAP requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ from those estimates.  Material estimates that are particularlysusceptible to significant change in the near term relate to the determinationof the allowance for loan losses, the valuation and realizability of deferredtax assets and the evaluation of other than temporary impairment ofinvestments.  These financial statementsdo not contain all necessary disclosures required by GAAP and therefore shouldbe read in conjunction with the audited financial statements and the notesthereto included in Fox Chase Bancorp, Inc.’s Annual Report on Form 10-K, filed with the Securities and ExchangeCommission on March 14, 2008.  These financial statements include all normal and recurring adjustmentswhich management believes were necessary in order to conform to GAAP.  The results for the three months ended March 31,2008 are not necessarily indicative of the results that may be expected for theyear ending December 31, 2008.

** **

**7**

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** **

**PerShare Information**

** **

**The Company follows the provisions of SFAS No. 128, “EarningsPer Share.”  Basic earnings per shareexcludes dilution and is computed by dividing income available to commonstockholders by the weighted-average common shares outstanding during theperiod.  Diluted earnings per share takesinto account the potential dilution that could occur if securities or othercontracts to issue common stock were exercised and converted into commonstock.  Unallocated shares in the ESOPand shares purchased to fund the 2007 Equity Incentive Plan are not included ineither basic or diluted earnings per share.**

** **

**Thefollowing table presents the reconciliation of the numerators and denominatorsof the basic and diluted EPS computations.**

** **
| ** **                                                                   | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                   | ** ** | **March 31,**               | ** ** |
| ** **                                                                   | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| Net income                                                                   |       | $                                | 345,000    |   | $ | 293,000 |   |
|                                                                         |       |                             |       |   |   |
| Weighted-average  common shares outstanding                                  |       | 14,344,277                       |       | 14,679,750 |   |
| Average common  stock acquired by stock benefit plans:                       |       |                             |       |   |   |
| Unvested shares –  long-term incentive plan                             |       | (25,114                          | )          | (38,867 | ) |
| ESOP shares  unallocated                                                     |       | (495,418                         | )          | (533,780 | ) |
| Shares purchased  by trust                                                   |       | (287,500                         | )          | — |   |
|                                                                         |       |                             |       |   |   |
| Weighted-average  common shares used to calculate basic earnings per share   |       | 13,536,245                       |       | 14,107,103 |   |
|                                                                         |       |                             |       |   |   |
| Dilutive effect  of:                                                         |       |                             |       |   |   |
| Unvested shares –  long-term incentive plan                             |       | 25,114                           |       | 38,867 |   |
| Restricted stock  awards                                                     |       | 4                                |       | — |   |
|                                                                         |       |                             |       |   |   |
| Weighted-average  common shares used to calculate diluted earnings per share |       | 13,561,363                       |       | 14,145,970 |   |
|                                                                         |       |                             |       |   |   |
| Earnings per  share-basic                                                    |       | $                                | 0.03       |   | $ | 0.02 |   |
| Earnings per  share-diluted                                                  |       | $                                | 0.03       |   | $ | 0.02 |   |
|                                                                         |       |                             |       |   |   |
| Outstanding common  stock equivalents having no dilutive effect              |       | 806,196                          |       | — |   |

 

8

----

** **

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

** **

The amortized cost and fair value of securitiesavailable-for-sale as of March 31, 2008 and December 31, 2007 aresummarized as follows:

 
| ** **                        | ** ** | **March 31, 2008 (Unaudited)** | ** ** |
|-----------------------------------|------------|-----------------------------------------------|------------|
| ** **                        | ** ** | **Amortized  Cost**                           | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                        | ** ** | **(In Thousands)**                       | ** ** |
| ** **                        | ** ** | ** **                                    | ** ** |
| State and  political subdivisions |       | $                                             | 15,901     |   | $ | 168 |   | $ | (46 | ) | $ | 16,023 |   |
| Corporate  securities             |       | 4,842                                         |       | 55 |   | — |   | 4,897 |   |
|                              |       | 20,743                                        |       | 223 |   | (46 | ) | 20,920 |   |
|                              |       |                                          |       |   |   |   |   |   |   |
| Mortgage related  securities      |       | 262,338                                       |       | 2,539 |   | (721 | ) | 264,156 |   |
|                              |       |                                          |       |   |   |   |   |   |   |
| **Total  securities**             |       | $                                             | 283,081    |   | $ | 2,762 |   | $ | (767 | ) | $ | 285,076 |   |

 
| ** **                               | ** ** | **December 31, 2007** | ** ** |
|------------------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **Amortized  Cost**             | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                               | ** ** | **(In Thousands)**         | ** ** |
| ** **                               | ** ** | ** **                      | ** ** |
| Obligations of  U.S. government agencies |       | $                               | 10,000     |   | $ | 16 |   | $ | — |   | $ | 10,016 |   |
| State and  political subdivisions        |       | 81,019                          |       | 126 |   | (2 | ) | 81,143 |   |
|                                     |       | 91,019                          |       | 142 |   | (2 | ) | 91,159 |   |
|                                     |       |                            |       |   |   |   |   |   |   |
| Mortgage related  securities             |       | 204,362                         |       | 1,078 |   | (295 | ) | 205,145 |   |
|                                     |       |                            |       |   |   |   |   |   |   |
| **Total  securities**                    |       | $                               | 295,381    |   | $ | 1,220 |   | $ | (297 | ) | $ | 296,304 |   |

 

9

----

** **

**NOTE 2 -INVESTMENT AND MORTGAGE RELATED SECURITIES (CONTINUED)**

 

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 31,2008 and December 31, 2007:

 
| ** **                        | ** ** | **March 31, 2008 (Unaudited)** | ** ** |
|-----------------------------------|------------|-----------------------------------------------|------------|
| ** **                        | ** ** | **Less than 12 Months**        | ** ** | **12 Months or More** | ** ** | **Total** | ** ** |
| ** **                        | ** ** | **Fair  Value**                               | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** |
| ** **                        | ** ** | **(In  Thousands)**                           | ** ** |
| ** **                        | ** ** | ** **                                    | ** ** |
| State and political  subdivisions |       | $                                             | 1,735      |   | $ | (46 | ) | $ | — |   | $ | — |   | $ | 1,735 |   | $ | (46 | ) |
| Mortgage related  securities      |       | 84,778                                        |       | (702 | ) | 7,171 |   | (19 | ) | 91,949 |   | (721 | ) |
|                              |       |                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Total  securities**             |       | $                                             | 86,513     |   | $ | (748 | ) | $ | 7,171 |   | $ | (19 | ) | $ | 93,684 |   | $ | (767 | ) |

 
| ** **                        | ** ** | **December 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)**                    | ** ** |
| ** **                        | ** ** | ** **                             | ** ** |
| State and  political subdivisions |       | $                                      | 597        |   | $ | (1 | ) | $ | 672 |   | $ | (1 | ) | $ | 1,269 |   | $ | (2 | ) |
| Mortgage related  securities      |       | 32,627                                 |       | (78 | ) | 25,977 |   | (217 | ) | 58,604 |   | (295 | ) |
|                              |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| **Total  securities**             |       | $                                      | 33,224     |   | $ | (79 | ) | $ | 26,649 |   | $ | (218 | ) | $ | 59,873 |   | $ | (297 | ) |

 

10

----

** **

**NOTE 3 -LOANS**

** **

The composition of netloans at March 31, 2008, and December 31, 2007 is provided below (inthousands).

 
| ** **                           | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|--------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                           | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| Real estate  loans:                  |       |                     |       |                        |       |
| One-to  four-family                  |       | $                        | 219,093    |                        | $          | 215,817 |   |
| Multi-family and  commercial         |       | 80,260                   |       | 76,287                      |       |
| Construction                         |       | 49,647                   |       | 46,471                      |       |
|                                 |       | 349,000                  |       | 338,575                     |       |
|                                 |       |                     |       |                        |       |
| Consumer loans:                      |       |                     |       |                        |       |
| Home equity                          |       | 66,254                   |       | 68,431                      |       |
| Automobile                           |       | 488                      |       | 565                         |       |
| Lines of credit                      |       | 9,753                    |       | 9,642                       |       |
| Other                                |       | 146                      |       | 106                         |       |
|                                 |       | 76,641                   |       | 78,744                      |       |
|                                 |       |                     |       |                        |       |
| Commercial loans                     |       | 36,641                   |       | 33,356                      |       |
|                                 |       |                     |       |                        |       |
| **Total  Loans**                     |       | 462,282                  |       | 450,675                     |       |
|                                 |       |                     |       |                        |       |
| Deferred loan  origination fees, net |       | (278                     | )          | (264                        | )          |
| Allowance for  loan losses           |       | (3,540                   | )          | (3,376                      | )          |
|                                 |       |                     |       |                        |       |
| **Net  Loans**                       |       | $                        | 458,464    |                        | $          | 447,035 |   |

