**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D. C. 20549**

 

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**FORM 10-Q**

 

 

**QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIESEXCHANGE ACT OF 1934 for Quarter Ended March 31, 2002**

 

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**CommissionFile Number 0-16018**

 

**ABINGTON BANCORP, INC.**

(Exact name of Registrantas specified in its charter)

 
| **Massachusetts**                                                                       |   | **04-3334127**                    |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization)                         |   | (I.R.S.  Identification No.) |
|                                                                                    |   |                              |
| **536  Washington Street, Abington, Massachusetts**                                     |   | **02351**                         |
| (Address of principal  executive offices)                                               |   | (Zip Code)                        |
|                                                                                    |   |                              |
| Registrant’s telephone  number, including area code   **(781) 982-3200** |

 

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the Registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes ý No o

 

Indicate the number of shares outstanding of each of the Registrant’s classesof common stock, as of the latest practicable date: 3,184,352 shares as of May7, 2002.

 

 

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Certain statements in this Form 10-Q constitute “forward-lookingstatements” within the meaning of Section 27A of the Securities Act and Section21E of the Exchange Act. Further, any statements contained in this Form 10-Qthat are not statements of historical fact may be deemed to be forward-lookingstatements.  Without limiting theforegoing, the words “expect,” “anticipate,” “plan,” “believe,” “seek,” “estimate,”“internal” and similar words are intended to identify expressions that may beforward-looking statements. Forward-looking statements involve certain risksand uncertainties, and actual results may differ materially from thosecontemplated by such statements. For example, actual results may be adverselyaffected by the following possibilities: (1) competitive pressure amongdepository institutions may increase; (2) changes in interest rates may reducebanking interest margins; (3) general economic conditions and real estatevalues may be less favorable than contemplated; and (4) adverse legislation orregulatory requirements may be adopted. Many of such factors are beyond the Company’s ability to control or predict.Readers of this Form 10-Q are accordingly cautioned not to place undue relianceon forward-looking statements. The Company disclaims any intent or obligationto update publicly any of the forward–looking statements herein, whetherin response to new information, future events or otherwise.

 

2

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ABINGTON BANCORP, INC.

FORM10-Q

 

INDEX

 
| Part I            | Financial Information                                                                                                            |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                             |   |
| Item 1.           |                                                                                                                             | Financial Statements |
|              |                                                                                                                             |
|              | Consolidated Balance Sheets  as of March 31, 2002 (Unaudited) and December 31, 2001                                              |
|              |                                                                                                                             |
|              | Consolidated Statements  of Operations (Unaudited) for the Three Months Ended March 31, 2002 and 2001                            |
|              |                                                                                                                             |
|              | Consolidated  Statements of Changes in Stockholders’ Equity (Unaudited) for the Three  Months Ended March 31, 2002 and 2001 |
|              |                                                                                                                             |   |
|              | Consolidated  Statements of Comprehensive Income (Unaudited) for the Three Months Ended  March 31, 2002 and 2001                 |
|              |                                                                                                                             |   |
|              | Consolidated  Statements of Cash Flows (Unaudited) for the Three Months Ended March 31,  2002 and 2001                           |
|              |                                                                                                                             |
|              | Notes  to Unaudited Consolidated Financial Statements                                                                            |
|              |                                                                                                                             |   |
| Item  2.          |                                                                                                                             | Management’s  Discussion and Analysis of Consolidated Financial Condition and Results of  Operations |
|              |                                                                                                                             |   |
| Item  3.          |                                                                                                                             | Quantitative  and Qualitative Disclosures about Market Risk |
|              |                                                                                                                             |   |
| Part II           | Other Information                                                                                                                |
|              |                                                                                                                             |   |
| Item 1.           |                                                                                                                             | Legal Proceedings |
|              |                                                                                                                             |   |
| Item 2.           |                                                                                                                             | Change in Securities |
|              |                                                                                                                             |   |
| Item 3.           |                                                                                                                             | Defaults upon  Senior Securities |
|              |                                                                                                                             |   |
| Item  4.          |                                                                                                                             | Submission  of Matters to a Vote of Security Holders |
|              |                                                                                                                             |   |
| Item 5.           |                                                                                                                             | Other Information |
|              |                                                                                                                             |   |
| Item 6.           |                                                                                                                             | Exhibits and  Reports on Form 8-K |
|              |                                                                                                                             |   |
| Signature Page    |
|              |                                                                                                                             |   |
| Index to Exhibits |

 

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ABINGTONBANCORP, INC.

 

CONSOLIDATED BALANCESHEETS

 
|                                                                                                                              |   | **(Unaudited)**     |       |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|
|                                                                                                                              |   | **March 31,  2002** | ** ** | **December  31,  2001** |   |
|                                                                                                                              |   | **(In Thousands)**  |       |
| ASSETS                                                                                                                            |   |                |       |   |   |
|                                                                                                                              |   |                |       |   |   |
| Cash  and due from banks                                                                                                          |   | $                   | 30,477     |   | $ | 21,706 |   |
| Short-term  investments                                                                                                           |   | 38,909              |       | 32,870 |   |
| Total  cash and cash equivalents                                                                                                  |   | 69,386              |       | 54,576 |   |
|                                                                                                                              |   |                |       |   |   |
| Loans  held for sale                                                                                                              |   | 7,473               |       | 22,705 |   |
| Securities  available for sale - at market value                                                                                  |   | 376,412             |       | 277,627 |   |
| Loans                                                                                                                             |   | 364,955             |       | 386,329 |   |
| Less:                                                                                                                             |   |                |       |   |   |
| Allowance  for possible loan loss                                                                                                 |   | (5,472              | )          | (5,482 | ) |
| Loans,  net                                                                                                                       |   | 359,483             |       | 380,847 |   |
|                                                                                                                              |   |                |       |   |   |
| Federal  Home Loan Bank stock, at cost                                                                                            |   | 12,910              |       | 12,910 |   |
| Banking  premises and equipment, net .                                                                                            |   | 8,593               |       | 8,784 |   |
| Other  real estate owned, net                                                                                                     |   | —              |       | — |   |
| Intangible  assets                                                                                                                |   | 2,205               |       | 2,259 |   |
| Bank-owned  life insurance - contract value                                                                                       |   | 3,720               |       | 3,678 |   |
| Deferred  tax asset, net                                                                                                          |   | 2,021               |       | 393 |   |
| Other  assets                                                                                                                     |   | 7,100               |       | 6,339 |   |
|                                                                                                                              |   | $                   | 849,303    |   | $ | 770,118 |   |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                        |   |                |       |   |   |
|                                                                                                                              |   |                |       |   |   |
| Deposits                                                                                                                          |   | $                   | 526,455    |   | $ | 497,459 |   |
| Short-term  borrowings                                                                                                            |   | 6,821               |       | 8,049 |   |
| Long-term  debt                                                                                                                   |   | 224,500             |       | 193,500 |   |
| Accrued  taxes and expenses                                                                                                       |   | 4,541               |       | 4,100 |   |
| Other  liabilities                                                                                                                |   | 36,229              |       | 15,696 |   |
| Total  liabilities                                                                                                                |   | $                   | 798,546    |   | $ | 718,804 |   |
| Guaranteed  preferred beneficial interest in the Company’s junior subordinated debentures                                    |   | 12,181              |       | 12,163 |   |
|                                                                                                                              |   |                |       |   |   |
| Commitments  and contingencies                                                                                                    |   |                |       |   |   |
| Stockholders’  equity:                                                                                                       |   |                |       |   |   |
| Serial  preferred stock, $.10 par value, 3,000,000 shares authorized; none issued                                                 |   | —              |       | — |   |
| Common  stock, $.10 par value 12,000,000 shares authorized; 4,991,000 and 4,925,000  shares issued in 2002 and 2001, respectively |   | 499                 |       | 492 |   |
| Additional  paid-in capital                                                                                                       |   | 23,292              |       | 23,081 |   |
| Retained  earnings                                                                                                                |   | 33,052              |       | 31,403 |   |
|                                                                                                                              |   | 56,843              |       | 54,976 |   |
| Treasury  stock 1,807,000 shares in 2002 and 2001, at cost                                                                        |   | (17,584             | )          | (17,584 | ) |
| Compensation  plans                                                                                                               |   | 120                 |       | 120 |   |
| Other  accumulated comprehensive income -                                                                                         |   |                |       |   |   |
| Net  unrealized gain (loss) on available for sale securities, net of taxes                                                        |   | (803                | )          | 1,639 |   |
| Total  stockholders’ equity                                                                                                  |   | 38,576              |       | 39,151 |   |
|                                                                                                                              |   | $                   | 849,303    |   | $ | 770,118 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements

 

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ABINGTONBANCORP, INC.

 

