** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

----

**FORM 10-Q**

----

** **

**(Mark One)**

**x****                      ****QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thequarterly period ended June 30, 2007**

**OR**

**o****                         ****TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thetransition period from                         to                         **

**Commission file number: 001-32971**

----

**FoxChase Bancorp, Inc.**

**(Exact nameof registrant as specified in its charter)**

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

**(215) 682-7400**

**(Registrant’stelephone number, including area code)**

**N/A**

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

----

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

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

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

As of August10, 2007, there were 14,679,750 shares of the registrant’s common stockoutstanding.

 

----

**FOX CHASE BANCORP, INC.**

**Table of Contents**
|                                    | ** ** | ** **                                                                                                   | ** ** | **Page  No.** | ** ** |
|------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|---------------|------------|
| **Part  I. Financial Information** | ** ** |                                                                                                         | ** ** | ** **    |       |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item  1.                           |       | Financial  Statements                                                                                        |       |          | 3          | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
|                               |       | Consolidated Statements of Condition at June 30, 2007  (unaudited) and December 31, 2006                     |       |          | 3          | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
|                               |       | Consolidated Statements of Operations for the Three  and Six Months Ended June 30, 2007 and 2006 (unaudited) |       |          | 4          | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
|                               |       | Consolidated Statement of Changes in Equity for the Six  Months Ended June 30, 2007 (unaudited)              |       |          | 5          | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
|                               |       | Consolidated Statements of Cash Flows for the Six  Months Ended June 30, 2007 and 2006 (unaudited)           |       |          | 6          | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
|                               |       | Notes to Unaudited Consolidated Financial Statements                                                         |       |          | 7          | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 2.                            |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                  |       |          | 15         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 3.                            |       | Quantitative and Qualitative Disclosures About Market  Risk                                                  |       |          | 24         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 4.                            |       | Controls and Procedures                                                                                      |       |          | 24         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| **Part  II. Other Information**    | ** ** |                                                                                                         | ** ** | ** **    |       |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item  1.                           |       | Legal  Proceedings                                                                                           |       |          | 24         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 1A.                      |       | Risk Factors                                                                                                 |       |          | 25         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 2.                            |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                                 |       |          | 25         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 3.                            |       | Defaults Upon Senior Securities                                                                              |       |          | 25         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 4.                            |       | Submission of Matters to a Vote of Security Holders                                                          |       |          | 25         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item  5.                           |       | Other  Information                                                                                           |       |          | 25         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| Item 6.                            |       | Exhibits                                                                                                     |       |          | 25         | ** ** |   |
|                               |       |                                                                                                         |       |          |       | ** ** |   |
| **Signatures**                     |       |                                                                                                         |       |          |       | ** ** |   |
|                                    |            |                                                                                                              |            |               |            |  |  |  |

 

2

----

**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**FOXCHASE BANCORP, INCConsolidated Statements of Condition(In Thousands, Except Share Data)**
| ** **                                                                                                                                            | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                            | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| ** **                                                                                                                                            | ** ** | **(Unaudited)**   | ** ** | ** **            | ** ** |
| **ASSETS**                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| Cash and due from banks                                                                                                                               |       | $                 | 4,669      |                  | $          | 3,295 |   |
| Interest-earning demand  deposits in other banks                                                                                                      |       | 118,176           |       | 131,146               |       |
| Total cash and  cash equivalents                                                                                                                      |       | 122,845           |       | 134,441               |       |
| Investment securities  available-for-sale                                                                                                             |       | 61,214            |       | 70,112                |       |
| Mortgage related  securities available-for-sale                                                                                                       |       | 132,548           |       | 158,320               |       |
| Loans held for sale                                                                                                                                   |       | —            |       | 1,194                 |       |
| Loans, net of allowance  for loan losses of $3,025 at June 30, 2007 and $2,949 at December 31, 2006                                                   | ** ** | 406,826           | ** ** | 355,617               | ** ** |
| Federal Home Loan Bank  stock, at cost                                                                                                                |       | 4,015             |       | 4,422                 |       |
| Bank-owned life  insurance                                                                                                                            |       | 11,540            |       | 11,324                |       |
| Premises and equipment                                                                                                                                |       | 14,778            |       | 14,287                |       |
| Accrued interest and  dividends receivable                                                                                                            |       | 3,142             |       | 3,397                 |       |
| Mortgage servicing  rights                                                                                                                            |       | 1,115             |       | 1,177                 |       |
| Deferred tax asset, net                                                                                                                               |       | 1,091             |       | 1,087                 |       |
| Other assets                                                                                                                                          |       | 1,412             |       | 1,607                 |       |
| **Total  Assets**                                                                                                                                     |       | $                 | 760,526    |                  | $          | 756,985 |   |
| ** **                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                        | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| **LIABILITIES**                                                                                                                                       | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| Deposits                                                                                                                                              |       | $                 | 597,903    |                  | $          | 596,534 |   |
| Federal Home Loan Bank  advances                                                                                                                      |       | 30,000            |       | 30,000                |       |
| Advances from borrowers  for taxes and insurance                                                                                                      |       | 2,926             |       | 2,262                 |       |
| Accrued interest  payable                                                                                                                             |       | 293               |       | 298                   |       |
| Accrued expenses and  other liabilities                                                                                                               |       | 2,647             |       | 2,246                 |       |
| ** **                                                                                                                                            |       |              |       |                  |       |
| **Total  Liabilities**                                                                                                                                |       | 633,769           |       | 631,340               |       |
| ** **                                                                                                                                            |       |              |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                                                                                                                         | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| Preferred stock ($.01  par value; 1,000,000 shares authorized, none issued and outstanding at June  30, 2007 or December 31, 2006)                    | ** ** | —            | ** ** | —                | ** ** |
| Common stock ($.01 par  value; 35,000,000 shares authorized, 14,679,750 shares issued and outstanding  at June 30, 2007 and  December 31,  2006) | ** ** | 147               | ** ** | 147                   | ** ** |
| Additional paid-in  capital                                                                                                                           |       | 62,508            |       | 62,365                |       |
| Unearned common stock  held by employee stock ownership plan                                                                                          |       | (5,179            | )          | (5,371                | )          |
| Retained earnings                                                                                                                                     |       | 70,690            |       | 69,545                |       |
| Accumulated other  comprehensive loss, net                                                                                                            |       | (1,409            | )          | (1,041                | )          |
| ** **                                                                                                                                            |       |              |       |                  |       |
| **Total  Stockholders’ Equity**                                                                                                                  |       | 126,757           |       | 125,645               |       |
| ** **                                                                                                                                            |       |              |       |                  |       |
| **Total Liabilities and Stockholders’  Equity**                                                                                                  |       | $                 | 760,526    |                  | $          | 756,985 |   |

*** ***

***Seeaccompanying notes to the unaudited consolidated financial statements.***

3

----

**FOXCHASE BANCORP, INCConsolidated Statements of Operations(Unaudited)(In Thousands)**
| ** **                                                        | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                        | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **INTEREST INCOME**                                          | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest and fees on loans                                        |       | $                                               | 6,044      |                                          | $          | 5,243 |   | $ | 11,592 |   | $ | 10,668 |   |
| Interest on mortgage related securities  available-for-sale       |       | 1,712                                           |       | 2,148                                         |       | 3,530 |   | 4,034 |   |
| Interest on investment securities available-for-sale:             |       |                                            |       |                                          |       |   |   |   |   |
| Taxable                                                           |       | 455                                             |       | 1,050                                         |       | 908 |   | 1,960 |   |
| Non-taxable                                                       |       | 259                                             |       | 239                                           |       | 504 |   | 445 |   |
| Dividend income                                                   |       | 62                                              |       | 58                                            |       | 128 |   | 251 |   |
| Other interest income                                             |       | 1,494                                           |       | 270                                           |       | 2,951 |   | 533 |   |
| **Total Interest Income**                                         |       | 10,026                                          |       | 9,008                                         |       | 19,613 |   | 17,891 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| **INTEREST  EXPENSE**                                             |       |                                            |       |                                          |       |   |   |   |   |
| Deposits                                                          |       | 5,143                                           |       | 4,693                                         |       | 10,013 |   | 9,178 |   |
| Federal Home Loan Bank advances                                   |       | 370                                             |       | 367                                           |       | 736 |   | 733 |   |
| **Total Interest Expense**                                        |       | 5,513                                           |       | 5,060                                         |       | 10,749 |   | 9,911 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| **Net Interest Income**                                           |       | 4,513                                           |       | 3,948                                         |       | 8,864 |   | 7,980 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Provision (Credit)  for loan losses                               |       | 75                                              |       | (383                                          | )          | 75 |   | (383 | ) |
| **Net Interest Income after Provision (Credit) for  Loan Losses** |       | 4,438                                           |       | 4,331                                         |       | 8,789 |   | 8,363 |   |
| ** **                                                        |       |                                            |       |                                          |       |   |   |   |   |
| **NONINTEREST  INCOME**                                           |       |                                            |       |                                          |       |   |   |   |   |
| Service charges and other fee income                              |       | 208                                             |       | 307                                           |       | 424 |   | 528 |   |
| Net gain (loss) on sale of:                                       |       |                                            |       |                                          |       |   |   |   |   |
| Loans                                                             |       | 16                                              |       | 46                                            |       | 73 |   | 34 |   |
| Assets acquired through foreclosure                               |       | —                                          |       | —                                        |       | — |   | 85 |   |
| Fixed assets                                                      |       | 874                                             |       | —                                        |       | 874 |   | (1 | ) |
| Securities                                                        |       | —                                          |       | —                                        |       | — |   | (18 | ) |
| Income on bank-owned life insurance                               |       | 109                                             |       | 106                                           |       | 216 |   | 210 |   |
| Other                                                             |       | 51                                              |       | 128                                           |       | 107 |   | 177 |   |
| **Total Noninterest Income**                                      |       | 1,258                                           |       | 587                                           |       | 1,694 |   | 1,015 |   |
| ** **                                                        |       |                                            |       |                                          |       |   |   |   |   |
| **NONINTEREST  EXPENSE**                                          |       |                                            |       |                                          |       |   |   |   |   |
| Salaries, benefits and other compensation                         |       | 2,252                                           |       | 2,234                                         |       | 4,669 |   | 4,329 |   |
| Occupancy expense                                                 |       | 462                                             |       | 422                                           |       | 843 |   | 771 |   |
| Furniture and equipment expense                                   |       | 247                                             |       | 218                                           |       | 476 |   | 402 |   |
| Data processing costs                                             |       | 388                                             |       | 387                                           |       | 761 |   | 716 |   |
| Professional fees                                                 |       | 547                                             |       | 288                                           |       | 1,039 |   | 768 |   |
| Marketing expense                                                 |       | 176                                             |       | 159                                           |       | 297 |   | 241 |   |
| FDIC premiums                                                     |       | 22                                              |       | 313                                           |       | 42 |   | 654 |   |
| Other                                                             |       | 453                                             |       | 664                                           |       | 877 |   | 990 |   |
| **Total Noninterest Expense**                                     |       | 4,547                                           |       | 4,685                                         |       | 9,004 |   | 8,871 |   |
| **Income Before Income Taxes**                                    |       | 1,149                                           |       | 233                                           |       | 1,479 |   | 507 |   |
| Income tax provision (benefit)                                    |       | 297                                             |       | (98                                           | )          | 334 |   | (92 | ) |
| **Net  Income**                                                   |       | $                                               | 852        |                                          | $          | 331 |   | $ | 1,145 |   | $ | 599 |   |
| ** **                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Earnings  per share (1):                                          |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                             |       | $                                               | 0.06       |                                          | —     |   | $ | 0.08 |   | — |   |
| Diluted                                                           |       | $                                               | 0.06       |                                          | —     |   | $ | 0.08 |   | — |   |
| ** **                                                        |       |                                            |       |                                          |       |   |   |   |   |

----

(1)Due to thetiming of the Bank’s reorganization into the mutual holding company form andthe completion of the Company’s initial public offering on September 29, 2006,earnings per share information for the three and six months ended June 30, 2006is not applicable.

