0001104659-07-061874.txt : 20070813 0001104659-07-061874.hdr.sgml : 20070813 20070813161436 ACCESSION NUMBER: 0001104659-07-061874 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070813 DATE AS OF CHANGE: 20070813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Fox Chase Bancorp Inc CENTRAL INDEX KEY: 0001359111 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 000000000 STATE OF INCORPORATION: X1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32971 FILM NUMBER: 071049213 BUSINESS ADDRESS: STREET 1: 4390 DAVISVILLE ROAD CITY: HATBORO STATE: PA ZIP: 19040 BUSINESS PHONE: 215-682-7400 MAIL ADDRESS: STREET 1: 4390 DAVISVILLE ROAD CITY: HATBORO STATE: PA ZIP: 19040 10-Q 1 a07-19381_110q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2007

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

For the transition period from to

Commission file number: 001-32971

Fox Chase Bancorp, Inc.

(Exact name of registrant as specified in its charter)

United States		33-1145559
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4390 Davisville Road, Hatboro, Pennsylvania		19040
(Address of principal executive offices)		(Zip Code)

(215) 682-7400

(Registrant’s telephone number, including area code)

N/A

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

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

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

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

As of August 10, 2007, there were 14,679,750 shares of the registrant’s common stock outstanding.

FOX CHASE BANCORP, INC.

Table of Contents

		Page No.
Part I. Financial Information

Item 1.	Financial Statements		3

	Consolidated Statements of Condition at June 30, 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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FOX CHASE BANCORP, INC
Consolidated Statements of Condition
(In Thousands, Except Share Data)

	June 30,			December 31,
	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

See accompanying notes to the unaudited consolidated financial statements.

FOX CHASE BANCORP, INC
Consolidated 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 the timing of the Bank’s reorganization into the mutual holding company form and the 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, 2006 is not applicable.

See accompanying notes to the unaudited consolidated financial statements.

FOX CHASE BANCORP, INC
Consolidated Statement of Changes in Equity
Six 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

See accompanying notes to the unaudited consolidated financial statements.

FOX CHASE BANCORP, INC
Consolidated 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

See accompanying notes to the unaudited consolidated financial statements.

FOX CHASE BANCORP, INC
Notes to the Unaudited Consolidated Financial Statements

NOTE 1 — PRINCIPLES OF CONSOLIDATION AND PRESENTATION

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

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

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

The Company and Bank are subject to regulations of certain federal banking agencies. These regulations can and do change significantly from period to period. The Company and Bank also undergo periodic examinations by regulatory agencies which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations.

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

The Company follows accounting principles and reporting practices which are in compliance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation and realizability of deferred tax assets and the evaluation of other than temporary impairment of investments. These financial statements do not contain all necessary disclosures required by GAAP and therefore should be read in conjunction with the audited financial statements and the notes thereto included in Fox Chase Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 29, 2007. These financial statements include all normal and recurring adjustments which management believes were necessary in order to conform to GAAP. The results for the six months ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

Per Share Information

The Company follows the provisions of SFAS No. 128, “Earnings Per Share.” Basic earnings per share exclude dilution and are computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period. Diluted earnings per share take into account the potential dilution that could occur if securities or other contracts 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 for the three and six months ended June 30, 2006 since the Company did not complete its initial public offering until September 29, 2006.

The following table presents the reconciliation of the numerators 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

NOTE 2 — INVESTMENT AND MORTGAGE RELATED SECURITIES

The amortized cost and fair value of securities available-for-sale as 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

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

NOTE 3 — LOANS

The composition of net loans at June 30, 2007, and December 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 the allowance 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

NOTE 4 — MORTGAGE SERVICING ACTIVITY

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

The following summarizes mortgage servicing rights for the six months ended June 30, 2007 and 2006 and the year ended December 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 and December 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 using a third-party valuation model that calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience. The discount rate used to determine the present value of future net servicing income - another key assumption in the model - is the required rate of return the market would expect for an asset with similar risk. Both assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change.