CONSOLIDATEDSTATEMENTS OF OPERATIONS

 
|                                                                                                |   | **(Unaudited)  Three Months Ended March 31** |       |
|-----------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|
|                                                                                                |   | **2002**                                     | ** ** | **2001** |   |
|                                                                                                |   | **(In thousands, except per share data)**    |       |
| Interest  and dividend income:                                                                      |   |                                         |       |   |   |
| Interest  and fees on loans                                                                         |   | $                                            | 6,619      |   | $ | 7,241 |   |
| Interest  on mortgage-backed investments                                                            |   | 4,225                                        |       | 3,527 |   |
| Interest  on bonds and obligations                                                                  |   | 575                                          |       | 1,452 |   |
| Dividend  income                                                                                    |   | 157                                          |       | 292 |   |
| Interest  on short-term investments                                                                 |   | 120                                          |       | 14 |   |
| Total  interest and dividend income                                                                 |   | 11,696                                       |       | 12,526 |   |
|                                                                                                |   |                                         |       |   |   |
| Interest  expense:                                                                                  |   |                                         |       |   |   |
| Interest  on deposits                                                                               |   | 2,987                                        |       | 3,831 |   |
| Interest  on short-term borrowings                                                                  |   | 36                                           |       | 522 |   |
| Interest  on long-term debt                                                                         |   | 2,895                                        |       | 2,855 |   |
| Total  interest expense                                                                             |   | 5,918                                        |       | 7,208 |   |
|                                                                                                |   |                                         |       |   |   |
| Net  interest income                                                                                |   | 5,778                                        |       | 5,318 |   |
| Provision  for possible loan losses                                                                 |   | —                                       |       | — |   |
| Net  interest income after provision for possible loan losses                                       |   | 5,778                                        |       | 5,318 |   |
|                                                                                                |   |                                         |       |   |   |
| Non-interest  income:                                                                               |   |                                         |       |   |   |
| Loan  servicing fees                                                                                |   | 44                                           |       | 78 |   |
| Customer  service fees                                                                              |   | 2,030                                        |       | 1,713 |   |
| Gain  on securities, net                                                                            |   | 35                                           |       | 72 |   |
| Gain  on sales of mortgage loans, net                                                               |   | 1,124                                        |       | 460 |   |
| Gain  on sales and write-down of other real estate owned, net                                       |   | —                                       |       | — |   |
| Other                                                                                               |   | 96                                           |       | 123 |   |
| Total  non-interest income                                                                          |   | 3,329                                        |       | 2,446 |   |
|                                                                                                |   |                                         |       |   |   |
| Non-interest  expense:                                                                              |   |                                         |       |   |   |
| Salaries  and employee benefits                                                                     |   | 3,151                                        |       | 3,059 |   |
| Occupancy  and equipment expense                                                                    |   | 833                                          |       | 861 |   |
| Trust  preferred securities expense                                                                 |   | 280                                          |       | 280 |   |
| Other  non-interest expenses                                                                        |   | 1,739                                        |       | 1,694 |   |
| Total  non-interest expense                                                                         |   | 6,003                                        |       | 5,894 |   |
|                                                                                                |   |                                         |       |   |   |
| Income  before provision for income taxes and cumulative effect of change in  accounting principles |   | 3,104                                        |       | 1,870 |   |
| Provision  for income taxes                                                                         |   | 1,130                                        |       | 655 |   |
| Net  income before cumulative effect of change in accounting principle                              |   | 1,974                                        |       | 1,215 |   |
|                                                                                                |   |                                         |       |   |   |
| Cumulative  effect of change in accounting principle, net of tax of $200                            |   | —                                       |       | (298 | ) |
| Net  income                                                                                         |   | $                                            | 1,974      |   | $ | 917 |   |
|                                                                                                |   |                                         |       |   |   |
| Earnings  per share                                                                                 |   |                                         |       |   |   |
| Basic  -                                                                                            |   |                                         |       |   |   |
| Income  before cumulative effect of change in accounting principle                                  |   | $                                            | .62        |   | $ | .40 |   |
| Cumulative  effect of change in accounting principle                                                |   | —                                       |       | (.10 | ) |
|                                                                                                |   | $                                            | .62        |   | $ | .30 |   |
| Net  Income                                                                                         |   |                                         |       |   |   |
| Weighted  average common shares                                                                     |   | 3,180,000                                    |       | 3,078,000 |   |
| Diluted  -                                                                                          |   |                                         |       |   |   |
| Income  before cumulative effect of change in accounting principle                                  |   | $                                            | .60        |   | $ | .38 |   |
| Cumulative  effect of change in accounting principle                                                |   | —                                       |       | (.09 | ) |
| Net  Income                                                                                         |   | $                                            | .60        |   | $ | .29 |   |
| Weighted  average common shares                                                                     |   | 3,290,000                                    |       | 3,208,000 |   |
| Dividends  per share                                                                                |   | $                                            | .10        |   | $ | .09 |   |

 

See accompanying notesto unaudited consolidated financial statements.

 

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ABINGTONBANCORP, INC.

CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

(Unaudited)

 
|                                                                        |   | **Common  Stock**                          |   | **Additional  Paid-in  Capital** |   | **Retained  Earnings** |   | **Treasury  Stock** |   | **Net  Unrealized  Gain  (Loss) on  Available  for Sale  Securities** |   | **Compensation  Plans** |   | **Total** |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------------|--------|----------------------------------|--------|------------------------|--------|---------------------|--------|-----------------------------------------------------------------------|--------|-------------------------|--------|-----------|--------|
|                                                                        |   | **(In  thousands, except per share data)** |   |
| Balance  at December 31, 2001                                               |   | $                                          | 492    |                             | $      | 23,081                 |   | $                   | 31,403 |                                                                  | $      | (17,584                 | )      | $         | 1,639  |   | $ | 120 |   | $ | 39,151 |   |
| Net  income                                                                 |   | —                                     |   | —                           |   | $                      | 1,974  |                | — |                                                                  | — |                    | — |      | 1,974  |   |
| Issuance  of stock                                                          |   | 7                                          |   | 211                              |   | —                 |   | —              |   | —                                                                |   | —                  |   | 218       |   |
| Increase  in unrealized loss on available for sale securities, net of taxes |   | —                                     |   | —                           |   | —                 |   | —              |   | (2,442                                                                | )      | —                  |   | (2,442    | )      |
| Dividends  declared ($.10 per share)                                        |   | —                                     |   | —                           |   | (325                   | )      | —              |   | —                                                                |   | —                  |   | (325      | )      |
| Balance  at March 31, 2002                                                  |   | $                                          | 499    |                             | $      | 23,292                 |   | $                   | 33,052 |                                                                  | $      | (17,584                 | )      | $         | (803   | ) | $ | 120 |   | $ | 38,576 |   |
|                                                                        |   |                                       |   |                             |   |                   |   |                |   |                                                                  |   |                    |   |      |   |
| Balance  at December 31, 2000                                               |   | $                                          | 488    |                             | $      | 22,915                 |   | $                   | 29,570 |                                                                  | $      | (17,584                 | )      | $         | (1,195 | ) | $ | 111 |   | $ | 34,305 |   |
| Net  income                                                                 |   | —                                     |   | —                           |   | 917                    |   | —              |   | —                                                                |   | —                  |   | 917       |   |
| Issuance  of stock                                                          |   | 3                                          |   | 53                               |   | —                 |   | —              |   | —                                                                |   | —                  |   | 56        |   |
| Decrease  in unrealized loss on available for sale securities, net of taxes |   | —                                     |   | —                           |   | —                 |   | —              |   | 1,046                                                                 |   | —                  |   | 1,046     |   |
| Dividends  declared ($.10 per share)                                        |   | —                                     |   | —                           |   | (310                   | )      | —              |   | —                                                                |   | —                  |   | (310      | )      |
| Balance  at March 31, 2001                                                  |   | $                                          | 491    |                             | $      | 22,968                 |   | $                   | 30,177 |                                                                  | $      | (17,584                 | )      | $         | (149   | ) | $ | 111 |   | $ | 36,014 |   |
|                                                                             |        |                                            |        |                                  |        |                        |        |                     |        |                                                                       |        |                         |        |           |        |  |  |  |  |  |  |  |  |  |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

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ABINGTON BANCORP, INC.

CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME

(Unaudited)

 
|                                                                                                             |   | **Three Months Ended March 31,** |   |
|------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                             |   | **2002**                         |   | **2001** |   |
| (Dollars  in thousands)                                                                                          |   |                             |   |   |   |
|                                                                                                             |   |                             |   |   |   |
| Net  income, as reported                                                                                         |   | 1,974                            |   | 917 |   |
| Change  in unrealized gains/(losses) on available for sale securities, net of taxes                              |   | (2,419                           | )      | 1,093 |   |
| Less:  Reclassification adjustment for available for sale securities gains included  in net income, net of taxes |   | 23                               |   | 47 |   |
|                                                                                                             |   |                             |   |   |   |
| Comprehensive  income (loss)                                                                                     |   | $                                | (468   | ) | $ | 1,963 |   |
|                                                                                                                  |        |                                  |        |  |  |  |  |

 

See accompanying notesto unaudited consolidated financial statements.

 

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ABINGTONBANCORP, INC.

 

CONSOLIDATED STATEMENTSOF CASH FLOWS

(Unaudited)

 

 
|                                                                                      |   | **Three Months Ended  March 31,** |   |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                      |   | **2002**                          |   | **2001** |   |
| (Dollars  in thousands)                                                                   |   |                              |   |   |   |
|                                                                                      |   |                              |   |   |   |
| Cash  flows from operating activities:                                                    |   |                              |   |   |   |
| Net  income                                                                               |   | $                                 | 1,974  |   | $ | 917 |   |
|                                                                                      |   |                              |   |   |   |
| Adjustments  to reconcile net income to net cash provided (used) by operating activities: |   |                              |   |   |   |
| Provision  for loan losses                                                                |   | —                            |   | — |   |
| Amortization,  accretion and depreciation, net                                            |   | 512                               |   | 405 |   |
| Gain  on sales of securities, net                                                         |   | (35                               | )      | (72 | ) |
| Loans  originated for sale in the secondary market                                        |   | (49,482                           | )      | (37,603 | ) |
| Proceeds  from sales of loans                                                             |   | 65,655                            |   | 31,056 |   |
| Gain  on sales of mortgage loans, net                                                     |   | (1,124                            | )      | (460 | ) |
| Other,  net                                                                               |   | 20,146                            |   | 17,047 |   |
| Net  cash provided (used) by operating activities                                         |   | 37,646                            |   | 11,290 |   |
|                                                                                      |   |                              |   |   |   |
| Cash  flows from investing activities:                                                    |   |                              |   |   |   |
| Proceeds  from sales of available for sale securities                                     |   | 4,625                             |   | 21,691 |   |
| Proceeds  from principal payments on and maturities of available for sale securities      |   | 22,906                            |   | 24,303 |   |
| Purchase  of available for sale securities                                                |   | (130,386                          | )      | (66,114 | ) |
| Loans  (originated/purchased) paid, net                                                   |   | 21,547                            |   | (2,349 | ) |
| Purchases  of FHLB stock                                                                  |   | —                            |   | — |   |
|                                                                                           |        |                                   |        |  |  |  |  |

 

See accompanying notesto unaudited consolidated financial statements.