 

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

 
| ** **                 | ** ** | **Three Months** | ** ** | **Year**              | ** ** |
|----------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **Ended**             | ** ** | **Ended**             | ** ** |
| ** **                 | ** ** | **March 31,**    | ** ** | **December 31,** | ** ** |
| ** **                 | ** ** | **2008**              | ** ** | **2007**              | ** ** | **2007** | ** ** |
| ** **                 | ** ** | **(Unaudited)**       | ** ** | ** **            | ** ** |
| ** **                 | ** ** | ** **            | ** ** | ** **            | ** ** | ** ** | ** ** |
| Balance,  beginning        |       | $                     | 3,376      |                  | $          | 2,949 |   | $ | 2,949 |   |
| Provision for  loan losses |       | 175                   |       | —                |       | 425 |   |
| Loans charged  off         |       | (12                   | )          | (1                    | )          | (2 | ) |
| Recoveries                 |       | 1                     |       | 1                     |       | 4 |   |
|                       |       |                  |       |                  |       |   |   |
| Balance, ending            |       | $                     | 3,540      |                  | $          | 2,949 |   | $ | 3,376 |   |

 

Asof March 31, 2008 and December 31, 2007, the Bank had one interestrate swap in the notional amount of $1.2 million to hedge a 15-year fixed rateloan, which was earning interest at 7.43%. The Company is receiving a variable rate payment of three-month LIBORplus 2.24% and is paying a fixed rate payment of 7.43%. The swap matures in April 2022and had a market value loss position of $116,000 and $60,000 at March 31,2008 and December 31, 2007, respectively.

 

EffectiveJanuary 1, 2008, the Company adopted SFAS No. 159, “The Fair ValueOption for Financial Assets and Liabilities - Including an Amendment of FASBStatement No. 115” (SFAS No. 159) which is further discussed in Note9.  In conjunction with the adoption ofSFAS No. 159, the Company identified two financial instruments to bedesignated for fair value reporting.  Theidentified instruments are the $1.2 million loan and the related swap discussedin the preceding paragraph.

 

Asthe loan is contractually current, the Company has determined the market valueof the gain position of the loan is equal to the market value loss position ofthe swap as of both December 31, 2007 and March 31, 2008.  Accordingly, adopting SFAS No. 159 forthese two financial instruments has no impact on the Company’s beginning ofperiod retained earnings or the income statement for the three months ended March 31,2008. The impact of adopting SFAS No. 159 had the balance sheet effect ofincreasing loans receivable and reducing other assets by $116,000 as of March 31,2008.

 

TheCompany elected to adopt SFAS No. 159 for these two financial instrumentsas they represent the financial instruments associated with the Company’s onlyswap agreement.  The critical terms ofthe loan and the swap are a mirror image, except the loan includes a defaultinterest rate clause.

 

11

----

** **

**NOTE 4 –MORTGAGE SERVICING ACTIVITY**

** **

Loans serviced for othersare not included in the accompanying consolidated statements of condition. Theunpaid principal balances of these loans were $114.3 million and $127.3 millionat March 31, 2008 and 2007, respectively, and $118.1 million at December 31,2007.

 

The following summarizesmortgage servicing rights for the three months ended March 31, 2008 and2007 and the year ended December 31, 2007 (in thousands):

 
| ** **                             | ** ** | **Three Months  Ended  March 31,** | ** ** | **Year  Ended  December 31,** | ** ** |
|----------------------------------------|------------|----------------------------------------------|------------|------------------------------------|------------|
| ** **                             | ** ** | **2008**                                     | ** ** | **2007**                           | ** ** | **2007** | ** ** |
| ** **                             | ** ** | **(Unaudited)**                              | ** ** | ** **                         | ** ** |
| Balance,  beginning                    |       | $                                            | 1,066      |                               | $          | 1,177 |   | $ | 1,177 |   |
| Mortgage  servicing rights capitalized |       | —                                       |       | 1                                  |       | 1 |   |
| Mortgage  servicing rights amortized   |       | (34                                          | )          | (28                                | )          | (112 | ) |
|                                   |       |                                         |       |                               |       |   |   |
| Balance, ending                        |       | $                                            | 1,032      |                               | $          | 1,150 |   | $ | 1,066 |   |

 

At March 31, 2008, March 31,2007 and December 31, 2007, the fair value of the mortgage servicingrights (“MSRs”) was $1.2 million (unaudited), $1.5 million (unaudited) and $1.3million, respectively. The fair value at these dates was determined using athird-party valuation model that calculates the present value of estimatedfuture servicing income. The model incorporates assumptions that marketparticipants use in estimating future net servicing income, including estimatesof prepayment speeds and discount rates. Mortgage loan prepayment speed is theannual rate at which borrowers are forecasted to repay their mortgage loanprincipal and is based on historical experience. The discount rate used todetermine the present value of future net servicing income - another keyassumption - is the required rate of return the market would expect for anasset with similar risk. Both assumptions can, and generally will, changequarterly valuations as market conditions and interest rates change.

 

**NOTE 5 -DEPOSITS**

** **

Deposits and theirrespective weighted average interest rate at March 31, 2008 and December 31,2007 consist of the following (dollars in thousands):

 
|                                  |   | **March 31,  2008**    |   | **December 31,  2007** |    |
|---------------------------------------|--------|-----------------------------|--------|-----------------------------|---------|
|                                  |   | **Weighted  Average  Rate** |   | **Amount**                  |    | **Weighted  Average  Rate** |   | **Amount** |   |
|                                  |   | **(Unaudited)**             |   |                        |    |   |   |
| Non-interest  bearing demand accounts |   | —                      |   | $                           | 46,986  |   | — |   | $ | 43,462 |   |
| NOW accounts                          |   | 1.34                        | %      | 38,223                      |    | 1.70 | % | 39,299 |   |
| Money market  accounts                |   | 2.96                        |   | 59,478                      |    | 3.13 |   | 50,568 |   |
| Savings and club  accounts            |   | 0.35                        |   | 52,592                      |    | 0.65 |   | 54,019 |   |
| Certificates of  deposit              |   | 4.48                        |   | 400,703                     |    | 4.71 |   | 398,212 |   |
| **Total  Deposits**                   |   | 3.42                        | %      | $                           | 597,982 |   | 3.64 | % | $ | 585,560 |   |

 

12

----

** **

**NOTE 6 –BORROWINGS**

** **

**Federal Home Loan Bank Advances**

 

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, 2008, the Bank had $137.2 millionin qualifying collateral pledged against its advances.

 
| **Maturity Date** | ** ** | **Interest Rate** | ** ** | **Strike Rate** | ** ** | **Call Date** | ** ** | **Amount**              | ** ** |
|------------------------|------------|------------------------|------------|----------------------|------------|--------------------|------------|-------------------------|------------|
| ** **             | ** ** | ** **             | ** ** | ** **           | ** ** | ** **         | ** ** | **(in thousands)** | ** ** |
| ** **             | ** ** | ** **             | ** ** | ** **           | ** ** | ** **         | ** ** | ** **              | ** ** |
| February 2010     |       | 2.84                   | %          | —               |       |               |       | $                       | 10,000     |   |
| August 2011       |       | 4.89                   | %          | 7.50                 | %          |               |       | 20,000                  |       |
| August 2011       |       | 4.87                   | %          | 7.50                 | %          |               |       | 10,000                  |       |
| January 2015      |       | 3.49                   | %          | —               |       |               |       | 29,368                  |       |
| November 2017     |       | 3.62                   | %          |                 |       | November 2010 |       | 15,000                  |       |
| November 2017     |       | 3.87                   | %          |                 |       | November 2011 |       | 15,000                  |       |
| December 2017     |       | 2.83                   | %          |                 |       | June 2008     |       | 20,000                  |       |
|                   |       |                   |       |                 |       |               |       | $                       | 119,368    |   |

** **

Forthe borrowings that contractually mature in August 2011, if three-monthLIBOR is greater than or equal to the Strike Rate, the FHLB can notify the Bankof its intention to convert the borrowing to an adjustable-rate advance equalto three-month LIBOR (2.69% at March 31, 2008) plus .2175% on a quarterlybasis. The Bank has the option to repay these advances at each of the optiondates without penalty. Accordingly, the contractual maturities above may differfrom actual maturities.