NOTE 5 — DEPOSITS

Deposits and their respective weighted average interest rate at June 30, 2007 and December 31, 2006 consist of the following (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

NOTE 6 — FEDERAL HOME LOAN BANK ADVANCES

Pursuant to collateral agreements with the Federal Home Loan Bank of Pittsburgh (the “FHLB”), advances are secured by qualifying first mortgage loans, qualifying fixed-income securities, FHLB stock and an interest-bearing demand deposit account with the FHLB. As of June 30, 2007, the Bank 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) is greater than or equal to the Strike Rate fifteen calendar days prior to the next possible conversion date, which occurs on a quarterly basis through maturity, the FHLB has the option to convert the advances to an adjustable-rate equal to three-month LIBOR (5.36% at June 30, 2007) plus .2175%. Notification of such conversion by the FHLB must be ten calendar days prior to conversion date. The Bank has the option to repay these advances at each conversion date without penalty. Accordingly, the contractual maturities above may differ from actual maturities.

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

NOTE 7 — COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) for the three and six months 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	)

NOTE 8 — RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, FASB issued Financial Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an interpretation of SFAS Statement No. 109. FIN 48 provides guidance on financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. According to the Interpretation, a tax position is recognized if it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If the tax position meets more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize and should be measured at the largest amount of benefit that is greater than 50% likely of being realized upon 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 fiscal years beginning after December 15, 2006. Effective January 1, 2007, the Company adopted FIN 48. As of January 1, 2007, the Company had no material unrecognized tax benefits or accrued interest and penalties. The Company’s policy is to account for interest as a component of interest expense and penalties as a component of other expense. Federal and state tax years 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 statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements.

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

The FASB has recently approved the Emerging Issues Task Force (“EITF”) Issue No. 06-4 “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” In this issue, the EITF concluded that an endorsement split dollar life insurance policy does not effectively settle an employer’s obligation to provide the post retirement benefit that the policy was designed to provide. Therefore, some current expense recognition may need to be made for any endorsement split dollar plans with post retirement benefits.

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

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

· the actuarial present value of the future death benefit or

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

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

At its September 2006 meeting, the EITF reached a final consensus on Issue 06-05, “Accounting for Purchases of Life Insurance — Determining the Amount That Could be Realized in Accordance with FASB Technical Bulletin No. 85-4.” Issue 06-05 concludes that in determining the amount that could be realized under an insurance contract accounted for under FASB Technical Bulletin No. 85-4, “Accounting for Purchases of Life Insurance,” the policyholder should (1) consider any additional amounts included in the contractual terms of the policy; (2) assume the surrender value on a individual-life by individual-life policy basis; and (3) not discount the cash surrender value component of the amount that could be realized when contractual restrictions on the ability to surrender a policy exist. Issue 06-05 should be adopted through either (1) a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption or (2) a change in accounting principle through retrospective application to all prior periods. Issue 06-05 is effective for fiscal years beginning after December 15, 2006. The application of Issue 06-05 did not have a material effect on the Company’s financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 (SFAS 159).” SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value and amends SFAS 115 to, among other things, require certain disclosures

for amounts for which the fair value option is applied. Additionally, this Statement provides that an entity may reclassify held-to-maturity and available-for-sale securities to the trading account when the fair value option is elected for such securities, without calling into question the intent to hold other securities to maturity in the future. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of 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 SFAS No. 159 and the impact, if any, on its consolidated financial statements. The Company has determined that it will not early adopt this statement.

NOTE 9— LEGAL PROCEEDINGS

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

On April 28, 2006, Gregory S. Cipa, the former President and Chief Executive Officer of Fox Chase Bank, filed a complaint against Fox Chase Bank in the Civil Division of the Court of Common Pleas of Bucks County, Pennsylvania. In May 2006, Fox Chase Bank moved the case to federal court, answered the complaint and filed a counterclaim. In November 2006, Mr. Cipa amended his complaint, and now alleges Fox Chase Bank breached its contract with him and violated its state statutory obligations by failing to pay Mr. Cipa certain employment benefits which he claims to have earned while serving as the President and Chief Executive Officer of Fox Chase Bank. Mr. Cipa seeks monetary damages in excess of $900,000 and the payment of litigation costs. The parties completed discovery and filed motions for summary judgment that have not yet been ruled upon. Fox Chase Bank believes this action is without merit and intends to vigorously pursue its defenses.

