As filed with the Securities and Exchange Commission on November 5, 2010

Registration No. 333-169363

­ ­

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Pre-Effective Amendment No. 2 to the

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Alliance Bancorp, Inc. of Pennsylvania

and Alliance Bank Profit Sharing/401(k) Plan

 

 

 

 

(Exact name of registrant as specified in its articles of incorporation)

 

 

541 Lawrence Road

Broomall, Pennsylvania 19008

(610) 353-2900

 

 

 

 

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Dennis D. Cirucci

President and Chief Executive Officer

Alliance Bancorp, Inc. of Pennsylvania

541 Lawrence Road

Broomall, Pennsylvania 19008

(610) 353-2900

 

 

 

 

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies to:

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

The Registrant hereby amends this Registration Statement on such date as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

 

 

PROSPECTUS

(Proposed holding company for Alliance Bank)

Up to 3,565,000 Shares of Common Stock for Sale

(Anticipated Maximum)

 

Alliance Bancorp, Inc. of Pennsylvania, a newly formed Pennsylvania corporation (which we refer to as “Alliance Bancorp — New”), is offering up to 3,565,000 shares of its common stock to the public in connection with the “second step” conversion of Alliance Mutual Holding Company from the mutual to the stock form of organization. All shares of common stock being offered for sale will be sold at a price of $10.00 per share. The shares being offered represent Alliance Mutual Holding Company’s current 59.5% ownership interest in the existing mid-tier holding company for Alliance Bank, a federally chartered corporation also known as Alliance Bancorp, Inc. of Pennsylvania (which we refer to as “Alliance Bancorp”). The remaining 40.5% ownership interest in Alliance Bancorp is now owned by public shareholders and will be exchanged for shares of common stock of Alliance Bancorp — New. The common stock of Alliance Bancorp is currently listed on the Nasdaq Global Market under the symbol “ALLB.” We expect that the common stock of Alliance Bancorp — New will trade under the symbol “ALLBD” for a period of 20 trading days after completion of the conversion and offering. Thereafter, the trading symbol will be “ALLB.”

We are offering shares of common stock in a “subscription offering” to eligible depositors of Alliance Bank. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given to residents of our local communities and the shareholders of Alliance Bancorp. We must sell a minimum of 2,635,000 shares to complete the offering. Stifel, Nicolaus & Company, Incorporated will assist us in selling our common stock on a best efforts basis in the subscription and community offerings. We also may offer for sale shares of common stock not purchased in the subscription offering or community offering in a “syndicated community offering” through a syndicate of selected broker-dealers, with Stifel, Nicolaus & Company, Incorporated serving as a sole book-running manager. We retain the right to accept or reject, in part or in whole, any order received in the community offering or the syndicated community offering. Stifel, Nicolaus & Company, Incorporated is not obligated to purchase any shares of common stock that are being offered for sale.

The minimum order is 25 shares. The subscription offering will end at 2:00 p.m., Eastern Time, on          , 2010. We expect that the community offering, if held, will terminate at the same time, although it may continue without notice to you until          , 2010. The offering may be extended further, if the Office of Thrift Supervision approves a later date. No single extension may exceed 90 days and the offering must be completed by          , 2012. Once submitted, orders are irrevocable unless the offering is terminated or is extended beyond          , 2010, or the number of shares of common stock to be sold is increased to more than 4,099,750 shares or decreased to less than 2,635,000 shares. If we extend the offering beyond          , 2010, all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will promptly return your funds, with interest calculated at Alliance Bank’s passbook rate or cancel your deposit account withdrawal authorization. If we intend to sell fewer than 2,635,000 shares or more than 4,099,750 shares, we will promptly return all funds, with interest, and set a new offering range. All subscribers will be notified and given the opportunity to place a new order. Funds received prior to the completion of the offering will be held in a segregated account at Alliance Bank and will earn interest calculated at Alliance Bank’s passbook savings rate, which is currently     % per annum.

This investment involves a degree of risk, including the possible loss of principal. Please read “Risk Factors” beginning on page 21.

 

OFFERING SUMMARY
Price Per Share: $10.00

 

 

 

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

Stifel Nicolaus Weisel

 

For assistance, please contact the Stock Information Center, toll-free, at (          )          -          

The date of this prospectus is           , 2010

 

MAP OF OUR MARKET AREA

 

 

 

 

TABLE OF CONTENTS

 

 

SUMMARY

	•	Expanding our Market Presence.  We have increased our market penetration through the use of television, print media and outdoor sign marketing campaigns and by increasing the products and services we offer. We incentivize our employees to cross-sell our products and emphasize a Customer First® mentality in an effort to maximize the number of our products that each customer, household or business utilizes.
	•	Complementary acquisitions.  In addition to organic growth, we continue to evaluate market expansion acquisition opportunities to acquire other financial institutions or financial service companies (such as wealth management and insurance companies) in our current market area as well as contiguous market areas that afford us the opportunity to add complementary products to our existing businesses, although we currently have no plans, agreements or understandings with respect to any acquisitions or de novo openings.
	•	De novo branching.  The net proceeds from the offering will facilitate our ability to add new branch locations, either on a de novo basis or through acquisitions to provide our customers with better access and service in addition to filling any gaps in our footprint. While our business plan indicates our intention to open a new de novo branch office in each of the next two years, any such openings will be subject to, among other factors, market conditions, the economic environment and the identification of sites which are acceptable to us being available within our targeted expense range. We currently have no specific plans, agreements or understandings with respect to any acquisitions or de novo openings.

	•	Emphasizing Origination of Commercial Real Estate Loans.  Commercial real estate loans are attractive because they generally provide us with higher yields and less interest rate risk because they typically have adjustable rates of interest and/or shorter terms to maturity in comparison to

		traditional single-family residential mortgage loans. At June 30, 2010, $136.9 million or 47.6% of our total loan portfolio consisted of commercial real estate loans. The net proceeds from the offering will increase our capital, although we currently maintain regulatory capital in excess of “well capitalized” standards, and will facilitate our ability to expand our loan relationships, consistent with our current underwriting guidelines. We intend to continue to emphasize growth in our commercial real estate lending in a manner consistent with our loan underwriting policies and procedures. Commercial real estate loans generally are considered to have a higher risk of loss than single-family residential mortgage loans due to, among other things, the fact that repayment of commercial real estate loans often depends on the successful operation of a business or the underlying property securing the loan as well as the fact that commercial real estate loans often typically involve larger loan balances to single borrowers or groups of related borrowers. See “Risk Factors — Risks Related to Our Business — Our Loan Portfolio Includes a Significant Amount of Commercial Real Estate Loans and Construction Loans, Which Have a Higher Risk of Loss than Conforming, Single-Family Residential Mortgage Loans.”

