Forward-Looking Statements

Alliance Bancorp, Inc. of Pennsylvania (the "Company") may from time to time make written or oral "forward-looking statements," including statements contained in the Company's filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the exhibits hereto and thereto), in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company's control). The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute competitors' products and services for the Company's products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date of this report. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

General

The Company's profitability is highly dependent on net interest income. The components that drive net interest income are the amounts of interest-earning assets and interest-bearing liabilities along with rates earned or paid on such rate sensitive instruments. The Company manages interest rate exposure by attempting to match asset maturities with liability maturities. In addition to managing interest rate exposure, the Company also considers the credit risk, prepayment risk and extension risk of certain assets. The Company maintains asset quality by

utilizing comprehensive loan underwriting standards and collection efforts as well as originating or purchasing primarily secured or guaranteed assets.

The Company's profitability is also affected by fee income, gain or loss on the sale of other real estate owned, general and administrative expenses, provisions for loan losses, other real estate owned expenses, and income taxes.

Critical Accounting Policies

In reviewing and understanding financial information for the Company, you are encouraged to read and understand the significant accounting policies used in preparing our consolidated financial statements included elsewhere herein. These policies are described in Note 2 of the notes to the consolidated financial statements in the December 31, 2008 annual report to stockholders. The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America (US GAAP) and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the periods presented. The following accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

Allowance for Loan Losses. The allowance for loan losses is established through a provision for loan losses charged to expense. Charges against the allowance for loan losses are made when management believes that the collectibility of loan principal is unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that management believes will cover known and inherent losses in the loan portfolio, based on evaluations of the collectibility of loans. The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, estimated losses relating to specifically identified loans, and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impaired loans, value of collateral, estimated losses on our commercial and residential loan portfolios and general amounts for historical loss experience. All of these estimates may be susceptible to significant change.

While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. Historically, our estimates of the allowance for loan losses have not required significant adjustments from management's initial estimates. In addition, the Department and the FDIC, as an integral part of their examination processes, periodically review our allowance for loan losses. The Department and the FDIC may require the recognition of adjustments to the allowance for loan losses based on their judgment of information available to them at the time of their examinations. To the extent that actual

outcomes differ from management's estimates, additional provisions to the allowance for loan losses may be required that would adversely impact earnings in future periods.

Income Taxes. Management makes estimates and judgments to calculate various tax liabilities and determine the recoverability of our deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenues and expenses. As of March 31, 2009, the Company carried $645,000 in deferred tax assets from the loss on the sale and impairment charges taken on certain mutual funds. The Company must generate capital gains within a certain time period to realize the tax benefit from these capital losses. We also estimate a deferred tax asset valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. These estimates and judgments are inherently subjective. Historically, our estimates and judgments to calculate our deferred tax accounts have not required significant revision to our initial estimates.

In evaluating our ability to recover deferred tax assets, we consider all available positive and negative evidence, including our past operating results, recent cumulative losses and our forecast of future taxable income. In determining future taxable income, we make assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require us to make judgments about our future taxable income and are consistent with the plans and estimates we use to manage our business. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings.

Other than Temporary Impairment of Investment Securities and Mortgage Backed Securities. The Company is required to perform periodic reviews of individual securities in its investment portfolio to determine whether a decline in the fair value of a security below its amortized cost is other than temporary. A review of other than temporary impairment requires management to make certain judgments regarding the nature of the decline, its effect on the consolidated financial statements and the probability, extent and timing of a valuation recovery and the Company's intent and ability to hold the security until market recovery. Management evaluates securities for other than temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions warrant such evaluations. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. If the decline in the market value of a security is determined to be other than temporary the Company would recognize the decline as a realized loss on the consolidated income statement.

Comparison of Financial Condition at March 31, 2009 and December 31, 2008

Total assets increased $3.9 million or 0.9% to $428.0 million at March 31, 2009 compared to $424.1 million at December 31, 2008. This increase was primarily due to an $8.4 million or 29.8% increase in total cash and cash equivalents, a $3.5 million or 1.3% increase in net loans and a $2.1 million or 8.7% increase in investment securities held to maturity. These increases were partially offset by a $10.0 million or 26.5% decrease in investment securities available for

sale and a $2.0 million or 6.2% decrease in mortgage-backed securities available for sale.