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

Forward-Looking Statements

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

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

Critical Accounting Policies

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

Allowance for Loan Losses. The allowance for loan losses is maintained at a level representing management’s best estimate of known and inherent losses in the loan portfolio, based on management’s evaluation of the portfolio’s collectibility. The allowance is established through the provision for loan losses, which is charged against income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance on a quarterly basis and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other relevant factors related to the collectibility

of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our allowance for loan losses. Such agency may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes as prescribed in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings.

Other-Than-Temporary Impairment of Securities. Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and FASB Staff Position FAS 115-1and 124-1 “The Meaning of Other Than Temporary Impairment and Its Application to Certain Investments,” require companies to perform periodic reviews of individual securities in their investment portfolios to determine whether a decline in the value of a security is other than temporary. A review of other-than-temporary impairment requires companies to make certain judgments regarding the nature of the decline, its effect on the financial statements and the probability, extent and timing of a valuation recovery and the company’s intent and ability to hold the security. Pursuant to these requirements, we assess valuation declines to determine the extent to which such changes are attributable to (1) fundamental factors specific to the issuer, such as financial condition, business prospects or other factors, or (2) market-related factors, such as interest rates or equity market declines. If the decline in the market value of a security is determined to be other than temporary, we reduce the book value of such security to its current market value, recognizing the decline as a realized loss on the income statement.

Comparison of Financial Condition at June 30, 2007 and December 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 was primarily due to the $51.2 million increase in loans, which was driven by a $55.9 million increase in commercial, commercial real estate and construction loans. In 2006, the Bank hired a highly experienced team of nineteen commercial lending, credit and risk management professionals to accelerate these types of lending activities. Loan growth was funded primarily through a decrease of $11.6 million in cash and cash equivalents, a decrease of $25.8 million in mortgage related securities due to normal principal payments and a decrease of $8.9 million of investment securities available-for-sale which were called or matured. The decrease in securities for the six months ended June 30, 2007 is consistent with the Bank’s strategy of utilizing funds from the liquidation of lower yielding mortgage-backed and investment securities to fund loan growth.

Deposits increased $1.4 million from $596.5 million at December 31, 2006 to $597.9 million at June 30, 2007. The modest increase was primarily a result of increased money market accounts of $12.1 million and non-interest bearing demand accounts of $3.5 million, offset by decreases in NOW accounts of $9.2 million, savings and club accounts of $4.0 million and certificates of deposit of $1.1 million. The increase in money market accounts was a result of a successful promotion of the Bank’s money market tiered rate structure, which also caused some NOW accounts to transfer to money market accounts. The increase in non-interest bearing demand accounts was a result of continued efforts to increase 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 for gathering deposits cost effectively.

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

Comparison of Operating Results for the Three and Six Months Ended June 30, 2007 and 2006

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

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 sale of the Bank’s operations center.

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

Net Interest Income. Net interest income increased $565,000, or 14.3%, to $4.5 million for the three months ended June 30, 2007 compared the same period in 2006 primarily due to an increase in average earning assets of $7.9 million, an increase in the average yield on earning assets from 5.04% to 5.58% as well as a decrease in the average balance of interest-bearing liabilities. These changes were offset by an increase in the average rate on interest-bearing liabilities from 3.18% to 3.85%. The increase in the average balance of earning assets was primarily due to increases in the Bank’s average loan portfolio of $33.5 million and an increase in the volume of interest-earning demand deposits generated by proceeds received in the Company’s initial public offering, offset by decreases in the average balance of the mortgage-backed and investment securities portfolios. The increase in the average yield on earning assets was primarily due to the general increase in market interest rates from 2004 through 2006 as yield on loans increased from 5.87% to 6.16%, the yield on mortgage-related securities increased from 4.32% to 4.87% and yield on interest-earning demand deposits increased from 4.93% to 5.20%. The decrease in the average balance of interest bearing liabilities was primarily due to decreases in deposit accounts. The increase in the average rate on interest-bearing liabilities was primarily due to the cost of certificates of deposit, which increased 66 basis points from 3.84% to 4.50% and a 100 basis point increase in NOW and money market 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 period in 2006 primarily due to an increase in the average yield on earning assets from 4.94% to 5.51% and a decrease in the average balance of interest-bearing liabilities. These changes were offset by a decrease in the average balance of interest-earning assets of $4.7 million and 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 primarily due to the general increase in market interest rates from 2004 through 2006 as the yield on loans increased from 5.86% to 6.06%, the yield on mortgage-related securities increased from 4.13% to 4.82% and yield on interest-earning demand deposits increased from 4.55% to 5.16%. The decrease in the average balance of earning assets was primarily due to decreases in the average balance of the mortgage-backed and investment securities portfolios, offset by increases in the Bank’s average loan portfolio of $18.3 million and an increase in the volume of interest-earning demand deposits generated by proceeds received in the Company’s initial public offering. The decrease in the average balance of interest-bearing liabilities was primarily due to decreases in deposit accounts. The increase in the average rate on interest-bearing liabilities was primarily due to the cost of certificates 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% to 2.29%.