	•	Expanding Business Banking Operations.  We hired an additional loan officer in 2009 and are currently seeking more relationship managers and loan officers to facilitate increased sales calls on local real estate investors, builders and other area businesses to capitalize on our commercial banking experience and to further penetrate the markets we serve. As a community based bank, we believe that we offer high quality customer service by combining locally based management for fast decisions on loan applications and approvals with customized deposit services which are attractive to small and medium sized businesses.
	•	Controlling Non-interest Expense.  We monitor our expense ratios closely and strive to improve our efficiency ratio through expense control and increases in non interest income and in net interest income. Our largest non-interest expense is compensation. We work to limit growth of compensation expense by controlling increases in the number of employees to those needed to support our growth and by maximizing the use of technology to increase efficiency.
	•	Considering New Product Lines and Businesses.  We continue to evaluate new product lines in our efforts to maintain a competitive edge and provide our customers with a broad array of products and services to meet the needs of our retail and business customers. In particular, we continue to evaluate financial products to expand our product offerings and improve our non-interest income. In addition, we continue evaluate opportunities to provide our customers with wealth management and insurance products and services and to increase our non-interest income.
	•	Continuing Residential Mortgage Lending.  As a community bank we continue our mission of supporting the communities we serve by offering a strong line of traditional single-family residential mortgage products. We offer first and second mortgages of various terms using fixed or adjustable rate products. In addition, we offer home equity loans and lines of credit to support short term financing needs. At June 30, 2010, our loans secured by single-family residential mortgages amounted to $110.4 million or 38.4% of our total loan portfolio. At such date, our single-family residential loans included $20.0 million in home equity loans and lines of credit. Our single-family residential loan portfolio also includes loans which are considered “subprime.” Our subprime loans amounted to $23.2 million, or 8.1% of our total loan portfolio, at June 30, 2010. We are continuing to originate subprime loans. By their nature, subprime loans generally are considered to have a greater degree of risk than conforming single-family residential mortgage loans. See “Risk Factors — Risks Related to Our Business — We Originate Subprime Mortgage Loans For Our Portfolio and Subprime Loans Have a Higher Risk of Loss than Conforming Single-Family Residential Mortgage Loans.” We reported $1.2 million or 5.4% of our subprime loans as non-performing at June 30, 2010. We recognize the additional risk associated with subprime lending and utilize a higher risk-weighting factor in maintaining our allowance for loan losses with respect to these loans.

FIRST:		Eligible Account Holders (depositors at Alliance Bank with $50 or more on deposit as of June 30, 2009).
SECOND:		Alliance Bank’s employee stock ownership plan.
THIRD:		Supplemental Eligible Account Holders (depositors at Alliance Bank with $50 or more on deposit as of          , 2010).
FOURTH:		Other Depositors (depositors at Alliance Bank as of          , 2010 who do not qualify as Eligible Account Holders or Supplemental Eligible Account Holders).

Company Name and Ticker Symbol		Exchange		Headquarters		Total Assets
						(In millions)
New Hampshire Thrift Bancshares, Inc. (NHTB)		Nasdaq		Newport, New Hampshire		$	939
Harleysville Savings Financial Corporation (HARL)		Nasdaq		Harleysville, Pennsylvania			844
TF Financial Corporation (THRD)		Nasdaq		Newtown, Pennsylvania			721
BCSB Bancorp, Inc. (BCSB)		Nasdaq		Baltimore, Maryland			601
Central Bancorp, Inc. (CEBK)		Nasdaq		Somerville, Massachusetts			542
Elmira Savings Bank (ESBK)		Nasdaq		Elmira, New York			499
Newport Bancorp, Inc. (NFSB)		Nasdaq		Newport, Rhode Island			450
WVS Financial Corp. (WVFC)		Nasdaq		Pittsburgh, Pennsylvania			376
Rome Bancorp, Inc. (ROME)		Nasdaq		Rome, New York			330
Mayflower Bancorp, Inc. (MFLR)		Nasdaq		Middleboro, Massachusetts			256

	•	our historical, present and projected operating results including, but not limited to, historical income statement information such as return on assets, return on equity, net interest margin trends, operating expense ratios, levels and sources of non-interest income, and levels of loan loss provisions;
	•	our historical, present and projected financial condition including, but not limited to, historical balance sheet size, composition and growth trends, loan portfolio composition and trends, liability composition and trends, credit risk measures and trends, and interest rate risk measures and trends;
	•	the economic, demographic and competitive characteristics of Alliance Bancorp’s primary market area including, but not limited to, employment by industry type, unemployment trends, size and growth of the population, trends in household and per capita income, deposit market share and largest competitors by deposit market share;
	•	a comparative evaluation of the operating and financial statistics of Alliance Bancorp’s with those of other similarly situated, publicly traded companies, which included a comparative analysis of balance sheet composition, income statement ratios, credit risk, interest rate risk and loan portfolio composition;
	•	the impact of the offering on Alliance Bancorp’s consolidated stockholders’ equity and earning potential including, but not limited to, the increase in consolidated equity resulting from the offering, the estimated increase in earnings resulting from the reinvestment of the net proceeds of the offering, the estimated impact on the consolidated equity and earnings resulting from adoption of the employee benefit plans and the effect of higher consolidated equity on Alliance Bancorp’s future operations;
	•	the impact of consolidation of Alliance Mutual Holding Company with and into Alliance Bancorp, including the impact of consolidation of Allliance Mutual Holding Company’s assets and liabilities, the addition of certain expenses currently borne by Alliance Mutual Holding Company and the elimination of certain intercompany income and expenses; and
	•	the trading market for securities of comparable institutions and general conditions in the market for such securities.

