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**SECURITIES AND EXCHANGECOMMISSION****Washington,D. C. 20549**

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**FORM 10–Q**

**QUARTERLY REPORTUNDER SECTION 13 OF THE SECURITIESEXCHANGE ACT OF 1934**

**for Quarter Ended June 30, 2001**

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**Commission File Number 0–16018**

| **ABINGTON BANCORP, INC.**                              |
|---------------------------------------------------------|
| ****                                                    |
| (Exact name of Registrant  as specified in its charter) |

 

| **Massachusetts**                  |   | **04–3334127**               |
|------------------------------------|--------|-----------------------------------|
|                                    |   |                                   |
| (State or Other  Jurisdiction      |   | (I.R.S.  Identification No.) |
| of Incorporation or  Organization) |   |                              |

 

| **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 theRegistrant (1) has filed all reports required to be filed by Section 13 of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the Registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.  Yes ý No o

Indicate the number of shares outstandingof each of the Registrant's classes of common stock, as of the latestpracticable date:  3,110,852 shares asof August 6, 2001.

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Certain statements in this Form 10–Qconstitute "forward–looking statements" within the meaning ofSection 27A of the Securities Act and Section 21E of the Exchange Act. Further,any statements contained in this Form 10–Q that are not statements ofhistorical fact may be deemed to be forward–looking statements.  Without limiting the foregoing, the words"expect," "anticipate," "plan," "believe,""seek," "estimate," "internal" and similar wordsare intended to identify expressions that may be forward–lookingstatements. Forward–looking statements involve certain risks anduncertainties, and actual results may differ materially from those contemplatedby such statements. For example, actual results may be adversely affected bythe following possibilities: (1) competitive pressure among depositoryinstitutions may increase; (2) changes in interest rates may reduce bankinginterest margins; (3) general economic conditions and real estate values may beless favorable than contemplated; and (4) adverse legislation or regulatoryrequirements may be adopted.  Many ofsuch factors are beyond the Company's ability to control or predict. Readers ofthis Form 10–Q are accordingly cautioned not to place undue reliance onforward–looking statements. The Company disclaims any intent orobligation to update publicly any of the forward–looking statementsherein, whether in response to new information, future events or otherwise.

ABINGTONBANCORP, INC.FORM 10-Q

INDEX

| Part  I        | Financial  Information                                                                                                   |   |
|----------------|--------------------------------------------------------------------------------------------------------------------------|--------|
|           |                                                                                                                     |   |
| Item  1.       | Financial  Statements                                                                                                    |   |
|           |                                                                                                                     |   |
|           | Consolidated Balance Sheets  as of June 30, 2001 (Unaudited) and December 31, 2000                                       |   |
|           |                                                                                                                     |   |
|           | Consolidated  Statements of Operations (Unaudited) for the Three and Six Months Ended June  30, 2001 and 2000            |   |
|           |                                                                                                                     |   |
|           | Consolidated  Statements of Changes in Stockholders' Equity (Unaudited) for the Six Months  Ended June 30, 2001 and 2000 |   |
|           |                                                                                                                     |   |
|           | Consolidated  Statements of Comprehensive Income (Unaudited) for the Three and Six Months  Ended June 30, 2001 and 2000  |   |
|           |                                                                                                                     |   |
|           | Consolidated  Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2001  and 2000                      |   |
|           |                                                                                                                     |   |
|           | 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 |                                                                                                                     |

ABINGTON BANCORP, INC.CONSOLIDATED BALANCE SHEETS(Unaudited)