The following table summarizes average balances and average yields and costs of interest-earning assets and interest-bearing liabilities for the three and six months ended June 30, 2007 and 2006. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant. (See also nonperforming loan table).

	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 in average balance computations

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

	Three Months Ended 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

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

The following table provides information with respect to the Bank’s nonperforming assets at the dates indicated. There were no troubled debt restructurings as 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 total assets, at June 30, 2007 compared to $3.2 million, or 0.43% of total assets, at December 31, 2006. During the three months ended December 31, 2006, a loan totaling $2.9 million went past its contractual maturity and was included in the accruing loans past due 90 days or more category of nonperforming assets. The Bank extended the maturity on this loan in the first quarter of 2007 and therefore removed it from the total nonperforming assets, accounting for a majority of the $3.0 million decrease in nonperforming assets. This loan remains current on all required payments under the extension agreement and is secured by real estate. Additionally, the property is under an agreement of sale and expected to be sold in 2007.

Noninterest Income. The following table summarizes noninterest income for the three and six months ended 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

* Not meaningful

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 of the Management’s Discussion and Analysis section, the increase in both the three and six months ended June 30, 2007 was primarily a result of the Bank recognizing a pre-tax gain of $874,000 on the sale of its operations center in the second quarter of 2007.

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

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

Noninterest Expense. The following table summarizes noninterest expense for the three and six months ended 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 June 30, 2007, respectively, compared to the same periods in 2006. The largest changes for the six month period were: (1) an increase in salaries and benefits expense of $340,000 due to the hiring of the previously discussed team of experienced commercial lenders and commercial credit staff in the spring of 2006 and the implementation of an Employee Stock Ownership Plan in September 2006 in conjunction with the Bank’s conversion to a public entity; and (2) an increase in professional fees of $271,000 primarily associated with being a public entity, including compliance with the Sarbanes-Oxley Act and exploring strategic initiatives. The increased costs were offset by a decrease in Federal Deposit Insurance Corporation (the “FDIC”) insurance premiums of $612,000 primarily due to the lifting of the Bank’s Office of Thrift Supervision Cease and Desist Order on June 28, 2006 and, to a lesser extent, to changes made by the FDIC in the way it assesses financial institutions, as well as 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 our automated teller machines system. The majority of remaining increases in operating expenses were related to the addition of the Marmora, New Jersey branch office in first quarter of 2006, and the opening of two loan production offices in Media and Exton, Pennsylvania in the second quarter of 2006. Additionally, marketing costs increased between periods due to additional expenditures to market and promote the Bank’s commercial lending and deposit initiatives.

The largest changes for the three month period were: (1) an increase in professional fees of $259,000 primarily associated with being a public entity, including compliance with the Sarbanes-Oxley Act and exploring strategic initiatives; (2) a decrease in Federal Deposit Insurance Corporation (the “FDIC”) insurance premiums of $291,000 primarily due to the lifting of the Bank’s Office of Thrift Supervision Cease and Desist Order on June 28, 2006 and, to a lesser extent, to changes made by the FDIC in the way it assesses financial institutions; and (3) 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 our automated teller machines system. The majority of remaining increases in operating expenses were related to the addition of the Marmora, New Jersey

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

Income Taxes. The income tax provision for the three and six months 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 effective income tax rate was 25.8% and (42.1)% for the three-month periods ended June 30, 2007 and 2006, and 22.6% and (18.1)% for the six months ended June 30, 2007 and 2006, respectively. These rates reflect the Company’s levels of tax-exempt income for the 2007 periods relative to the overall level of pre-tax book income. The Company recorded a tax benefit in 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 a short-term nature. Our primary sources of funds consist of deposit inflows, loan sales and repayments, maturities and sales of securities and proceeds from the stock offering. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

The following table presents certain of our contractual obligations as of June 30, 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 lease obligations for commercial loan processing offices and the Bank’s operations center.