		Price to Earnings				Price to Book				Price to Tangible
		Multiple				Value Ratio				Book Value Ratio
Alliance Bancorp — New (pro forma)
Minimum			55.53	x			57.80	%			57.80	%
MidPoint			65.94	x			64.72				64.72
Maximum			76.55	x			70.97				70.97
Maximum, as adjusted			89.00	x			77.40				77.40
Peer group companies as of August 20, 2010
Average			16.11	x			81.26				90.93
Median			14.55	x			81.87				86.75

	•	terminate the offering and promptly return all funds;
	•	promptly return all funds, set a new offering range and give all subscribers the opportunity to place a new order; or
	•	take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

																										100 Shares of
																		Total Shares of								Alliance Bancorp
																		Alliance								Common Stock
																		Bancorp — New								would be
										Shares of Alliance								Common Stock								Exchanged for
										Bancorp — New Stock								to be								the Following
		Shares to be Sold in								to be Exchanged for								Outstanding								Number of Shares				Equivalent
		the Offering								Current Common Stock								after the				Exchange				of Alliance				per Share
		Amount				Percent				Amount				Percent				Conversion				Ratio				Bancorp — New(1)				Value(2)
Minimum			2,635,000				59.5	%			1,792,183				40.5	%			4,427,183				0.6631				66			$	6.63
Midpoint			3,100,000				59.5				2,108,449				40.5				5,208,449				0.7801				78				7.80
Maximum			3,565,000				59.5				2,424,717				40.5				5,989,717				0.8971				89				8.97
15% above the maximum			4,099,750				59.5				2,788,424				40.5				6,888,174				1.0317				103				10.32

(1)		Cash will be paid instead of issuing any fractional shares.
(2)		Represents the value of shares of Alliance Bancorp-New common stock to be received by a holder of one share of Alliance Bancorp common stock at the exchange ratio, assuming a value of $10.00 per share.

	•	The additional funds resulting from the offering will increase our capital (although Alliance Bank is deemed to be “well-capitalized”) and support continued growth, as well as provide increased lending capability.
	•	We believe that our current mutual holding company structure has limited our opportunities to acquire other institutions because we cannot now issue stock in an acquisition in an amount that would cause Alliance Mutual Holding Company to own less than a majority of the outstanding shares of Alliance Bancorp. We expect that our conversion will facilitate our ability to acquire other institutions in the future by eliminating this requirement of majority ownership by our mutual holding company. Currently, we have no plans, agreements or understandings regarding any merger or acquisition transactions.
	•	The conversion to the fully public form of ownership will remove the uncertainties associated with the mutual holding company structure created by the recently enacted financial reform legislation, which will result in a change of the federal regulator for our holding company. We believe that the conversion and offering will eliminate some of the uncertainties associated with the recent legislation, and better position us to continue to meet all future regulatory requirements, including regulatory capital requirements.
	•	The conversion will increase the number of outstanding shares held by public shareholders, so we expect our stock to have greater liquidity.

	•	Current shareholders of Alliance Bancorp will receive a lower exchange ratio for their existing shares compared to transactions that take place when market and economic conditions are more favorable. However, there is no way that our board of directors could ascertain when, or if, market or economic conditions may become more or less favorable in this regard.
	•	In the initial period following the conversion and offering, the additional capital generated from the conversion and offering will likely result in a lower return on equity for Alliance Bancorp-New compared to many of its peers.
	•	Given the current economic slowdown and the reduced demand for new originations of loans meeting our underwriting standards, it may be a challenge for us to deploy the net proceeds from the conversion and offering as quickly as we would like.

	•	The plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by depositors of Alliance Bank;
	•	The plan of conversion and reorganization is approved by at least:

	•	two-thirds of the outstanding shares of Alliance Bancorp common stock; and

	•	a majority of the outstanding shares of Alliance Bancorp common stock held by the public shareholders;

	•	We sell at least the minimum number of shares offered; and
	•	We receive the final approval of the Office of Thrift Supervision and the Pennsylvania Department of Banking to complete the conversion and offering and related transactions.

										Price Performance from Initial Trading Date
																						Through
		Closing																				August 20,
Company Name and Ticker Symbol		Date				Exchange				1 Day				1 Week				1 Month				2010
Jacksonville Bancorp, Inc. (JXSB)			7/15/10				Nasdaq				6.5	%			5.8	%			3.0	%			1.2	%
Colonial Fin. Services, Inc. (COBK)			7/13/10				Nasdaq				0.5				(3.5	)			(3.5	)			(2.0	)
Viewpoint Fin. Group (VPFG)			7/7/10				Nasdaq				(5.0	)			(4.5	)			(3.0	)			(6.9	)
Oneida Financial Corp. (ONFC)			7/7/10				Nasdaq				(6.3	)			(6.3	)			(1.3	)			(4.0	)
Fox Chase Bancorp, Inc. (FXCB)			6/29/10				Nasdaq				(4.1	)			(4.0	)			(3.2	)			(6.5	)
Oritani Financial Corp. (ORIT)			6/24/10				Nasdaq				3.1				(1.4	)			(0.9	)			(5.7	)
Eagle Bancorp Montana, Inc. (EBMT)			4/5/10				Nasdaq				5.5				6.5				4.1				(6.8	)
Ocean Shore Holding Co. (OSHC)			12/21/09				Nasdaq				7.5				12.3				13.1				29.8
Northwest Bancshares, Inc. (NWBI)			12/18/09				Nasdaq				13.5				13.0				14.0				9.6
Average											2.4	%			2.0	%			2.5	%			1.0	%
Median											3.1				(1.4	)			(0.9	)			(4.0	)

										Percentage of Net
		Amount,				Amount,				Offering Proceeds
Use of Proceeds		at the Minimum				at the Maximum				at the Maximum
		(Dollars in thousands)
Loan to our employee stock ownership plan		$	1,221			$	1,652				5.0	%
Repurchase of shares for our recognition and retention plan			1,771				2,396				7.3
Investment in Alliance Bank			12,036				16,502				50.0
General corporate purposes — dividend payments, possible acquisitions and stock repurchases			9,044				12,454				37.7
Total		$	24,072			$	33,004				100.0	%

	•	persons on joint accounts with you;
	•	relatives living in your house;
	•	companies, trusts or other entities in which you have a controlling interest or hold a position as an officer or a similar position;
	•	trusts or other estates in which you have a substantial beneficial interest or as to which you serve as trustee or in another fiduciary capacity; or
	•	other persons who may be acting together with you.

	•	Full-time employees, including officers, are participants in our existing employee stock ownership plan which will purchase additional shares of common stock in the offering;
	•	Subsequent to completion of the offering, we intend to implement:

	•	a stock recognition and retention plan; and
	•	a new stock option plan;

	•	Employee Stock Ownership Plan.  The employee stock ownership plan provides retirement benefits to all eligible employees of Alliance Bank. The plan will purchase a number of shares of Alliance Bancorp — New common stock equal to 4.63% of the shares in the offering. When combined with the shares previously acquired by the employee stock ownership plan, as adjusted for the exchange ratio, the employee stock ownership plan will have acquired an aggregate of 7.0% of the shares of Alliance Bancorp-New to be outstanding after the conversion and offering. Alliance Bancorp — New will make a loan to the employee stock ownership plan to finance its purchase of shares in the offering (in our discretion, subject to OTS approval, the ESOP may purchase such shares in the open market after completion of the conversion and offering). As the loan is repaid and shares are released from collateral, the shares will be allocated to the accounts of participants based on a participant’s compensation as a percentage of total plan compensation. Non-employee directors are not eligible to

		participate in the employee stock ownership plan. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan.