 

Theborrowing that contractually matures in January 2015 represents aseven-year amortizing borrowing and has equal monthly payments of $403,000.

 

Theborrowings that contractually mature in November 2017 may be called by theFHLB on the call date disclosed in the above table. If the borrowing is called,the Bank has the option to pay off the borrowing without penalty.  If the Bank fails to do so, the borrowing’sfixed rate will reset to a variable rate of three-month LIBOR plus .10%.Subsequent to the call date, the borrowings are callable by the FHLB quarterly.  Accordingly, the contractual maturities abovemay differ from actual maturities.

 

Theborrowing that contractually matures in December 2017 may be called by theFHLB on the call date disclosed in the above table. If the borrowing is called,the Bank has the option to pay off the borrowing without penalty.  If the Bank fails to do so, the borrowing’sfixed rate will reset to a variable rate of three-month LIBOR plus .11%.  Subsequent to the call date, the borrowing iscallable by the FHLB quarterly.  Accordingly,the contractual maturities above may differ from actual maturities.

 

TheBank had a maximum borrowing capacity with the FHLB of approximately $462.2million at December 31, 2007, the latest date for which information isavailable.

 

**Other Borrowed Funds**

** **

Otherborrowed funds of $20.0 million carry an interest rate of 3.60%, contractuallymature in November 2014 and may be called by the lender in November 2009.  Subsequent to the call date, the borrowing iscallable by the lender quarterly. Accordingly, the contractual maturities abovemay differ from actual maturities. Mortgage backed securities with a carrying value of $27.6 million at March 31,2008 were pledged as collateral for these other borrowed funds.

 

13

----

 

 **NOTE 7 –STOCK BASED COMPENSATION**

 

During the three monthsended March 31, 2008, the Company recorded $208,000 of stock basedcompensation expense, comprised of stock option expense of $86,000 andrestricted stock expense of $122,000. The Company anticipates that the 287,500 shares purchased by a trustduring 2007 will fund amounts earned under the restricted stock awards.

 

The following is asummary of the Company’s stock option activity and related information for the2007 Equity Incentive Plan for the three months ended March 31, 2008:

 
| ** **                             | ** ** | **Number  of  Stock  Options** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|----------------------------------------|------------|--------------------------------|------------|----------------------------------------|------------|
|                                   |       |                           |       |                                   |       |
| Outstanding at  December 31, 2007 |       | 518,800                        |       | $                                      | 12.38      |   |
| Granted                                |       | 73,400                         |       | 11.38                                  |       |
| Exercised                              |       | —                         |       | —                                 |       |
| Forfeited                              |       | —                         |       | —                                 |       |
| Outstanding at  March 31, 2008    |       | 592,200                        |       | $                                      | 12.26      |   |
| Exercisable at  March 31, 2008    |       | —                         |       | —                                 |       |

 

The following is asummary of the Company’s unvested options as of March 31, 2008 and changestherein during the three months then ended:

 
| ** **                          | ** ** | **Number  of  Stock  Options** | ** ** | **Weighted  Average  Grant Date  Fair Value** | ** ** |
|-------------------------------------|------------|--------------------------------|------------|-----------------------------------------------|------------|
|                                |       |                           |       |                                          |       |
| Unvested at  December 31, 2007 |       | 518,800                        |       | $                                             | 3.40       |   |
| Granted                             |       | 73,400                         |       | 2.73                                          |       |
| Exercised                           |       | —                         |       | —                                        |       |
| Forfeited                           |       | —                         |       | —                                        |       |
| Unvested at  March 31, 2008    |       | 592,200                        |       | $                                             | 3.32       |   |

 

Expected future expenserelating to the 592,200 non-vested options outstanding as of March 31,2008 is $1.7 million over a weighted average period of 4.5 years.

 

The following is asummary of the status of the Company’s restricted stock as of March 31,2008 and changes therein during the three months then ended:

 
| ** **                          | ** ** | **Number  of  Restricted  Shares** | ** ** | **Weighted  Average  Grant Date  Fair Value** | ** ** |
|-------------------------------------|------------|------------------------------------|------------|-----------------------------------------------|------------|
| Unvested at  December 31, 2007 |       | 203,400                            |       | $                                             | 12.38      |   |
| Granted                             |       | 10,600                             |       | 11.39                                         |       |
| Vested                              |       | —                             |       | —                                        |       |
| Forfeited                           |       | —                             |       | —                                        |       |
| Unvested at  March 31, 2008    |       | 214,000                            |       | $                                             | 12.33      |   |

 

Expected future compensationexpense relating to the 214,000 restricted shares at March 31, 2008 is$2.2 million over a weighted average period of 4.4 years.

 

14

----

 

**NOTE 8 -COMPREHENSIVE INCOME**

 

Comprehensive income forthe three months ended March 31, 2008, and 2007 is as follows (inthousands):

 
| ** **                                                                                                                                                             | ** ** | **Three Months  Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                                                             | ** ** | **2008**                                     | ** ** | **2007** | ** ** |
| ** **                                                                                                                                                             | ** ** | **(Unaudited)**                              | ** ** |
| Net income                                                                                                                                                             |       | $                                            | 345        |   | $ | 293 |   |
|                                                                                                                                                                   |       |                                         |       |   |   |
| Other  comprehensive income:                                                                                                                                           |       |                                         |       |   |   |
| Unrealized  holding gains arising during the period, net of tax expense ($369 and $249  for the three months ended March 31, 2008 and 2007, respectively)         |       | 751                                          |       | 469 |   |
| Less:  Reclassification adjustment for gains included in net income, net of taxes  ($24 and $0 for the three months ended March 31, 2008 and 2007,  respectively) |       | 46                                           |       | — |   |
| Plus:  Amortization of pension actuarial loss                                                                                                                          |       | 2                                            |       | — |   |
| Other  comprehensive income                                                                                                                                            |       | 707                                          |       | 469 |   |
| Comprehensive  income                                                                                                                                                  |       | $                                            | 1,052      |   | $ | 762 |   |

 

**NOTE 9 –ACCOUNTING PRONOUNCEMENTS ADOPTED IN THREE MONTHS ENDED MARCH 31, 2008**

 

**Statementof Financial Accounting Standards No. 159**

** **

**In February 2007, the FASB issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities—Including anAmendment of FASB Statement No. 115 (SFAS No. 159).” SFAS No. 159permits entities to choose to measure many financial instruments and certainother items at fair value and amends SFAS No. 115 to, among other things,require certain disclosures for amounts for which the fair value option isapplied.  This Statement is effective asof the entity’s first fiscal year that begins after November 15,2007.  Effective January 1, 2008,the Company adopted SFAS No. 159 for two financial instruments, which areidentified and discussed in Note 3 to these consolidated financial statements.**

** **

# **Statement ofFinancial Accounting Standards No. 157**

# ** **

In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurement” (SFAS No. 157).  This statement defines fair value,establishes a framework for measuring fair value in generally accepted accountingprinciples and expands disclosures about fair value measurements.  This statement applies under other accountingpronouncements that require or permit fair value measurements.   SFAS No. 157 became effective for theCompany on January 1, 2008, including interim periods.

 

The standard describesthree levels of inputs that may be used to measure fair value:

 

Level 1 - Inputs arequoted prices (unadjusted) in active markets for identical assets orliabilities that are accessible at the measurement date.

 

Level 2  - Inputs are other than quoted pricesincluded within Level 1 that are observable for the asset or liability, eitherdirectly or indirectly, such as quoted prices for similar assets orliabilities; quoted prices in markets that are not active; or other inputs thatare observable or can be corroborated by observable market data forsubstantially the full term of the assets or liabilities.