 

8

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|                                                                                             |   | **Three Months Ended March 31,** |   |
|--------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                             |   | **2002**                         |   | **2001** |   |
| (Dollars  in thousands)                                                                          |   |                             |   |   |   |
|                                                                                             |   |                             |   |   |   |
| Purchase  of banking premises and equipment and improvements to other real estate owned          |   | $                                | (196   | ) | $ | (288 | ) |
| Proceeds  from sales of other real estate owned                                                  |   | —                           |   | — |   |
| Net  cash provided by (used for) investing activities                                            |   | (81,504                          | )      | (22,757 | ) |
|                                                                                             |   |                             |   |   |   |
| Cash  flows from financing activities:                                                           |   |                             |   |   |   |
|                                                                                             |   |                             |   |   |   |
| Net  increase in deposits                                                                        |   | 28,996                           |   | 23,809 |   |
| Net  increase (decrease) in borrowings with original maturities of three months or  less         |   | (1,495                           | )      | (21,862 | ) |
| Proceeds  from short-term borrowings with maturities in excess of three months                   |   | 267                              |   | — |   |
| Principal  payments issuance of short-term borrowings with maturities in excess of three  months |   | —                           |   | — |   |
| Proceeds  from issuance of long-term debt                                                        |   | 35,000                           |   | 30,000 |   |
| Principal  payments on long term debt                                                            |   | (4,000                           | )      | (16,717 | ) |
| Proceeds  from issuance of stock                                                                 |   | 217                              |   | 56 |   |
| Purchase  of treasury stock                                                                      |   | —                           |   | — |   |
| Cash  paid for dividends                                                                         |   | (317                             | )      | (310 | ) |
| Net  cash provided (used) by financing activities                                                |   | 58,668                           |   | 15,156 |   |
| Net  increase (decrease) in cash and cash equivalents                                            |   | 14,810                           |   | 3,689 |   |
| Cash  and cash equivalents at beginning of period                                                |   | 54,576                           |   | 27,609 |   |
| Cash  and cash equivalents at end of period                                                      |   | $                                | 69,386 |   | $ | 31,298 |   |
|                                                                                             |   |                             |   |   |   |
| Supplemental  cash flow information:                                                             |   |                             |   |   |   |
|                                                                                             |   |                             |   |   |   |
| Interest  paid on deposits                                                                       |   | $                                | 2,944  |   | $ | 3,836 |   |
| Interest  paid on borrowed funds                                                                 |   | 2,870                            |   | 3,398 |   |
| Income  taxes paid                                                                               |   | 720                              |   | 909 |   |
| Transfer  of loans to other real estate owned, net                                               |   | —                           |   | 355 |   |
|                                                                                                  |        |                                  |        |  |  |  |  |  |  |  |

 

See accompanying notesto unaudited consolidated financial statements.

 

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ABINGTONBANCORP, INC.

NOTESTO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March31, 2002

 

A)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidatedfinancial statements include the accounts of Abington Bancorp, Inc. (the“Company”) (a Massachusetts Corporation) and its wholly-owned subsidiaries,Abington Savings Bank (the “Bank”) and Abington Bancorp Capital Trust. The Bankalso includes its wholly-owned subsidiaries Abington Securities Corporation,which invests primarily in obligations of the United States Government and itsagencies and equity securities, Old Colony Mortgage Corporation, whichoriginates and sells residential mortgages to investors on a servicing releasedbasis, and Holt Park Place Development Corporation and Norroway PondDevelopment Corporation, each typically owning properties being marketed forsale.

 

The accompanyingconsolidated financial statements as of March 31, 2002 and for the three monthperiods ended March 31, 2002 and 2001 have been prepared by the Company withoutaudit, and reflect all adjustments (consisting of normal recurring adjustments)which, in the opinion of management, are necessary to reflect a fair statementof the results of the interim periods presented.

 

Certain information andfootnote disclosures normally included in the annual consolidated financialstatements which are prepared in accordance with accounting principlesgenerally accepted in the United States have been condensed or omitted.Accordingly, the Company believes that although the disclosures are adequate tomake the information presented not misleading, these consolidated financialstatements should be read in conjunction with the footnotes contained in theCompany’s consolidated financial statements as of and for the year endedDecember 31, 2001, which are included in the Company’s Annual Report on Form10-K. Interim results are not necessarily indicative of results to be expectedfor the entire year. All significant intercompany balances and transactionshave been eliminated in consolidation.

 

10

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B)       DIVIDEND DECLARATION

 

The Board of Directorsof Abington Bancorp, Inc. declared a cash dividend of $.10 per share to holdersof its common stock in March, 2001. This dividend was payable on April 26, 2001to stockholders of record as of the close of business on April 19, 2001.

 

11

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C)       Stock Repurchase Program

 

On March 27, 1997, theCompany announced that its Board of Directors had authorized the Company torepurchase up to 10% (375,000 shares) of its then outstanding common stock fromtime to time at prevailing market prices. On February 24, 1998, the Company announcedthat its Board of Directors had authorized the Company to repurchase anadditional 10% (347,000) of its outstanding common stock, as adjusted foramounts remaining to be repurchased under the March 1997 plan. On March 25,1999, the Board of Directors authorized the Company to repurchase an additional10% (320,000) of its outstanding common stock, as adjusted for amountsremaining to be purchased under the previously authorized plans. The Boarddelegated to the discretion of the Company’s senior management the authority todetermine the timing of the repurchase program’s commencement, subsequentpurchases and the prices at which the repurchases will be made.

 

As of May 7, 2002, theCompany had repurchased 932,600 shares of its common stock under these plans ata total cost of approximately $13,882,000.

 

D)       Earnings per Share

 

The primary differencebetween basic and fully diluted average common shares outstanding for theperiods presented relates to options issued to officers and directors which arenot anti-dilutive. The calculation of common stock equivalents for fullydiluted per share computations excludes options which have an exercise price inexcess of the average closing price of the Company’s stock for the periodpresented. At March 31, 2002, based on the closing price of the Company’s stockof $16.45, there were approximately 42,000 options with an exercise price of$20.75 which would not be considered dilutive for purposes of calculatingearnings per share.

 

E)       Acquisition of Massachusetts Fincorp,Inc.

 

On April 10, 2002, theCompany signed a definitive agreement to acquire Massachusetts Fincorp, Inc.the parent company of Massachusetts Co-Operative Bank with three branches inthe Greater Boston area, for $30.00 per share in cash and Company stock for atotal purchase price of $17.3 million. Massachusetts Fincorp, Inc. stockholders will be permitted to electeither shares of the Company stock or cash, with the total mix of considerationfixed at 60% Company stock and 40% cash. The transaction is intended to qualify as a tax-free reorganization forfederal income tax purposes.

 

He transaction will notimpact the Company’s “well-capitalized” status under current regulatorystandards.  The Company will remain“well-capitalized” by current regulatory standards at the time the transactionis closed.

 

The transaction issubject to Regulatory approvals.  It isanticipated that the transaction will be completed by late in the third quarteror early in the fourth quarter of 2002.

 

12

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F)       Business Segments

 

March 31, 2002:

 
|                                |   | **Community  Banking** |    | **Mortgage  Banking** |   | **Other** |   | **Elimination** |   | **Total** |   |
|-------------------------------------|--------|------------------------|---------|-----------------------|--------|-----------|--------|-----------------|--------|-----------|--------|
|                                |   |                   |    |                  |   |      |   |            |   |      |   |
| Securities                          |   | $                      | 376,412 |                  | $      | —    |   | $               | — |      | $      | — |   | $ | 376,412 |   |
| Net  loans                          |   | 366,930                |    | 7,473                 |   | —    |   | (7,447          | )      | 366,956   |   |
| Net  assets                         |   | 848,491                |    | 10,346                |   | 52,151    |   | (61,685         | )      | 849,303   |   |
| Total  deposits                     |   | 527,790                |    | —                |   | —    |   | (1,335          | )      | 526,455   |   |
| Total  borrowings                   |   | 231,321                |    | 7,447                 |   | —    |   | (7,447          | )      | 231,321   |   |
| Total  liabilities                  |   | 799,283                |    | 8,045                 |   | —    |   | (8,782          | )      | 798,546   |   |
|                                |   |                   |    |                  |   |      |   |            |   |      |   |
| Three  months ended                 |   |                   |    |                  |   |      |   |            |   |      |   |
|                                |   |                   |    |                  |   |      |   |            |   |      |   |
| Total  interest income              |   | $                      | 11,599  |                  | $      | 207       |   | $               | 5      |      | $      | (115 | ) | $ | 11,696 |   |
| Total  interest expense             |   | 5,918                  |    | 115                   |   | —    |   | (115            | )      | 5,918     |   |
| Net  interest income                |   | 5,681                  |    | 92                    |   | 5         |   | —          |   | 5,778     |   |
| Provision  for possible loan losses |   | —                 |    | —                |   | —    |   | —          |   | —    |   |
| Total  non-interest income          |   | 2,201                  |    | 1,128                 |   | —    |   | —          |   | 3,329     |   |
| Total  non-interest expense         |   | 5,069                  |    | 654                   |   | 280       |   | —          |   | 6,003     |   |
| Net  income                         |   | 1,817                  |    | 338                   |   | (181      | )      | —          |   | 1,974     |   |

 

13

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March 31, 2001:

 
|                                |   | **Community  Banking** |    | **Mortgage  Banking** |   | **Other** |    | **Elimination** |   | **Total** |   |
|-------------------------------------|--------|------------------------|---------|-----------------------|--------|-----------|---------|-----------------|--------|-----------|--------|
|                                |   |                   |    |                  |   |      |    |            |   |      |   |
| Securities                          |   | $                      | 312,290 |                  | $      | —    |    | $               | — |      | $      | — |   | $ | 312,290 |   |
| Net  loans                          |   | 383,162                |    | 10,755                |   | —    |    | (10,778         | )      | 383,139   |   |
| Net  assets                         |   | 763,688                |    | 12,415                |   | 49,078    |    | (62,117         | )      | 763,064   |   |
| Total  deposits                     |   | 480,034                |    | —                |   | —    |    | (1,478          | )      | 478,556   |   |
| Total  borrowings                   |   | 213,733                |    | 10,778                |   | —    |    | (10,778         | )      | 213,733   |   |
| Total  liabilities                  |   | 715,933                |    | 11,029                |   | —    |    | (12,256         | )      | 714,706   |   |
|                                |   |                   |    |                  |   |      |    |            |   |      |   |
| Three  months ended                 |   |                   |    |                  |   |      |    |            |   |      |   |
|                                |   |                   |    |                  |   |      |    |            |   |      |   |
| Total  interest income              |   | $                      | 12,545  |                  | $      | 143       |    | $               | 8      |      | $      | (170 | ) | $ | 12,526 |   |
| Total  interest expense             |   | 7,239                  |    | 139                   |   | —    |    | (170            | )      | 7,208     |   |
| Net  interest income                |   | 5,306                  |    | 4                     |   | 8         |    | —          |   | 5,318     |   |
| Provision  for possible loan losses |   | —                 |    | —                |   | —    |    | —          |   | —    |   |
| Total  non-interest income          |   | 1,991                  |    | 455                   |   | —    |    | —          |   | 2,446     |   |
| Total  non-interest expense         |   | 5,205                  |    | 409                   |   | 280       |    | —          |   | 5,894     |   |
| Net  income                         |   | 1,079                  |    | 18                    |   | (180      | )  | —          |   | 917       |   |

 

14

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MANAGEMENT’SDISCUSSION AND ANALYSIS OF

CONSOLIDATEDFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

G)       Pension Plan Termination

 

As part of a program toredesign the Company’s employee retirement benefits, the Board of Directorsvoted October 10, 2000 to freeze the Company’s Pension Plan effective as ofOctober 31, 2000 and terminate the Pension Plan effective on December 31,2000.  In connection therewith, theCompany has amended the Pension Plan to improve the benefit formula for currentemployees and permit payment of lump sums from the Pension Plan.