|                                                                                            | June  30,                                                                                                                          |    | December  31, |    |
|-------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|---------|---------------|---------|
|                                                                                            | 2001                                                                                                                               |    | 2000          |    |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | (Dollars  in thousands)                                                                                                            |
|                                                                                            |                                                                                                                               |    |          |    |
| ASSETS                                                                                          |                                                                                                                               |    |          |    |
|                                                                                            |                                                                                                                               |    |          |    |
| Cash and due from  banks                                                                        | $                                                                                                                                  | 28,542  |          | $       | 27,374 |   |
| Short-term investments                                                                          | 239                                                                                                                                |    | 235           |    |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | Total cash and cash  equivalents                                                                                                   | 28,781  |          | 27,609  |   |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            |                                                                                                                               |    |          |    |
| Loans held for sale                                                                             | 7,229                                                                                                                              |    | 3,617         |    |
| Securities available  for sale - at fair value                                                  | 336,572                                                                                                                            |    | 290,211       |    |
| Loans                                                                                           | 393,640                                                                                                                            |    | 374,377       |    |
|                                                                                            | Less:                                                                                                                              |    |          |    |   |
|                                                                                            | Allowance for possible  loan losses                                                                                                | (4,176  | )             | (3,856  | ) |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | Loans, net                                                                                                                         | 389,464 |          | 370,521 |   |
|                                                                                            |                                                                                                                                    |    |               |    |
| Federal Home Loan Bank  stock, at cost                                                          | 12,910                                                                                                                             |    | 12,910        |    |
| Banking premises and  equipment, net                                                            | 9,610                                                                                                                              |    | 9,481         |    |
| Other real estate  owned, net                                                                   | 355                                                                                                                                |    | -             |    |
| Intangible assets                                                                               | 2,484                                                                                                                              |    | 2,710         |    |
| Bank-owned life  insurance – contract value                                                | 3,597                                                                                                                              |    | 3,511         |    |
| Other assets                                                                                    | 10,917                                                                                                                             |    | 7,679         |    |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | $                                                                                                                                  | 801,919 |          | $       | 728,249 |   |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            |                                                                                                                               |    |          |    |
| LIABILITIES AND  STOCKHOLDERS' EQUITY                                                           |                                                                                                                               |    |          |    |
|                                                                                            |                                                                                                                               |    |          |    |
| Deposits                                                                                        | $                                                                                                                                  | 477,643 |          | $       | 454,747 |   |
| Short-term borrowings                                                                           | 43,129                                                                                                                             |    | 49,565        |    |
| Long-term debt                                                                                  | 209,500                                                                                                                            |    | 172,567       |    |
| Accrued taxes and  expenses                                                                     | 3,503                                                                                                                              |    | 3,582         |    |
| Other liabilities                                                                               | 20,034                                                                                                                             |    | 1,397         |    |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | Total liabilities                                                                                                                  | 753,809 |          | 681,858 |   |
|                                                                                            |                                                                                                                                    |    |               |    |
| Guaranteed preferred  beneficial interests in the Company’s junior subordinated debentures | 12,124                                                                                                                             |    | 12,086        |    |
| 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; 4,918,000 and 4,875,000 shares issued in  2001 and 2000, respectively | 492     |          | 488     |   |
| Additional paid-in  capital                                                                     | 23,017                                                                                                                             |    | 22,915        |    |
| Retained earnings                                                                               | 31,523                                                                                                                             |    | 29,570        |    |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | 55,032                                                                                                                             |    | 52,973        |    |
| Treasury stock –  1,807,000 shares in 2001 and 2000, at cost                               | (17,584                                                                                                                            | )       | (17,584       | )       |
| Compensation plans                                                                              | 117                                                                                                                                |    | 111           |    |
| Other accumulated  comprehensive income -                                                       |                                                                                                                               |    |          |    |
| Net unrealized loss on  available for sale securities, net of taxes                             | (1,579                                                                                                                             | )       | (1,195        | )       |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | Total stockholders'  equity                                                                                                        | 35,986  |          | 34,305  |   |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                            | $                                                                                                                                  | 801,919 |          | $       | 728,249 |   |
|                                                                                            |                                                                                                                                    |    |               |    |
|                                                                                                 |                                                                                                                                    |         |               |         |  |  |  |  |

See accompanying notesto unaudited consolidated financial statements.

ABINGTON BANCORP, INC.CONSOLIDATED STATEMENTS OFOPERATIONS(Unaudited)

