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 June 30, 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. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income. As of June 30, 2009 management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates particularly given the negligible inherent credit risk

associated with these securities. These investment securities are comprised of securities that are rated investment grade by at least one bond credit rating service.

Comparison of Financial Condition at June 30, 2009 and December 31, 2008

Total assets increased $12.3 million or 2.9% to $436.4 million at June 30, 2009 compared to $424.1 million at December 31, 2008. This increase was primarily due to a $20.1 million or 70.9% increase in total cash and cash equivalents and a $2.5 million or 0.9% increase in loans receivable, net of allowance for loan losses. The increase was partially offset by a $9.7 million or 25.6% decrease in investment securities available for sale and a $4.6 million or 14.5% decrease in mortgage backed securities available for sale. The increase in total cash and cash equivalents was primarily attributed to an increase in customer deposits as well as the decrease in investment securities available for sale that resulted from certain securities being called by the issuers and the decrease in mortgage backed securities available for sale which was due to normal principal repayments.

Total liabilities increased $12.7 million or 3.4% to $387.9 million at June 30, 2009 compared to $375.2 million at December 31, 2008. This increase was due to a $12.7 million or 3.8% increase in total deposits. Management believes the increase in deposits was primarily attributable to consumers seeking more stable investments, such as insured deposits, given the current economic environment.

Stockholders' equity decreased $401,000 to $48.5 million as of June 30, 2009 compared to $48.9 million at December 31, 2008. Beginning January of 2009, the Company commenced a 292,612 share repurchase program and has repurchased 111,000 shares at an average price of $8.15 per share through June 30, 2009, which decreased stockholders' equity by $905,000. The decrease was partially offset by net income of $625,000 for the six months ended June 30, 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 $11.2 million or 2.57% of total assets at June 30, 2009 from $7.0 million or 1.65% 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 June 30, 2009, the $11.2 million of nonperforming assets consisted of $1.7 million of accruing loans 90 days or more delinquent, $7.4 million of nonaccrual loans, and $2.1 million in OREO. At June 30, 2009, the $7.4 million of nonaccrual loans consisted of two single family real estate loans totaling $1.4 million, ten commercial real estate loans totaling $1.8 million, one real estate construction loan in the amount of $3.9 million, and one commercial business loan in the amount of $248,000. The amount of specific reserves related to nonaccrual loans was $249,000 as of June 30, 2009. Management continues to aggressively pursue the collection and resolution of all delinquent loans.

At June 30, 2009 and December 31, 2008, the allowance for loan losses amounted to $3.3 million and $3.2 million, respectively. At June 30, 2009, the allowance for loan losses amounted to 35.7% of nonperforming loans and 1.15% 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 and Six Months ended June 30, 2009 and June 30, 2008

General. Net income increased $129,000 or 152.6% to $213,000 or $0.03 per share for the three months ended June 30, 2009 as compared to $84,000 or $0.01 per share for the same period in 2008. The increase in net income was primarily due to the prior year $266,000 impairment charge on certain mutual funds and a $153,000 loss on the sale of certain mutual funds recorded during the three month period in 2008, and a increase in net interest income of $81,000 or 3.0% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. These items were partially offset by an increase in other expenses which included an increase of $277,000 or 543.1% in deposit insurance premiums for the three months ended June 30, 2009 when compared to the same period in 2008.

Net income increased $499,000 or 396.0% to $625,000 or $0.09 per share for the six months ended June 30, 2009 as compared to $126,000 or $0.02 per share for the same period in 2008. The increase in net income was primarily due to the prior year $629,000 impairment charge on certain mutual funds and a $153,000 loss on the sale of certain mutual funds recorded during the six month period in 2008, and a increase in net interest income of $370,000 or 7.0% for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. These items were partially offset by an increase in other expenses which included an increase of $389,000 or 637.7% in deposit insurance premiums for the six months ended June 30, 2009, including a $195,000 charge for an FDIC special assessment payable on September 30, 2009, when compared to the same period in 2008.

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 $81,000 or 3.0% during the three months ended June 30, 2009 as compared to the same period in 2008. This increase was the result of a $395,000 decrease in interest expense primarily due to a 57 basis point or 17.4% decrease in the average rates paid on interest bearing liabilities. The increase was partially offset by a $314,000 decrease in interest income as a result of a 44 basis point or 7.9% decrease in the average rates earned on interest earning assets and a $14.6 million or 4.2% increase in the average balance of interest bearing liabilities. As a result, the interest rate spread increased 13 basis points from 2.32% for the three months ended June 30, 2008 to 2.45% for the three months ended June 30, 2009.

Net interest income increased $370,000 or 7.0% during the six months ended June 30, 2009 as compared to the same period in 2008. This increase was the result of a $1.2 million decrease in interest expense primarily due to a 76 basis point or 21.5% decrease in the average rates paid on interest bearing liabilities. The increase was partially offset by an $830,000 decrease in interest income as a result of a 43 basis point or 7.5% decrease in the average rates earned on interest earning assets and an $8.8 million or 2.5% increase in the average balance of interest bearing liabilities. As a result, the interest rate spread increased 33 basis points from 2.16% for the six months ended June 30, 2008 to 2.49% for the six months ended June 30, 2009.