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

4

----

**FOX CHASE BANCORP,INCConsolidated Statement of Changes in EquitySix Months Ended June 30, 2007(In Thousands, Unaudited)**
| ** **                                                                      | ** ** | ** ** | ** ** | ** **     | ** ** | **Unearned**        | ** ** | ** **   | ** ** | ** **         | ** ** | ** **             | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|----------------|------------|---------------------|------------|--------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                                      | ** ** | ** ** | ** ** | ** **     | ** ** | **Common**          | ** ** | ** **   | ** ** | **Accumulated**    | ** ** | ** **             | ** ** |
| ** **                                                                      | ** ** | ** ** | ** ** | **Additional** | ** ** | **Stock held** | ** ** | ** **   | ** ** | **Other**          | ** ** | **Total**              | ** ** |
| ** **                                                                      | ** ** | **Common** | ** ** | **Paid-in**    | ** ** | **by**              | ** ** | **Retained** | ** ** | **Comprehensive**  | ** ** | **Stockholders’** | ** ** |
| ** **                                                                      | ** ** | **Stock**  | ** ** | **Capital**    | ** ** | **ESOP**            | ** ** | **Earnings** | ** ** | **Loss, Net** | ** ** | **Equity**             | ** ** |
| **BALANCE  — DECEMBER 31, 2006**                                           |       | $          | 147        |           | $          | 62,365              |       | $            | (5,371     | )                  | $          | 69,545                 |       | $ | (1,041 | ) | $ | 125,645 |   |
| Unallocated ESOP  shares committed to employees                                 |       | —     |       | 71             |       | 192                 |       | —       |       | —             |       | 263                    |       |
| Shares allocated  in long-term incentive plan                                   |       | —     |       | 72             |       | —              |       | —       |       | —             |       | 72                     |       |
| Net income                                                                      |       | —     |       | —         |       | —              |       | 1,145        |       | —             |       | 1,145                  |       |
| Amortization of  pension actuarial loss, net of taxes                           |       | —     |       | —         |       | —              |       | —       |       | 3                  |       | 3                      |       |
| Net change in  unrealized losses on securities available-for-sale, net of taxes |       | —     |       | —         |       | —              |       | —       |       | (371               | )          | (371                   | )          |
| **BALANCE — JUNE 30, 2007**                                                |       | $          | 147        |           | $          | 62,508              |       | $            | (5,179     | )                  | $          | 70,690                 |       | $ | (1,409 | ) | $ | 126,757 |   |

 

***Seeaccompanying notes to the unaudited consolidated financial statements.***

5

----

**FOXCHASE BANCORP, INCConsolidated Statements of Cash Flows(In Thousands)**
| ** **                                                                               | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                               | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                                                               | ** ** | **(Unaudited)**                                   | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**                                                |       |                                              |       |   |   |
| Net income                                                                               |       | $                                                 | 1,145      |   | $ | 599 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:       |       |                                              |       |   |   |
| Provision (credit) for loan losses                                                       |       | 75                                                |       | (383 | ) |
| Depreciation                                                                             |       | 527                                               |       | 500 |   |
| Net amortization of securities premiums and  discounts                                   |       | 136                                               |       | 495 |   |
| Provision for deferred income taxes                                                      |       | 224                                               |       | 190 |   |
| Shares committed to be released to the ESOP                                              |       | 263                                               |       | - |   |
| Shares earned in the long-term incentive plan                                            |       | 72                                                |       | - |   |
| Origination of loans held for sale                                                       |       | (6,112                                            | )          | (10,597 | ) |
| Proceeds from sale of loans held for sale                                                |       | 7,331                                             |       | 9,708 |   |
| Net realized (gains) losses on sales of fixed assets                                     |       | (874                                              | )          | 1 |   |
| Net realized gain on sale of assets acquired through  foreclosure                        |       | -                                                 |       | (85 | ) |
| Net loss on sale and impairment of securities                                            |       | -                                                 |       | 18 |   |
| Net gain on sales of loans and loans held for sale                                       |       | (73                                               | )          | (34 | ) |
| Earnings on investment in bank-owned life insurance                                      |       | (216                                              | )          | (210 | ) |
| Decrease (increase) in mortgage servicing rights                                         |       | 62                                                |       | (53 | ) |
| Decrease in accrued interest and dividends  receivable and other assets                  |       | 498                                               |       | 135 |   |
| Increase (decrease) in accrued interest payable,  accrued expenses and other liabilities |       | 401                                               |       | (1,778 | ) |
| **NET CASH PROVIDED BY (USED IN) OPERATING  ACTIVITIES**                                 |       | 3,459                                             |       | (1,494 | ) |
|                                                                                     |       |                                              |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**                                                |       |                                              |       |   |   |
| Investment securities available-for-sale:                                                |       |                                              |       |   |   |
| Purchases                                                                                |       | (15,089                                           | )          | (28,418 | ) |
| Proceeds from sales                                                                      |       | -                                                 |       | 17,205 |   |
| Proceeds from maturities, calls and principal  repayments                                |       | 23,717                                            |       | 29,300 |   |
| Mortgage related securities available-for-sale:                                          |       |                                              |       |   |   |
| Purchases                                                                                |       | -                                                 |       | (31,789 | ) |
| Proceeds from maturities, calls and principal  repayments                                |       | 25,305                                            |       | 31,497 |   |
| Net (increase) decrease in loans                                                         |       | (28,456                                           | )          | 17,934 |   |
| Purchase of loan participations                                                          |       | (22,828                                           | )          | - |   |
| Net decrease (increase) in Federal Home Loan Bank  stock                                 |       | 407                                               |       | (422 | ) |
| Purchases of premises and equipment                                                      |       | (1,872                                            | )          | (1,136 | ) |
| Proceeds from sales of premises and equipment                                            |       | 1,728                                             |       | - |   |
| Proceeds from sale of assets acquired through  foreclosure                               |       | -                                                 |       | 192 |   |
| **Net cash Provided by (Used in) Investing  Activities**                                 |       | (17,088                                           | )          | 34,363 |   |
|                                                                                     |       |                                              |       |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES**                                                |       |                                              |       |   |   |
| Net increase (decrease) in deposits                                                      |       | 1,369                                             |       | (43,677 | ) |
| Increase in advances from borrowers for taxes and  insurance                             |       | 664                                               |       | 486 |   |
| **Net Cash Provided by (Used in) Financing  Activities**                                 |       | 2,033                                             |       | (43,191 | ) |
|                                                                                     |       |                                              |       |   |   |
| **Net Decrease in Cash and Cash Equivalents**                                            |       | (11,596                                           | )          | (10,322 | ) |
|                                                                                     |       |                                              |       |   |   |
| **CASH  AND CASH EQUIVALENTS — BEGINNING**                                          |       | 134,441                                           |       | 46,086 |   |
|                                                                                     |       |                                              |       |   |   |
| **CASH  AND CASH EQUIVALENTS — ENDING**                                             |       | $                                                 | 122,845    |   | $ | 35,764 |   |
|                                                                                     |       |                                              |       |   |   |
| **SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION**                                    |       |                                              |       |   |   |
| Interest paid                                                                            |       | $                                                 | 11,004     |   | $ | 9,853 |   |
| Income taxes  paid                                                                       |       | $                                                 | 19         |   | $ | 425 |   |

 

***Seeaccompanying notes to the unaudited consolidated financial statements.***

6

----

**FOXCHASE BANCORP, INCNotes to the Unaudited Consolidated Financial Statements**

**NOTE 1 — PRINCIPLESOF CONSOLIDATION AND PRESENTATION**

Fox Chase Bancorp, Inc. (the “Company”) was organizedon September 29, 2006 under the laws of the United States for the purpose ofbeing a holding company for Fox Chase Bank (the “Bank”), a stock savings bankalso organized under the laws of the United States.  On September 29, 2006, the Company completedits initial public offering in which it sold 6,395,835 shares, or 43.57%, ofits outstanding common stock to the public, including 575,446 shares purchasedby the Fox Chase Bank Employee Stock Ownership Plan (the “ESOP”).  An additional 8,148,915 shares, or 55.51% ofthe Company’s outstanding stock, were issued to Fox Chase MHC, the Company’sfederally chartered mutual holding company. Net proceeds of the offeringtotaled $56.6 million.  Additionally, theCompany contributed $150,000 in cash and issued 135,000 shares, or 0.92% of itsoutstanding common stock, to the Fox Chase Bank Charitable Foundation.

The Company’s primary business is holding the commonstock of the Bank and making a loan to the ESOP to fund its purchase of commonstock.   Fox Chase Bancorp, Inc. isauthorized to pursue other business activities permissible by laws andregulations for other savings and loan holding companies.

The Company provides a wide variety of financialproducts and services to individuals and businesses through its eleven branchesin Philadelphia, Richboro, Willow Grove, Warminster, Lahaska, Hatboro, Mediaand Exton, Pennsylvania, and Ocean City, Marmora and Egg Harbor Township, NewJersey.  The operations of the Companyare managed as a single business segment. The Company competes with other financial institutions and othercompanies that provide financial services.

The Company and Bank are subject to regulations ofcertain federal banking agencies.  Theseregulations can and do change significantly from period to period.  The Company and Bank also undergo periodicexaminations by regulatory agencies which may subject it to further changeswith respect to asset valuations, amounts of required loss allowances andoperating restrictions resulting from the regulators’ judgments based oninformation available to them at the time of their examinations.

The consolidated financial statements include theaccounts of the Company and its wholly owned subsidiary, the Bank. The Bank’soperations include the accounts of its wholly owned subsidiary, Fox ChaseFinancial, Inc.  Fox Chase Financial,Inc. is a Delaware chartered investment holding company and its sole purpose isto manage and hold investment securities. The consolidated financial statements include the Company beginning onSeptember 29, 2006.  The consolidatedfinancial statements and related notes include only the activity and balancesof the Bank and its subsidiary through September 29, 2006.  The financial statements do not include thetransactions and balances of Fox Chase MHC. All material inter-company transactions and balances have beeneliminated in consolidation. Prior period amounts are reclassified, whennecessary, to conform with the current year’s presentation. The statement ofcash flows for the six months ended June 30, 2006 has been revised to reflectthe correction of certain immaterial errors identified by the Company.