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

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

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2007, cash and cash equivalents totaled $122.8 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $193.8 million at June 30, 2007. In addition, at March 31, 2007, the latest date available, we had the ability to borrow a total of approximately $426.4 million 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 loan commitments outstanding, which consisted of $2.1 million of mortgage loan commitments, $22.5 million in unused home equity lines of credit, $1.6 million in consumer loan commitments or lines of credit, $69.0 in commercial loan commitments and $586,000 in stand-by letters of credit. Certificates of deposit due within one year of June 30, 2007 totaled $222.9 million, or 54.5%, of total certificates of deposit. We believe the large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods in the current low interest rate environment. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be

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

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

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

	Six Months Ended 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. The Bank is subject to various regulatory capital requirements administered by the Office of Thrift Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2007, the Bank exceeded all of regulatory capital requirements and was considered a “well capitalized” institution under regulatory guidelines.

The following table presents the Bank’s capital ratios and the minimum capital requirements to be considered ‘‘well capitalized” by the 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 public stock offering, the Bank’s capital was increased by $30.0 million in September 2006. The remaining proceeds of the offering were retained by Fox Chase Bancorp to be used for general corporate purposes. The capital ratios above reflect this infusion of capital.

The capital from the offering significantly increased our liquidity and capital resources. Over time, this initial level of liquidity will be reduced as net proceeds 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 be enhanced by the capital from the offering, resulting in increased net interest-earning assets. However, the large increase in equity resulting from the capital raised in the offering will have an adverse impact on our return on equity. The Company may use capital management tools such as cash dividends and share repurchases. However, under Office of Thrift Supervision regulations,

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

Off-Balance Sheet Arrangements

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

As of June 30, 2007, the Company had an interest rate swap with a notional amount of $1.2 million. The Company is receiving variable rate payments of three-month Libor plus 2.24% and paying fixed-rate payments of 7.43%. The swap matures March 31, 2022. The hedged item is a commercial real estate loan, which has a fixed payment rate of 7.43% and matures on the same 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 the exception of the aforementioned commitments and swap arrangements, the Company did not engage in any additional off-balance sheet transactions reasonably likely to have a material effect on the Company’s financial condition, results of operation or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures

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

Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

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

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 Company were elected. The votes cast for each nominee 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 the adoption 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 the appointment of KPMG, LLP as the independent registered public accounting firm for fiscal year ending December 31, 2007. The votes cast were as follows:

For		Against		Abstain
13,973,454		99,989		45,425

Item 5. Other Information

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

* Management contract or compensatory plan, contract or arrangement.

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

(2) Incorporated by reference into this document from Appendix A to the definitive proxy materials filed in connection with the 2007 Annual Meetng of Stockholders.

SIGNATURES

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

	FOX CHASE BANCORP, INC.


Dated: August 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)

EX-10.1 2 a07-19381_1ex10d1.htm EX-10.1

Exhibit 10.1

FOX CHASE BANK
CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT (“Agreement”) is hereby entered into as of July 6, 2007, by and between FOX CHASE BANK (the “Bank”), a federally chartered savings bank, Roger S. Deacon (“Executive”) and FOX CHASE BANCORP, INC. (the “Company”), a federally-chartered corporation and the holding company of the Bank, as guarantor.

WHEREAS, the Bank recognizes the importance of Executive to the Bank’s operations and wishes to protect his position with the Bank in the event of a change in control of the Bank or the Bank for the period provided for in this Agreement; and

WHEREAS, Executive and the Bank desire to enter into an agreement setting forth the terms and conditions of payments due to Executive in the event of a change in control and the related rights and obligations of each of the parties.

NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is hereby agreed as follows:

1. TERM OF AGREEMENT.

(a) The term of this Agreement shall be (i) the initial term of this Agreement, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the second anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 1.