Total liabilities increased $3.8 million or 1.0% to $379.0 million at March 31, 2009 compared to $375.2 million at December 31, 2008. This increase was due to a $3.7 million or 1.1% increase in interest bearing deposits and a $336,000 or 2.5% increase in non-interest bearing deposits. These increases were partially offset by a $160,000 decrease in demand notes issued to the U.S. Treasury from December 31, 2008 to March 31, 2009.

Nonperforming assets, which consist of nonaccruing loans, accruing loans 90 days or more delinquent and other real estate owned (OREO) (which includes real estate acquired through, or in lieu of, foreclosure) increased to $10.8 million or 2.5% of total assets at March 31, 2009 from $7.0 million or 1.7% of total assets at December 31, 2008. This increase was primarily due to the placement of a $3.9 million residential real estate construction loan on nonaccrual. This loan is secured by 18 substantially completed condominium units, 2 of which have been sold and settled, located near center city Philadelphia. At March 31, 2009, the $10.8 million of nonperforming assets consisted of $1.3 million of accruing loans 90 days or more delinquent, and $7.9 million of nonaccrual loans, and $1.6 million in OREO. At March 31, 2009, the $7.9 million of nonaccrual loans consisted of two single family real estate loans totaling $1.4 million, ten commercial real estate loans totaling $2.6 million, and one real estate construction loan in the amount of $3.9. Management continues to aggressively pursue the collection and resolution of all delinquent loans.

At March 31, 2009 and December 31, 2008, the allowance for loan losses amounted to $3.2 million. At March 31, 2009, the allowance for loan losses amounted to 35.2% of nonperforming loans and 1.14% of total loans receivable, as compared to 45.3% and 1.13%, respectively, at December 31, 2008. The decrease in the allowance for loan losses to total nonperforming loans was due to our analysis of the underlying real estate collateral securing these loans which warranted little in additional reserves in most cases.

Although management uses the best information available to make determinations with respect to the provisions for loan losses, additional provisions for loan losses may be required to be established in the future should economic or other conditions change substantially. In addition, the Department and the FDIC, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to such allowance based on their judgments about information available to them at the time of their examination.

Comparison of Results of Operations for the Three Months ended March 31, 2009 and March 31, 2008

General. Net income increased $369,000 or 878.6% to $411,000 or $0.06 per share for the three months ended March 31, 2009 as compared to $42,000 or $0.01 per share for the same period in 2008. The increase in net income was primarily due to an impairment charge on certain mutual funds recorded during the three month period in 2008 and an increase in net interest income for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. These items were offset by an increase in other expenses and an increase in income tax expense.

Net Interest Income. Net interest income is determined by the interest rate spread (i.e., the difference between the yields earned on its interest-earning assets and the rates paid on its

interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities. Net interest income increased $288,000 or 11.3% during the three months ended March 31, 2009 as compared to the same period in 2008. The increase in net interest income was due to an $804,000 or 24.1% decrease in interest expense on interest bearing liabilities primarily the result of a 103 basis point or 29.5% decrease on rates paid on interest bearing deposits which was partially offset by a $516,000 or 8.8% decrease in the interest earned on interest earning assets primarily as a result of a $7.0 million or 1.7% decrease in the average balance of interest earning assets as well as a 7.2% or 42 basis point decrease in the average rates earned on interest earning assets.

As a result, the interest rate spread increased 51 basis points from 2.02% for the three months ended March 31, 2008 to 2.53% for the three months ended March 31, 2009. Based on the current market interest rate environment and increased competition, management anticipates downward pressure on the interest rate spread for the second quarter of 2009 which may negatively impact net interest income.

