NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION

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

The Bancorp’s primary business is holding the common stock of the Bank and making two loans to the ESOP. The Bancorp is authorized to pursue other business activities permissible by laws and regulations for savings and loan holding companies.

The Bancorp and the Bank (collectively referred to as the “Company”) provide a wide variety of financial products and services to individuals and businesses through the Bank’s eleven branches in Philadelphia, Richboro, Willow Grove, Warminster, Lahaska, Hatboro, Media and West Chester, Pennsylvania, and Ocean City, Marmora and Egg Harbor Township, New Jersey. The 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 Bank also owns approximately 45% of Philadelphia Mortgage Advisors (“PMA”), a mortgage banker located in Plymouth Meeting, Pennsylvania and Ocean City, New Jersey.

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

The consolidated financial statements include the accounts of the Bancorp and the Bank. The Bank’s operations include the accounts of its wholly owned subsidiaries, Fox Chase Financial, Inc., Fox Chase Service Corporation, 104 S. Oakland Ave., LLC and Davisville Associates, LLC. Fox Chase Financial Inc. is a Delaware-chartered investment holding company and its sole purpose is to manage and hold investment securities. Fox Chase Service Corporation is a Pennsylvania chartered company and its purposes are to facilitate the Bank’s investment in PMA and, for regulatory purposes, to hold commercial loans. At March 31, 2013, Fox Chase Service Corporation held $20.0 million in commercial loans. 104 S. Oakland Ave., LLC is a New Jersey-chartered limited liability company formed to secure, manage and hold foreclosed real estate. Davisville Associates, LLC is a Pennsylvania-chartered limited liability company formed to secure, manage and hold foreclosed real estate. 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.

During 2013 and 2012, the Bank engaged in certain business activities with PMA. These activities included providing a warehouse line of credit to PMA, as well as acquiring residential mortgage and home equity loans from PMA. The Bank recorded interest income from PMA on the warehouse line of $80,000 and $69,000 for the three months ended March 31, 2013 and 2012, respectively, as well as loan satisfaction fees, which are recorded in service charges and other fee income, from PMA of $12,000 and $13,000 for the three months ended March 31, 2013 and 2012, respectively. In addition, the Bank acquired total loans from PMA of $3.5 million for the three months ended March 31, 2012, which includes the cost of the loans. The Bank did not acquire any loans from PMA during the three months ended March 31, 2013.

The Company follows accounting principles and reporting practices that are in compliance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation and realizability of deferred tax assets, the evaluation of other-than-temporary impairment and the valuation of investment securities and assets acquired through foreclosure.

These interim financial statements do not contain all necessary disclosures required by GAAP for complete financial statements and therefore should be read in conjunction with the audited financial statements and the notes thereto included in Fox Chase Bancorp, Inc.’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 13, 2013. These financial statements include all normal and recurring adjustments which management believes were necessary in order to conform to GAAP. The results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other period.

Per Share Information

Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Unallocated shares in the ESOP and shares purchased to fund the Bancorp’s Equity Incentive Plans are not included in either basic or diluted earnings per share.

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

	Three Months Ended
	March 31,
	2013		2012
	(Unaudited)

Net income	$	1,827,000	$	1,187,000

Weighted-average common shares outstanding (1)	12,325,321		12,878,960
Average common stock acquired by stock benefit plans:
ESOP shares unallocated	(610,957)		(676,010)
Shares purchased by trust	(338,310)		(394,318)
Weighted-average common shares used to calculate basic earnings per share	11,376,054		11,808,632
Dilutive effect of:
Restricted stock awards	38,371		33,698
Stock option awards	188,208		59,407
Weighted-average common shares used to calculate diluted earnings per share	11,602,633		11,901,737

Earnings per share-basic	$	0.16	$	0.10
Earnings per share-diluted	$	0.16	$	0.10

Outstanding common stock equivalents having no dilutive effect	1,147,912		786,280

(1) Excludes treasury stock.