Interest Income. Interest income decreased $314,000 or 5.7% to $5.2 million for the three months ended June 30, 2009, compared to the same period in 2008. The decrease was due to a $138,000 or 78.4% decrease in interest income on balances due from depository institutions, a $52,000 or 14.0% decrease on interest income on mortgage backed securities, a $49,000 or 7.2% decrease in interest income from investment securities, and a $75,000 or 1.7% decrease in interest income on loans. The decrease in interest income on balances due from depository institutions was due to a 165 basis point or 80.9% decrease in rates earned on balances due from depository institutions, partially offset by a $4.1 million or 11.9% increase in the average balance of the balances due from depository institutions. The decrease in interest income on mortgage backed securities was due to a $3.7 million or 11.2% decrease in the average balance of the mortgage backed securities and a 15 basis point or 3.3% decrease in rates earned on mortgage backed securities. The decrease in interest earned on investment securities was due to a $1.4 million or 2.5% decrease in the average balance in investment securities and a 23 basis point or 4.8% decrease in rates earned on investment securities. The decrease in interest earned on loans was due to a 33 basis point or 5.2% decrease in rates earned on loans, partially offset by a $10.0 million increase in the average balance of the loans.

Interest income decreased $830,000 or 7.3% to $10.6 million for the six months ended June 30, 2009, compared to the same period in 2008. The decrease was due to a $404,000 or 85.6% decrease in interest income on balances due from depository institutions, a $97,000 or 12.6% decrease on interest income on mortgage backed securities, a $179,000 or 12.6% decrease in interest income from investment securities, and a $150,000 or 1.7% decrease in interest income on loans. The decrease in interest income on balances due from depository institutions was due to a 220 basis point or 84.0% decrease in rates earned on balances due from depository institutions and a $3.5 million or 9.8% decrease in the average balance of the balances due from depository institutions. The decrease in interest income on mortgage backed securities was due to a $3.8 million or 11.3% decrease in the average balance of the mortgage backed securities and a 7 basis point or 1.5% decrease in rates earned on mortgage backed securities. The decrease in interest earned on investment securities was due to a $6.4 million or 10.1% decrease in the average balance in investment securities and a 9 basis point or 1.9% decrease in rates earned on investment securities. The decrease in interest earned on loans was due to a 45 basis point or 6.9% decrease in rates earned on loans, partially offset by a $14.8 million or 5.5% increase in the average balance of the loans.

Interest Expense. Interest expense decreased $395,000 or 13.9% to $2.4 million for the three months ended June 30, 2009, compared to the same period in 2008. This decrease was due to a decrease of $395,000 or 17.6% in interest expense on deposits. The decrease in interest expense

on deposits was due to a 21.3% or 62 basis point decrease in the average rate paid, partially offset by a $14.6 million or 4.7% increase in the average balance outstanding.

Interest expense decreased $1.2 million or 1.9% to $5.0 million for the six months ended June 30, 2009, compared to the same period in 2008. This decrease was primarily due to a decrease of $1.2 million or 23.8% in interest expense on deposits. The decrease in interest expense on deposits was due to a 25.9% or 83 basis point decrease in the average rate paid, partially offset by an $8.8 million or 2.8% increase in the average balance of deposits.

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.

                             Average Balance Sheet

                          Three Months Ended June 30,



                                            2009                              2008
                                Average                           Average
(Dollars in Thousands)          Balance     Interest     Rate     Balance     Interest     Rate
Interest-earning assets:
Loans receivable
(1) (2) (3) (4)                $ 282,700   $    4,250     6.01 % $ 272,732   $    4,325     6.34 %
Mortgage-backed securities
(3) (4)                           28,867          320     4.43      32,521          372     4.58
Investment securities
(4) (5)                           55,434          630     4.55      56,854          679     4.78
Other interest-earning
assets                            38,673           38     0.39      34,557          176     2.04
Total interest-earning
assets                           405,674        5,238     5.16     396,664        5,552     5.60
Noninterest-earning assets        26,318                            22,825
Total assets                   $ 431,992                         $ 419,489

Interest-bearing
liabilities:
Deposits                       $ 323,999        1,856     2.29   $ 309,392        2,251     2.91
FHLB advances and other
borrowings                        37,047          589     6.36      37,079          589     6.35
Total interest-bearing
liabilities                      361,046        2,445     2.71     346,471        2,840     3.28
Noninterest-bearing
Liabilities                       21,922                            23,308
Total liabilities                382,968                           369,779
Stockholders' equity              49,024                            49,710
Total liabilities and
stockholders' equity           $ 431,992                         $ 419,489

Net interest-earning assets    $  44,628                         $  50,193
Net interest income/interest
rate spread                                $    2,793     2.45 %             $    2,712     2.32 %
Net yield on
interest-earning assets (4)                               2.75 %                            2.73 %

(2) Nonaccrual loans and loan fees have been included.

(3) Net interest income divided by interest-earning assets.

(4) The indicated yields are not reflected on a tax equivalent basis.

(5) Includes dividend income.

                             Average Balance Sheet

                           Six Months Ended June 30,



                                                 2009                                2008
                                    Average                             Average
(Dollars in Thousands)              Balance      Interest     Rate      Balance     Interest     Rate
Interest-earning assets:
Loans receivable
(1) (2) (3) (4)                   $   282,827   $    8,530      6.03 % $ 267,985   $    8,680      6.48 %
Mortgage-backed securities
(3) (4)                                30,070          674      4.48      33,884          771      4.55
Investment securities (4) (5)          56,767        1,332      4.69      63,170        1,511      4.78
Other interest-earning assets          32,503           68      0.42      36,038          472      2.62
Total interest-earning assets         402,167       10,604      5.27     401,077       11,434      5.70
Noninterest-earning assets             26,105                             21,939
Total assets                      $   428,272                          $ 423,016

. . .