The Company follows accounting principles andreporting practices which are in compliance with U.S. generally acceptedaccounting principles (“GAAP”). The preparation of the financial statements inconformity with GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.  Material estimates that areparticularly susceptible to significant change in the near term relate to thedetermination of the allowance for loan losses, the valuation and realizabilityof deferred tax 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 for the year ended December 31, 2006, filedwith the Securities and Exchange Commission on March 29, 2007.   These financial statements include allnormal and recurring adjustments which management believes were necessary inorder to conform to GAAP.  The resultsfor the six months ended June 30, 2007 are not necessarily indicative of theresults that may be expected for the year ending December 31, 2007.

7

----

**Per ShareInformation**

The Company follows the provisions of SFAS No. 128, “EarningsPer Share.”  Basic earnings per shareexclude dilution and are computed by dividing income available to commonstockholders by the weighted-average common shares outstanding during theperiod.  Diluted earnings per share takeinto account the potential dilution that could occur if securities or othercontracts to issue common stock were exercised and converted into common stock.

Earnings per share (“EPS”), basic and diluted, were$0.06 and $0.08 for the three and six months ended June 30, 2007.  Earnings per share were not calculated forthe three and six months ended June 30, 2006 since the Company did not completeits initial public offering until September 29, 2006.

The following table presents the reconciliation of thenumerators and denominators of the basic and diluted EPS computations.

|                                                                              | ** ** | **Three Months**       | ** ** | **Six Months**         | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                                   | ** ** | **Ended**                   | ** ** | **Ended**                   | ** ** |
| ** **                                                                   | ** ** | **June 30, 2007** | ** ** | **June 30, 2007** | ** ** |
| Net income                                                                   |       | $                           | 852,000    |                        | $          | 1,145,000 |   |
|                                                                         |       |                        |       |                        |       |
| Weighted-average  common shares outstanding                                  |       | 14,679,750                  |       | 14,679,750                  |       |
| Average common  stock acquired by stock benefit plans:                       |       |                        |       |                        |       |
| Unvested shares — long-term incentive plan                              |       | (38,867                     | )          | (38,867                     | )          |
| ESOP shares unallocated, net                                                 |       | (524,190                    | )          | (528,958                    | )          |
|                                                                         |       |                        |       |                        |       |
| Weighted-average  common shares used to calculate basic earnings per share   |       | 14,116,693                  |       | 14,111,925                  |       |
|                                                                         |       |                        |       |                        |       |
| Dilutive effect  of shares in long-term incentive plan                       |       | 38,867                      |       | 38,867                      |       |
|                                                                         |       |                        |       |                        |       |
| Weighted-average  common shares used to calculate diluted earnings per share |       | 14,155,560                  |       | 14,150,792                  |       |
|                                                                         |       |                        |       |                        |       |
| Earnings per  share-basic                                                    |       | $                           | 0.06       |                        | $          | 0.08 |   |
| Earnings per  share-diluted                                                  |       | $                           | 0.06       |                        | $          | 0.08 |   |

** **

8

----

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

The amortized cost and fair value of securities available-for-saleas of June 30, 2007 and December 31, 2006 are summarized as follows:
| ** **                               | ** ** | **June 30, 2007** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Amortized  Cost**         | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                               | ** ** | **(In Thousands)**     | ** ** |
| Obligations of  U.S. government agencies |       | $                           | 29,304     |   | $ | — |   | $ | (380 | ) | $ | 28,924 |   |
| State and  political subdivisions        |       | 32,489                      |       | 32 |   | (319 | ) | 32,202 |   |
| Equity  securities                       |       | 89                          |       | — |   | (1 | ) | 88 |   |
|                                     |       | 61,882                      |       | 32 |   | (700 | ) | 61,214 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| Mortgage related  securities             |       | 133,907                     |       | 229 |   | (1,588 | ) | 132,548 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| **Total securities**                     |       | $                           | 195,789    |   | $ | 261 |   | $ | (2,288 | ) | $ | 193,762 |   |

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

 

9

----

The following tables show gross unrealized losses andfair value of securities, aggregated by security category and length of timethat individual securities have been in a continuous unrealized loss position,at June 30, 2007 and December 31, 2006:
| ** **                               | ** ** | **June 30, 2007**            | ** ** |
|------------------------------------------|------------|----------------------------------------|------------|
| ** **                               | ** ** | **Less than 12 Months** | ** ** | **12 Months or More** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | **Fair  Value**                        | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** |
| ** **                               | ** ** | **(In Thousands)**                | ** ** |
| Obligations of  U.S. government agencies |       | $                                      | 9,273      |   | $ | (33 | ) | $ | 19,651 |   | $ | (347 | ) | $ | 28,924 |   | $ | (380 | ) |
| State and  political subdivisions        |       | 14,067                                 |       | (232 | ) | 2,662 |   | (87 | ) | 16,729 |   | (319 | ) |
| Equity  securities                       |       | 88                                     |       | (1 | ) | — |   | — |   | 88 |   | (1 | ) |
| Mortgage related  securities             |       | 40,137                                 |       | (569 | ) | 49,723 |   | (1,019 | ) | 89,860 |   | (1,588 | ) |
|                                     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| **Total  securities**                    |       | $                                      | 63,565     |   | $ | (835 | ) | $ | 72,036 |   | $ | (1,453 | ) | $ | 135,601 |   | $ | (2,288 | ) |

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

 

10

----

**NOTE 3 — LOANS**

The composition of net loans at June 30, 2007, andDecember 31, 2006 is provided below (in thousands).

|                                      | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                           | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| Real estate  loans:                  |       |                    |       |                        |       |
| One-to four-family                   |       | $                       | 209,355    |                        | $          | 209,463 |   |
| Multi-family and commercial          |       | 54,193                  |       | 41,720                      |       |
| Construction                         |       | 25,860                  |       | 11,568                      |       |
|                                 |       | 289,408                 |       | 262,751                     |       |
|                                 |       |                    |       |                        |       |
| Consumer loans:                      |       |                    |       |                        |       |
| Home equity                          |       | 70,432                  |       | 73,456                      |       |
| Automobile                           |       | 723                     |       | 1,030                       |       |
| Lines of credit                      |       | 9,229                   |       | 10,468                      |       |
| Other                                |       | 153                     |       | 148                         |       |
|                                 |       | 80,537                  |       | 85,102                      |       |
| Commercial loans                     |       | 40,293                  |       | 11,155                      |       |
| **Total Loans**                      |       | 410,238                 |       | 359,008                     |       |
| Unearned loan  origination fees, net |       | (387                    | )          | (442                        | )          |
| Allowance for  loan losses           |       | (3,025                  | )          | (2,949                      | )          |
| **Net Loans**                        |       | $                       | 406,826    |                        | $          | 355,617 |   |

 

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

|                                    | ** ** | **Six Months  Ended  June 30,** | ** ** | **Year  Ended  December 31,** | ** ** |
|------------------------------------|------------|-------------------------------------------|------------|------------------------------------|------------|
| ** **                         | ** ** | **2007**                                  | ** ** | **2006**                           | ** ** | **2006** | ** ** |
| ** **                         | ** ** | **(Unaudited)**                           | ** ** | ** **                         | ** ** |
| Allowance at  beginning of period  |       | $                                         | 2,949      |                               | $          | 8,349 |   | $ | 8,349 |   |
| Provision (Credit) for loan losses |       | 75                                        |       | (383                               | )          | (5,394 | ) |
| Loans charged off                  |       | (1                                        | )          | —                             |       | (8 | ) |
| Recoveries                         |       | 2                                         |       | —                             |       | 2 |   |
| Allowance at end  of period        |       | $                                         | 3,025      |                               | $          | 7,966 |   | $ | 2,949 |   |

** **

11

----

**NOTE 4 — MORTGAGE SERVICINGACTIVITY**

Loans serviced for others are not included in theaccompanying consolidated statements of condition. The unpaid principalbalances of these loans were $123,516,000 and $137,359,000 at June 30, 2007 and2006, respectively, and $130,294,000 at December 31, 2006.

The following summarizes mortgage servicing rights forthe six months ended June 30, 2007 and 2006 and the year endedDecember 31, 2006 (in thousands):

|                                       | ** ** | **Six Months  Ended  June 30,** | ** ** | **Years  Ended  December 31,** | ** ** |
|---------------------------------------|------------|-------------------------------------------|------------|-------------------------------------|------------|
| ** **                            | ** ** | **2007**                                  | ** ** | **2006**                            | ** ** | **2006** | ** ** |
| ** **                            | ** ** | **(Unaudited)**                           | ** ** | ** **                          | ** ** |
| Balance,  beginning                   |       | $                                         | 1,177      |                                | $          | 1,168 |   | $ | 1,168 |   |
| Mortgage servicing rights capitalized |       | 2                                         |       | 112                                 |       | 178 |   |
| Mortgage servicing rights amortized   |       | (64                                       | )          | (59                                 | )          | (169 | ) |
| Balance, ending                       |       | $                                         | 1,115      |                                | $          | 1,221 |   | $ | 1,177 |   |
|                                  |       |                                      |       |                                |       |   |   |

 

For the periods ended June 30, 2007, June 30, 2006 andDecember 31, 2006, the fair value of the mortgage servicing rights (“MSRs”)was $1,390,000 (unaudited), $1,515,000 (unaudited) and $1,623,000,respectively. The fair value of the MSRs for these periods was determined usinga third-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 in the model - is the required rate of return the market wouldexpect for an asset with similar risk. Both assumptions can, and generallywill, change quarterly valuations as market conditions and interest rateschange.

**NOTE 5 —DEPOSITS**

Deposits and their respective weighted averageinterest rate at June 30, 2007 and December 31, 2006 consist of thefollowing (dollars in thousands):
| ** **                            | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **Weighted**                | ** ** | ** **                      | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Average**                 | ** ** | ** **                      | ** ** | **Average** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Rate**                    | ** ** | **Amount**                      | ** ** | **Rate** | ** ** | **Amount** | ** ** |
| ** **                            | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Non-interest  bearing demand accounts |       | —                      | %          | $                               | 44,946     |   | — | % | $ | 41,429 |   |
| NOW accounts                          |       | 1.76                        |       | 41,536                          |       | 1.80 |   | 50,717 |   |
| Money market  accounts                |       | 4.05                        |       | 41,916                          |       | 3.92 |   | 29,770 |   |
| Savings and club  accounts            |       | 0.74                        |       | 60,356                          |       | 0.74 |   | 64,338 |   |
| Certificates of  deposit              |       | 4.65                        |       | 409,149                         |       | 4.43 |   | 410,280 |   |
|                                  |       | 3.67                        | %          | $                               | 597,903    |   | 3.47 | % | $ | 596,534 |   |

** **

12

----

**NOTE 6 — FEDERAL HOME LOAN BANKADVANCES**

Pursuant to collateral agreements with the FederalHome Loan Bank of Pittsburgh (the “FHLB”), advances are secured by qualifyingfirst mortgage loans, qualifying fixed-income securities, FHLB stock and aninterest-bearing demand deposit account with the FHLB. As of June 30, 2007, theBank has $34,500,000 in qualifying collateral pledged against its advances.

| Maturity Date | ** ** | **Interest Rate** | ** ** | **Strike Rate** | ** ** | **Amount**              | ** ** |
|--------------------|------------|------------------------|------------|----------------------|------------|-------------------------|------------|
| ** **         | ** ** | ** **             | ** ** | ** **           | ** ** | **(in thousands)** | ** ** |
| August 2011        |       | 4.89                   | %          | 7.50                 | %          | $                       | 20,000     |   |
| August 2011        |       | 4.87                   | %          | 7.50                 | %          | 10,000                  |       |
|               |       |                   |       |                 |       | $                       | 30,000     |   |

 

If the Comparative Rate Index (three-month LIBOR) isgreater than or equal to the Strike Rate fifteen calendar days prior to thenext possible conversion date, which occurs on a quarterly basis throughmaturity, the FHLB has the option to convert the advances to an adjustable-rateequal to three-month LIBOR (5.36% at June 30, 2007) plus .2175%.  Notification of such conversion by the FHLBmust be ten calendar days prior to conversion date. The Bank has the option torepay these advances at each conversion date without penalty. Accordingly, thecontractual maturities above may differ from actual maturities.