(b) On each anniversary date thereafter, the Board of Directors of the Bank (the “Board of Directors”) may extend the term of this Agreement for an additional one (1) year period beyond the then effective expiration date: provided that Executive shall not have given at least sixty (60) days’ written notice of his desire that the term not be extended.

(c) Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Bank terminates Executive’s employment prior to a Change in Control.

2. TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.

(a) Upon the occurrence of a Change in Control followed at any time during the term of this Agreement by (i) the termination of Executive’s employment by the Bank, other than for Cause (as defined in Section 3 below), or (ii) the Executive’s termination of employment for “Good Reason” (as defined in Section 3 below), Executive shall be entitled to receive the following:

(A) continuation of Executive’s base salary for a period of twenty-four (24) months.

(B) continuation of health (including medical and dental) and life insurance coverage for a period of twenty-four (24) months upon terms no less favorable than the terms upon which such coverage was provided to Executive prior to Executive’s termination of employment. In the event that the Bank is unable to provide such coverage by reason of Executive no longer being an employee, the Bank shall provide Executive with comparable coverage on an individual policy basis.

(i) for salaried employees, the employee’s annual base salary shall be defined as the current rate in effect on his or her termination date plus the highest cash bonus or similar cash incentive compensation paid to or accrued on behalf of the Executive with respect to the two (2) taxable years preceding his termination of employment or, if greater, the rate in effect on the date immediately preceding the Change in Control.

(ii) for employees whose compensation is determined in whole or in part on the basis of commission income, the employee’s base salary at termination (or, if greater, the base salary on date immediately preceding the effective date of the Change in Control), if any, plus the commissions earned by the employee in the twelve (12) full calendar months preceding his or her termination date (or, if greater, the commissions earned in the twelve (12) full calendar months immediately preceding the effective date of the Change in Control).

(iii) for hourly employees, the employee’s total hourly wages for the twelve (12) full calendar months preceding his or her termination date or, if greater, the twelve (12) full calendar months preceding the effective date of the Change in Control.

3. DEFINITIONS; SPECIAL LIMITATIONS.

(a) For purposes of this Agreement, the following definitions shall apply:

(A) “Change in Control” means the occurrence of one of the following events:

i. Merger: The Bank or the Company merges into or consolidates with another entity, or merges another entity into the Bank or the Company, and as a result less than a majority of the combined voting power of the resulting entity immediately after the merger or consolidation is held by persons who were shareholders of the Bank or the Company immediately before the merger or consolidation;

ii. Change in Board Composition: During any period of two consecutive years, individuals who constitute the Boards of Directors of the Bank or the Company at the beginning of the two-year period cease for any reason (other than as required by the Order to Cease and Desist dated June 6, 2005 entered into by the Bank with the Office of Thrift Supervision) to constitute at least a majority of the Boards of Directors of the Bank or the Company; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the members) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or

iii. Acquisition of Significant Share Ownership: There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of

1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 20% or more of a class of the Bank’s or the Company’s voting securities, however this clause (iii) shall not apply to beneficial ownership of Bank or Company voting shares held in a fiduciary capacity by an entity of which the Bank or the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities; or

iv. Sale of Assets: The Bank or the Company sells to a third party all or substantially all of its assets; or

v. Proxy Statement Distribution: An individual or company (other than current management of the Company) solicits proxies from stockholders of the Company seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or Bank with one or more corporations as a result of which the outstanding shares of the class of securities then subject to such plan or transaction are exchanged for or converted into cash or property or securities not issued by the Bank or the Company; or

vi. Tender Offer: A tender offer is made for 20% or more of the voting securities of the Bank or Company then outstanding.

Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement.

(B) “Good Reason” means, unless Executive has consented in writing thereto, the occurrence following a Change in Control, of any of the following:

i. a material reduction in title, authority or responsibilities;

ii. a reduction of the Executive’s base salary in effect immediately prior to the Change in Control;

iii. the relocation of the Executive’s office to a location more than 30 miles from its location immediately prior to the Change in Control;

iv. the taking of any action by the Bank or any of its affiliates or successors that would materially adversely affect Executive’s overall compensation and benefits package, unless such changes to the compensation and benefits package are made on a non-discriminatory basis to all employees; or

v. failure of any successor institution to assume the obligations under this Agreement in accordance with Section 16 of this Agreement

(b) Executive shall not have the right to receive termination benefits pursuant to Section 3 hereof upon termination for Cause. The term “Cause” shall mean termination of Executive’s employment by the Bank because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), final cease and desist order, or

any material breach of any provision of this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause.