	•	New Stock Option and Stock Recognition and Retention Plans.  We intend to implement a new stock option plan and a stock recognition and retention plan no earlier than six months after the conversion. Under these plans, we may award stock options and shares of restricted stock to employees and directors. Shares of restricted stock will be awarded at no cost to the recipient. Stock options will be granted at an exercise price equal to 100% of the fair market value of our common stock on the option grant date. We will incur additional compensation expense as a result of both plans. See “Pro Forma Data” for an illustration of the effects of these plans. Under the new stock option plan, we may grant stock options in an amount up to 10.0% of the common stock of Alliance Bancorp — New to be sold in the offering. Under the stock recognition and retention plan, we may award restricted stock in an amount equal to 4.0% of the to-be outstanding shares of Alliance Bancorp — New, or 6.72% of the shares sold in the offering. The plans will comply with all applicable Office of Thrift Supervision regulations.

		Value of
		177,087 Shares				208,338 Shares				239,589 Shares				275,527 Shares
		Awarded at				Awarded at				Awarded at				Awarded at 15%
		Minimum of				Midpoint of				Maximum of				Above Maximum of
Share Price		Range				Range				Range				Range
		(Dollars in thousands)
$8.00		$	1,417			$	1,667			$	1,917			$	2,204
10.00			1,771				2,083				2,396				2,755
12.00			2,125				2,500				2,875				3,306
14.00			2,479				2,917				3,354				3,857

		Value of
																		409,975
						263,500 Options				310,000 Options				356,500 Options				Options Granted
						Granted at				Granted at				Granted at				at 15% Above
		Per Share				Minimum of				Midpoint of				Maximum of				Maximum of
Per Share Exercise Price		Option Value				Range				Range				Range				Range
		(Dollars in thousands, except per share amounts)
$8.00		$	2.50			$	659			$	775			$	891			$	1,025
10.00			3.13				825				970				1,116				1,283
12.00			3.76				991				1,166				1,340				1,542
14.00			4.38				1,154				1,358				1,561				1,796

		Number of Shares to be Granted or Purchased																				Total Estimated Value of Grants
																		Dilution
																		Resulting
																		From
																		Issuance of
														As a % of				Shares for
		At				At				As a %				Common				Stock-								At
		Minimum of				Maximum of				of Shares				Stock to be				Based				At Minimum of				Maximum of
		Offering				Offering				in the				Outstanding After				Benefit				Offering				Offering
		Range				Range				Offering				the Offering				Plans(3)				Range				Range
		(Dollars in Thousands)
Employee stock ownership plan(1)			122,100				165,204				4.63	%			2.76	%			—	%		$	1,221			$	1,652
Recognition and retention plan awards(1)			177,087				239,589				6.72				4.00				3.85				1,771				2,396
Stock options(2)			263,500				356,500				10.00				5.95				5.62				825				1,116
Total			562,687				761,293				21.35	%			12.71	%			9.05	%		$	3,817			$	5,164

(1)		Assumes the value of the common stock of Alliance Bancorp — New is $10.00 per share for purposes of determining the total estimated value of the grants.
(2)		Assumes the value of a stock option is $3.13, which was determined using the Black-Scholes option-pricing formula. See “Pro Forma Data.”
(3)		Represents the dilution of stock ownership interest assuming that we use newly issued shares for the proposed recognition and retention plan and new stock option plan, and that shares are sold in the offering at the midpoint of the offering range. No dilution is reflected for the employee stock ownership plan as shares for it are assumed to be purchased in the offering.

												Percentage of Shares
								Estimated				Outstanding After the
Existing and New Stock Benefit Plans		Participants		Shares(1)				Value				Conversion
Employee Stock Ownership Plan:		All Employees
Shares previously purchased(2)					254,076			$	2,540,760				4.24	%
Shares to be purchased in this offering					165,204				1,652,040				2.76
Total employee stock ownership plan					419,280			$	4,192,800				7.00
Proposed New Recognition and Retention Plan(3)		Directors and Officers			239,589			$	2,395,890				4.00
Stock Option Plans:
1996 Stock Option Plan(4)		Directors and Officers			128,543			$	402,340	(5)			2.15	(4)
Proposed New Stock Option Plan(5)		Directors and Officers			356,500				1,115,845				5.95
Total stock option plans					485,043				1,518,185				8.10
Total stock benefits plans					1,143,912			$	8,106,875				19.10	%

(1)		Shares previously purchased by the employee stock ownership plan prior to the conversion and shares reflected for the 1996 stock option plan have been adjusted for the 0.8971 exchange ratio at the maximum of the offering range.
(2)		Approximately 203,373 (226,700 shares prior to adjustment for the exchange ratio) of these shares have been allocated to the accounts of participants.
(3)		The actual value of new recognition and retention plan awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share.
(4)		An aggregate of 143,287 shares previously were reserved for issuance under the 1996 stock option plan. All options previously granted under the 1996 stock option plan have been exercised or have been cancelled. No options remain outstanding under the 1996 stock option plan, and no additional options may be granted thereunder as the plan has terminated by its terms.
(5)		The fair value of stock options has been estimated at $3.13 per option using the Black-Scholes option-pricing model with the following assumptions: exercise price, $10.00; trading price on date of grant, $10.00; dividend yield, 0.96%; expected life, 10 years; expected volatility, 23.23%; and risk-free interest of 2.53%.

	•	prohibitions on the acquisition of more than 10% of our stock;
	•	limitations on voting rights of shares held in excess of 10% thereafter;
	•	staggered election of only approximately one-third of our board of directors each year;
	•	limitations on the ability of shareholders to call special meetings;
	•	advance notice requirements for shareholder nominations and new business;
	•	removals of directors only for cause and by a majority vote of all shareholders;
	•	requirement of a 75% vote of shareholders for certain amendments to the bylaws and certain provisions of the articles of incorporation;
	•	the right of the board of directors to issue shares of preferred or common stock without shareholder approval; and
	•	a 75% vote of shareholders’ requirement for the approval of certain business combinations not approved by two-thirds of the board of directors.

 

You should consider carefully the following risk factors in deciding how to vote on the conversion and before purchasing Alliance Bancorp — New common stock.

 

Risks Related to Our Business

 

Our Loan Portfolio Includes A Significant Amount of Commercial Real Estate Loans and Construction Loans, Which Have a Higher Risk of Loss than Conforming, Single-Family Residential Mortgage Loans.