The Bank has a maximum borrowing capacity with theFHLB of approximately $426.4 million at March 31, 2007, the latest dateavailable.

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

Comprehensive income (loss) for the three and sixmonths ended June 30, 2007 and 2006 is as follows (in thousands):
| ** **                                                                                                                                                           | ** ** | **Three Months** | ** ** | **Six Months** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                                                                                                                                           | ** ** | **Ended**             | ** ** | **Ended**           | ** ** |
| ** **                                                                                                                                                           | ** ** | **June 30,**     | ** ** | **June 30,**   | ** ** |
| ** **                                                                                                                                                           | ** ** | **2007**              | ** ** | **2006**            | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income                                                                                                                                                           |       | $                     | 852        |                | $          | 331 |   | $ | 1,145 |   | $ | 599 |   |
| Other  comprehensive loss:                                                                                                                                           |       |                  |       |                |       |   |   |   |   |
| Unrealized holding losses arising during the period,  net of tax benefit (three and six months 6/30/07 and 6/30/06 $(479), $(232), $(445)  and $(718), respectively) |       | (840                  | )          | (864                | )          | (371 | ) | (1,394 | ) |
| Less: Reclassification adjustment for losses  included in net loss, net of taxes (three and six months 6/30/07 and 6/30/06  $0, $0, $0 and $(6), respectively)       |       | —                |       | —              |       | — |   | (12 | ) |
| Amortization of pension actuarial loss, net of taxes                                                                                                                 |       | 3                     |       | —              |       | 3 |   | — |   |
|                                                                                                                                                                 |       |                  |       |                |       |   |   |   |   |
| Other comprehensive loss                                                                                                                                             |       | (837                  | )          | (864                | )          | (368 | ) | (1,382 | ) |
|                                                                                                                                                                 |       |                  |       |                |       |   |   |   |   |
| Comprehensive  income (loss)                                                                                                                                         |       | $                     | 15         |                | $          | (533 | ) | $ | 777 |   | $ | (783 | ) |

** **

13

----

**NOTE 8 — RECENT ACCOUNTINGPRONOUNCEMENTS**

In June 2006, FASB issued Financial Interpretation No.48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an interpretationof SFAS Statement No. 109. FIN 48 provides guidance on financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return. According to the Interpretation, a tax position is recognized ifit is more likely than not that the tax position will be sustained uponexamination, including resolution of any related appeals or litigationprocesses, based on the technical merits of the position. If the tax positionmeets more-likely-than-not recognition threshold, the position is measured todetermine the amount of benefit to recognize and should be measured at thelargest amount of benefit that is greater than 50% likely of being realizedupon ultimate settlement. FIN 48 also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure and transition. The provisions of FIN 48 are effective for fiscalyears beginning after December 15, 2006. Effective January 1, 2007, the Company adopted FIN 48.  As of January 1, 2007, the Company had nomaterial unrecognized tax benefits or accrued interest and penalties.  The Company’s policy is to account forinterest as a component of interest expense and penalties as a component ofother expense.  Federal and state taxyears 2003 through 2006 were open for examination as of January 1, 2007.

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurement.  This statementdefines fair value, establishes a framework for measuring fair value in generallyaccepted accounting principles and expands disclosures about fair valuemeasurements.  This statement appliesunder other accounting pronouncements that require or permit fair valuemeasurements, the Board having previously concluded in those accountingpronouncements that fair value is the relevant measurement attribute.  Accordingly, this statement does not requireany new fair value measurements.

SFAS No. 157 is effective for fiscal years beginningafter November 15, 2007.  Earlieradoption is encouraged, provided that the reporting entity has not yet issuedfinancial statements for that fiscal year, including financial statements foran interim period within that fiscal year. The Company is evaluating this statement and has not yet determined theimpact on its results of operations or financial position, if any.   The Company has determined that it will notearly adopt this statement.

The FASB has recently approved the Emerging IssuesTask Force (“EITF”) Issue No. 06-4 “Accounting for Deferred Compensation andPostretirement Benefit Aspects of Endorsement Split-Dollar Life InsuranceArrangements.”  In this issue, the EITFconcluded that an endorsement split dollar life insurance policy does noteffectively settle an employer’s obligation to provide the post retirementbenefit 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 to all post retirement endorsementsplit dollar arrangements.  This will notimpact split dollar plans that only provide pre-retirement death benefits.

The accrual for the liability would be calculated inone of two ways:

·                  theactuarial present value of the future death benefit or

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

Compliance with this EITF must be applied to fiscalyears beginning after December 15, 2007 (January 1, 2008 for calendar yearentities).  It can be made through acumulative—effect adjustment to retained earnings in the year of adoption or asa change in accounting principles through retrospective application to allprior periods.  The Company has notdetermined if this Statement will have a material impact on its consolidatedfinancial statements upon adoption.

At its September 2006 meeting, the EITF reached afinal consensus on Issue 06-05, “**Accounting for Purchases of Life Insurance —Determining the Amount That Could be Realized in Accordance with FASB TechnicalBulletin No. 85-4***.*”Issue 06-05 concludes thatin determining the amount that could be realized under an insurance contractaccounted for under FASB Technical Bulletin No. 85-4, “Accounting forPurchases of Life Insurance,” the policyholder should (1) consider anyadditional amounts included in the contractual terms of the policy; (2) assumethe surrender value on a individual-life by individual-life policybasis; and (3) not discount the cash surrender value component of the amountthat could be realized when contractual restrictions on the ability tosurrender a policy exist. Issue 06-05 should be adopted through either(1) a change in accounting principle through a cumulative-effectadjustment to retained earnings as of the beginning of the year of adoption or(2) a change in accounting principle through retrospective application to allprior periods. Issue 06-05 is effective for fiscal years beginning afterDecember 15, 2006. The application of Issue 06-05 did not have a materialeffect on the Company’s financial position or results of operations.

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 159).” SFAS 159 permits entities tochoose to measure many financial instruments and certain other items at fairvalue and amends SFAS 115 to, among other things, require certain disclosures

14

----

for amounts for which the fair value option isapplied.  Additionally, this Statementprovides that an entity may reclassify held-to-maturity and available-for-salesecurities to the trading account when the fair value option is elected forsuch securities, without calling into question the intent to hold othersecurities to maturity in the future. This Statement is effective as of the beginning of an entity’s firstfiscal year that begins after November 15, 2007. Early adoption is permitted asof the beginning of a fiscal year that begins on or before November 15, 2007,provided the entity also elects to apply the provisions of SFAS 157.  The Company is reviewing the impact of SFASNo. 159 and the impact, if any, on its consolidated financial statements.   The Company has determined that it will notearly adopt this statement.

**NOTE 9— LEGAL PROCEEDINGS**

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

On April 28, 2006, Gregory S. Cipa, the formerPresident and Chief Executive Officer of Fox Chase Bank, filed a complaintagainst Fox Chase Bank in the Civil Division of the Court of Common Pleas ofBucks County, Pennsylvania.  In May 2006,Fox Chase Bank moved the case to federal court, answered the complaint andfiled a counterclaim. In November 2006, Mr. Cipa amended his complaint,and now alleges Fox Chase Bank breached its contract with him and violated itsstate statutory obligations by failing to pay Mr. Cipa certain employmentbenefits which he claims to have earned while serving as the President andChief Executive Officer of Fox Chase Bank. Mr. Cipa seeks monetary damages in excess of $900,000 and thepayment of litigation costs.  The partiescompleted discovery and filed motions for summary judgment that have not yetbeen ruled upon.  Fox Chase Bank believesthis action is without merit and intends to vigorously pursue its defenses.

**Item 2.   Management’s Discussion andAnalysis of Financial Condition and Results of Operation**

**Forward-Looking Statements**

This quarterly report contains forward-lookingstatements that are based on assumptions and may describe future plans, strategiesand expectations of the Company. These forward-looking statements are generallyidentified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,”“project” or similar expressions. The Company’s ability to predict results or theactual effect of future plans or strategies is inherently uncertain. Factorswhich could have a material adverse effect on the operations of the Company andits subsidiary include, but are not limited to, changes in interest rates,national and regional economic conditions, legislative and regulatory changes,monetary and fiscal policies of the U.S. government, including policies of theU.S. Treasury and the Federal Reserve Board, the quality and composition of theloan or investment portfolios, demand for loan products, deposit flows,competition, demand for financial services in the Company’s market area,changes in real estate market values in the Company’s market area, changes inrelevant accounting principles and guidelines and the inability of third partyservice providers to perform their functions. Additional factors that may affect our results are discussed in thesection titled “Risk Factors” in the Company’s Annual Report on Form 10-K,included in the section titled “Risk Factors”, filed with the Securities andExchange Commission on March 29, 2007.

These risks and uncertainties should be considered inevaluating forward-looking statements and undue reliance should not be placedon such statements. Except as required by applicable law or regulation, theCompany does not undertake, and specifically disclaims any obligation, torelease publicly the result of any revisions that may be made to anyforward-looking statements to reflect events or circumstances after the date ofthe statements or to reflect the occurrence of anticipated or unanticipatedevents.

**Critical Accounting Policies**

We consider accounting policies involving significantjudgments and assumptions by management that have, or could have, a materialimpact on the carrying value of certain assets or on income to be criticalaccounting policies. We consider the following to be our critical accountingpolicies: allowance for loan losses, deferred income taxes, andother-than-temporary impairment of securities.

***Allowance for Loan Losses.***   Theallowance for loan losses is maintained at a level representing management’sbest estimate of known and inherent losses in the loan portfolio, based onmanagement’s evaluation of the portfolio’s collectibility. The allowance isestablished through the provision for loan losses, which is charged againstincome. Determining the amount of the allowance for loan losses necessarilyinvolves a high degree of judgment. Among the material estimates required toestablish the allowance are: loss exposure at default; the amount and timing offuture cash flows on impacted loans; value of collateral; and determination ofloss factors to be applied to the various elements of the portfolio. All ofthese estimates are susceptible to significant change. Management reviews thelevel of the allowance on a quarterly basis and establishes the provision forloan losses based upon an evaluation of the portfolio, past loss experience,current economic conditions and other relevant factors related to thecollectibility 

15

----

of the loanportfolio. Although we believe that we use the best information available toestablish the allowance for loan losses, future adjustments to the allowancemay be necessary if economic conditions differ substantially from theassumptions used in making the evaluation. In addition, the Office of ThriftSupervision, as an integral part of its examination process, periodicallyreviews our allowance for loan losses. Such agency may require us to recognizeadjustments to the allowance based on its judgments about information availableto it at the time of its examination. A large loss could deplete the allowanceand require increased provisions to replenish the allowance, which wouldnegatively affect earnings.