 

As part of the redesignof retirement benefits, the Bank added, effective in January 2001, a 3%automatic contribution to the 401(k) plan for all employees even for employeeswho do not separately contribute to that plan. Such contribution is being madefor all eligible participants based on their W-2 compensation.

 

During the first quarterof 2002, the Company settled the remaining obligations of the terminatedpension plan.  This resulted in a gainon settlement of $537,000 (approximately $349,000, net of applicable taxes) whichis netted against salaries and benefits expense in the Consolidated Statementof Operations.

 

15

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GENERAL

 

The Company’s results ofoperations depend primarily on its net interest income after provision forpossible loan losses, its revenue from other banking services and non-interestexpenses. The Company’s net interest income depends upon the net interest ratespread between the yield on the Company’s loan and investment portfolios andthe cost of funds, consisting primarily of interest expense on deposits andFederal Home Loan Bank advances. The interest rate spread is affected by thematch between the maturities or repricing intervals of the Company’s assets andliabilities, the mix and composition of interest sensitive assets andliabilities, economic factors influencing general interest rates, loanprepayment speeds, loan demand and savings flows, as well as the effect ofcompetition for deposits and loans. The Company’s net interest income is also affectedby the performance of its loan portfolio, amortization or accretion of premiumsor discounts on purchased loans and mortgage-backed securities, and the levelof non-earning assets. Revenues from loan fees and other banking servicesdepend upon the volume of new transactions and the market level of prices forcompetitive products and services. Non-interest expenses depend upon theefficiency of the Company’s internal operations and general market and economicconditions.

 

NET INTEREST INCOME

 

Net interest income isaffected by the mix and volume of assets and liabilities, the movement andlevel of interest rates and interest spread, which is the difference betweenthe average yield received on earning assets and the average rate paid ondeposits and borrowings. The Company’s net interest rate spread was 3.20% forthe quarter ended March 31, 2002 and 3.06% for the quarter ended March 31,2001.

 

The level of nonaccrual(impaired) loans and other real estate owned can have an impact on net interestincome but balances in these categories have generally been immaterial in 2001and 2002. At March 31, 2002, the Company had $3,862,000 in non-accrual loans,and no other real estate owned, compared to $3,881,000 in non-accrual loans andno other real estate owned as of December 31, 2001 and $398,000 in non-accrualloans and $355,000 of other real estate owned as of March 31, 2001.

 

16

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MANAGEMENT’SDISCUSSION AND ANALYSIS

 

The table below presentsthe components of interest income and expense for the major categories ofassets and liabilities for the periods indicated.

 
|                                     |   | **Three Months Ended  March 31** |   |
|------------------------------------------|--------|----------------------------------|--------|
|                                     |   | **2002**                         |   | **2001** |   |
|                                     |   |                             |   |   |   |
| Interest  and dividend income:           |   |                             |   |   |   |
| Interest  and fees on loans              |   | $                                | 6,619  |   | $ | 7,241 |   |
| Interest  on mortgage-backed investments |   | 4,225                            |   | 3,527 |   |
| Interest  on bonds and obligations       |   | 575                              |   | 1,452 |   |
| Dividend  income                         |   | 157                              |   | 292 |   |
| Interest  on short-term investments      |   | 120                              |   | 14 |   |
| Total  interest and dividend income      |   | $                                | 11,696 |   | $ | 12,526 |   |
|                                     |   |                             |   |   |   |
| Interest  expense:                       |   |                             |   |   |   |
| Interest  on deposits                    |   | $                                | 2,987  |   | $ | 3,831 |   |
| Interest  on short-term borrowings       |   | 36                               |   | 522 |   |
| Interest  on long-term debt              |   | 2,895                            |   | 2,855 |   |
| Total  interest expense                  |   | 5,918                            |   | 7,208 |   |
| Net  interest income                     |   | $                                | 5,778  |   | $ | 5,318 |   |

 

A breakdown of thecomponents of the Company’s net interest-rate spread is as follows:

 
|                                                      |   | **March 31** |   |
|-----------------------------------------------------------|--------|--------------|--------|
|                                                      |   | **2002**     |   | **2001** |   |
|                                                      |   |         |   |   |   |
| Weighted  average yield earned on:                        |   |         |   |   |   |
| Loans                                                     |   | 7.19         | %      | 7.77 | % |
| Mortgage-backed  investments                              |   | 6.38         |   | 6.91 |   |
| Bonds  and obligations                                    |   | 5.20         |   | 7.27 |   |
| Marketable  and other equity securities                   |   | 3.93         |   | 5.21 |   |
| Short-term  investments                                   |   | 1.89         |   | 6.47 |   |
|                                                      |   |         |   |   |   |
| Weighted  average yield earned on interest-earning assets |   | 6.51         |   | 7.37 |   |
|                                                      |   |         |   |   |   |
| Weighted  average rate paid on:                           |   |         |   |   |   |
| NOW  and non-interest NOW deposits                        |   | .29          |   | .41 |   |
| Savings  deposits                                         |   | 1.91         |   | 2.22 |   |
| Time  deposits                                            |   | 4.60         |   | 6.00 |   |
| Total  deposits                                           |   | 2.38         |   | 3.38 |   |
| Short-term  borrowings                                    |   | 1.96         |   | 5.79 |   |
| Long-term  debt                                           |   | 5.59         |   | 6.34 |   |
|                                                      |   |         |   |   |   |
| Weighted  average rate paid on deposits and borrowings    |   | 3.31         |   | 4.30 |   |
|                                                      |   |         |   |   |   |
| Net  interest-rate spread                                 |   | 3.20         | %      | 3.06 | % |

 

17

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RATE/VOLUME ANALYSIS

 

The following tablespresent, for the periods indicated, the change in interest income and thechange in interest expense attributable to the change in interest rates and thechange in the volume of earning assets and interest-bearing liabilities. Thechange attributable to both volume and rate has been allocated proportionatelyto the change due to volume and the change due to rate.

 
|                                |   | **THREE MONTHS ENDED MARCH 31** |   |
|-------------------------------------|--------|---------------------------------|--------|
|                                |   | **2002**                        |   | **VS.** |   | **2001** |   |
|                                |   | **INCREASE (DECREASE)**         |   |
|                                |   | **Due to  Volume**              |   | **Due to  Rate** |   | **Total** |   |
|                                |   | **(Dollars in Thousands)**      |   |
|                                |   |                            |   |   |   |   |   |
| Interest  and dividend income:      |   |                            |   |   |   |   |   |
| Loans                               |   | $                               | (90    | ) | $ | (532 | ) | $ | (622 | ) |
| Mortgage-backed  investments        |   | 986                             |   | (288 | ) | 698 |   |
| Bonds  and obligations              |   | (535                            | )      | (342 | ) | (877 | ) |
| Equity  securities                  |   | (73                             | )      | (62 | ) | (135 | ) |
| Short-term  investments             |   | 123                             |   | (17 | ) | 106 |   |
| Total  interest and dividend income |   | 411                             |   | (1,241 | ) | (830 | ) |
|                                |   |                            |   |   |   |   |   |
| Interest  expense:                  |   |                            |   |   |   |   |   |
| NOW  deposits                       |   | 21                              |   | (40 | ) | (19 | ) |
| Savings  deposits                   |   | 225                             |   | (115 | ) | 110 |   |
| Time  deposits                      |   | (296                            | )      | (639 | ) | (935 | ) |
| Short-term  borrowings              |   | (266                            | )      | (220 | ) | (486 | ) |
| Long-term  debt                     |   | 401                             |   | (361 | ) | 40 |   |
| Total  interest expense             |   | 85                              |   | (1,375 | ) | (1,290 | ) |
|                                |   |                            |   |   |   |   |   |
| Net  interest income                |   | $                               | 326    |   | $ | 134 |   | $ | 460 |   |

 

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COMPARISON OF THE THREEMONTHS ENDED MARCH 31, 2002 AND 2001

 

GENERAL. Net income forthe quarter ended March 31, 2002 was $1,974,000 or $.60 per diluted sharecompared to net income of $917,000 or $ .29 per diluted share in thecorresponding period of 2001, a net increase of $1,057,000 or 115.2% in netincome or 106.9% in diluted earnings per share. The overall increase in netincome was mainly attributable to increases in net interest income, customerservice fees and gains on sales of mortgage loans, the gain on pensionsettlement (presented as a net reduction in salaries and benefits expense) anddecreases in cumulative effect of change in accounting for cost of salesincentives partially offset by increases in non-interest expenses andprovisions for income taxes.

 

INTEREST AND DIVIDENDINCOME. Interest and dividend income decreased $830,000 or 6.6% during thethree month period ended March 31, 2002, as compared to the same period in2001. The decrease was attributable to decreases in the yield on earning assetspartially offset by increases in average balance of earning assets.  The balance of average earning assets forthe three month period ended March 31, 2002 was approximately $718,828,000 ascompared to $680,193,000 for the same period in 2001, an overall increase of$38,635,000 or 5.7%.