 

Level 3 – Valuations areobserved from unobservable inputs that are supported by little or no marketactivity and that are significant to the fair value of the assets orliabilities.

 

The Company classifiedtwo financial instruments as Level 3 as of March 31, 2008. The first instrumentis a private label collateralized mortgage obligation (“CMO”) which, unlikeU.S. agency mortgage related securities, the fair value of private labelsecurities is more difficult to determine because they are not actively tradedin securities markets.  The secondinstrument is a  loan, which was recordedat fair value when the Company adopted SFAS No. 159, since lending credit riskis not an observable input for this individual commercial loan.  The unrealized loss in the private label CMOwas $59,000 at March 31, 2008 compared to an unrealized loss of $27,000 atJanuary 1, 2008.  The unrealized gain onthe loan was $116,000 at March 31, 2008 compared to an unrealized gain of$60,000 at January 1, 2008.

 

15

----

 

The following table ofthe Company’s fair value measurements at March 31, 2008 includes (1) investmentsecurities and mortgage related securities available-for-sale; and  (2) the two financial instrumentsrecorded at fair value in conjunction with the Company’s adoption of SFAS No. 159in the first quarter of 2008:

 
| ** **                             | ** ** | ** **              | ** ** | **Fair Value Measurements at Reporting Date Using**               | ** ** |
|----------------------------------------|------------|-------------------------|------------|-------------------------------------------------------------------------------------------------|------------|
| **Description**                        | ** ** | **3/31/2008**           | ** ** | **Quoted Prices in  Active Markets  for Identical  Assets  (Level 1)** | ** ** | **Significant  Other  Observable  Inputs  (Level 2)** | ** ** | **Significant  Other  Unobservable  Inputs  (Level 3)** | ** ** |
| ** **                             | ** ** | **(In Thousands)** | ** ** |
| State and  Political Subdivisions      |       | $                       | 16,023     |                                                                                            | $          | — |   | $ | 16,023 |   | $ | — |   |
| Corporate  Securities                  |       | 4,897                   |       | —                                                                                          |       | 4,897 |   | — |   |
| Mortgage Related  Securities           |       | 264,156                 |       | —                                                                                          |       | 263,147 |   | 1,009 |   |
| Loans (1)                              |       | 1,346                   |       | —                                                                                          |       | — |   | 1,346 |   |
| Other Assets –  Swap Contract (1) |       | (116                    | )          | —                                                                                          |       | (116 | ) | — |   |
| Total                                  |       | $                       | 286,306    |                                                                                            | $          | — |   | $ | 283,951 |   | $ | 2,355 |   |

 

----

(1) Suchassets recorded at fair value in conjunction with adoption of SFAS No. 159.

 

The Company utilizes anexternal third-party pricing service to perform evaluations on its investmentportfolio on at least a quarterly basis. The Company will be evaluating the appropriateness of the identifiedLevel 1, 2 or 3 classifications on a recurring basis. The Company has alsoadopted FASB Staff Position No. 157-2, which allowed it to defer theeffective date of SFAS No. 157 for certain nonfinancial assets andliabilities until January 1, 2009.

 

**EmergingIssues Task Force Issue No. 06-4**

** **

In Emerging Issues TaskForce (“EITF”) Issue No. 06-4 “Accounting for Deferred Compensation andPostretirement Benefit Aspects of Endorsement Split-Dollar Life InsuranceArrangements”, the EITF concluded that an endorsement split dollar lifeinsurance policy does not effectively settle an employer’s obligation toprovide the post retirement benefit that the policy was designed to provide.  Therefore, some current expense recognitionmay need 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 impact split dollar plans thatonly provide pre-retirement death benefits.

 

The accrual for theliability would be calculated in one of two ways:

 

·                  the actuarial present value of the futuredeath benefit or

 

·                  the cost of insurance of the policyduring 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 a cumulative–effectadjustment to retained earnings in the year of adoption or as a change inaccounting principles through retrospective application to all priorperiods.  As required, the Companyadopted this EITF in the first quarter of 2008. This did not have a materialimpact to the Company’s results of operations or financial position,accordingly no adjustment was made to prior year retained earnings.**

** **

**NOTE10 – OTHER ACCOUNTING PRONOUNCMENTS**

** **

InMarch 2008, the FASB issued SFAS No. 161 “Disclosures aboutDerivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133”(SFAS No. 161).  SFAS No. 161changes the disclosure requirements for derivative instruments and hedgingactivities.  Entities are required toprovide enhanced disclosures about (a) how and why an entity usesderivative instruments, (b) how derivative instruments and related hedgeditems are accounted for under Statement 133 and its related interpretations,and (c) how derivative instruments and related hedged items affect anentity’s financial position, financial performance, and cash flows.  SFAS No. 161 is effective for financialstatements issued for fiscal years and interim periods beginning after November 15,2008, with early application encouraged. The Company is evaluating thisstatement and has not yet determined the impact on its requireddisclosures.  The Company does not intendto early adopt this statement.

 

16

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

 

**Forward-LookingStatements**

 

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 thatmay affect our results are discussed in the section titled “Risk Factors” inthe Company’s Annual Report on Form 10-K, filed with the Securities andExchange Commission on March 14, 2008, and its other Securities andExchange Commission reports.

 

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.

 

**CriticalAccounting Policies**

 

We consider accounting policies involving significant judgments andassumptions by management that have, or could have, a material impact on thecarrying 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.*** The allowance for loan losses ismaintained at a level representing management’s best estimate of known andinherent losses in the loan portfolio, based on management’s evaluation of theportfolio’s collectibility. The allowance is established through the provisionfor loan losses, which is charged against income. Determining the amount of theallowance for loan losses necessarily involves a high degree of judgment. Amongthe material estimates required to establish the allowance are: loss exposureat default; the amount and timing of future cash flows on impacted loans; valueof collateral; and determination of loss factors to be applied to the variouselements of the portfolio. All of these estimates are susceptible tosignificant change. Management reviews the level of the allowance on aquarterly basis and establishes the provision for loan losses based upon anevaluation of the size and composition of the portfolio, loss experience inparticular segments of the portfolio, trends and absolute levels of classifiedand criticized loans, trends and absolute levels in delinquent loans, trends inrisk ratings, trends in industry charge-offs by particular segments and changesin existing general economic and business conditions affecting our lendingareas and the national economy.  Althoughwe believe that we use the best information available to establish theallowance for loan losses, future adjustments to the allowance may be necessaryif economic conditions differ substantially from the assumptions used in makingthe evaluation. In addition, the Office of Thrift Supervision, as an integralpart of its examination process, periodically reviews our allowance for loanlosses. Such agency may require us to recognize adjustments to the allowancebased on its judgments about information available to it at the time of itsexamination. A large loss could deplete the allowance and require increasedprovisions to replenish the allowance, 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. Specifically, the Company had a charitablecontribution carryover of $1.4 million as of March 31, 2008, resulting ina deferred tax asset of $467,000. Utilization of this carryover is limited to 10% of taxable income on anannual basis. Such carryover will expire on December 31, 2011, if notutilized. If the Company is unable to generate sufficient taxable income toutilize this carryover it may require us to record a valuation allowanceagainst this deferred tax asset.  Anyvaluation allowance would result in additional income tax expense in theperiod, which would negatively affect earnings.

 

17

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***Other-Than-Temporary Impairment ofSecurities***. Statement of Financial Accounting Standards No. 115,“Accounting for Certain Investments in Debt and Equity Securities,” and FASBStaff Position FAS 115-1and 124-1 “The Meaning of Other Than TemporaryImpairment and Its Application to Certain Investments,” require companies toperform periodic reviews of individual securities in their investmentportfolios to determine whether a decline in the value of a security is otherthan temporary. A review of other-than-temporary impairment requires companiesto make certain judgments regarding the nature of the decline, its effect onthe financial statements and the probability, extent and timing of a valuationrecovery and the company’s intent and ability to hold the security. Pursuant tothese requirements, we assess valuation declines to determine the extent towhich such changes are attributable to (1) fundamental factors specific tothe issuer, such as financial condition, business prospects or other factors,or (2) market-related factors, such as interest rates or equity marketdeclines. If the decline in the market value of a security is determined to beother than temporary, we reduce the book value of such security to its currentmarket value, recognizing the decline as a realized loss on the incomestatement.