***Deferred Income Taxes.***   We usethe asset 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 is established.Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. We exercise significantjudgment in evaluating the amount and timing of recognition of the resultingtax liabilities and assets. These judgments require us to make projections offuture taxable income. The judgments and estimates we make in determining ourdeferred tax assets, which are inherently subjective, are reviewed on acontinual basis as regulatory and business factors change. Any reduction inestimated future taxable income may require us to record a valuation allowanceagainst our deferred tax assets. A valuation allowance would result in additionalincome tax expense in the period, which would negatively affect earnings.

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

**Comparison of Financial Condition at June 30, 2007 andDecember 31, 2006**

Total assets increased $3.5 million, or 0.5%, to$760.5 million at June 30, 2007, compared to $757.0 million at December 31,2006.  The modest increase in assets wasprimarily due to the $51.2 million increase in loans, which was driven by a$55.9 million increase in commercial, commercial real estate and constructionloans.  In 2006, the Bank hired a highlyexperienced team of nineteen commercial lending, credit and risk management professionalsto accelerate these types of lending activities.  Loan growth was funded primarily through adecrease of $11.6 million in cash and cash equivalents, a decrease of $25.8million in mortgage related securities due to normal principal payments and adecrease of $8.9 million of investment securities available-for-sale which werecalled or matured.  The decrease insecurities for the six months ended June 30, 2007 is consistent with the Bank’sstrategy of utilizing funds from the liquidation of lower yieldingmortgage-backed and investment securities to fund loan growth.

Deposits increased $1.4 million from $596.5 million atDecember 31, 2006 to $597.9 million at June 30, 2007.  The modest increase was primarily a result ofincreased money market accounts of $12.1 million and non-interest bearingdemand accounts of $3.5 million, offset by decreases in NOW accounts of $9.2million, savings and club accounts of $4.0 million and certificates of depositof $1.1 million.  The increase in moneymarket accounts was a result of a successful promotion of the Bank’s moneymarket tiered rate structure, which also caused some NOW accounts to transferto money market accounts.  The increasein non-interest bearing demand accounts was a result of continued efforts toincrease commercial deposit relationships. The Bank is located in a highly competitive deposit market which,combined with the flat yield curve, has created a difficult climate forgathering deposits cost effectively.

Stockholders’ equity increased $1.1 million to $126.8million at June 30, 2007 compared to $125.6 million at December 31, 2006primarily due to net income of $1.1 million.

**Comparison of Operating Results for the Three and Six MonthsEnded June 30, 2007 and 2006**

***General.  ***Net income increased $521,000, or 157.4%, for the three months endedJune 30, 2007 compared to the three months ended June 30, 2006.  The increase in net income was due to anincrease in net interest income of $565,000, an increase in noninterest incomeof $671,000 and a decrease in noninterest expense of $138,000, which was offsetby an increase in the 

16

----

provision for loan losses of $458,000.  The increase in noninterest income of$671,000 includes a gain of $874,000 (after tax $577,000) related to the saleof the Bank’s operations center.

Net income increased $546,000, or 91.2%, for the sixmonths ended June 30, 2007 compared to the six months ended June 30, 2006. Theincrease in net  income was due to anincrease in net interest income of $884,000 and an increase in noninterestincome of $679,000, which was offset by an increase in the provision for loanlosses of $458,000 and an increase in noninterest expense of $133,000. Theincrease in noninterest income of $679,000 includes the previously discussedgain of $874,000 (after tax $577,000).

***Net Interest Income*****.  **Net interest income increased $565,000, or 14.3%, to $4.5 million forthe three months ended June 30, 2007 compared the same period in 2006 primarilydue to an increase in average earning assets of $7.9 million, an increase inthe average yield on earning assets from 5.04% to 5.58% as well as a decreasein the average balance of interest-bearing liabilities.  These changes were offset by an increase inthe average rate on interest-bearing liabilities from 3.18% to 3.85%. Theincrease in the average balance of earning assets was primarily due toincreases in the Bank’s average loan portfolio of $33.5 million and an increasein the volume of interest-earning demand deposits generated by proceedsreceived in the Company’s initial public offering, offset by decreases in theaverage balance of the mortgage-backed and investment securities portfolios.The increase in the average yield on earning assets was primarily due to thegeneral increase in market interest rates from 2004 through 2006 as yield onloans increased from 5.87% to 6.16%, the yield on mortgage-related securitiesincreased from 4.32% to 4.87% and yield on interest-earning demand depositsincreased from 4.93% to 5.20%.  Thedecrease in the average balance of interest bearing liabilities was primarilydue to decreases in deposit accounts. The increase in the average rate on interest-bearing liabilities wasprimarily due to the cost of certificates of deposit, which increased 66 basispoints from 3.84% to 4.50% and a 100 basis point increase in NOW and moneymarket accounts from 1.48% to 2.48%.

Net interest income increased $884,000, or 11.1%, to$8.9 million for the six months ended June 30, 2007 compared to the same periodin 2006 primarily due to an increase in the average yield on earning assetsfrom 4.94% to 5.51% and a decrease in the average balance of interest-bearingliabilities.  These changes were offsetby a decrease in the average balance of interest-earning assets of $4.7 millionand an increase in the average yield on interest-bearing liabilities from 3.09%to 3.77%. The increase in the average yield on earnings assets was primarilydue to the general increase in market interest rates from 2004 through 2006 asthe yield on loans increased from 5.86% to 6.06%, the yield on mortgage-relatedsecurities increased from 4.13% to 4.82% and yield on interest-earning demanddeposits increased from 4.55% to 5.16%. The decrease in the average balance of earning assets was primarily dueto decreases in the average balance of the mortgage-backed and investmentsecurities portfolios, offset by increases in the Bank’s average loan portfolioof $18.3 million and an increase in the volume of interest-earning demanddeposits generated by proceeds received in the Company’s initial publicoffering.  The decrease in the averagebalance of interest-bearing liabilities was primarily due to decreases indeposit accounts.  The increase in theaverage rate on interest-bearing liabilities was primarily due to the cost ofcertificates of deposit, which increased 69 basis points from 3.75% to 4.44%and a 84 basis point increase in NOW and money market accounts from 1.45% to2.29%.

The following table summarizes average balances andaverage yields and costs of interest-earning assets and interest-bearingliabilities for the three and six months ended June 30, 2007 and 2006. Yieldsare not presented on a tax-equivalent basis. Any adjustments necessary topresent yields on a tax-equivalent basis are insignificant. (See alsononperforming loan table).

 

17

----

| ** **                                                               | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                               | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                                               | ** ** | **Average  Balance**                                | ** ** | **Interest and  Dividends**                  | ** ** | **Yield/  Cost** | ** ** | **Average  Balance** | ** ** | **Interest and  Dividends** | ** ** | **Yield/  Cost** | ** ** | **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                                         |       | $                                                   | 114,954    |                                              | $          | 1,494 |   | 5.20 | % | $ | 21,910 |   | $ | 270 |   | 4.93 | % | $ | 114,379 |   | $ | 2,951 |   | 5.16 | % | $ | 23,420 |   | $ | 533 |   | 4.55 | % |
| Mortgage related securities                                              |       | 140,471                                             |       | 1,712                                             |       | 4.87 | % | 199,026 |   | 2,148 |   | 4.32 | % | 146,510 |   | 3,530 |   | 4.82 | % | 195,249 |   | 4,034 |   | 4.13 | % |
| Taxable securities                                                       |       | 42,884                                              |       | 517                                               |       | 4.82 | % | 113,087 |   | 1,108 |   | 3.92 | % | 45,171 |   | 1,036 |   | 4.59 | % | 120,062 |   | 2,211 |   | 3.68 | % |
| Nontaxable securities                                                    |       | 28,400                                              |       | 259                                               |       | 3.65 | % | 23,619 |   | 239 |   | 4.05 | % | 26,272 |   | 504 |   | 3.84 | % | 22,009 |   | 445 |   | 4.04 | % |
| Loans (1):                                                               |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential loans                                                        |       | 206,676                                             |       | 2,943                                             |       | 5.70 | % | 220,453 |   | 3,081 |   | 5.59 | % | 207,449 |   | 5,864 |   | 5.65 | % | 223,499 |   | 6,207 |   | 5.55 | % |
| Commercial and construction loans                                        |       | 103,245                                             |       | 1,924                                             |       | 7.37 | % | 53,286 |   | 991 |   | 7.36 | % | 92,224 |   | 3,343 |   | 7.21 | % | 57,513 |   | 2,158 |   | 7.46 | % |
| Consumer loans                                                           |       | 81,016                                              |       | 1,177                                             |       | 5.81 | % | 83,694 |   | 1,171 |   | 5.60 | % | 82,438 |   | 2,385 |   | 5.79 | % | 82,811 |   | 2,303 |   | 5.56 | % |
| Total loans                                                              |       | 390,937                                             |       | 6,044                                             |       | 6.16 | % | 357,433 |   | 5,243 |   | 5.87 | % | 382,111 |   | 11,592 |   | 6.06 | % | 363,823 |   | 10,668 |   | 5.86 | % |
| Allowance for loan losses                                                |       | (2,976                                              | )          |                                              |       |   |   | (8,345 | ) |   |   |   |   | (2,973 | ) |   |   |   |   | (8,347 | ) |   |   |   |   |
| Net loans                                                                |       | 387,961                                             |       |                                              |       |   |   | 349,088 |   |   |   |   |   | 379,138 |   |   |   |   |   | 355,476 |   |   |   |   |   |
| Total interest-earning assets                                            |       | 714,670                                             |       | 10,026                                            |       | 5.58 | % | 706,730 |   | 9,008 |   | 5.04 | % | 711,470 |   | 19,613 |   | 5.51 | % | 716,216 |   | 17,891 |   | 4.94 | % |
| Noninterest-earning assets                                               |       | 36,126                                              |       |                                              |       |   |   | 37,949 |   |   |   |   |   | 36,129 |   |   |   |   |   | 37,672 |   |   |   |   |   |
| Total assets                                                             |       | $                                                   | 750,796    |                                              |       |   |   |   | $ | 744,679 |   |   |   |   |   | $ | 747,599 |   |   |   |   |   | $ | 753,888 |   |   |   |   |   |
|                                                                     |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and equity:                                                  |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                            |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW and money market deposit accounts                                    |       | $                                              | 77,971     |                                              | 481        |   | 2.48 | % | $  | 96,764 |   | 357 |   | 1.48 | % | $  | 77,041 |   | 876 |   | 2.29 | % | $  | 102,722 |   | 738 |   | 1.45 | % |
| Savings and club accounts                                                |       | 60,934                                              |       | 112                                               |       | 0.73 | % | 74,903 |   | 154 |   | 0.82 | % | 62,038 |   | 226 |   | 0.73 | % | 76,368 |   | 288 |   | 0.76 | % |
| Certificates of deposit                                                  |       | 405,425                                             |       | 4,550                                             |       | 4.50 | % | 436,717 |   | 4,182 |   | 3.84 | % | 404,953 |   | 8,911 |   | 4.44 | % | 438,675 |   | 8,152 |   | 3.75 | % |
| Total interest-bearing deposits                                          |       | 544,330                                             |       | 5,143                                             |       | 3.79 | % | 608,384 |   | 4,693 |   | 3.09 | % | 544,032 |   | 10,013 |   | 3.71 | % | 617,765 |   | 9,178 |   | 3.00 | % |
| FHLB advances                                                            |       | 30,000                                              |       | 370                                               |       | 4.88 | % | 30,000 |   | 367 |   | 4.84 | % | 30,000 |   | 736 |   | 4.88 | % | 30,000 |   | 733 |   | 4.86 | % |
| Total interest-bearing liabilities                                       |       | 574,330                                             |       | 5,513                                             |       | 3.85 | % | 638,384 |   | 5,060 |   | 3.18 | % | 574,032 |   | 10,749 |   | 3.77 | % | 647,765 |   | 9,911 |   | 3.09 | % |
| Noninterest-bearing deposits                                             |       | 44,992                                              |       |                                              |       |   |   | 34,800 |   |   |   |   |   | 42,444 |   |   |   |   |   | 34,090 |   |   |   |   |   |
| Other noninterest-bearing liabilities                                    |       | 4,967                                               |       |                                              |       |   |   | 8,099 |   |   |   |   |   | 5,331 |   |   |   |   |   | 8,316 |   |   |   |   |   |
| Total liabilities                                                        |       | 624,289                                             |       |                                              |       |   |   | 681,283 |   |   |   |   |   | 621,807 |   |   |   |   |   | 690,171 |   |   |   |   |   |
|                                                                     |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retained Earnings                                                        |       | 127,220                                             |       |                                              |       |   |   | 66,169 |   |   |   |   |   | 126,650 |   |   |   |   |   | 66,169 |   |   |   |   |   |
| Accumulated comprehensive loss                                           |       | (713                                                | )          |                                              |       |   |   | (2,773 | ) |   |   |   |   | (858 | ) |   |   |   |   | (2,452 | ) |   |   |   |   |
| Total equity                                                             |       | $                                                   | 126,507    |                                              |       |   |   |   | $ | 63,396 |   |   |   |   |   | $ | 125,792 |   |   |   |   |   | $ | 63,717 |   |   |   |   |   |
| Total liabilities and equity                                             |       | $                                                   | 750,796    |                                              |       |   |   |   | $ | 744,679 |   |   |   |   |   | $ | 747,599 |   |   |   |   |   | $ | 753,888 |   |   |   |   |   |
| Net interest income                                                      |       |                                                |       | $                                                 | 4,513      |   |   |   |   |   | $ | 3,948 |   |   |   |   |   | $ | 8,864 |   |   |   |   |   | $ | 7,980 |   |   |   |
| Interest rate spread                                                     |       |                                                |       |                                              |       | 1.73 | % |   |   |   |   | 1.86 | % |   |   |   |   | 1.74 | % |   |   |   |   | 1.85 | % |
| Net interest margin                                                      |       |                                                |       |                                              |       | 2.50 | % |   |   |   |   | 2.21 | % |   |   |   |   | 2.45 | % |   |   |   |   | 2.20 | % |
| Average  interest-earning assets to average interest-bearing liabilities |       |                                                |       |                                              |       | 124.44 | % |   |   |   |   | 110.72 | % |   |   |   |   | 123.94 | % |   |   |   |   | 110.57 | % |