 

The increase in earningassets was primarily driven by increases in average mortgage-backed investmentsand short-term investments offset by decreases in loans, discussed below.  Average mortgage-backed investments andshort-term investments were $264,969,000 and $25,463,000, respectively for thequarter ended March 31, 2002 as compared to $204,172,000 and $866,000,respectively for the same period in 2001. These balances when combinedincreased $85,394,000 or 29.4%.  Theyield on earning assets decreased to 6.51% in the three months ended March 31,2002 as compared to 7.37% in the same period of 2001. These yields decreasedprimarily due to the declining interest rate environment which existed for mostof 2001. From January 2001 to December 2001, the Federal Reserve Bank decreasedrates 475 basis points.  Additionally, anagency investment security which was called by the issuer resulted in adiscount being taken to income of approximately $74,000 in the first quarter of2001. This had the effect of increasing the yield on investment securitiesapproximately 37 basis points in that as well as higher levels of prepyamentdue to the low mortgage rates available in 2001, particularly in the fourthquarter, which led to relatively high levels of prepayment activity asconsumers refinanced their loans.

 

The average balance ofloans decreased to $368,182,000 for the three months ended March 31, 2002 from$372,891,000 for the same period in 2001, a decline of $4,709,000 or 1.3%.These balances declined as a result of fewer residential loans being purchasedand/or originated for the Company’s loan portfolio in late 2001 and thus far in2002.  The yield on loans decreased to7.19% in the first three months of 2002 as compared to 7.77% for the sameperiod in 2001. This was generally due to the lower rate environment whichexisted for most of 2001, which impacted new loan originations.

 

19

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INTEREST EXPENSE.Interest expense for the quarter ended March 31, 2002 decreased $1,290,000 or17.9% compared to the same period in 2001, generally due to decreases in therates paid in deposits and borrowed funds. The average balance of core deposits rose to $325,452,000 for the firstquarter of 2002 as compared to $256,750,000 for the first quarter of 2001.  The average balances of total deposits rose10.5% for the three months ended March 31, 2002 as compared to the same periodin 2001, while core deposits rose 26.8% over the same periods.  This was due to the Company’s continuedsuccess in attracting core deposits and also due to a shift from time depositsto money markets over this same time period. Time deposits decreased 10.8% in the first quarter of 2002 as comparedto the same period in 2001, generally due to the lower interest rateenvironment and customers’ desire to invest in instruments with shorterterms.  The Company will continue toclosely manage its cost of deposits by continuing to seek methods of acquiringnew core deposits and maintaining its current core deposits while prudentlyadding time deposits at reasonable rates in comparison to local markets andother funding alternatives, including borrowings.  The average balances of borrowed funds remained relatively flatduring the first quarter of 2002 as compared to 2001, at $214,539,000 ascompared to $216,180,000, a decrease of .8%. Borrowings were kept consistent as a result of the Company’s success inattracting deposits over the past year as well as due to the favorable rates onlonger term borrowings over the past year.

 

The blended weightedaverage rate paid on deposits and borrowed funds was 3.31% for the three monthsended March 31, 2002 as compared to 4.30% for the same period in 2001.  The overall weighted average rates paid onborrowed funds decreased to approximately 5.47% for the quarter ended March 31,2002 from 6.24% in the first quarter of 2001. This decrease is reflective of actions taken by the Federal Reserve Bankin 2001.  It is anticipated, given thecurrent rate environment, that the rates paid on borrowed funds could declinefurther in future quarters as borrowings are refinanced as they reach maturity.  The Company will continue to evaluate theuse of borrowing as an alternative funding source for asset growth in futureperiods. See “Asset/Liability Management” for further discussion of thecompetitive market for deposits and overall strategies for uses of borrowedfunds. The weighted average rates paid on deposits was 2.38% for the quarterended March 31, 2002 as compared to 3.38% for the same period in 2001. Theoverall cost of deposits has decreased in the first quarter of 2002 generallydue to the interest rate which existed in 2001.

 

NON-INTERESTINCOME.  Total non-interest incomeincreased $883,000 or 36.1% in the first quarter of 2002 in comparison to thesame period in 2001.  Customer servicefees, which were $2,030,000 for the quarter ended March 31, 2002 as compared to$1,713,000 for 2001, for an increase of $317,000 or 18.5%, rose primarily dueto growth in deposit accounts, primarily NOW and checking account portfoliosand continued success in cross selling to customers, debit card activity, andsales of mutual funds and annuities. Loan servicing fees and gains on sales of mortgage loans were $44,000and $1,124,000, respectively, for the first quarter of 2002 as compared to$78,000 and $460,000, respectively. Gains on sales of mortgage loans increased $664,000 or 144.3% in thefirst quarter of 2002 as compared to the same period in 2001.  This was generally due to a more favorablemarket for loan originations and related higher volume of loans beingoriginated and sold in the first quarter of 2002 as compared to the same periodin 2001.  As the Company has beenselling loans generally on a servicing released basis since 1996, the portfolioof loans serviced for others has declined which has caused the continued dropin loan servicing income.

 

20

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Realized gains onsecurities, net, were $35,000 for the first quarter of 2002 as compared to$72,000 for 2001 for a decrease of $37,000 or 51.4%.  The results from the first quarter 2002 are reflective of currentmarket conditions for equity investments and bonds as well as managements’decision to generate lower levels of gains on sales of securities as comparedto 2001.

 

NON-INTERESTEXPENSES.  Non-interest expenses for thequarter ended March 31, 2002 increased $109,000 or 1.8% compared to the sameperiod in 2001.  Salaries and employeebenefits increased 3.0% or $92,000 on a net basis.  This increase was actually $629,000 or 20.6% excluding theone-time favorable impact of $537,000 which resulted from the Company’ssettlement of its previously terminated pension plan.  This increase was primarily the result of higher commissions paidto loan originators and other mortgage company incentives ($309,000), the openingof the Hanover branch (July 2001) ($54,000), other incentive increases($108,000) with the remaining increase generally relating to general usageincreases over the past year.  Occupancyexpenses decreased $28,000 or 3.3%. This decrease was primarily related to lower levels of maintenance andrepairs to facilities, as well as lower costs associated with snow removal andutilities in the first three months of 2002 as compared to 2001.  The decrease was offset in part due tohigher costs associated with the opening of Hanover (approximately $55,000).  Other non-interest expenses, including trustpreferred expenses, also increased $45,000 or 2.7% for the quarter ended March31, 2002 in comparison to the same period in 2001.  These results include the effect of the Company’s adoption ofSFAS No. 142, “Goodwill and Other Intangible Assets” as of January 1, 2002which resulted in approximately $82,000 less in goodwill amortization expensebeing recorded in the first quarter of 2002 as compared to 2001.  Excluding the effect of this change,non-interest expenses, including trust preferred securities expense increased$127,000 or 7.5%.  These increasesprimarily relate to increased volumes of accounts and transactions which haveoccurred over the past year.

 

PROVISION FOR POSSIBLELOAN LOSSES. The provision for possible loan losses for the quarters endedMarch 31, 2002 and 2001 were $0. The levels of provision in both periods isgenerally attributable to the continued strength of asset quality factors thatmanagement uses to measure and evaluate the adequacy of loan loss reservelevels, which include delinquency rates, charge offs, problem or “watched”assets and anticipated losses.  At March31, 2002, the Company’s non-performing asset and delinquency statistics wereinflated primarily due to an impaired loan relationship (telecom), which was onnon accrual at March 31, 2002 and December 31, 2001, which totaledapproximately $3.3 million.  See“Liquidity and Capital Resources” for additional discussion of credit qualitystatistics and trends.  The resultinglevel of loan loss reserves were approximately 1.47% of period end loans atMarch 31, 2002 as compared to 1.34% and .99% at December 31, and March 31,2001, respectively.

 

PROVISION FOR INCOMETAXES. The Company’s effective income tax rate for the quarter ended March 31,2002 was 36.4% compared to 35.0% for the quarter ended March 31, 2001. Thelower effective tax rate in comparison to statutory rates for both periods isreflective of income earned by certain non-bank subsidiaries which are taxed,for state tax purposes, at lower rates. The 2001 effective rate was lower due to a higher portion of theconsolidated earnings being contributed by a subsidiary which is taxed at lowerrates for state purposes.

 

CUMULATIVE EFFECT OFCHANGE IN ACCOUNTING. In December 2001, the Company elected to early adopt EITF00-14-“Accounting for Certain Sales Incentives.”  This pronouncement provided additional guidance for theaccounting for the cost of incentives given to customers to open new depositaccounts with the Bank.  Under thisguidance the cost of the incentive are charged to earnigns on the date theaccount is opened.  This varies from theprevious methodology used by the Company which was to defer this cost andamortize it to expense over the expected life of the deposit accountrelationship.  This impact of thischange in accounting is reflected on a net of tax basis as if it were appliedat the beginning of the year of adoption. The cumulative effect of this change in accounting principle was towrite off the unamortized portion of previously capitalized incentives atJanuary 1, 2001 totaling $298,000, net of tax. This quarterly restatement did not have a material impact on thequarterly results.  There was nocumulative effect of accounting changes in the first quarter of 2002.

 

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ASSET/LIABILITYMANAGEMENT

 

The objective ofasset/liability management is to ensure that liquidity, capital and market riskare prudently managed. Asset/liability management is governed by policiesreviewed and approved annually by the Company’s Board of Directors (Board). TheBoard delegates responsibility for asset/liability management to the corporateAsset/Liability Management Committee (ALCO). ALCO sets strategic directives thatguide the day-to-day asset/liability management activities of the Company. ALCOalso reviews and approves all major funding, capital and market risk-managementprograms. ALCO is comprised of members of management and executive managementof the Company and the Bank.

 

Interest rate risk isthe sensitivity of income to variations in interest rates over both short-termand long-term time horizons. The primary objective of interest rate riskmanagement is to control this risk within limits approved by the Board and byALCO. These limits and guidelines reflect the Company’s tolerance for interestrate risk. The Company attempts to control interest rate risk by identifyingpotential exposures and developing tactical plans to address such potentialexposures. The Company quantifies its interest rate risk exposures usingsophisticated simulation and valuation models, as well as a more simple gapanalysis. The Company manages its interest rate exposures by generally usingon-balance sheet strategies, which is most easily accomplished through themanagement of the durations and rate sensitivities of the Company’sinvestments, including mortgage-backed securities portfolios, and by extendingor shortening maturities of borrowed funds. Additionally, pricing strategies, assetsales and, in some cases, hedge strategies are also considered in theevaluation and management of interest rate risk exposures.