(c) Notwithstanding anything in this Agreement to the contrary, in no event shall the aggregate payments or benefits to be made or afforded to Executive under said paragraphs or otherwise (the “Termination Benefits”) constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended, or any successor thereto, and to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount (the “Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to three (3) times Executive’s “base amount,” as determined in accordance with said Section 280G. The allocation of the reduction required hereby among the Termination Benefits provided by this Section 3 shall be determined by Executive.

(d) Notwithstanding anything in this Agreement to the contrary, if the Bank in good faith determines that amounts that, as of the effective date of the Executive’s termination of employment are or may become payable to the Executive upon termination of his employment hereunder are required to be suspended or delayed for six (6) months in order to satisfy the requirements of Section 409A of the Internal Revenue Code, then the Bank will so advise the Executive, and any such payments shall be suspended and accrued for six months.

4. NOTICE OF TERMINATION.

(a) Any termination by the Bank or by Executive shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(b) “Date of Termination” shall mean the date specified in the Notice of Termination (which, in the case of a termination for Cause, shall not be less than thirty (30) days from the date such Notice of Termination is given).

5. NON-COMPETE; NON-SOLICITATION.

(a) During the period commencing on the effective date of Executive’s termination of employment (i) on a voluntary basis at any time but without Good Reason, or (ii) following a Change in Control, by the Bank without Cause or by Executive with Good Reason, and ending one(1) year thereafter (the “Restricted Period”), Executive shall not, without express prior written consent of the Bank, directly or indirectly, own or hold any proprietary interest in, or be employed by or receive remuneration from, any corporation, partnership, sole proprietorship or other entity (collectively, an “entity”) “engaged in competition” (as defined below) with the Bank or any of its affiliates (a “Competitor”). For purposes of the preceding sentence, the term “proprietary interest” means direct or indirect ownership of an equity interest in an entity other than ownership of less than two (2) percent of any class stock in a publicly-held entity. Further, an entity shall be considered to be “engaged in competition” if such entity is, or is a holding company for or a subsidiary of an entity which is engaged in the business of providing banking, trust services, asset management advice, or similar financial services to consumers, businesses individuals or other entities; and the entity, holding company or subsidiary maintains physical offices for the transaction of such business or businesses in any city, town or county in which the Executive’s normal business office is located or the Bank has an office or has filed an application for regulatory approval to establish an office, as determined on the date of Executive’s termination of employment.

(b) During the Restricted Period, Executive shall not, without express prior written consent of the Bank, solicit or assist any other person in soliciting for the account of any Competitor, any customer or client of the Bank or any of its subsidiaries.

(c) During the Restricted Period, Executive shall not, without the express prior written consent of the Bank, directly or indirectly, (i) solicit or assist any third party in soliciting for employment any person employed by the Bank or any of its subsidiaries at the time of the termination of Executive’s employment (collectively, “Employees”), (ii) employ, attempt to employ or materially assist any third party in employing or attempting to employ any Employee, or (iii) otherwise act on behalf of any Competitor to interfere with the relationship between the Bank or any of its affiliates and their respective Employees.

(d) Executive acknowledges that the restrictions contained in this Section 5 are reasonable and necessary to protect the legitimate interests of the Bank and that any breach by Executive of any provision contained in this Section 5 will result in irreparable injury to the Bank for which a remedy at law would be inadequate. Accordingly, Executive acknowledges that the Bank shall be entitled to temporary, preliminary and permanent injunctive relief against Executive in the event of any breach or threatened breach by Executive of the provisions of this Section 5, in addition to any other remedy that may be available to the Bank whether at law or in equity. With respect to any provision of this Section 5 finally determined by a court of competent jurisdiction to be unenforceable, such court shall be authorized to reform this Agreement or any provision hereof so that it is enforceable to the maximum extent permitted by law. If the covenants of Section 5 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Bank’s right to enforce such covenants in any other jurisdiction and shall not bar or limit the enforceability of any other provisions. The Bank shall not be required to post any bond or other security in connection with any proceeding to enforce the provisions of this Section 5.