 

As of June 30, 2010, $136.9 million or 47.6% of our loan portfolio consisted of commercial real estate loans and $24.1 million or 8.4% of our loan portfolio consisted of construction loans. Commercial real estate loans and construction loans are generally considered to have a higher risk of loss than conforming, single-family residential mortgage loans. Commercial real estate loans generally are considered to have a higher risk of loss because repayment of the loans often depends on the successful operation of a business or the underlying property securing the loan. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Accordingly, an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. We seek to minimize these risks through our underwriting policies, which require such loans to be qualified on the basis of the property’s net income and debt service ratio; however, there is no assurance that our underwriting policies will protect us from credit-related losses. Construction loans generally have a higher risk of loss than single-family residential mortgage loans due primarily to the critical nature of the initial estimates of a property’s value upon completion of construction compared to the estimated costs, including interest, of construction as well as other assumptions. If the estimates upon which construction loans are made prove to be inaccurate, we may be confronted with projects that, upon completion, have values which are below the loan amounts. Commercial real estate loans and construction loans are also typically larger than single-family residential mortgage loans. The deterioration of one or more of these loans could cause a significant increase in non-performing loans, which could adversely affect our results of operations by requiring us to increase our provisions for loan losses. The net proceeds from the offering will increase our capital and facilitate our ability to make larger commercial real estate and construction loans by increasing our internal loans to one borrower limits.

 

We Originate Subprime Mortgage Loans For Our Portfolio and Subprime Loans Have a Higher Risk of Loss than Conforming Single-Family Residential Mortgage Loans.

 

Our single-family residential mortgage loan portfolio includes loans which are considered “subprime” due to the credit scores of our borrowers being lower than specified thresholds or, to a lesser extent, loan documentation issues. At June 30, 2010, we had $23.2 million of subprime loans, which constitutes 8.1% of our total loan portfolio at such date. At such date, $1.2 million, or 5.4%, of our subprime loans were considered non-performing loans. By their nature, subprime loans are generally considered to have a greater degree of risk than conforming single-family residential mortgage loans because the lower credit score of the borrower may indicate a reduced ability to remain current on loan payments. As a result of the composition of our loan portfolio, our credit risk profile will be higher than traditional thrift institutions that have higher concentrations of conforming one- to four-family residential loans.

 

Our Allowance for Losses on Loans May Not Be Adequate to Cover Probable Losses.

 

We have established an allowance for loan losses based upon various assumptions and judgments about the collectibility of our loan portfolio which we believe is adequate to offset probable losses on our existing loans. Since we must use assumptions regarding individual loans and the economy, our current allowance for loan losses may not be sufficient to cover actual loan losses, and increases in the allowance may become necessary in the future. Any future declines in real estate market conditions, general economic conditions or changes in regulatory policies may require us to increase our allowance for loan losses, which would adversely affect our results of operations. We may also need to significantly increase our provision for loan losses,

particularly if one or more of our larger loans or credit relationships becomes delinquent. In addition, federal regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize loan charge-offs. Our allowance for loan losses amounted to 31.9% of non-performing loans at June 30, 2010.

 

Our Loans are Concentrated to Borrowers In Our Market Area, Which Has Experienced an Economic Downturn, and That Has Adversely Affected the Value of Collateral Securing our Loans.

 

The preponderance of our total loans are to individuals and/or secured by properties located in our market area of the greater Philadelphia metropolitan area and surrounding areas in southeastern Pennsylvania and the contiguous counties in New Jersey and Delaware. We have relatively few loans outside of our market. As a result, we have a greater risk of loan defaults and losses in the event of an economic downturn in our market area as adverse economic changes may have a negative effect on the ability of our borrowers to make timely repayment of their loans. Beginning in 2008 and continuing in 2009 and 2010, our market area has experienced a rise in unemployment as well as certain declines in real estate values, both residential and commercial. The decline in real estate values has adversely affected the value of certain collateral securing loans in our portfolio. Based on data obtained from the National Association of Realtors, median single-family home prices in the Philadelphia Metropolitan Statistical Area (“MSA”) declined by 5.0% at June 30, 2010 compared to December 31, 2007. In addition, we have seen an increased amount of foreclosure activity in our market area. According to data obtained from RealtyTrac, total foreclosure activity in Delaware and Chester Counties, Pennsylvania, increased by approximately 147% for the third quarter of 2010 compared to the fourth quarter of 2007. Continuing increases in unemployment or declines in collateral values could be a factor requiring us to make additional provisions to the allowance for loan losses, which would have a negative impact on net income. Additionally, if we are required to liquidate a significant amount of collateral during a period of reduced real estate values to satisfy the debt, our earnings and capital could be adversely affected.

 

Our Non-Performing Assets Have Increased in Recent Periods and Have Adversely Affected Our Results of Operations.

 

Our non-performing assets, which consist of non-accruing loans, accruing loans 90 days or more past due and other real estate owned and acquired by foreclosure or by accepting a deed-in-lieu of foreclosure (“OREO”), have increased in recent periods, which has had a negative impact on our results of operations. Our total non-performing assets increased to $16.1 million, or 3.6% of total assets, at June 30, 2010 compared to $10.8 million and $7.0 million at December 31, 2009 and 2008, respectively. In large part as a result of the increases in our level of non-performing assets, our provisions for loan losses, which are reflected as a charge to earnings, amounted to $1.2 million for the six months ended June 30, 2010 and $528,000 and $585,000 for the years ended December 31, 2009 and 2008, respectively. If our non-accruing loans at June 30, 2010 and at December 31, 2009 and 2008 had been current in accordance with their respective terms, we would have recorded an additional $214,000, $199,000 and $226,000 in interest income during the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008, respectively. In addition, we recognized $135,000 and $107,000 in provisions for losses on OREO during the six-months ended June 30, 2010 and the year ended December 31, 2009, respectively. Our ability to manage and reduce the level of our non-performing assets without incurring significant additional provisions for loan losses or losses related to OREO is likely to bear a key factor in our future results. No assurance can be given that we will be able to reduce the level of our non-performing assets without incurring additional provisions for loan losses or losses related to OREO.

 

Our Results of Operations are Significantly Dependent on Economic Conditions and Related Uncertainties.