 

The Company usessimulation analysis to measure the exposure of net interest income to changesin interest rates over a 1 to 5 year time horizon. Simulation analysis involvesprojecting future interest income and expense from the Company’s assets,liabilities, and off-balance sheet positions under various interest ratescenarios.

 

The Company’s limits oninterest rate risk specify that if interest rates were to ramp up or down 200basis points over a 12 month period, estimated net interest income for the next12 months should decline by less than 10%. The following table reflects theCompany’s estimated exposure, as a percentage of estimated net interest incomefor the next 12 months, which does not materially differ from the impact on netincome, on the above basis:

 
| **Rate Change  (Basis Points)** |   | **Estimated Exposure as a  % of Net Interest Income** |   |
|---------------------------------|--------|-------------------------------------------------------|--------|
|                            |   |                                                  |   |
| +200                            |   |                                                  | 3.4    | % |
| -200                            |   |                                                  | (1.8   | )% |

 

22

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Interest rate gapanalysis provides a static view of the maturity and repricing characteristicsof the on-balance sheet and off-balance sheet positions. The interest rate gapanalysis is prepared by scheduling all assets, liabilities and off-balancesheet positions according to scheduled repricing or maturity.  Interest rate gap analysis can be viewed asa short-hand complement to simulation and valuation analysis.

 

The Company’s policy isto match, as well as possible, the interest rate sensitivities of its assetsand liabilities.  Generally, residentialmortgage loans currently originated by the Company are sold in the secondarymarket.  Residential mortgage loans thatthe Company currently originates, from time to time, or purchases for theCompany’s own portfolio are primarily 1-year, 3-year, 5-year and 7-yearadjustable rate mortgages and shorter term (generally 15-year or seasoned30-year) fixed rate mortgages.

 

The Company alsoemphasizes loans with terms to maturity or repricing of 5 years or less, suchas certain commercial mortgages, business loans, residential construction loansand home equity loans.

 

23

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Management desires toexpand its interest earning asset base in future periods primarily throughgrowth in the Company’s loan portfolio. Loans comprised approximately 54.7% of the average interest earningassets for the first three months of 2002. In the future, the Company intends to continue to be competitive in theresidential mortgage market but plans to place greater emphasis on home equityand commercial loans.  The Company alsoexpects to become more active in pursuing wholesale opportunities to purchaseloans.  During the first three months of2002 and 2001, the Company acquired approximately $11,000,000 and $,12,000,000,respectively, of residential first mortgages which are serviced by others.

 

The Company has alsoused mortgage-backed investments (typically with weighted average lives of 5 to7 years) as a vehicle for fixed and adjustable rate investments and as anoverall asset/liability tool. These securities have been highly liquid givencurrent levels of prepayments in the underlying mortgage pools and, as aresult, have provided the Company with greater reinvestment flexibility.

 

Currently, managementbelieves the current interest rate environment to be at the lower end of theinterest rate cycle.  As a result,management has been very selective in the types and terms of loans andinvestments that are put on the Company’s balance sheet.  As a result, the Company has shifted itsinvestment strategy during the fourth quarter of 2001 and the first quarter of2002 toward investment securities with average lives closer to 3 to 4 years inorder to put the Company in a more favorable environment as rates eventuallyrise.  Most of the Company’s residentialloan production has been sold in the secondary market as part of this strategy.

 

During the first quarterof 2002, the Company continued to experience high levels of prepayment activityin its mortgage related assets (residential mortgages and mortgage-backedsecurities) which comprise approximately 65.7% of the Company’s balance sheetas of March 31, 2002.  At March 31,2002, the Company had roughly $38.9 million in short-term or overnightinvestments which management plans to use to pay for acquisitions of loans andsecurities which are not due to settle until later in the second quarter.  As required by generally accepted accountingprinciples, these investments and loans are both included as assets on theaccompanying consolidated balance sheets with an offsetting liability beingbooked in Other Liabilities.  Therefore,the total asset amounts as of March 31, 2002 are temporarily inflated byapproximately $34 million.  Had thesepurchases settled before March 31, 2002, total assets would have beenapproximately $815,300,000 which would have represented 5.9% growth incomparison to December 31, 2001 levels.

 

The level of theCompany’s liquid assets and the mix of its investments may vary, depending uponmanagement’s judgement as to market trends, the quality of specific investmentopportunities and the relative attractiveness of their maturities and yields.  Management has been aggressively promotingthe Company’s core deposit products since the first quarter of 1995,particularly checking and NOW accounts. The success of this program has favorably impacted the overall depositgrowth to date, despite interest rate and general market pressures, and hashelped the Company to increase its customer base.  However, given the strong performance of mutual funds and theequity markets in general, the Company and many of its peers have begun to seelower levels of growth in time deposits as compared to prior years as customersreflect their desire to increase their returns on investment.  This pressure has been exacerbated currentlyby the historically low long-term economic interest rates.  Management believes that the markets forfuture time deposit growth, particularly with terms of 1 to 2 years, willremain highly competitive. Management will continue to evaluate future fundingstrategies and alternatives accordingly as well as to continue to focus itsefforts on attracting core, retail deposit relationships.

 

The Company is also avoluntary member of the Federal Home Loan Bank (“FHLB”) of Boston. Thisborrowing capacity assists the Company in managing its asset/liability growthbecause, at times, the Company considers it more advantageous to borrow moneyfrom the FHLB of Boston than to raise money through non-core deposits (i.e.,certificates of deposit).  Borrowedfunds totaled $231,321,000 at March 31, 2002 compared to $201,549,000 atDecember 31, 2001.  These borrowings areprimarily comprised of FHLB of Boston advances and have primarily fundedresidential loan originations and purchases as well as mortgage-backedinvestments and investment securities.

 

24

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Also, the Companyobtained funding in June 1998 through the issuance of Trust PreferredSecurities which carry a higher interest rate than similar FHLB borrowings butat the same time are included as capital, without diluting earnings per shareand are tax deductible. See “Liquidity and Capital Resources” for furtherdiscussion.

 

The following table setsforth maturity and repricing information relating to interest sensitive assetsand liabilities at March 31, 2002. The balance of such accounts has beenallocated among the various periods based upon the terms and repricingintervals of the particular assets and liabilities. For example, fixed rateresidential mortgage loans and mortgage-backed securities, regardless of“available for sale” classification, are shown in the table in the time periodscorresponding to projected principal amortization computed based on theirrespective weighted average maturities and weighted average rates usingprepayment data available from the secondary mortgage market.

 

Adjustable rate loansand securities are allocated to the period in which the rates would be nextadjusted. The following table does not reflect partial or full prepayment ofcertain types of loans and investment securities prior to scheduled contractualmaturity. Additionally, all securities or borrowings which are callable at theoption of the issuer or lender are reflected in the following table based uponthe likelihood of call options being exercised by the issuer on certaininvestments or borrowings in a most likely interest rate environment. Sinceregular passbook savings and NOW accounts are subject to immediate withdrawal,such accounts have been included in the “Other Savings Accounts” category andare assumed to mature within 6 months. This table does not include non-interestbearing deposits.

 

While this tablepresents a cumulative negative gap position in the 6 month to 5 year horizon,the Company considers its earning assets to be more sensitive to interest ratemovements than its liabilities. In general, assets are tied to increases thatare immediately impacted by interest rate movements while deposit rates aregenerally driven by market area and demand which tend to be less sensitive togeneral interest rate changes. In addition, other savings accounts and moneymarket accounts are substantially stable core deposits, although subject torate changes. A substantial core balance in these type of accounts isanticipated to be maintained over time.

 

25

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|                                                                                         |   | **At March 31, 2002**           |     |          |   |
|----------------------------------------------------------------------------------------------|--------|---------------------------------|----------|---------------|--------|
|                                                                                         |   | **Repricing/Maturity Interval** |     |          |   |
|                                                                                         |   | **0-6 MOS.**                    |     | **6-12 MOS.** |   | **1-2 YRS.** |   | **2-3 YRS.** |   | **3-5 YRS.** |   | **Over5 YRS.** |   | **TOTAL** |   |
|                                                                                         |   | **(Dollars in thousands)**      |     |
| Assets subject to interest  rate adjustment:                                                 |   |                            |     |          |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments                                                                       |   | $                               | 38,909   |          | $      | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 38,909 |   |
| Bonds and obligations                                                                        |   | 517                             |     | 10,966        |   | 19,946 |   | 21,940 |   | 3,007 |   | 1,096 |   | 57,472 |   |
| Mortgage-backed investments                                                                  |   | 43,853                          |     | 33,252        |   | 51,999 |   | 34,129 |   | 58,583 |   | 95,975 |   | 317,791 |   |
| Mortgage loans subject to rate review                                                        |   | 47,935                          |     | 10,985        |   | 25,292 |   | 12,352 |   | 22,936 |   | 4,841 |   | 124,341 |   |
| Fixed rate mortgage loans                                                                    |   | 55,243                          |     | 19,553        |   | 29,361 |   | 22,941 |   | 61,352 |   | 38,642 |   | 227,092 |   |
| Commercial and other loans                                                                   |   | 12,761                          |     | 2,128         |   | 1,659 |   | 1,289 |   | 2,678 |   | 480 |   | 20,995 |   |
| Total                                                                                        |   | 199,218                         |     | 76,884        |   | 128,257 |   | 92,651 |   | 148,556 |   | 141,034 |   | 786,600 |   |
| Liabilities subject to interest rate adjustment:                                             |   |                            |     |          |   |   |   |   |   |   |   |   |   |   |   |
| Money market deposit accounts                                                                |   | 61,268                          |     | —        |   | — |   | — |   | — |   | — |   | 61,268 |   |
| Savings deposits-term certificates                                                           |   | 75,935                          |     | 44,291        |   | 20,317 |   | 11,754 |   | 10,567 |   | — |   | 162,864 |   |
| Other savings accounts                                                                       |   | 228,716                         |     | —        |   | — |   | — |   | — |   | — |   | 228,716 |   |
| Borrowed funds                                                                               |   | 56,821                          |     | 30,000        |   | 50,000 |   | 15,000 |   | 5,000 |   | 74,500 |   | 231,321 |   |
| Total                                                                                        |   | 422,740                         |     | 74,291        |   | 70,317 |   | 26,754 |   | 15,567 |   | 74,500 |   | 684,169 |   |
| Guaranteed preferred beneficial interest in junior  subordinated debentures                  |   | —                          |     | —        |   | — |   | — |   | — |   | 12,181 |   | 12,181 |   |
| Excess (deficiency) of rate sensitive assets over rate  sensitive liabilities                |   | (223,522                        | )        | 2,593         |   | 57,940 |   | 65,897 |   | 132,989 |   | 54,353 |   | 90,250 |   |
| Cumulative excess (deficiency) of rate sensitive assets  over rate sensitive liabilities (1) |   | $                               | (223,522 | )             | $      | (220,929 | ) | $ | (162,989 | ) | $ | (97,092 | ) | $ | 35,897 |   | $ | 90,250 |   |   |   |
| Rate sensitive assets as a percent of rate sensitive  liabilities (cumulative)               |   | 47.1                            | %        | 55.6          | %      | 71.3 | % | 83.7 | % | 105.9 | % | 113.0 | % |   |   |
|                                                                                              |        |                                 |          |               |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1)Cumulative as to the amounts previously repriced or matured.  Assets held for sale are reflected in theperiod in which sales are expected to take place.  Securities classified as available for sale are shown atrepricing/maturity intervals as if they are to be held to maturity as there isno definitive plan of disposition. They are also shown at amortized cost.