----

(1)                Nonperforming loans are included inaverage balance computations

 

18

----

***Rate/VolumeAnalysis.***   The following table sets forth theeffects of changing rates and volumes on our net interest income.  The rate column shows the effectsattributable to changes in rate (changes in rate multiplied by prior volume).  The volume column shows the effectsattributable to changes in volume (changes in volume multiplied by priorrate).  The net column represents the sumof the columns.  For purposes of thistable, changes attributable to changes in both rate and volume that cannot besegregated have been allocated proportionally based on the changes due to rateand the changes due to volume.
| ** **                          | ** ** | **Three Months Ended  June 30, 2007  Compared to  Three Months Ended June 30, 2006** | ** ** | **Six Months Ended  June 30, 2007  Compared to  Six Months Ended June 30, 2006** | ** ** |
|-------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                          | ** ** | **Increase (Decrease)  Due to**                                                                                              | ** ** | ** **                                                                                                                         | ** ** | **Increase (Decrease)  Due to** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Volume**                                                                                                                             | ** ** | **Rate**                                                                                                                           | ** ** | **Net** | ** ** | **Volume** | ** ** | **Rate** | ** ** | **Net** | ** ** |
|                                |       |                                                                                                                                   |       |                                                                                                                               |       |   |   |   |   |   |   |   |   |
| Interest and dividend  income:      |       |                                                                                                                                   |       |                                                                                                                               |       |   |   |   |   |   |   |   |   |
| Interest-earning  demand deposits   |       | $                                                                                                                                      | 1,146      |                                                                                                                               | $          | 78 |   | $ | 1,224 |   | $ | 2,070 |   | $ | 348 |   | $ | 2,418 |   |
| Mortgage related  securities        |       | (632                                                                                                                                   | )          | 196                                                                                                                                |       | (436 | ) | (1,007 | ) | 503 |   | (504 | ) |
| Taxable  securities                 |       | (688                                                                                                                                   | )          | 97                                                                                                                                 |       | (591 | ) | (1,379 | ) | 204 |   | (1,175 | ) |
| Nontaxable  securities              |       | 48                                                                                                                                     |       | (28                                                                                                                                | )          | 20 |   | 86 |   | (27 | ) | 59 |   |
| Loans:                              |       |                                                                                                                                   |       |                                                                                                                               |       |   |   |   |   |   |   |   |   |
| Residential  loans                  |       | (193                                                                                                                                   | )          | 55                                                                                                                                 |       | (138 | ) | (445 | ) | 102 |   | (343 | ) |
| Commercial and  construction loans  |       | 930                                                                                                                                    |       | 3                                                                                                                                  |       | 933 |   | 1,301 |   | (116 | ) | 1,185 |   |
| Consumer loans                      |       | (38                                                                                                                                    | )          | 44                                                                                                                                 |       | 6 |   | (10 | ) | 92 |   | 82 |   |
| Total loans                         |       | 699                                                                                                                                    |       | 102                                                                                                                                |       | 801 |   | 846 |   | 78 |   | 924 |   |
| Total  interest-earning assets      |       | 573                                                                                                                                    |       | 445                                                                                                                                |       | 1,018 |   | 616 |   | 1,106 |   | 1,722 |   |
|                                |       |                                                                                                                                   |       |                                                                                                                               |       |   |   |   |   |   |   |   |   |
| Interest expense:                   |       |                                                                                                                                   |       |                                                                                                                               |       |   |   |   |   |   |   |   |   |
| NOW and money  market deposits      |       | (70                                                                                                                                    | )          | 194                                                                                                                                |       | 124 |   | (185 | ) | 323 |   | 138 |   |
| Savings accounts                    |       | (28                                                                                                                                    | )          | (14                                                                                                                                | )          | (42 | ) | (54 | ) | (8 | ) | (62 | ) |
| Certificates of  deposit            |       | (300                                                                                                                                   | )          | 668                                                                                                                                |       | 368 |   | (627 | ) | 1,386 |   | 759 |   |
| Total  interest-bearing deposits    |       | (398                                                                                                                                   | )          | 848                                                                                                                                |       | 450 |   | (866 | ) | 1,701 |   | 835 |   |
|                                |       |                                                                                                                                   |       |                                                                                                                               |       |   |   |   |   |   |   |   |   |
| FHLB advances                       |       | —                                                                                                                                 |       | 3                                                                                                                                  |       | 3 |   | — |   | 3 |   | 3 |   |
| Total  interest-bearing liabilities |       | (398                                                                                                                                   | )          | 851                                                                                                                                |       | 453 |   | (866 | ) | 1,704 |   | 838 |   |
| Net change in net interest income   |       | $                                                                                                                                      | 971        |                                                                                                                               | $          | (406 | ) | $ | 565 |   | $ | 1,482 |   | $ | (598 | ) | $ | 884 |   |

 

19

----

***Provision for LoanLosses.***   The provision forloan losses was $75,000 for the three and six month period ending June 30,2007, reflecting continued growth in the loan portfolio, especially incommercial real estate, commercial and construction loans, which carry a higherrisk of default, offset by a decrease in nonperforming loans.  The Company recorded a credit to theprovision for loan losses of $383,000 for the three and six months ended June30, 2006, which was a result of: (1) a reduction in criticized and classifiedassets; (2) a decrease in the size of the loan portfolio; and (3) the absenceof charge-offs in the portfolio during that period.

The following table provides information with respectto the Bank’s nonperforming assets at the dates indicated.   There were no troubled debt restructuringsas of the dates presented below.  
| ** **                                   | ** ** | **At June 30,  2007**      | ** ** | **At December 31,  2006** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                   | ** ** | **(Dollars in thousands)** | ** ** |
| Nonaccrual  loans:                           |       |                                 |       |                                |       |
| One- to four-family                          |       | $                                    | 115        |                                | $          | 284 |   |
| Consumer                                     |       | 126                                  |       | —                              |       |
| Multi-family and commercial real estate      |       | —                               |       | —                              |       |
| Total                                        |       | 241                                  |       | 284                                 |       |
| Accruing loans  past due 90 days or more:    |       |                                 |       |                                |       |
| Multi-family and commercial real estate      |       | —                               |       | 2,941                               |       |
| Total                                        |       | —                               |       | 2,941                               |       |
| Total of nonaccrual loans and accruing loans |       |                                 |       |                                |       |
| 90 days or more past due                     |       | $                                    | 241        |                                | $          | 3,225 |   |
| Real estate  owned                           |       | —                               |       | —                              |       |
| Total nonperforming assets                   |       | $                                    | 241        |                                | $          | 3,225 |   |
| Total  nonperforming loans to total loans    |       | 0.06                                 | %          | 0.90                                | %          |
| Total  nonperforming loans to total assets   |       | 0.03                                 |       | 0.43                                |       |
| Total nonperforming  assets to total assets  |       | 0.03                                 |       | 0.43                                |       |

 

Nonperforming assets totaled $241,000, or 0.03% of totalassets, at June 30, 2007 compared to $3.2 million, or 0.43% of total assets, atDecember 31, 2006.  During the threemonths ended December 31, 2006, a loan totaling $2.9 million went past itscontractual maturity and was included in the accruing loans past due 90 days ormore category of nonperforming assets. The Bank extended the maturity on this loan in the first quarter of 2007and therefore removed it from the total nonperforming assets, accounting for amajority of the $3.0 million decrease in nonperforming assets.  This loan remains current on all requiredpayments under the extension agreement and is secured by real estate.  Additionally, the property is under anagreement of sale and expected to be sold in 2007.