Interest Income. Interest income decreased $516,000 or 8.8% to $5.4 million for the three months ended March 31, 2009, compared to the same period in 2008. The decrease was due to a $266,000 or 89.9% decrease in interest income on balances due from depository institutions, a $131,000 or 15.7% decrease in interest income on investment securities, a $44,000 or 11.0% decrease in interest income on mortgage backed securities, and a $75,000 or 1.7% decrease on interest income on loans. The decrease in interest income on balances due from depository institutions was due to an $11.3 million or 30.0% decrease in the average balance of balances due from depository institutions and a 270 basis point or 85.4% decrease in the average yield earned on balances due from depository institutions. The decrease in interest income on investment securities was due to a $11.5 million or 16.5% decrease in the average balance of investment securities, partially offset by a 4 basis point or 0.8% increase in the average yield earned on investment securities. The decrease in interest income on mortgage backed securities was due to a $4.0 million or 11.2% decrease in the average balance of mortgage backed securities. The increase in interest income on loans was due to a $19.7 million or 7.5% increase in the average balance of loans outstanding, partially offset by a 57 basis point or 8.6% decrease in the average yield earned.

Interest Expense. Interest expense decreased $804,000 or 24.1% to $2.5 million for the three months ended March 31, 2009, compared to the same period in 2008. This decrease was due to a $797,000 or 29.0% decrease in interest expense on deposits and a $7,000 or 1.2% decrease in interest expense on FHLB advances and other borrowings.

The decrease in interest expense on deposits was due to a 103 basis point or 29.5% decrease in the rates paid on deposits, partially offset by a $3.0 million or 1.0% increase in the average balance of deposits. Interest expense on deposits is expected to continue to decrease as higher cost time deposits reprice at lower rates as the Company responds to the Federal Reserve's decreases in the federal funds rate. The decrease in interest expense on FHLB advances and other borrowings was due to an $888,000 or 2.3% decrease in the average balance of FHLB advances and other borrowings, partially offset by a 7 basis point increase in the rates paid on FHLB advances and other borrowings.

Average Balances, Net Interest Income and Yields Earned and Rates Paid. The following average balance sheet table sets forth for the periods indicated, information on the Company regarding: (i) the total dollar amounts of interest income on interest-earning assets and the resulting average yields; (ii) the total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs; (iii) net interest income; (iv) interest rate spread;
(v) net interest-earning assets (interest-bearing liabilities); (vi) the net yield earned on interest-earning assets; and (vii) the ratio of total interest-earning assets to total interest-bearing liabilities. Information is based on average daily balances during the periods presented.

                                              Three Months Ended March 31,
                                         2009                               2008
                            Average                            Average
(Dollars in Thousands)      Balance     Interest     Rate      Balance     Interest     Rate

Interest-earning assets:
Loans receivable
(1) (2) (3) (4)            $ 282,956   $    4,280      6.05 % $ 263,240   $    4,355      6.62 %
Mortgage-backed
securities (3) (4)            31,287          355      4.54      35,246          399      4.53
Investment securities
(4) (5)                       58,163          701      4.82      69,636          832      4.78
Due from depository
institutions                  26,264           30      0.46      37,519          296      3.16
Total interest-earning
assets                       398,670        5,366      5.38     405,641        5,882      5.80
Noninterest-earning
assets                        25,840                             20,902
Total assets               $ 424,510                          $ 426,543

Interest-bearing
liabilities:
Deposits                   $ 318,577        1,956      2.46   $ 315,545        2,753      3.49
FHLB advances and other
borrowings                    37,053          582      6.28      37,941          589      6.21
Total interest-bearing
liabilities                  355,630        2,538      2.85     353,486        3,342      3.78
Noninterest-bearing
Liabilities                   19,960                             21,639
Total liabilities            375,590                            375,125
Stockholders' equity          48,920                             51,418
Total liabilities and
stockholders' equity       $ 424,510                          $ 426,543

Net interest-earning
assets                     $  43,040                          $  52,155
Net interest
income/interest rate
spread                                 $    2,828      2.53 %             $    2,540      2.02 %
Net yield on
interest-Earning assets
(4)                                                    2.84 %                             2.50 %

Provision for Loan Losses. The provision for loan losses amounted to $75,000 for the three months ended March 31, 2009 as compared to $165,000 for the three months ended March 31, 2008. The decrease for the three month period in the provision for loan losses was primarily due to a partial loan charge-off of $100,000 taken in the first quarter of 2008. Such provisions were primarily to maintain a reserve level deemed appropriate by management in light of factors such as the level of nonperforming loans and the current economic environment.