 

26

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LIQUIDITY AND CAPITALRESOURCES

 

Payments and prepaymentson the Company’s loan and mortgage-backed investment portfolios, sales of fixedrate residential loans, increases in deposits, borrowed funds and maturities ofvarious investments comprise the Company’s primary sources of liquidity. TheCompany is also a voluntary member of the FHLB of Boston and, as such, isentitled to borrow an amount up to the value of its qualified collateral thathas not been pledged to outside sources. Qualified collateral generallyconsists of residential first mortgage loans, securities issued, insured orguaranteed by the U.S. Government or its agencies, and funds on deposit at theFHLB of Boston. Short-term advances may be used for any sound business purpose,while long-term advances may be used only for the purpose of providing funds tofinance housing. At March 31, 2002, the Company had approximately $266,479,000in unused borrowing capacity that is contingent upon the purchase of additionalFHLB of Boston stock. Use of this borrowing capacity is also impacted bycapital adequacy considerations.

 

The Company regularlymonitors its asset quality to determine the level of its loan loss reservesthrough periodic credit reviews by members of the Company’s Management CreditCommittee. The Management Credit Committee, which reports to the ExecutiveCommittee of the Company’s Board of Directors, also works on the collection ofnon-accrual loans and disposition of real estate acquired by foreclosure. Theallowance for possible loan losses is determined by the Management CreditCommittee after consideration of several key factors including, withoutlimitation, potential risk in the current portfolio, levels and types ofnon-performing assets and delinquency, levels of potential problem loans, whichgenerally have varying degrees of loan collateral and repayment issues, on thewatched asset reports.  Workout approachand financial condition of borrowers are also key considerations to theevaluation of non-performing loans.

 

Non-performing assetswere $3,862,000 at March 31, 2002, compared to $3,959,000 at December 31, 2001,a decrease of $97,000 or 2.5%. The Company’s percentage of delinquent loans tototal loans was 1.19% at March 31, 2002, as compared to 1.16% at December 31,2001.  At March 31, 2002 and December31, 2001, the Company’s levels of non-performing assets and delinquent loanswere adversely affected by primarily one impaired loan relationship (telecom)which was on non-accrual as of those dates. This relationship totaled apprxomately $3.3 million at both March 31,2002 and December 31, 2001.  This loanalso had a portion of the allowance for loan losses specifically allocated toaddress potential identifiable loss exposures totaling $1.9 million at bothMarch 31, 2002 and December 31, 2001.  Atable of key credit quality statistics as reported and as adjusted for thisrelationship is as follows:

 
|                                                 |   | **March 31,  2002** |   | **December 31,  2001** |   | **March 31,  2001** |   |
|------------------------------------------------------|--------|---------------------|--------|------------------------|--------|---------------------|--------|
|                                                 |   |                |   |                   |   |                |   |
| Non-Performing  Assets                               |   | $                   | 3,862  |                   | $      | 3,959               |   | $ | 398 |   |
|                                                 |   |                |   |                   |   |                |   |
| All  Delinquent Loans as a Percentage of Total Loans |   | 1.19                | %      | 1.16                   | %      | .21                 | %      |
|                                                 |   |                |   |                   |   |                |   |
| Loan  Loss Reserve to Non-performing loans           |   | 142.7               | %      | 138.5                  | %      | 964.3               | %      |
|                                                      |        |                     |        |                        |        |                     |        |  |  |  |

 

27

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Management believes thatwhile delinquency rates and non-performing assets remain at relatively lowlevels, particularly excluding the one large impaired relationship noted above,these factors are at historic lows, and at some point in the future some degreeof economic slow down is likely which in turn may result in future increases inproblem assets and loan loss provisions. Management continues to monitor the overall economic environment and itspotential effects on future credit quality on an ongoing basis.

 

At March 31, 2002, theCompany had outstanding commitments to originate and sell residential mortgageloans in the secondary market amounting to $26,650,000 and $7,473,000,respectively.  The Company also hasoutstanding commitments to grant advances under existing home equity lines ofcredit amounting to $19,193,000. Unadvanced commitments under outstanding commercial and constructionloans totaled $15,374,000 as of March 31, 2002. The Company believes it hasadequate sources of liquidity to fund these commitments.

 

The Company’s totalstockholders’ equity was $38,576,000 or 4.54% of total assets at March 31,2002, compared with $39,151,000 or 5.1% of total assets at December 31,2001.  The decrease in totalstockholders’ equity of approximately $575,000 or 1.5% primarily resulted froman increase in the unrealized loss on the market value of available for salesecurities, net of taxes and dividends paid or payable offset, in part, by theearnings of the Company.

 

The Company issued$12,650,000 or 8.25% Trust Preferred Securities in June 1998.  Under current regulatory guidelines, trustpreferred securities are allowed to represent up to approximately 25% of theCompany’s Tier 1 capital with any excess amounts available as Tier 2 capital.As of March 31, 2002, all of these securities were included in Tier 1 capital.

 

Bank regulatoryauthorities have established a capital measurement tool called “Tier 1”leverage capital. A 4.00% ratio of Tier 1 capital to assets now constitutes theminimum capital standard for most banking organizations and a 5.00% Tier 1leverage capital ratio is required for a “well-capitalized” classification. AtMarch 31, 2002, the Company’s Tier 1 leverage capital ratio was approximately5.81%. In addition, regulatory authorities have also implemented risk-basedcapital guidelines requiring a minimum ratio of Tier 1 capital to risk-weightedassets of 4.00% (6.00% for “well-capitalized”) and a minimum ratio of totalcapital to risk-weighted assets of 8.00% (10.00% for “well-capitalized”). AtMarch 31, 2002, the Company’s Tier 1 and total risk-based capital ratios wereapproximately 11.82% and 13.08%, respectively. The Company is categorized as “well-capitalized” under the FederalDeposit Insurance Corporation Improvement Act of 1991 (F.D.I.C.I.A.). The Bankis also categorized as “well-capitalized” as of March 31, 2002.

 

28

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IMPACT OF INFLATION

 

The ConsolidatedFinancial Statements of the Company and related Financial Data presented hereinhave been prepared in accordance with accounting principles generally acceptedin the United States which generally require the measurement of financialcondition and operating results in terms of historical dollars withoutconsidering the changes in the relative purchasing power of money over time dueto inflation. The primary impact of inflation on operations of the Company isreflected in increased operating costs. Unlike most industrial companies,almost all the assets and liabilities of a financial institution are monetaryin nature. As a result, interest rates have a more significant impact on afinancial institution’s performance than the effects of general levels ofinflation. Interest rates do not necessarily move in the same direction or inthe same magnitude as the price of goods and services.

 

InSeptember 2000, the FASB issued SFAS No. 140, *Accounting for Transfers and Servicingof Financial Assets and Extinguishments of Liabilities.* ThisStatement replaces SFAS No. 125, *Accounting for Transfers and Servicing of FinancialAssets and Extinguishments of Liabilities,* and rescinds SFASStatement No. 127, *Deferral of the Effective Date of Certain Provisionsof FASB Statement No. 125.* SFAS No. 140 providesaccounting and reporting standards for transfers and servicing of financialassets and extinguishments of liabilities. This statement provides consistentstandards for distinguishing transfers of financial assets that are sales fromtransfers that are secured borrowings. This statement is effective fortransfers and servicing of financial assets and extinguishments of liabilitiesoccurring after March 31, 2001 and is effective for recognition andreclassification of collateral and for disclosures relating to securitizationtransactions and collateral for fiscal years ending after December 15,2000. The adoption of SFAS No. 140 did not have a material impact on theCompany’s consolidated financial position or results or operations.

 

## CRITICAL ACCOUNTING POLICIES AND CONTRACTUALOBLIGATIONS AND COMMITMENTS

 

Weconsidered the disclosure requirements of FR-60 regarding Critical AccountingPolicies and FR-61 regarding liquidity and capital resources, certain tradingactivities and related party/certain either disclosures, and concluded thatnothing materially changed during the quarter that would warrant furtherdisclosure under these releases.

 

29

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PROPOSED ACCOUNTINGPRONOUNCEMENTS

 

None.

 

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

 

See “Management’sDiscussion and Analysis - Asset/Liability Management.”

 

Part II. OTHERINFORMATION

 

Item 1.           Legal Proceedings.

 

The Company is adefendant in various legal matters, none of which is believed by management tobe material to the consolidated financial statements.

 

Item 2.           Changes in Securities.

 

(a)Not applicable.

(b)Not applicable.

(c)Not applicable.

(d)Not applicable.

 

Item 3.           Defaults Upon Senior Securities.

 

None.

 

Item 4.           Submission of Matters to a Vote ofSecurity Holders.