 

Banking is affected, directly and indirectly, by domestic and international economic and political conditions and by governmental monetary and fiscal policies. Conditions such as inflation, recession, unemployment, volatile interest rates, real estate values, government monetary policy, international conflicts, the actions of terrorists and other factors beyond our control may adversely affect our results of operations. As a result of the downturn in the economy accompanying the national recession, among other factors, we saw a

significant increase in delinquent and non-performing loans during the first six months of 2010 and the years ended December 31, 2009 and 2008 over the respective prior periods as well as declines in property values of the collateral securing loans we have made. The negative economic factors being experienced in our market area could continue to have adverse effects upon our operations. We are particularly sensitive to changes in economic conditions and related uncertainties in southeastern Pennsylvania because we derive substantially all of our loans, deposits and other business from the greater Philadelphia region in southeastern Pennsylvania and contiguous counties in New Jersey and Delaware. Accordingly, we remain subject to the risks associated with a continuing and prolonged decline in the national or local economies. Changes in interest rates also could adversely affect our net interest income and have a number of other adverse effects on our operations, as discussed further in the risk factors below.

 

Future Changes in Interest Rates Could Reduce Our Profits.

 

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:

 

 

As a result of our historical focus on one- to four-family residential real estate loans, a substantial amount of our loans have fixed interest rates. Additionally, many of our securities investments have fixed interest rates. Like many savings institutions, our focus on deposit accounts as a source of funds, which have no stated maturity date or short contractual maturities, results in our liabilities having a shorter duration than our assets. For example, as of June 30, 2010, 69.2% of our loans had contractual maturities of more than five years, while 77.8% of our certificates of deposit had maturities of one year or less. This imbalance can create significant earnings volatility, because market interest rates change over time. In a period of rising interest rates, the interest income earned on our assets, such as loans and investments, may not increase as rapidly as the interest paid on our liabilities, such as deposits. In a period of declining interest rates, the interest income earned on our assets may decrease more rapidly than the interest paid on our liabilities, as borrowers prepay mortgage loans, and mortgage-backed securities and callable investment securities are called or prepaid, thereby requiring us to reinvest these cash flows at lower interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Asset and Liability Management.”

 

Changes in interest rates create reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities in a declining interest rate environment. Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans. Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates.

 

Any Future Increases in Federal Deposit Insurance Corporation Insurance Premiums or Special Assessments Will Adversely Impact Our Earnings.

 

In May 2009, the Federal Deposit Insurance Corporation adopted a final rule levying a five basis point special assessment on each insured depository institution. We recorded an expense of approximately $195,000 during the year ended December 31, 2009, to reflect the special assessment. Any further special assessments that the Federal Deposit Insurance Corporation levies will be recorded as an expense during the appropriate period. In addition, the Federal Deposit Insurance Corporation increased the general assessment rate and, therefore, our Federal Deposit Insurance Corporation general insurance premium expense has increased compared to prior periods.

 

The Federal Deposit Insurance Corporation also issued a final rule pursuant to which all insured depository institutions were required to prepay on December 30, 2009 their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. We prepaid $2.3 million of our assessments on December 30, 2009, based on our deposits and assessment rate as of September 30, 2009. The prepaid balance

will be reduced by the actual expense for our quarterly assessments, until the balance is exhausted. Depending on how our actual assessments compare to the estimated assessments, the prepaid balance may be exhausted earlier than or later than the planned three year time period.

 

The Requirement to Account for Certain Assets at Estimated Fair Value, and a Proposal to Account for Additional Financial Assets and Liabilities at Estimated Fair Value, May Adversely Affect Our Stockholders’ Equity and Results of Operations.

 

We report certain assets, including securities, at fair value, and a recent proposal would require us to report nearly all of our financial assets and liabilities at fair value. Generally, for assets that are reported at fair value, we use quoted market prices or valuation models that utilize observable market inputs to estimate fair value. Because we carry these assets on our books at their estimated fair value, we may incur losses even if the asset in question presents minimal credit risk. Under current accounting requirements, elevated delinquencies, defaults, and estimated losses from the disposition of collateral in our mortgage-backed securities portfolio may require us to recognize additional other-than-temporary impairment in future periods with respect to our securities portfolio. The amount and timing of any impairment recognized will depend on the severity and duration of the decline in the estimated fair value of the asset and our estimate of the anticipated recovery period. Under proposed accounting requirements, we may be required to record reductions in the fair value of nearly all of our financial assets and liabilities (including loans) either through a charge to net income or through a reduction to accumulated other comprehensive income (loss). Accordingly, we could be required to record charges on assets such as loans where we have no intention to sell the loan and expect to receive repayment in full on the loan. This could result in a decrease in net income, or a decrease in our stockholders’ equity, or both.

 

Strong Competition Within Our Market Area Could Hurt our Profits and Slow Growth.

 

We face intense competition both in making loans and attracting deposits. This competition has made it more difficult for us to make new loans and attract deposits. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which would reduce net interest income. Competition also makes it more difficult to maintain and improve market share of loans and deposits. At June 30, 2009, which is the most recent date for which data is available from the FDIC, we held approximately 3.2% of the deposits in Delaware County, Pennsylvania and less than 1.0% of the deposits in Chester County, Pennsylvania. Some of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. We expect continued strong competition in the future. Our profitability depends upon our continued ability to compete successfully in our market area.

 

We May Not Succeed In Our Plan To Grow.

 

We intend to seek to either acquire other financial institutions and/or branch offices. Alliance Bank has never acquired another banking institution and we cannot assure you that we will be able to grow through acquisitions or, if we do, successfully integrate other financial institutions or branch offices. Our ability to successfully acquire other institutions depends on our ability to identify, acquire and integrate such institutions into our franchise. Currently, we have no agreements or understandings with anyone regarding an acquisition. In addition to acquisitions, we may seek to grow organically by opening new branch offices. Our ability to establish new branch offices depends on whether we can identify advantageous locations and generate new deposits and loans from those locations that will create an acceptable level of net income. New branches also typically entail start-up expenses. We cannot assure you that we will be successful in our plan to grow.

 

We Have A Significant Deferred Tax Asset and Cannot Assure It Will Be Fully Realized.

 

We had net deferred tax assets of $4.7 million as of June 30, 2010. We did not establish a valuation allowance against our federal net deferred tax assets as of June 30, 2010 as we believe that it is more likely than not that all of these assets will be realized. In evaluating the need for a valuation allowance, we estimated future taxable income based on management’s forecasts. This process required significant judgment by

management about matters that are by nature uncertain. If future events differ from our current forecasts, we may need to establish a valuation allowance, which could have a material adverse effect on our future results of operations and financial condition.

 

We Operate in a Highly Regulated Environment and We May Be Adversely Affected By Changes in Laws and Regulations.