***NoninterestIncome*****.  **Thefollowing table summarizes noninterest income for the three and six monthsended June 30, 2007 and 2006.  
| ** **                           | ** ** | **Three Months  Ended June 30,** | ** ** | ** ** | ** ** | **Six Months  Ended June 30,** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|-------------------------------------------------|------------|------------|------------|-----------------------------------------------|------------|------------|------------|
| ** **                           | ** ** | **2007**                                        | ** ** | **2006**   | ** ** | **% Change**                             | ** ** | **2007**   | ** ** | **2006** | ** ** | **% Change** | ** ** |
| ** **                           | ** ** | **(Dollars in thousands)**            | ** ** |
| Service charges                      |       | $                                               | 208        |       | $          | 307                                           |       | (32.3      | )%         | $ | 424 |   | $ | 528 |   | (19.7 | )% |
| Net gain (loss)  on sale of:         |       |                                            |       |       |       |                                          |       |       |       |   |   |   |   |
| Loans                                |       | 16                                              |       | 46         |       | (65.2                                         | )          | 73         |       | 34 |   | 114.7 |   |
| Assets acquired through foreclosure  |       | —                                          |       | —     |       | —                                        |       | —     |       | 85 |   | (100.0 | ) |
| Fixed assets                         |       | 874                                             |       | —     |       | 100.0                                         |       | 874        |       | (1 | ) | n/m | * |
| Securities                           |       | —                                          |       | —     |       | —                                        |       | —     |       | (18 | ) | (100.0 | ) |
| Income on  bank-owned life insurance |       | 109                                             |       | 106        |       | 2.8                                           |       | 216        |       | 210 |   | 2.9 |   |
| Other                                |       | 51                                              |       | 128        |       | (60.2                                         | )          | 107        |       | 177 |   | (39.6 | ) |
|                                 |       |                                            |       |       |       |                                          |       |       |       |   |   |   |   |
| Total                                |       | $                                               | 1,258      |       | $          | 587                                           |       | 114.3      |       | $ | 1,694 |   | $ | 1,015 |   | 66.9 |   |

----

* Notmeaningful

20

----

 

Noninterest income increased $671,000, or 114.3%, and$679,000, or 66.9%, during the three and six months ended June 30, 2007,respectively, compared to the same periods in 2006.  As previously discussed in the “***General”***section ofthe Management’s Discussion and Analysis section, the increase in both thethree and six months ended June 30, 2007 was primarily a result of the Bankrecognizing a pre-tax gain of $874,000 on the sale of its operations center inthe second quarter of 2007.

For the six months ended June 30, 2007, the Bank alsorecognized an increase in gain on sale of loans of $39,000.  These gains were offset primarily by areduction in service charges and other fee income of $104,000, as the Bankmodified its fee policies related to customer deposit accounts, a decrease inother non-interest income of $70,000 and a decrease in gain on sale of an assetacquired through foreclosure of $85,000 in 2006 which did not occur in 2007.

For the three months ended June 30, 2007, the gain onsale of its operations center was offset primarily by a reduction in servicecharges and other fee income of $99,000, as the Bank modified its fee policiesrelated to customer deposit accounts, a decrease in other non-interest incomeof $77,000 and a decrease in gain on sale of loans of $30,000.  During the second quarter of 2007, the Bankbegan holding longer-term newly originated residential loans in its portfoliorather than selling such loans as it had done previously.

***Noninterest Expense*.**The following table summarizes noninterest expense for the three and six monthsended June 30, 2007 and 2006.
| ** **                                 | ** ** | **Three Months  Ended June 30,** | ** ** | ** ** | ** ** | **Six Months  Ended June 30,** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|-------------------------------------------------|------------|------------|------------|-----------------------------------------------|------------|------------|------------|
| ** **                                 | ** ** | **2007**                                        | ** ** | **2006**   | ** ** | **% Change**                             | ** ** | **2007**   | ** ** | **2006** | ** ** | **% Change** | ** ** |
| ** **                                 | ** ** | **(Dollars in thousands)**            | ** ** |
| Salaries,  benefits and other compensation |       | $                                               | 2,252      |       | $          | 2,234                                         |       | 0.8        | %          | $ | 4,669 |   | $ | 4,329 |   | 7.9 | % |
| Occupancy  expense                         |       | 462                                             |       | 422        |       | 9.5                                           |       | 843        |       | 771 |   | 9.3 |   |
| Furniture and  equipment expense           |       | 247                                             |       | 218        |       | 13.3                                          |       | 476        |       | 402 |   | 18.4 |   |
| Data processing  costs                     |       | 388                                             |       | 387        |       | 0.3                                           |       | 761        |       | 716 |   | 6.3 |   |
| Professional  fees                         |       | 547                                             |       | 288        |       | 89.9                                          |       | 1,039      |       | 768 |   | 35.3 |   |
| Marketing expense                          |       | 176                                             |       | 159        |       | 10.7                                          |       | 297        |       | 241 |   | 23.2 |   |
| FDIC premiums                              |       | 22                                              |       | 313        |       | (93.0                                         | )          | 42         |       | 654 |   | (93.6 | ) |
| Other                                      |       | 453                                             |       | 664        |       | (31.8                                         | )          | 877        |       | 990 |   | (11.4 | ) |
| Total                                      |       | $                                               | 4,547      |       | $          | 4,685                                         |       | (3.0       | )          | $ | 9,004 |   | $ | 8,871 |   | 1.5 |   |

 

Noninterest expense decreased by $138,000, or 3.0%,and increased by $133,000, or 1.5%, during the three and six months ended June30, 2007, respectively, compared to the same periods in 2006.  The largest changes for the six month periodwere: (1) an increase in salaries and benefits expense of $340,000 due to thehiring of the previously discussed team of experienced commercial lenders andcommercial credit staff in the spring of 2006 and the implementation of anEmployee Stock Ownership Plan in September 2006 in conjunction with the Bank’sconversion to a public entity; and (2) an increase in professional fees of$271,000 primarily associated with being a public entity, including compliancewith the Sarbanes-Oxley Act and exploring strategic initiatives.  The increased costs were offset by a decreasein Federal Deposit Insurance Corporation (the “FDIC”) insurance premiums of$612,000 primarily due to the lifting of the Bank’s Office of ThriftSupervision Cease and Desist Order on June 28, 2006 and, to a lesser extent, tochanges made by the FDIC in the way it assesses financial institutions, as wellas a decrease in other expense associated with a second quarter 2006 charge of$232,000 related to a write-off of an error for reconciling transactions in ourautomated teller machines system.  Themajority of remaining increases in operating expenses were related to theaddition of the Marmora, New Jersey branch office in first quarter of 2006, andthe opening of two loan production offices in Media and Exton, Pennsylvania inthe second quarter of 2006. Additionally, marketing costs increased between periods due toadditional expenditures to market and promote the Bank’s commercial lending anddeposit initiatives.

The largest changes for the three month period were:(1) an increase in professional fees of $259,000 primarily associated withbeing a public entity, including compliance with the Sarbanes-Oxley Act andexploring strategic initiatives; (2) a decrease in Federal Deposit InsuranceCorporation (the “FDIC”) insurance premiums of $291,000 primarily due to thelifting of the Bank’s Office of Thrift Supervision Cease and Desist Order onJune 28, 2006 and, to a lesser extent, to changes made by the FDIC in the wayit assesses financial institutions; and (3) a decrease in other expenseassociated with a second quarter 2006 charge of $232,000 related to a write-offof an error for reconciling transactions in our automated teller machinessystem.  The majority of remainingincreases in operating expenses were related to the addition of the Marmora,New Jersey 

21

----

branch office in first quarter of 2006, and theopening of two loan production offices in Media and Exton, Pennsylvania in thesecond quarter of 2006.  Additionally,marketing costs increased between periods due to additional expenditures tomarket and promote the Bank’s commercial lending and deposit initiatives.

***Income Taxes*.****  **The income tax provision for the three and sixmonths ended June 30, 2007 was $297,000 and $334,000 compared to a benefit of$(98,000) and $(92,000) for the three and six months ended June 30, 2006,respectively.   The Company’s effectiveincome tax rate was 25.8% and (42.1)% for the three-month periods ended June30, 2007 and 2006, and 22.6% and (18.1)% for the six months ended June 30, 2007and 2006, respectively.  These ratesreflect the Company’s levels of tax-exempt income for the 2007 periods relativeto the overall level of pre-tax book income. The Company recorded a tax benefitin the second quarter of 2006 when it reduced its tax contingency reserve by$75,000 due to reevaluation of its tax position.

**Liquidity and Capital Management**

***Liquidity Management.***Liquidity is the ability to meet current and future financial obligations of ashort-term nature. Our primary sources of funds consist of deposit inflows,loan sales and repayments, maturities and sales of securities and proceeds fromthe stock offering. While maturities and scheduled amortization of loans andsecurities are predictable sources of funds, deposit flows and loan prepaymentsare greatly influenced by general interest rates, economic conditions andcompetition.

The following table presents certain of ourcontractual obligations as of June 30, 2007 and December 31, 2006.
| ** **                       | ** ** | ** **              | ** ** | **Payments Due by period** | ** ** |
|----------------------------------|------------|-------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations** | ** ** | **Total**               | ** ** | **Less than  One Year**         | ** ** | **One to  Three Years** | ** ** | **Three to  Five Years** | ** ** | **More Than  Five Years** | ** ** |
| ** **                       | ** ** | **(In thousands)** | ** ** |
|                             |       |                    |       |                                      |       |   |   |   |   |   |   |
| **At June  30, 2007**            |       |                    |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations (1) |       | $                       | 2,310      |                                      | $          | 460 |   | $ | 889 |   | $ | 921 |   | $ | 40 |   |
| FHLB advances                    |       | 36,178                  |       | 1,489                                     |       | 2,977 |   | 31,712 |   | — |   |
| Other long-term  obligations (2) |       | 4,282                   |       | 1,802                                     |       | 2,477 |   | 3 |   | — |   |
| Total                            |       | $                       | 42,770     |                                      | $          | 3,751 |   | $ | 6,343 |   | $ | 32,636 |   | $ | 40 |   |
|                             |       |                    |       |                                      |       |   |   |   |   |   |   |
| **At  December 31, 2006**        |       |                    |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations (1) |       | $                       | 158        |                                      | $          | 120 |   | $ | 38 |   | $ | — |   | $ | — |   |
| FHLB advances                    |       | 36,922                  |       | 1,487                                     |       | 2,979 |   | 32,456 |   | — |   |
| Other long-term  obligations (2) |       | 4,995                   |       | 1,754                                     |       | 3,238 |   | 3 |   | — |   |
| Total                            |       | $                       | 42,075     |                                      | $          | 3,361 |   | $ | 6,255 |   | $ | 32,459 |   | $ | — |   |

----

(1)          Represents leaseobligations for commercial loan processing offices and the Bank’s operationscenter.

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

We regularly adjust our investments in liquid assetsbased upon our assessment of: (1) expected loan demands; (2) expecteddeposit flows; (3) yields available on interest-earning deposits andsecurities; and (4) the objectives of our asset/liability managementpolicy. We use a variety of measures to assess our liquidity needs, which areprovided to our Asset/Liability Management and Pricing Committees on a regularbasis. Our policy is to maintain net liquidity of at least 50% of our fundingobligations over the next month. Additionally, our policy is to maintain anamount of cash and short-term marketable securities equal to at least 15% ofnet deposits and liabilities that will mature in one year or less.

Our most liquid assets are cash and cash equivalents.The levels of these assets depend on our operating, financing, lending andinvesting activities during any given period. At June 30, 2007, cash and cashequivalents totaled $122.8 million. Securities classified asavailable-for-sale, which provide additional sources of liquidity, totaled$193.8 million at June 30, 2007. In addition, at March 31, 2007, the latestdate available, we had the ability to borrow a total of approximately $426.4million from the Federal Home Loan Bank of Pittsburgh. On June 30, 2007, we had$30.0 million of borrowings outstanding.