 

**Comparisonof Financial Condition at March 31, 2008 and December 31, 2007**

 

Total assets increased $52.5million, or 6.5%, to $865.4 million at March 31, 2008, compared to $812.9million at December 31, 2007.  Loansincreased $11.4 million from December 31, 2007 to March 31, 2008 aswe continued to implement our strategic initiative to increase commercialloans. Mortgage related securities increased $59.0 million, due to a leveragestrategy implemented during the first quarter of 2008.  Investment securities available-for-saledecreased $70.2 million primarily due to the Bank liquidating $60.0 million inshort-term auction rate bonds and municipal securities during the first quarterof 2008 and reinvesting such funds in short-term money market accounts, whichincreased by $50.7 million during the three months ended March 31,2008.  The decision to liquidate theshort-term auction bonds was based on the deteriorating market conditions forsuch securities that occurred during the first quarter of 2008.

 

Deposits increased $12.4million, or 2.1%, from $585.6 at December 31, 2007 to $598.0 million at March 31,2008 as the Bank continued its marketing initiatives to increase core deposits.Federal Home Loan Bank advances increased $39.4 million, or 49.2%, to help fundthe leverage strategy mentioned above.

 

Stockholders’equity increased $1.0 million to $123.4 million at March 31, 2008 comparedto $122.4 million at December 31, 2007 primarily due to net income andunrealized gain on investment portfolio, offset by the repurchase of 31,200shares of common stock at a cost of $352,000.

 

**Comparisonof Operating Results for the Three Months Ended March 31, 2008 and 2007**

 

***General.***Net income increased $52,000, or 17.7%, to $345,000for the three months ended March 31, 2008 compared to $293,000 for thethree months ended March 31, 2007, primarily due to a $584,000 increase innet interest income offset by a decrease in other noninterest income of$43,000, an increase in noninterest expense of $265,000, a provision for loanlosses of $175,000 and an increase in tax expense of  $49,000.

 

***Net Interest Income*****.**Net interest income increased $584,000, or 13.4%, to$4.9 million for the three months ended March 31, 2008 compared the sameperiod in 2007 primarily due to an increase in the average balances on earningassets of $107.7 million and an increase in the average yield on interest-earningassets from 5.39% to 5.48%.  Thesechanges were offset by an increase in the average balances on interest-bearingliabilities of $104.8 million as well as an increase in the average cost oninterest-bearing liabilities from 3.70% to 3.73%.  The increase in the average balances ofinterest-earning assets was primarily due to an increase in the average balanceof loans of approximately $85.1 million year over year primarily related to theimplementation of the Company’s focus on increasing its levels of commerciallending.  The increase in the averagebalance of interest-bearing liabilities was primarily due to an increase in theaverage balance of FHLB advances of $77.9 million to fund a leverage strategy.

 

18

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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, 2008 and 2007. Yields are not presented on atax-equivalent basis. Any adjustments necessary to present yields on atax-equivalent basis are insignificant.

 
| ** **                                                               | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                               | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                                                               | ** ** | **Average  Balance**                                 | ** ** | **Interest  and  Dividends** | ** ** | **Yield/  Cost** | ** ** | **Average  Balance** | ** ** | **Interest  and  Dividends** | ** ** | **Yield/  Cost** | ** ** |
| ** **                                                               | ** ** | **(Dollars in thousands)**                 | ** ** |
| ** **                                                               | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets:**                                                              |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                                |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Interest-earning  demand deposits                                        |       | $                                                    | 13,259     |   | $ | 70 |   | 2.11 | % | $ | 113,803 |   | $ | 1,457 |   | 5.12 | % |
| Money market  funds                                                      |       | 29,915                                               |       | 275 |   | 3.70 |   | — |   | — |   | — |   |
| Mortgage related  securities                                             |       | 237,640                                              |       | 2,904 |   | 4.89 |   | 152,549 |   | 1,818 |   | 4.77 |   |
| Taxable  securities                                                      |       | 63,217                                               |       | 709 |   | 4.48 |   | 47,457 |   | 519 |   | 4.38 |   |
| Nontaxable  securities                                                   |       | 16,950                                               |       | 168 |   | 3.96 |   | 24,143 |   | 245 |   | 4.06 |   |
| Loans:                                                                   |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Residential loans                                                        |       | 217,444                                              |       | 3,068 |   | 5.64 |   | 208,223 |   | 2,921 |   | 5.61 |   |
| Commercial loans                                                         |       | 162,706                                              |       | 2,910 |   | 7.08 |   | 81,203 |   | 1,420 |   | 6.99 |   |
| Consumer loans                                                           |       | 78,278                                               |       | 1,150 |   | 5.88 |   | 83,861 |   | 1,207 |   | 5.76 |   |
| Total loans                                                              |       | 458,428                                              |       | 7,128 |   | 6.19 |   | 373,287 |   | 5,548 |   | 5.95 |   |
| Allowance for  loan losses                                               |       | (3,420                                               | )          | — |   | — |   | (2,970 | ) | — |   | — |   |
| Net loans                                                                |       | 455,008                                              |       | 7,128 |   | — |   | 370,317 |   | 5,548 |   | 5.95 |   |
| Total  interest-earning assets                                           |       | 815,989                                              |       | 11,254 |   | 5.48 |   | 708,269 |   | 9,587 |   | 5.39 |   |
| Noninterest-earning  assets                                              |       | 36,485                                               |       |   |   |   |   | 36,132 |   |   |   |   |   |
| Total assets                                                             |       | $                                                    | 852,474    |   |   |   |   |   | $ | 744,401 |   |   |   |   |   |
|                                                                     |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities  and equity:**                                             | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest-bearing  liabilities:                                           |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| NOW and money  market deposits                                           |       | $                                                    | 94,169     |   | 538 |   | 2.30 |   | $ | 76,111 |   | 395 |   | 2.11 |   |
| Savings accounts                                                         |       | 53,637                                               |       | 58 |   | 0.43 |   | 63,142 |   | 114 |   | 0.73 |   |
| Certificates of  deposit                                                 |       | 402,810                                              |       | 4,511 |   | 4.50 |   | 404,481 |   | 4,361 |   | 4.37 |   |
| Total  interest-bearing deposits                                         |       | 550,616                                              |       | 5,107 |   | 3.73 |   | 543,734 |   | 4,870 |   | 3.63 |   |
| FHLB advances                                                            |       | 107,938                                              |       | 1,030 |   | 3.78 |   | 30,000 |   | 366 |   | 4.88 |   |
| Other borrowed  funds                                                    |       | 20,000                                               |       | 182 |   | 3.60 |   | — |   | — |   | — |   |
| Total borrowings                                                         |       | 127,938                                              |       | 1,212 |   | 3.75 |   | 30,000 |   | 366 |   | 4.88 |   |
| Total  interest-bearing liabilities                                      |       | 678,554                                              |       | 6,319 |   | 3.73 |   | 573,734 |   | 5,236 |   | 3.70 |   |
| Noninterest-bearing  deposits                                            |       | 44,417                                               |       |   |   |   |   | 39,896 |   |   |   |   |   |
| Other  non-interest bearing liabilities                                  |       | 6,416                                                |       |   |   |   |   | 5,695 |   |   |   |   |   |
| Total  liabilities                                                       |       | 729,387                                              |       |   |   |   |   | 619,325 |   |   |   |   |   |
| Retained  earnings                                                       |       | 121,810                                              |       |   |   |   |   | 126,080 |   |   |   |   |   |
| Accumulated  comprehensive income                                        |       | 1,277                                                |       |   |   |   |   | (1,004 | )  |   |   |   |   |
| Total  stockholders’ equity                                         |       | $                                                    | 123,087    |   |   |   |   |   | $ | 125,076 |   |   |   |   |   |
| Total  liabilities and stockholders’ equity                         |       | $                                                    | 852,474    |   |   |   |   |   | $ | 744,401 |   |   |   |   |   |
| Net interest  income                                                     |       |                                                 |       | $ | 4,935 |   |   |   |   |   | $ | 4,351 |   |   |   |
| Interest rate  spread                                                    |       |                                                 |       |   |   | 1.75 | % |   |   |   |   | 1.69 | % |
| Net interest  margin                                                     |       |                                                 |       |   |   | 2.39 | % |   |   |   |   | 2.45 | % |
| Average  interest-earning assets to average interest-bearing liabilities |       |                                                 |       |   |   | 120.25 | % |   |   |   |   | 123.45 | % |