 

Alliance Bank is subject to extensive regulation, supervision and examination by the Pennsylvania Department of Banking and by the Federal Deposit Insurance Corporation. Alliance Bancorp — New will be subject to regulation and supervision by the Office of Thrift Supervision. Such regulation and supervision governs the activities in which an institution and its holding company may engage, and are intended primarily for the protection of the insurance fund and the depositors and borrowers of Alliance Bank rather than for holders of Alliance Bancorp — New common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

 

Recently Enacted Regulatory Reform May Have a Material Impact on Our Operations.

 

On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act that, among other things, imposes new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies, including Alliance Bank. Under the new law, Alliance Bancorp’s primary regulator, the Office of Thrift Supervision, will be eliminated. Savings and loan holding companies will be regulated by the Federal Reserve Board, which will have the authority to promulgate new regulations governing Alliance Bancorp — New that will impose additional capital requirements and may result in additional restrictions on investments and other holding company activities. The law also creates a new consumer financial protection bureau that will have the authority to promulgate rules intended to protect consumers in the financial products and services market. The creation of this independent bureau could result in new regulatory requirements and raise the cost of regulatory compliance. The federal preemption of state laws currently accorded federally chartered financial institutions will be reduced. In addition, regulation mandated by the new law could require changes in regulatory capital requirements, loan loss provisioning practices, and compensation practices which may have a material impact on our operations. Because the regulations under the new law have not been promulgated, we cannot determine the full impact on our business and operations at this time. See “Regulation — Recently Enacted Regulatory Reform.”

 

We depend on the skills and performance of management.

 

We depend heavily on our management team to provide leadership and to implement our strategic plan. Our senior management team provides valuable financial expertise and administrative guidance. The loss of any member of our senior management team could impair our ability to succeed. We can give no assurances, however, that these executive officers will continue in their capacities for any specific periods of time. The loss of services of any member of our senior management team may make it difficult for us to implement our business strategy and obtain and retain customers. It may be difficult to replace any senior management team member, and, upon the loss of any senior officer, we would lose the benefit of the knowledge he or she gained during his or her tenure with us.

 

If Our Investment in the Common Stock of the Federal Home Loan Bank of Pittsburgh is Classified as Other-Than-Temporarily Impaired or as Permanently Impaired, Our Earnings and Stockholders’ Equity Could Decrease.

 

We own common stock of the Federal Home Loan Bank of Pittsburgh. We hold this stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank of Pittsburgh’s advance program. The aggregate cost and fair value of our Federal Home

Loan Bank of Pittsburgh common stock as of June 30, 2010 was $2.4 million based on its par value. There is no market for our Federal Home Loan Bank of Pittsburgh common stock.

 

Published reports indicate that certain member banks of the Federal Home Loan Bank System may be subject to accounting rules and asset quality risks that could result in materially lower regulatory capital levels. In an extreme situation, it is possible that the capital of a Federal Home Loan Bank, including the Federal Home Loan Bank of Pittsburgh, could be substantially diminished or reduced to zero. In December of 2008, the FHLB notified member banks that it was suspending dividend payments and the repurchase of capital stock. Consequently, we believe that there is a risk that our investment in Federal Home Loan Bank of Pittsburgh common stock could be impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the after-tax amount of the impairment charge. In addition, while we recently have repaid all of our remaining advances from the Federal Home Loan Bank of Pittsburgh, we have used the FHLB as a relatively low costing source of funds in the past and expect that we may do so again in the future. In the event that the financial position of the FHLB of Pittsburgh continues to deteriorate, it may cease to be a readily available or cost effective source of funds for our operations. In such case, we would be required to utilize other sources of funds, which may prove to be more costly or which may impose borrowing requirements that may be disadvantageous when compared to the loan products typically provided by the Federal Home Loan Bank of Pittsburgh.

 

Risks Related to this Offering

 

Our Stock Price May Decline When Trading Commences.

 

We cannot guarantee that if you purchase shares in the offering that you will be able to sell them at or above the $10.00 purchase price. The trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded.

 

There May Be a Limited Market For Our Common Stock, Which May Adversely Affect Our Stock Price.

 

Currently, shares of Alliance Bancorp common stock are listed on the Nasdaq Global Market. Since Alliance Bank common stock began trading in 1995, trading in our shares has been relatively limited. There is no guarantee that the offering will improve the liquidity of our stock. If an active trading market for our common stock does not develop, you may not be able to sell all of your shares of common stock in an efficient manner and the sale of a large number of shares at one time could temporarily depress the market price. There also may be a wide spread between the bid and asked price for our common stock. When there is a wide spread between the bid and asked price, the price at which you may be able to sell our common stock may be significantly lower than the price at which you could buy it at that time.

 

Our Share Price Will Fluctuate.

 

The market price of our common stock could be subject to significant fluctuations due to changes in sentiment in the market regarding our operations or business prospects. Factors that may affect market sentiment include:

 

 

 

Beginning in 2008 and through the present, the business environment for financial services firms has been extremely challenging. During this period many publicly traded financial services companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance or prospects of such companies. We may experience market fluctuations that are not directly related to our operating performance but are influenced by the market’s perception of the state of the financial services industry in general and, in particular, the market’s assessment of general credit quality conditions, including default and foreclosure rates in the industry.

 

While the U.S. and other governments continue efforts to restore confidence in financial markets and promote economic growth, we cannot assure you that further market and economic turmoil will not occur in the near- or long-term, negatively affecting our business, financial condition and results of operations, as well as the price, trading volume and volatility of our common stock.

 

Additional Expenses Following the Offering From New Equity Benefit Plans Will Adversely Affect Our Net Income.

 

Following the offering, we will recognize additional annual employee compensation and benefit expenses stemming from options and shares granted to employees, directors and executives under new benefit plans. These additional expenses will adversely affect our net income. We cannot determine the actual amount of these new stock-related compensation and benefit expenses at this time because applicable accounting practices generally require that they be based on the fair market value of the options or shares of common stock at the date of the grant; however, we expect them to be significant. We will recognize expenses for our employee stock ownership plan when shares are committed to be released to participants’ accounts and will recognize expenses for restricted stock awards and stock options generally over the vesting period of awards made to recipients. These benefit expenses in the first year following the offering have been estimated to be approximately $575,000 at the maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock at that time. For further discussion of these plans, see “Management-New Stock Benefit Plans.”

 

Our Return on Equity May Negatively Impact Our Stock Price.