At June 30, 2007, we had $95.2 million in loancommitments outstanding, which consisted of $2.1 million of mortgage loancommitments, $22.5 million in unused home equity lines of credit, $1.6 millionin consumer loan commitments or lines of credit, $69.0 in commercial loancommitments and $586,000 in stand-by letters of credit. Certificates of depositdue within one year of June 30, 2007 totaled $222.9 million, or 54.5%, of totalcertificates of deposit. We believe the large percentage of certificates ofdeposit that mature within one year reflects customers’ hesitancy to investtheir funds for long periods in the current low interest rate environment. Ifthese maturing deposits do not remain with us, we will be required to seekother sources of funds, including other certificates of deposit and borrowings.Depending on market conditions, we may be

22

----

 required to payhigher rates on such deposits or other borrowings than we currently pay on thecertificates of deposit due on or before June 30, 2007. We believe, however,based on past experience that a significant portion of these certificates ofdeposit will remain with us. We have the ability to attract and retain depositsby adjusting the interest rates offered.

Our primary investing activities are the originationof loans and the purchase of securities. Our primary financing activitiesconsist of activity in deposit accounts. Deposit flows are affected by theoverall level of interest rates, the interest rates and products offered by usand our local competitors and other factors. We generally manage the pricing ofour deposits to be competitive and to increase core deposit relationships.Occasionally, we offer promotional rates on certain deposit products to attractdeposits.

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

|                                                        | ** ** | **Six Months Ended  June 30,  2007** | ** ** | **Year Ended  December 31,  2006** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------|------------|
| Investing  activities:                                 |       |                                                |       |                                         |       |
| Loan originations                                      |       | $                                                   | (47,723    | )                                            | $          | (120,515 | ) |
| Other decreases in loans                               |       | 19,267                                              |       | 137,512                                      |       |
| Loan sales                                             |       | —                                              |       | 4,000                                        |       |
| Loan participation purchases                           |       | (22,828                                             | )          | (4,788                                       | )          |
| Security purchases                                     |       | (15,089                                             | )          | (60,207                                      | )          |
| Security sales                                         |       | —                                              |       | 17,205                                       |       |
| Security maturities, calls and principal repayments    |       | 49,022                                              |       | 145,471                                      |       |
| Financing  activities:                                 |       |                                                |       |                                         |       |
| Increase (decrease) in deposits                        |       | 1,369                                               |       | (85,773                                      | )          |
| Proceeds from  stock issuance, net of conversion costs |       | —                                              |       | 62,348                                       |       |
|                                                        |            |                                                     |            |                                              |            |  |  |

*** ***

***Capital Management.***   TheBank is subject to various regulatory capital requirements administered by theOffice of Thrift Supervision, including a risk-based capital measure. Therisk-based capital guidelines include both a definition of capital and aframework for calculating risk-weighted assets by assigning balance sheetassets and off-balance sheet items to broad risk categories. At June 30, 2007,the Bank exceeded all of regulatory capital requirements and was considered a “wellcapitalized” institution under regulatory guidelines.

The following table presents the Bank’s capital ratiosand the minimum capital requirements to be considered ‘‘well capitalized” bythe OTS as of June 30, 2007 and December 31, 2006:
| ** **                                          | ** ** | **Ratio** | ** ** | **Minimum  to be Well  Capitalized** | ** ** |
|-----------------------------------------------------|------------|-----------|------------|------------------------------------------------|------------|
| **June  30, 2007:**                                 |       |      |       |                                           |       |
| Tier 1 capital  (to adjusted assets)                |       | 12.62     | %          | 3 5.0                                     | %          |
| Tier 1 capital  (to risk-weighted assets)           |       | 24.37     | %          | 3 6.0                                     | %          |
| Total risk-based  capital (to risk-weighted assets) |       | 25.14     | %          | 3 10.0                                    | %          |
|                                                |       |      |       |                                           |       |
| **December  31, 2006:**                             |       |      |       |                                           |       |
| Tier 1 capital  (to adjusted assets)                |       | 12.49     | %          | 35.0                                      | %          |
| Tier 1 capital  (to risk-weighted assets)           |       | 26.79     | %          | 36.0                                      | %          |
| Total risk-based  capital (to risk-weighted assets) |       | 27.62     | %          | 3  10.0                                   | %          |

 

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

The capital from the offering significantly increasedour liquidity and capital resources. Over time, this initial level of liquidity will be reduced as netproceeds from the stock offering are used for general corporate purposes,including the funding of lending activities. The Company’s financial condition and results of operations will beenhanced by the capital from the offering, resulting in increased netinterest-earning assets.  However, thelarge increase in equity resulting from the capital raised in the offering willhave an adverse impact on our return on equity. The Company may use capital management tools such as cash dividends andshare repurchases.  However, under Officeof Thrift Supervision regulations, 

23

----

we are not allowed to repurchase any shares during thefirst year following the offering, except to fund restricted stock awards understock-based benefit plans, unless extraordinary circumstances exist and wereceive regulatory approval.  The Companyreceived stockholder approval for its long-term equity incentive plan at itsannual meeting of stockholders held on May 22, 2007. The Company has not yetgranted any restricted stock awards or stock options under this plan.

**Off-BalanceSheet Arrangements**

In the normal course of operations, we engage in avariety of financial transactions that, in accordance with U.S. generallyaccepted accounting principles, are not recorded in our financial statements.These transactions involve, to varying degrees, elements of credit, interestrate and liquidity risk. Such transactions are used primarily to managecustomers’ requests for funding and take the form of loan commitments, lettersof credit and lines of credit.

As of June 30, 2007, the Company had an interest rateswap with a notional amount of $1.2 million. The Company is receiving variablerate payments of three-month Libor plus 2.24% and paying fixed-rate payments of7.43%.  The swap matures March 31,2022.  The hedged item is a commercialreal estate loan, which has a fixed payment rate of 7.43% and matures on thesame date. The swap had a fair value gain position of $27,000 at June 30, 2007.

For the six months ended June 30, 2007, with theexception of the aforementioned commitments and swap arrangements, the Companydid not engage in any additional off-balance sheet transactions reasonablylikely to have a material effect on the Company’s financial condition, resultsof operation or cash flows.

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

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

**Item 4.Controls and Procedures**

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

Based upon their evaluation, the principal executiveofficer and principal financial officer concluded that, as of the end of theperiod covered by this report, the Company’s disclosure controls and procedureswere effective for the purpose of ensuring that the information required to bedisclosed in the reports that the Company files or submits under the ExchangeAct with the Securities and Exchange Commission (the “SEC”) (1) isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and (2) is accumulated and communicated tothe Company’s management, including its principal executive and principalfinancial officers, as appropriate to allow timely decisions regarding requireddisclosure. In addition, based on that evaluation, no change in the Company’sinternal control over financial reporting occurred during the quarter endedJune 30, 2007 that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting.

**PART II. OTHERINFORMATION**

**Item 1. LegalProceedings**

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

On April 28, 2006, Gregory S. Cipa, the formerPresident and Chief Executive Officer of Fox Chase Bank, filed a complaintagainst Fox Chase Bank in the Civil Division of the Court of Common Pleas ofBucks County, Pennsylvania.  In May 2006,Fox Chase Bank moved the case to federal court, answered the complaint andfiled a counterclaim. In November 2006, Mr. Cipa amended his complaint,and now alleges Fox Chase Bank breached its contract with him and violated itsstate statutory obligations by failing to pay Mr. Cipa certain employmentbenefits which he claims to have earned while serving as the President andChief Executive Officer of Fox Chase Bank. Mr. Cipa seeks monetary damages in excess of $900,000 and thepayment of litigation costs.  The partiescompleted discovery and filed motions for summary judgment that have not yet beenruled upon.  Fox Chase Bank believes thisaction is without merit and intends to vigorously pursue its defenses.

24

----

**Item 1A. RiskFactors**

As of June 30, 2007, the risk factors of the Companyhave not changed materially from those reported in the Company’s Annual Reporton Form 10-K.  In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the year ended December 31, 2006, which could materially affect ourbusiness, financial condition or future results.  The risks described in our Annual Report onForm 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially adversely affect ourbusiness, financial condition and/or operating results.

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

None.

**Item 3.Defaults upon Senior Securities**

Not applicable.

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

At the Company’s Annual Meeting of Stockholders (the “Meeting”)held on May 22, 2007, all the nominees for director proposed by the Companywere elected.  The votes cast for eachnominee were as follows:

|                         | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|-------------------------|------------|------------|------------|--------------|------------|
| Richard M.  Eisenstaedt |       | 14,045,711 |       | 212,672      |       |
| Anthony A. Nichols, Sr. |       | 14,018,598 |       | 239,785      |       |

 

At the Meeting, the stockholders also approved theadoption of the 2007 Equity Incentive Plan. The votes cast were as follows:

| For        | ** ** | **Against** | ** ** | **Abstain** | ** ** | **Broker Non-Votes** | ** ** |
|------------|------------|-------------|------------|-------------|------------|---------------------------|------------|
| 11,986,899 |       | 935,443     |       | 58,814      |       | 1,277,227                 |       |

 

Also at the Meeting, the stockholders ratified theappointment of KPMG, LLP as the independent registered public accounting firmfor fiscal year ending December 31, 2007. The votes cast were as follows:

 

| For        | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|------------|------------|-------------|------------|-------------|------------|
| 13,973,454 |       | 99,989      |       | 45,425      |       |

 

**Item 5. OtherInformation**

Not applicable.

**Item 6.Exhibits**
| 3.1       |   | Charter of Fox Chase Bancorp, Inc. (1)                                                           |
|-----------|--------|--------------------------------------------------------------------------------------------------|
|  3.2 |   | Bylaws of Fox Chase Bancorp, Inc. (1)                                                            |
| 4.1       |   | Stock Certificate of Fox Chase Bancorp, Inc. (1)                                                 |
| 10.1      |   | *Change of Control Agreement between Roger S.  Deacon, Fox Chase Bancorp, Inc and Fox Chase Bank |
| 10.2      |   | *Fox Chase Bancorp, Inc. 2007 Equity Incentive Plan  (2)                                         |
| 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               |

----

*                    Managementcontract or compensatory plan, contract or arrangement.

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

(2)             Incorporatedby reference into this document from Appendix A to the definitive proxymaterials filed in connection with the 2007 Annual Meetng of Stockholders.

25

----

**SIGNATURES**

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.
|                        |   | FOX CHASE BANCORP, INC. |
|------------------------|--------|-------------------------|
|                   |   |                    |   |   |
|                   |   |                    |   |   |
| Dated: August 13, 2007 |   | By:                     | /s/ THOMAS M. PETRO |
|                   |   |                    | Thomas M. Petro |   |
|                   |   |                    | President and Chief Executive Officer |
|                   |   |                    | (principal executive officer) |   |
|                   |   |                    |   |   |
|                   |   |                    |   |   |
| Dated: August 13, 2007 |   | By:                     | /s/ JERRY D. HOLBROOK |
|                   |   |                    | Jerry D. Holbrook |   |
|                   |   |                    | Chief Financial Officer and Secretary |
|                   |   |                    | (principal financial officer) |   |

 

----