Other Income (Loss). Other income (loss) was $290,000 for the three months ended March 31, 2009 as compared to a loss of $43,000 for the same period in 2008. The increase was primarily the result of the Company identifying an impairment charge on its $20.0 million investment in certain mutual funds as other than temporary and recording a $363,000 pretax loss against operating income in the first quarter of 2008. These mutual funds were sold to Alliance Mutual Holding Company in the third quarter of 2008 at fair value. The increase in other income (loss) was partially offset by a $16,000 or 17.6% decrease in service charges on deposit accounts, a $6,000 or 6.3% decrease in management fees, a $2,000 or 5.1% decrease in other fee income, and a $4,000 or 4.3% decrease in the increase in cash surrender value of bank owned life insurance.

Other Expenses. Other expenses increased $159,000 or 6.5% to $2.6 million for the three months ended March 31, 2009 compared to the same period in 2008. The increase was primarily due to an $112,000 or 1,120.0% increase in deposit insured premiums the Company has been accruing. On February 27, 2009, the FDIC adopted an interim rule imposing a 20 basis point emergency special assessment on insured institutions as of June 30, 2009, payable on September 30, 2009. The interim rule also permits the FDIC to impose an additional special assessment after June 30, 2009, of up to 10 basis points, if necessary to maintain public confidence in federal deposit insurance. However, the FDIC has indicated that the amount of the special assessment may be reduced if congress increases the FDIC's borrowing authority. Also contributing to the increase in other expense was a $39,000 or 38.2% increase in professional fees, and a $28,000 or 2.0% increase in salaries and employee benefits. The increase in other expense was partially offset by a $22,000 or 27.9% decrease in advertising and marketing expense.

Income Tax Expense (Benefit). Income tax expense (benefit) amounted to $24,000 and $(159,000) for the three months ended March 31, 2009 and 2008, respectively, resulting in effective tax rates of 5.5% and (135.9%), respectively. The increase in income tax expense was primarily due to a higher amount of taxable income before income taxes.

Liquidity and Capital Resources

Liquidity, represented by cash and cash equivalents, is a product of its cash flows from operations. The primary sources of funds are deposits, borrowings, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, sales of loans, maturities and calls of investment securities and other short-term investments and income from operations. Changes in the cash flows of these instruments are greatly influenced by economic conditions and competition. Management attempts to balance supply and demand by managing the pricing of its loan and deposit products while maintaining a level of growth consistent with the conservative operating philosophy of the management and board of directors. Any excess funds are invested in overnight and other short-term interest-earning accounts. Cash flows are generated through the retail deposit market, its traditional funding source, for use in investing activities. In addition, the borrowings such as Federal Home Loan Bank advances may be

utilized for liquidity or profit enhancement. At March 31, 2009, the Company had $37.0 million of outstanding advances and approximately $91.7 million of additional borrowing capacity from the FHLB of Pittsburgh. Further, the Company has access to the Federal Reserve Bank discount window. At March 31, 2009 no such funds were outstanding.

The primary use of funds is to meet ongoing loan and investment commitments, to pay maturing savings certificates and savings withdrawals and expenses related to general operations of the Company. At March 31, 2009, the total approved loan commitments outstanding amounted to $5.6 million. At the same date, commitments under unused lines of credit amounted to $31.7 million. Certificates of deposit scheduled to mature in one year or less at March 31, 2009 totaled $175.0 million. Management believes that a significant portion of maturing deposits will remain with the Company. For the quarter ended March 31, 2009, there were no material changes in contractual obligations that were outside of the ordinary course of business. Management anticipates that it will continue to have sufficient cash flows to meet its current and future commitments.

Impact of Inflation and Changing Prices

The unaudited condensed consolidated financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company's . . .