 

Return on equity, which equals net income divided by average equity, is a ratio used by many investors to compare the performance of a particular company with other companies. Our return on equity was 2.97% and 1.21% for the years ended December 31, 2009 and 2008, respectively, and on an annualized basis, was 1.09% for the six months ended June 30, 2010. These returns are lower than returns on equity for many comparable publicly traded financial institutions. We expect our return on equity ratio will not increase substantially, due in part to our increased capital level upon completion of the offering. Consequently, you should not expect a competitive return on equity in the near future. Failure to attain a competitive return on equity ratio may make an investment in our common stock unattractive to some investors which might cause our common stock to trade at lower prices than comparable companies with higher returns on equity. The net proceeds from the stock offering, which may be as much as $38.1 million, will significantly increase our stockholders’ equity. On a pro forma basis and based on net income for the six months ended June 30, 2010, our annualized return on equity ratio, assuming shares are sold at the maximum of the offering range, would be approximately 0.27%. Based on trailing 12-month data for the most recent publicly available financial information (as of March 31 or June 30, 2010), the ten companies comprising our peer group in the independent appraisal prepared by RP Financial and all publicly traded mutual holding companies had average ratios of returns on equity of 4.90% and -0.01%, respectively.

We Have Broad Discretion in Allocating the Proceeds of the Offering. Our Failure to Effectively Utilize Such Proceeds Would Reduce Our Profitability.

 

We intend to contribute approximately 50% of the net proceeds of the offering to Alliance Bank. Alliance Bancorp may use the portion of the proceeds that it retains to, among other things, invest in securities, pay cash dividends or repurchase shares of common stock, subject to regulatory restriction. Alliance Bank initially intends to use the net proceeds it retains to purchase investment and mortgage-backed securities. In the future, Alliance Bank may use the portion of the proceeds that it receives to fund new loans, open new branches, invest in securities and expand its business activities. Alliance Bancorp and Alliance Bank may also use the proceeds of the offering to diversify their business and acquire other companies, although we have no specific plans to do so at this time. We have not allocated specific amounts of proceeds for any of these purposes, and we will have significant flexibility in determining how much of the net proceeds we apply to different uses and the timing of such applications. There is a risk that we may fail to effectively use the net proceeds which could have a negative effect on our future profitability.

 

Our Employee Stock Benefit Plans Will Be Dilutive.

 

If the offering is completed and shareholders subsequently approve a stock recognition and retention plan and a stock option plan, we will allocate stock to our officers, employees and directors through these plans. If the shares for the stock recognition and retention plan are issued from our authorized but unissued stock, the ownership percentage of outstanding shares of Alliance Bancorp would be diluted by approximately 3.85%. However, it is our intention to purchase shares of our common stock in the open market to fund the stock recognition and retention plan. Assuming the shares of our common stock to be awarded under the stock recognition and retention plan are purchased at a price equal to the offering price in the offering, the reduction to stockholders’ equity from the stock recognition and retention plan would be between $1.8 million and $2.8 million at the minimum and the maximum, as adjusted, of the offering range. The ownership percentage of Alliance Bancorp’s public shareholders (those shareholders other than Alliance Mutual Holding Company) would also decrease by approximately 5.62% if all potential stock options under our proposed stock option plan are exercised and are filled using shares issued from authorized but unissued stock, assuming the offering closes at the maximum of the offering range. On a combined basis, if authorized but unissued shares of our common stock was the source of shares for both the recognition and retention plan and the stock option plan, the interests of public shareholders would be diluted by approximately 9.05%. See “Pro Forma Data” for data on the dilutive effect of the stock recognition and retention plan and the stock option plan and “Management — New Stock Benefit Plans” for a description of the plans.

 

We Intend to Remain Independent Which May Mean You Will Not Receive a Premium for Your Common Stock.

 

We intend to remain independent for the foreseeable future. Because we do not plan on seeking possible acquirors, it is unlikely that we will be acquired in the foreseeable future. Accordingly, you should not purchase our common stock with any expectation that a takeover premium will be paid to you in the near term.

 

Our Stock Value May Suffer from Anti-Takeover Provisions That May Impede Potential Takeovers That Management Opposes.

 

Provisions in our corporate documents, as well as certain federal regulations, may make it difficult and expensive to pursue a tender offer, change in control or takeover attempt that our board of directors opposes. As a result, our shareholders may not have an opportunity to participate in such a transaction, and the trading price of our stock may not rise to the level of other institutions that are more vulnerable to hostile takeovers. Anti-takeover provisions contained in our corporate documents include:

 

 

 

See “Restrictions on Acquisitions of Alliance Bancorp — New and Alliance Bank and Related Anti-Takeover Provisions” for a description of anti-takeover provisions in our corporate documents and federal regulations.

 

Our Stock Value May Suffer From Federal Regulations Restricting Takeovers.

 

For three years following the offering, Office of Thrift Supervision regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Office of Thrift Supervision. Accordingly, the range of potential acquirors for Alliance Bancorp — New will be limited which will correspondingly reduce the likelihood that shareholders will be able to realize a gain on their investment through an acquisition of Alliance Bancorp — New. See “Restrictions on Acquisitions of Alliance Bancorp — New and Alliance Bank and Related Anti-Takeover Provisions — Regulatory Restrictions” for a discussion of applicable Office of Thrift Supervision regulations regarding acquisitions.

 

The following tables contain certain information concerning the financial position and results of operations of Alliance Bancorp. You should read this information in conjunction with the financial statements included in this prospectus. The data presented as of and for the years ended December 31, 2009 and 2008 has been derived in part from the audited financial statements included in this prospectus. The data presented at June 30, 2010 and for the six month periods ended June 30, 2010 and 2009 are derived from unaudited condensed consolidated financial statements, but in the opinion of management reflect all adjustments necessary to present fairly the results for these interim periods. The adjustments consist only of normal recurring adjustments. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2010 or for any other period.

 

 

 

(Footnotes on following page)

 

 

 

 

The following tables contain certain information concerning the financial position and results of operations of Alliance Bancorp at and for the three months and nine months ended September 30, 2010 as well as the prior comparison periods. You should read this information in conjunction with the audited financial statements included in this prospectus. The financial information at September 30, 2010 and for the three months and nine months ended September 30, 2010 and 2009 are unaudited and are derived from our interim condensed consolidated financial statements. The financial condition data at December 31, 2009 is derived from Alliance Bancorp’s audited consolidated financial statements. In the opinion of management, financial information at September 30, 2010 and for the three months and nine months ended September 30, 2010 and 2009 reflect all adjustments, consisting only of normal recurring accruals, which are necessary to present fairly the results for such periods. Results for the three-month and nine-month periods ended September 30, 2010 may not be indicative of operations of Alliance Bancorp for the year ending December 31, 2010.

 

 

 

(Footnotes on next page)