 

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(1)                       Nonperforming loans are included inaverage balance computations

 

19

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***Rate/Volume Analysis*****.**  The followingtable sets forth the effects of changing rates and volumes on our net interestincome.  The rate column shows theeffects attributable to changes in rate (changes in rate multiplied by currentvolume).  The volume column shows theeffects attributable to changes in volume (changes in volume multiplied byprior rate).  The net column representsthe sum of the prior columns.  Forpurposes of this table, changes attributable to changes in both rate and volumethat cannot be segregated have been allocated proportionally based on thechanges due to rate and the changes due to volume.

 
| ** **                          | ** ** | **Three Months Ended  March 31, 2008  Compared to  Three Months Ended  March 31, 2007** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| ** **                          | ** ** | **Increase (Decrease)  Due to**                                                                                            | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Rate**                                                                                                                             | ** ** | **Volume** | ** ** | **Net** | ** ** |
| ** **                          | ** ** | **(In Thousands)**                                                                                                              | ** ** |
| Interest and  dividend income:      |       |                                                                                                                                 |       |       |       |   |   |
| Interest-earning  demand deposits   |       | $                                                                                                                                    | (102       | )          | $          | (1,285 | ) | $ | (1,387 | ) |
| Money market  funds                 |       | —                                                                                                                               |       | 275        |       | 275 |   |
| Mortgage related  securities        |       | 72                                                                                                                                   |       | 1,014      |       | 1,086 |   |
| Taxable  securities                 |       | 17                                                                                                                                   |       | 173        |       | 190 |   |
| Nontaxable  securities              |       | (4                                                                                                                                   | )          | (73        | )          | (77 | ) |
| Loans:                              |       |                                                                                                                                 |       |       |       |   |   |
| Residential  loans                  |       | 17                                                                                                                                   |       | 130        |       | 147 |   |
| Commercial loans                    |       | 33                                                                                                                                   |       | 1,457      |       | 1,490 |   |
| Consumer loans                      |       | 24                                                                                                                                   |       | (81        | )          | (57 | ) |
| Total loans                         |       | 74                                                                                                                                   |       | 1,506      |       | 1,580 |   |
| Total  interest-earning assets      |       | $                                                                                                                                    | 57         |       | $          | 1,610 |   | $ | 1,667 |   |
|                                |       |                                                                                                                                 |       |       |       |   |   |
| Interest  expense:                  |       |                                                                                                                                 |       |       |       |   |   |
| NOW and money  market deposits      |       | $                                                                                                                                    | 44         |       | $          | 99 |   | $ | 143 |   |
| Savings accounts                    |       | (40                                                                                                                                  | )          | (16        | )          | (56 | ) |
| Certificates of  deposit            |       | 120                                                                                                                                  |       | 30         |       | 150 |   |
| Total  interest-bearing deposits    |       | 124                                                                                                                                  |       | 113        |       | 237 |   |
|                                |       |                                                                                                                                 |       |       |       |   |   |
| FHLB advances                       |       | (301                                                                                                                                 | )          | 965        |       | 664 |   |
| Other borrowed  funds               |       | —                                                                                                                               |       | 182        |       | 182 |   |
| Total borrowings                    |       | (301                                                                                                                                 | )          | 1,147      |       | 846 |   |
| Total  interest-bearing liabilities |       | (177                                                                                                                                 | )          | 1,260      |       | 1,083 |   |
|                                |       |                                                                                                                                 |       |       |       |   |   |
| Net change in  net interest income  |       | $                                                                                                                                    | 234        |       | $          | 350 |   | $ | 584 |   |

 

20

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***Provision for Loan Losses*****.** The Bank recorded a provision for loanlosses of $175,000 for the three months ended March 31, 2008 compared to$0 for the three months ending March 31, 2007.  The increase in the provision reflectedcontinued loan growth, primarily in commercial loans.

 

The following tableprovides information with respect to the Bank’s nonperforming assets at thedates indicated. There were no troubled debt restructurings as of the datespresented.

 
| ** **                                                             | ** ** | **At March 31,  2008**     | ** ** | **At December 31,  2007** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                                             | ** ** | **(Dollars in thousands)** | ** ** |
| Nonaccrual  loans:                                                     |       |                                 |       |                                |       |
| One- to  four-family                                                   |       | $                                    | 615        |                                | $          | 155 |   |
| Consumer                                                               |       | 54                                   |       | —                              |       |
| Multi-family and  commercial real estate                               |       | 105                                  |       | 105                                 |       |
|                                                                   |       |                                 |       |                                |       |
| Total                                                                  |       | 774                                  |       | 260                                 |       |
| Accruing loans  past due 90 days or more:                              |       |                                 |       |                                |       |
| One- to  four-family                                                   |       | —                               |       | 559                                 |       |
|                                                                   |       |                                 |       |                                |       |
| Total                                                                  |       | —                               |       | 559                                 |       |
| Total of  nonaccrual loans and accruing loans 90 days or more past due |       | $                                    | 774        |                                | $          | 819 |   |
|                                                                   |       |                                 |       |                                |       |
| Real estate  owned                                                     |       | —                               |       | —                              |       |
|                                                                   |       |                                 |       |                                |       |
| Total  nonperforming assets                                            |       | $                                    | 774        |                                | $          | 819 |   |
|                                                                   |       |                                 |       |                                |       |
| Total  nonperforming loans to total loans                              |       | 0.17                                 | %          | 0.18                                | %          |
| Total  nonperforming loans to total assets                             |       | 0.09                                 |       | 0.10                                |       |
| Total  nonperforming assets to total assets                            |       | 0.09                                 |       | 0.10                                |       |

 

The increase innonaccrual loans to $774,000 at March 31, 2008 from $260,000 at December 31,2007 was a result of a $505,000 residential mortgage and a $54,000 home equityloan to one borrower, both of which were placed on non accrual during the threemonth period ended March 31, 2008. The loans were previously included in the 90 days past due and stillaccruing category as of December 31, 2007. The loans are secured by a residential property in southern New Jersey.

 

21

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***Noninterest Income*****.**The following table summarizes other income for thethree months ended March 31, 2008, and 2007.

 
| ** **                            | ** ** | **Three Months**                | ** ** | ** ** | ** ** | ** **              | ** ** |
|---------------------------------------|------------|--------------------------------------|------------|------------|------------|-------------------------|------------|
| ** **                            | ** ** | **Ended March 31,**        | ** ** | ** ** | ** ** | ** **              | ** ** |
| ** **                            | ** ** | **2008**                             | ** ** | **2007**   | ** ** | **$  Change** | ** ** | **% Change** | ** ** |
| ** **                            | ** ** | **(Dollars in thousands)** | ** ** | ** ** | ** ** | ** **              | ** ** |
| ** **                            | ** ** | ** **                           | ** ** | ** ** | ** ** | ** **              | ** ** | ** ** | ** ** |
| Service charges  and other fee income |       | $                                    | 191        |       | $          | 216                     |       | $ | (25 | ) | (11.6 | )% |
| Net gain on sale  of:                 |       |                                 |       |       |       |                    |       |   |   |
| Securities  available-for-sale        |       | 70                                   |       | —     |       | 70                      |       | 100.0 | % |
| Loans                                 |       | 3                                    |       | 57         |       | (54                     | )          | (94.7 | )% |
| Income on  bank-owned life insurance  |       | 111                                  |       | 107        |       | 4                       |       | 3.7 | % |
| Other                                 |       | 18                                   |       | 56         |       | (38                     | )          | (67.9 | )% |
| Total                                 |       | $                                    | 393        |       | $          | 436                     |       | $ | (43 | ) | (9.9 | )% |

 

Servicecharges and other fee income decreased by $25,000 due to reduced loan-servicingincome in connection with the Bank servicing a reduced level of mortgages forothers and reduced deposit service charge income as the Bank modified certainfee policies related to deposit accounts. Gain on sale of loans decreased$54,000 as the Company discontinued selling residential mortgage loans duringthe second quarter 2007. Gain on sale of investment securities increased$70,000 during the first quarter of 2008 as the Company took advantage of thesteepening yield curve to liquidate certain securities at a gain and reinvestthe proceeds in higher-yielding securities. Other income decreased $38,000 as a result of the Bank receiving areduced rate on the funds held at a third party check processor.