 

None

 

Item 5.           Other Information.

 

None.

 

30

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**ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K**

 
| Exhibits  and Reports on Form 8-K. |
|------------------------------------|
|                               |   |   |
| 2.1                                |   | Plan of Reorganization  and Acquisition dated as of October 15, 1996 between the Company and Abington  Savings Bank incorporated by reference to the Registration Statement on Form  8-A, effective January 13, 1997. |
|                               |   |   |
| 3.1                                |   | Articles of  Organization of the Company incorporated by reference to the Company’s  Registration Statement on Form 8-A, effective January 13, 1997. |
|                               |   |   |
| 3.2                                |   | By-Laws of the  Company, incorporated by reference to the Company’s quarterly report on Form  10-Q for the first quarter of 2000, filed on May 12, 2000. |
|                               |   |   |
| 4.1                                |   | Specimen stock  certificate for the Company’s Common Stock incorporated by reference to the  Company’s Registration Statement on Form 8-A, effective January 31, 1997. |
|                               |   |   |
| 4.2                                |   | Form of Indenture  between Abington Bancorp, Inc. and State Street Bank and Trust Company  incorporated by reference to Exhibit 4.1 of the Registration Statement on  Form S-2 of the Company and Abington Bancorp Capital Trust, filed on May 12,  1998. |
|                               |   |   |
| 4.3                                |   | Form of Junior  Subordinated Debenture incorporated by reference to Exhibit 4.2 of the  Registration Statement on Form S-2 of the Company and Abington Bancorp  Capital Trust, filed on May 12, 1998. |
|                               |   |   |
| 4.4                                |   | Form of Amended and  Restated Trust Agreement by and among the Company, State Street Bank and  Trust Company, Wilmington Trust Company and the Administrative Trustees of  the Trust incorporated by reference to Exhibit 4.4 of the Registration  Statement on Form S-2 of the Company and Abington Bancorp Capital Trust, filed  on May 12, 1998. |
|                               |   |   |
| 4.5                                |   | Form of Preferred  Securities Guarantee Agreement by and between the Company and State Street  Bank and Trust Company incorporated by reference to Exhibit 4.6 of the  Registration Statement on Form S-2 of the Company and Abington Bancorp  Capital Trust, filed on May 12, 1998. |
|                               |   |   |
| *10.1                              |   | (a) Amended and  Restated Special Termination Agreement dated as of January 1997 among the  Company, the Bank and James P. McDonough incorporated by reference to the  Company’s Annual Report on Form 10-K for the year ended December 31, 1996  filed on March 31, 1997. |
|                               |   |   |
|                               |   | *(b) Amendment to  Amended and Restated Special Termination Agreement, dated as of July 1, 1997  among the Company, the Bank and James P. McDonough, incorporated by reference  to the Company’s quarterly report on Form 10-Q for the second quarter of  1997, filed on August 13, 1997. |
|                               |   |   |
| *10.2                              |   | Special Termination  Agreement dated as of November 2, 1998 among the Company, the Bank and Kevin  M. Tierney, incorporated by reference to the Company’s quarterly report on  Form 10-Q for the third quarter of 1998, filed on November 12, 1998. |
|                               |   |   |
| 10.3                               |   | Special Termination  Agreement dated as of September 13, 2000 among the Company, the Bank and  Cynthia A. Mulligan, incorporated by reference to the Company’s quarterly  report on Form 10-Q for the first quarter of 2001, filed on November 15,  2000. |
|                               |   |   |
| *10.4                              |   | (a) Amended and  Restated Special Termination Agreement dated as of January 31, 1997 among the  Company, the Bank and Mario A. Berlinghieri incorporated by reference to the  Company’s Annual Report for the year ended December 31, 1996 on Form 10-K  filed on March 31, 1997. |

 

31

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (b) Amendment to  Amended and Restated Special Termination Agreement, dated as of July 1, 1997  among the Company, the Bank and Mario A. Berlinghieri, incorporated by  reference to the Company’s quarterly report on Form 10-Q for the second  quarter of 1997, filed on August 13, 1997.                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (c) Amendment No. 2 to  Amended and Restated Special Termination Agreement, dated as of April 16,  1998, by and among the Company, the Bank and Mario A. Berlinghieri,  incorporated by reference to the Company’s quarterly report on Form 10-Q for  the first quarter of 1998, filed on May 8, 1998.                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.5  |   | Abington Bancorp, Inc.  Incentive and Nonqualified Stock Option Plan, as amended and restated to  reflect holding company formation incorporated by reference to the Company’s  Annual Report for the year ended December 31, 1996 on Form 10-K filed on  March 31, 1997.                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.6  |   | Senior Management  Incentive Plan, incorporated by reference to the Company’s Annual Report for  the year ended December 31, 2001 on Form 10-K filed on March 28, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.7  |   | Revised Long Term  Performance Incentive Plan dated January 2000 incorporated by reference to  the Company’s Annual Report for the year ended December 31, 2000 on Form 10-K  filed on March 28, 2000.                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.8   |   | (a) Lease for office  space located at 538 Bedford Street, Abington, Massachusetts (“lease”), used  for the Bank’s principal and administrative offices dated January 1, 1996  incorporated by reference to the Company’s Annual Report for the year ended  December 31, 1996 on Form 10-K filed on March 31, 1997. Northeast Terminal  Associates, Limited owns the property. Dennis E. Barry and Joseph L. Barry,  Jr., who beneficially own more than 5% of the Company’s Common Stock, are the  principal beneficial owners of Northeast Terminal Associates, Limited. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (b) Amendment to Lease  dated December 31, 1997, incorporated by reference to the Company’s Annual  Report for the year ended December 31, 1997 on Form 10-K filed on March 25,  1998.                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.9   |   | Dividend Reinvestment  and Stock Purchase Plan is incorporated by reference herein to the Company’s  Registration Statement on Form S-3, effective January 31, 1997.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.10 |   | Abington Bancorp, Inc.  1997 Incentive and Nonqualified Stock Option Plan, incorporated by reference  herein to Appendix A to the Company’s proxy statement relating to its special  meeting in lieu of annual meeting held on June 17, 1997, filed with the  Commission on April 29, 1997.                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.11 |   | (a) Special  Termination Agreement dated as of July 1, 1997 among the Company, the Bank  and second quarter of 1997, filed on August 13, 1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (b) Amendment No. 1 to  Special Termination  Agreement, dated  April 16, 1998, by and among the Company, the Bank and Robert M. Lallo,  incorporated by reference to the Company’s quarterly report on Form 10-Q for  the first quarter of 1998, filed on May 8, 1998.                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.12 |   | Merger Severance  Benefit Program dated as of August 28, 1997, incorporated by reference to the  Company’s Quarterly Report on Form 10-Q for the third quarter of 1997, filed  on November 15, 1997.                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.13 |   | Supplemental Executive  Retirement Agreement between the Bank and James P. McDonough dated as of  August 23, 2001, incorporated by reference to the Company’s quarterly report  on Form 10-Q for the third quarter of 2001, filed on November 13, 2001.                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *10.14 |   | Deferred Stock  Compensation Plan for Directors, effective July 1, 1998 incorporated by  reference to Appendix A to the Company’s proxy statement (schedule 14A) for  its 1998 Annual Meeting, filed with the Commission on April 13, 1998.                                                                                                                                                                                                                                                                                                                                                    |

 

 

32

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|                                      |   |                                                                                                                                                                                                                                                                                                  |
|-------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *10.15                                    |   | Special Termination  Agreement dated as of February 7, 2000 among the Company, the Bank and Jack  B. Meehl, incorporated by reference to the Company’s Annual Report for the  year ended December 31, 2001 on Form 10-K filed on March 28, 2000.                                                 |
|                                      |   |                                                                                                                                                                                                                                                                                                  |
| *10.16                                    |   | Abington Bancorp, Inc.  2000 Incentive and Nonqualified Stock Option Plan, incorporated by reference  herein to Appendix A to the Company’s proxy statement relating to its annual  meeting held on May 16, 2000, filed with the Commission on April 13, 2000.                                   |
|                                      |   |                                                                                                                                                                                                                                                                                                  |
| *10.17                                    |   | Abington Bancorp, Inc.  Board of Directors Transition and Retirement Plan, incorporated by reference  to the Company’s quarterly report on Form 10-Q for the second quarter of  2000, filed on August 11, 2000.                                                                                  |
|                                      |   |                                                                                                                                                                                                                                                                                                  |
| *10.18                                    |   | Defined Contribution  Supplemental Executive Retirement Agreement between the Bank and  Kevin M. Tierney, Sr. dated July 26, 2001, incorporated by  reference to the Company’s quarterly report on Form 10-Q for the second  quarter of 2001, filed on August 10, 2001. |
|                                      |   |                                                                                                                                                                                                                                                                                                  |
| *10.19                                    |   | Defined Contribution  Supplemental Executive Retirement Agreement between the Bank and  Robert M. Lallo dated July 26, 2001, incorporated by reference to  the Company’s quarterly report on Form 10-Q for the second quarter of  2001, filed on August 10, 2001.            |
|                                      |   |                                                                                                                                                                                                                                                                                                  |
| 11.1                                      |   | A statement regarding  the computation of earnings per share is included in Note D to Unaudited  Consolidated Financial Statements included in this Report.                                                                                                                                           |
|                                      |   |                                                                                                                                                                                                                                                                                                  |
| (b) Reports on Form  8-K.                 |
|                                      |
| There  were no reports filed on Form 8-K. |

 

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* Management contract orcompensatory plan or arrangement.

 

33

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Company has dulycaused this report to be signed on its behalf by the undersiged thereunto dulyauthorized.

 
|                            | ABINGTON BANCORP, INC.                 |   |
|---------------------------------|----------------------------------------|--------|
|                            | (Company)                              |
|                            |                                   |
|                            |                                   |
| Date:  May   10, 2002 | By /s/ James P.  McDonough             |   |
|                            | James P. McDonough                     |
|                            | President and Chief  Executive Officer |
|                            |                                   |
| Date:  May 10, 2002        | By /s/ Robert M. Lallo                 |   |
|                            | Robert M. Lallo                        |
|                            | Treasurer                              |
|                            | (Principal Financial  Officer)         |
|                                 |                                        |        |  |

 

34

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