(e) The provisions of this Section 5 shall survive the termination of Executive’s employment with the Bank for any reason whatsoever so long as the termination of employment occurs during the Term, provided, however, that if the Executive or Bank give notice that the Agreement shall not be extended beyond the effective expiration date, the restrictions set forth in this Section 5 shall survive the termination of Executive’s employment with the Bank for a period of six (6) months.

(f) Notwithstanding the foregoing, Executive may elect to waive the payment provided for under Section 2(a)A of this Agreement in exchange for a release of all restrictions set forth in Section 5(a)-(e) of this Agreement. Executive must make his election under this Section 5(f) in writing and within 5 business days of receiving his Notice of Termination.

6. SOURCE OF PAYMENTS.

All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank. The Company, however, unconditionally guarantees payment and provision of all amounts and benefits due hereunder to Executive and, if such amounts and benefits due from the Bank are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Company.

7. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.

This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. Nothing in this Agreement shall confer upon Executive the right to continue in the employ of the Bank or shall impose on the Bank any obligation to employ or retain Executive in its employ for any period.

8. NO ATTACHMENT.

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of, Executive, the Bank and their respective successors and assigns.

9. MODIFICATION AND WAIVER.

(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

10. SEVERABILITY.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

11. HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. In addition, references herein to the masculine shall apply to both the masculine and the feminine.

12. GOVERNING LAW.

Except to the extent preempted by federal law, the validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, without regard to principles of conflicts of law of Pennsylvania.

13. ARBITRATION.

Any dispute or controversy arising under, or in connection with, this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator sitting in a location selected by Executive within twenty-five (25) miles from the location of the main office of the Bank, in accordance with the rules of the American Arbitration Association then in effect relating to employment disputes. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

14. PAYMENT OF LEGAL FEES.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank, only if Executive is successful pursuant to a legal judgment, arbitration or settlement.

15. INDEMNIFICATION.

The Bank shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been an officer of the Bank (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the cost of reasonable settlements.

16. SUCCESSORS TO THE BANK.

The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place.

17. REQUIRED PROVISIONS.

In the event any of the provisions of this Section 17 are in conflict with the other terms of this Agreement, this Section 17 shall prevail.

(a) The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, other than Termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause as defined in Section 2(b) above.

(b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while their contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

(c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(d) If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(e) All obligations under this contract shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his designee), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(f) Any payments made to employees pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

* * *

SIGNATURES

IN WITNESS WHEREOF, Fox Chase Bank has caused this Agreement to be executed and its seal to be affixed hereunto by a duly authorized officer, and Executive has signed this Agreement, on the day of July 6, 2007.

ATTEST:	FOX CHASE BANK


/s/ Jerry Holbrook			By:	/s/ Thomas M. Petro
Corporate Secretary	For the Entire Board of Directors

	FOX CHASE BANCORP, INC.
	*(guarantor)*

	By:	/s/ Thomas M. Petro

WITNESS:	EXECUTIVE


/s/ Michelle Davenport			/s/ Roger S. Deacon

EX-31.1 3 a07-19381_1ex31d1.htm EX-31.1

Exhibit 31.1

Certification

I, Thomas M. Petro, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Fox Chase Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2007		/s/ THOMAS M. PETRO
		Thomas M. Petro
		President and Chief Executive Officer

EX-31.2 4 a07-19381_1ex31d2.htm EX-31.2

Exhibit 31.2

Certification

I, Jerry D. Holbrook, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Fox Chase Bancorp, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2007		/s/ JERRY D. HOLBROOK
		Jerry D. Holbrook
		Chief Financial Officer and Secretary

EX-32 5 a07-19381_1ex32.htm EX-32

Exhibit 32.0

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Fox Chase Bancorp, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2007, as filed with the Securities and Exchange Commission (the “Report”), I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company as of and for the period covered by the Report.

		By:		/s/ THOMAS M. PETRO
				Thomas M. Petro
				President and Chief Executive Officer
				August 13, 2007


		By:		/s/ JERRY D. HOLBROOK
				Jerry D. Holbrook
				Chief Financial Officer and Secretary
				August 13, 2007