 

***Noninterest Expense*****.** The following table summarizes noninterest expensefor the three months ended March 31, 2008 and 2007.

 
| ** **                                 | ** ** | **Three Months**                | ** ** | ** ** | ** ** | ** **        | ** ** |
|--------------------------------------------|------------|--------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                 | ** ** | **Ended March 31,**        | ** ** | ** ** | ** ** | ** **        | ** ** |
| ** **                                 | ** ** | **2008**                             | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                 | ** ** | **(Dollars in thousands)** | ** ** | ** ** | ** ** | ** **        | ** ** |
| ** **                                 | ** ** | ** **                           | ** ** | ** ** | ** ** | ** **        | ** ** | ** ** | ** ** |
| Salaries, benefits  and other compensation |       | $                                    | 2,798      |       | $          | 2,417             |       | $ | 381 |   | 15.8 | % |
| Occupancy  expense                         |       | 486                                  |       | 399        |       | 87                |       | 21.8 | % |
| Furniture and  equipment expense           |       | 216                                  |       | 232        |       | (16               | )          | (6.9 | )% |
| Data processing  costs                     |       | 393                                  |       | 373        |       | 20                |       | 5.4 | % |
| Professional  fees                         |       | 313                                  |       | 474        |       | (161              | )          | (34.0 | )% |
| Marketing  expense                         |       | 95                                   |       | 121        |       | (26               | )          | (21.5 | )% |
| FDIC premiums                              |       | 30                                   |       | 20         |       | 10                |       | 50.0 | % |
| Other                                      |       | 391                                  |       | 421        |       | (30               | )          | (7.1 | )% |
| Total                                      |       | $                                    | 4,722      |       | $          | 4,457             |       | $ | 265 |   | 5.9 | % |

 

Salariesand benefits costs rose $381,000 between three month periods primarily due to$208,000 of expense associated with the equity awards granted under the 2007Equity Incentive Plan, costs associated with the opening of the Bank’s WestChester, Pennsylvania branch in October 2007 and annual merit increases.Professional fees decreased $161,000 primarily due to legal fees paid in thefirst quarter of 2007 in relation to the litigation with the Bank’s formerChief Executive Officer, which was settled in the fourth quarter of 2007, and adecrease in consulting fees in connection with the Company’s first year ofbecoming Sarbanes Oxley compliant in 2007. Occupancy expense increased $87,000 primarily due to higher costsassociated with the Company’s move to a leased operations center during thesecond quarter 2007 and the new West Chester branch.

 

***Income Taxes*****.**The income tax provision for the three months ended March 31,2008 was $86,000 compared to $37,000 for the three months ended March 31,2007.   The Company’s effectiveincome tax rate was 20.0% and 11.2% for the three-month periods ended March 31,2008 and 2007, respectively.  These ratesreflect the Company’s levels of tax-exempt income for both periods relative tothe overall level of taxable income.

 

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**Liquidityand Capital Management**

 

***Liquidity Management.*** Liquidity is the ability to meet current and futurefinancial obligations of a short-term nature. Our primary sources of fundsconsist of deposit inflows, loan repayments, securities repayments, maturitiesand sales. While maturities and scheduled amortization of loans and securitiesare predictable sources of funds, deposit flows and loans and securitiesprepayments are greatly influenced by general interest rates, economicconditions and competition.

 

The followingtable presents certain of our contractual obligations as of March 31, 2008and December 31, 2007.

 
| ** **                              | ** ** | ** ** | ** ** | **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, 2008**             |       |       |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations (1)        |       | $          | 2,026      |                                      | $          | 499 |   | $ | 905 |   | $ | 622 |   | $ | — |   |
| FHLB advances  and other borrowings (2) |       | 170,050    |       | 9,053                                     |       | 27,772 |   | 45,165 |   | 88,060 |   |
| Other long-term  obligations (3)        |       | 3,209      |       | 1,926                                     |       | 1,283 |   | — |   | — |   |
| Total                                   |       | $          | 175,285    |                                      | $          | 11,478 |   | $ | 29,960 |   | $ | 45,787 |   | $ | 88,060 |   |
|                                    |       |       |       |                                      |       |   |   |   |   |   |   |
| **At  December 31, 2007**          |       |       |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations (1)        |       | $          | 2,192      |                                      | $          | 494 |   | $ | 963 |   | $ | 735 |   | $ | — |   |
| FHLB advances  and other borrowings (2) |       | 127,460    |       | 3,939                                     |       | 7,859 |   | 35,861 |   | 79,801 |   |
| Other long-term  obligations (3)        |       | 3,481      |       | 1,910                                     |       | 1,571 |   | — |   | — |   |
| Total                                   |       | $          | 133,133    |                                      | $          | 6,343 |   | $ | 10,393 |   | $ | 36,596 |   | $ | 79,801 |   |

 

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

(2)          Includes principal and projected interest payments.

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

 

We regularly adjust ourinvestments in liquid assets based upon our assessment of: (1) expectedloan demands; (2) expected deposit flows; (3) yields available oninterest-earning deposits and securities; and (4) the objectives of ourasset/liability management policy. We use a variety of measures to assess ourliquidity needs, which are provided to our Asset/Liability Management Committeeon a regular basis.

 

Our most liquid assetsare cash and cash equivalents. The levels of these assets depend on ouroperating, financing, lending and investing activities during any given period.At March 31, 2008, cash and cash equivalents totaled $82.4 million.Securities classified as available-for-sale, which provide additional sourcesof liquidity, totaled $285.1 million at March 31, 2008. In addition, at December 31,2007, the latest date available, we had the ability to borrow a total ofapproximately $462.2 million from the FHLB. On March 31, 2008, we had$119.4 million of borrowings outstanding with the FHLB as well as  $20.0 million of borrowings outstanding withanother financial institution.

 

At March 31, 2008,we had $103.0 million in loan commitments outstanding, which consisted of $4.4million of mortgage loan commitments, $21.4 million in unused home equity linesof credit, $1.1 million in consumer loans, $74.4 million in commercial loancommitments and $1.7 million standby letters of credit. Certificates of depositdue within one year of March 31, 2008 totaled $250.2 million, or 62.4%, oftotal certificates of deposit at March 31, 2008. We believe the largepercentage of certificates of deposit that mature within one year reflectscustomers’ hesitancy to invest their funds for long periods in the currentinterest rate environment. If these maturing deposits do not remain with us, wewill be required to seek other sources of funds, including other certificatesof deposit and borrowings. Depending on market conditions, we may be requiredto pay higher rates on such deposits or other borrowings than we currently payon the certificates of deposit due on or before March 31, 2009. Webelieve, 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 investingactivities are the origination and sale of loans and the purchase and sale ofsecurities. Our primary financing activities consist of activity in depositaccounts and FHLB advances.  Depositflows are affected by the overall level of interest rates, the interest ratesand products 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.

 

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The following tablepresents our primary investing and financing activities during the periodsindicated and does not include loans originated and held for sale.

 
| ** **                                           | ** ** | **Three Months Ended  March 31,  2008** | ** ** | **Year Ended  December 31,  2007** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------|------------|
| Investing  activities:                               |       |                                                   |       |                                         |       |
| Loan  originations                                   |       | $                                                      | (30,053    | )                                            | $          | (193,870 | ) |
| Other decreases  in loans                            |       | 22,424                                                 |       | 134,091                                      |       |
| Purchase of loan  participations                     |       | (3,975                                                 | )          | (32,064                                      | )          |
| Security  purchases                                  |       | (106,243                                               | )          | (187,984                                     | )          |
| Security sales                                       |       | 91,051                                                 |       | 36,268                                       |       |
| Security  maturities, calls and principal repayments |       | 27,311                                                 |       | 86,128                                       |       |
| Financing  activities:                               |       |                                                   |       |                                         |       |
| Increase (decrease)  in deposits                     |       | 12,422                                                 |       | (10,974                                      | )          |
| Increase in FHLB  advances, net                      |       | 39,368                                                 |       | 50,000                                       |       |
| Increase in  other borrowings                        |       | —                                                 |       | 20,000                                       |       |
|                                                      |            |                                                        |            |                                              |            |  |  |

 

***Capital Management.*** The Bank is subject to various regulatory capitalrequirements administered by the Office of Thrift Supervision, including arisk-based capital measure. The risk-based capital guidelines include both adefinition of capital and a framework for calculating risk-weighted assets byassigning balance sheet assets and off-balance sheet items to broad risk categories.At March 31, 2008, the Bank exceeded all of regulatory capitalrequirements and was considered a “well capitalized” institution underregulatory guidelines.

 

The following tablepresents the Bank’s capital ratios and the minimum capital requirements to beconsidered ‘‘well capitalized” by the OTS as of March 31, 2008 and December 31,2007:

 
| ** **                                          | ** ** | **Ratio** | ** ** | **Minimum  to be Well  Capitalized** | ** ** |
|-----------------------------------------------------|------------|-----------|------------|------------------------------------------------|------------|
| **March 31,  2008:**                           |       |      |       |                                           |       |
| Total risk-based  capital (to risk-weighted assets) |       | 22.53     | %          | >                                      | 10.0       | % |
| Tier 1 capital  (to risk-weighted assets)           |       | 21.75     | %          | >                                      | 6.0        | % |
| Tier 1 capital  (to adjusted assets)                |       | 11.39     | %          | >                                      | 5.0        | % |
|                                                |       |      |       |                                           |       |
| **December 31,  2007:**                        |       |      |       |                                           |       |
| Total risk-based  capital (to risk-weighted assets) |       | 22.54     | %          | >                                      | 10.0       | % |
| Tier 1 capital  (to risk-weighted assets)           |       | 21.78     | %          | >                                      | 6.0        | % |
| Tier 1 capital  (to adjusted assets)                |       | 12.03     | %          | >                                      | 5.0        | % |

 

The capital from theoffering significantly increased our liquidity and capital resources.  Over time, this initial level of liquiditywill be reduced as net proceeds from the stock offering are used for generalcorporate purposes, including the funding of lending activities.  The Company’s financial condition and resultsof operations have been enhanced by the capital from the offering, resulting inincreased net interest-earning assets. However, the large increase in equity resulting from the capital raisedin the offering has had an adverse impact on our return on equity.  The Company may use capital management toolssuch as cash dividends and share repurchases as well as improve operatingincome to increase its return on equity.

 

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**Off-BalanceSheet Arrangements**

 

In the normal course ofoperations, we engage in a variety of financial transactions that, inaccordance with U.S. generally accepted accounting principles, are not recordedin our financial statements. These transactions involve, to varying degrees,elements of credit, interest rate and liquidity risk. Such transactions areused primarily to manage customers’ requests for funding and take the form ofloan commitments, letters of credit and lines of credit.

 

For the period ended March 31,2008, we did not engage in any off-balance sheet transactions reasonably likelyto have a material effect on our financial condition, results of operations orcash flows.

 

**Item 3. Quantitative and Qualitative Disclosures AboutMarket Risk.**

 

There has not been anymaterial change to the market risk disclosure from that contained in theCompany’s Annual Report on Form 10-K for the year ended December 31,2007.

 

**Item 4. Controls and Procedures**

 

TheCompany’s management, including the Company’s principal executive officer andprincipal financial officer, have evaluated the effectiveness of the Company’s “disclosurecontrols and procedures,” as such term is defined in Rule 13a-15(e) promulgatedunder the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Based upon their evaluation, the principal executive officer and principalfinancial officer concluded that, as of the end of the period covered by thisreport, the Company’s disclosure controls and procedures were effective for thepurpose of ensuring that the information required to be disclosed in thereports that the Company files or submits under the Exchange Act with theSecurities and Exchange Commission (the “SEC”): (1) is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and (2) is accumulated and communicated to theCompany’s management, including its principal executive and principal financialofficers, as appropriate to allow timely decisions regarding requireddisclosure.

 

While no change inthe Company’s internal control over financial reporting occurred during thequarter ended March 31, 2008 that has materially affected, or is reasonablylikely to affect, the Company’s internal control over financial reporting,effective April 1, 2008, Roger S. Deacon, former Chief Accounting Officerwas appointed Chief Financial Officer and Jerry D. Holbrook, former ChiefFinancial Officer, was appointed Chief Operating Officer.

 

**PART II. OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

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

 

**Item 1A. Risk Factors**

 

As of March 31,2008, the risk factors of the Company have not changed materially from thosereported in the Company’s Annual Report on Form 10-K.  In addition to the other information setforth in this report, you should carefully consider the factors discussed in Part I,“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the yearended December 31, 2007, which could materially affect our business,financial condition or future results.  Therisks described in our Annual Report on Form 10-K are not the only risksthat we face.  Additional risks anduncertainties not currently known to us or that we currently deem to beimmaterial also may materially adversely affect our business, financial conditionand/or operating results.

 

25

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**Item 2. Unregistered Sales of Equity Securities and Useof Proceeds**

 
| **Period**                                            | ** ** | **Total  Number of  Shares  Purchased** | ** ** | **Average  Price Paid  Per Share** | ** ** | **Total Number  of Shares  Purchased  as Part of  Publicly  Announced Plans  or  Programs** | ** ** | **Maximum  Number of Shares  that May Yet be  Purchased Under  the Plans or  Programs** | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                  |       |                                         |       |                                         |       |                                                                                                                 |       |                                                                                                                            |       |
| January 1,  2008 through January 31, 2008   |       | —                                       |       | —                                       |       | —                                                                                                               |       | —                                                                                                                          |       |
|                                                  |       |                                         |       |                                         |       |                                                                                                                 |       |                                                                                                                            |       |
| February 1,  2008 through February 28, 2008 |       | —                                       |       | —                                       |       | —                                                                                                               |       | —                                                                                                                          |       |
|                                                  |       |                                         |       |                                         |       |                                                                                                                 |       |                                                                                                                            |       |
| March 1,  2008 through March 31, 2008       |       | 31,200                                       |       | $                                            | 11.28      |                                                                                                                 | 31,200     |                                                                                                                            | 295,800    |   |
| Total                                                 |       | 31,200                                       |       | $                                            | 11.28      |                                                                                                                 | 31,200     |                                                                                                                            | 295,800    |   |

 

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# **(1) On February 7, 2008, the Company announced that the Board of Directors hadapproved a stock repurchase program authorizing the Company to repurchase up to327,000 shares of the Company’s common stock. The repurchase program willcontinue until it is completed or terminated by the Board of Directors.**

# ** **

**Item 3. Defaults upon Senior Securities**

 

Not applicable.

 

**Item 4. Submission of Matters to a Vote of SecurityHolders**

 

Not applicable.

 

**Item 5. Other Information**

 

EffectiveApril 23, 2008, the Company amended Article III, Section 2 ofthe Company’s Bylaws to increase the size of the Board of Directors from sevento eight seats.

 

**Item 6. Exhibits**

 
| 3.1  |   | Charter  of Fox Chase Bancorp, Inc. (1)                                            |
|------|--------|-----------------------------------------------------------------------------------------|
| 3.2  |   | Bylaws of Fox Chase  Bancorp, Inc.                                                 |
| 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 |

 

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(1)           Incorporated byreference to this document from the exhibits to the Company’s RegistrationStatement on Form S-1 (File No. 333-134160), as amended, initiallyfiled with the Securities and Exchange Commission on May 16, 2006.

 

26

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                    | FOX CHASE BANCORP, INC. |
|-------------------------|-------------------------|
|                    |                    |   |
| Dated: May 9, 2008 | By:                     | /s/ Thomas M.  Petro |
|                    |                    | Thomas M. Petro |
|                    |                    | President and Chief  Executive Officer |
|                    |                    | (principal executive  officer) |
|                    |                    |   |
| Dated: May 9, 2008 | By:                     | /s/ Roger S.  Deacon |
|                    |                    | Roger S. Deacon |
|                    |                    | Chief Financial Officer |
|                    |                    | (principal accounting  and financial officer) |

 

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