|                                                           | Three  Months Ended                                                  |                                          | Six  Months Ended |          |
|----------------------------------------------------------------|----------------------------------------------------------------------|-----------------------------------------------|-------------------|---------------|
|                                                           | June  30                                                             |                                          | June  30          |          |
|                                                           |                                                                      |                                          |                   |          |
|                                                           | **2001**                                                             |                                          | **2000**          |          | **2001** |   | **2000** |   |
|                                                           | ****                                                                 |                                          | ****              |          | **** |   | **** |   |
|                                                           | (In  thousands, except per share data)                               |
|                                                           |                                                                 |
| Interest and dividend  income:                                 |                                                                 |                                          |              |          |   |   |   |   |
|                                                           | Interest and fees on  loans                                          | $                                             | 7,166             |          | $ | 7,361 |   | $ | 14,407 |   | $ | 14,656 |   |
|                                                           | Interest on  mortgage-backed investments                             | 4,102                                         |              | 3,037         |   | 7,629 |   | 5,823 |   |
|                                                           | Interest on bonds and  obligations                                   | 1,218                                         |              | 1,289         |   | 2,670 |   | 2,543 |   |
|                                                           | Dividend income                                                      | 264                                           |              | 253           |   | 556 |   | 468 |   |
|                                                           | Interest on short-term  investments                                  | 16                                            |              | 12            |   | 30 |   | 27 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Total interest and  dividend income                                  | 12,766                                        |              | 11,952        |   | 25,292 |   | 23,517 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Interest expense:                                              |                                                                 |                                          |              |          |   |   |   |   |
|                                                           | Interest on deposits                                                 | 3,788                                         |              | 3,098         |   | 7,619 |   | 6,100 |   |
|                                                           | Interest on short-term  borrowings                                   | 370                                           |              | 2,102         |   | 892 |   | 4,091 |   |
|                                                           | Interest on long-term  debt                                          | 2,906                                         |              | 1,740         |   | 5,761 |   | 3,378 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Total interest expense                                               | 7,064                                         |              | 6,940         |   | 14,272 |   | 13,569 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Net interest income                                            | 5,702                                                                |                                          | 5,012             |          | 11,020 |   | 9,948 |   |
| Provision for possible  loan losses                            | 330                                                                  |                                          | 60                |          | 330 |   | 60 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Net interest income,  after provision for possible loan losses | 5,372                                                                |                                     | 4,952             |     | 10,690 |     | 9,888 |    |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Non-interest income:                                           |                                                                 |                                          |              |          |   |   |   |   |
|                                                           | Loan servicing fees                                                  | 66                                            |              | 76            |   | 144 |   | 159 |   |
|                                                           | Customer service fees                                                | 1,959                                         |              | 1,611         |   | 3,672 |   | 2,736 |   |
|                                                           | Gain (loss) on  securities, net                                      | (135                                          | )                 | 58            |   | (63 | ) | 303 |   |
|                                                           | Gain on sales of  mortgage loans, net                                | 904                                           |              | 299           |   | 1,364 |   | 542 |   |
|                                                           | Gain on sales and  write-down of other real estate owned,   net | -                                             |         | -             |     | - |     | - |   |
|                                                           | Other                                                                | 117                                           |              | 129           |   | 240 |   | 230 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Total non-interest  income                                           | 2,911                                         |              | 2,173         |   | 5,357 |   | 3,970 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Non-interest expense:                                          |                                                                 |                                          |              |          |   |   |   |   |
|                                                           | Salaries and employee  benefits                                      | 3,248                                         |              | 2,593         |   | 6,307 |   | 5,107 |   |
|                                                           | Occupancy and equipment  expenses                                    | 828                                           |              | 770           |   | 1,689 |   | 1,674 |   |
|                                                           | Trust preferred  securities expense                                  | 280                                           |              | 280           |   | 560 |   | 560 |   |
|                                                           | Other non-interest  expenses                                         | 1,837                                         |              | 1,702         |   | 3,500 |   | 2,987 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Total non-interest  expense                                          | 6,193                                         |              | 5,345         |   | 12,056 |   | 10,328 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Income before  provision for income taxes                      | 2,090                                                                |                                          | 1,780             |          | 3,991 |   | 3,530 |   |
| Provision for income  taxes                                    | 747                                                                  |                                          | 638               |          | 1,415 |   | 1,255 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Net income                                                           | $                                             | 1,343             |          | $ | 1,142 |   | $ | 2,576 |   | $ | 2,275 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Earnings per share                                             |                                                                 |                                          |              |          |   |   |   |   |
|                                                           | Basic -                                                              |                                          |              |          |   |   |   |   |   |
|                                                           | Net income per share                                                 | $                                             | .43               |          | $ | .38 |   | $ | .83 |   | $ | .74 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Weighted average  common shares                                      | 3,109,000                                     |              | 3,038,000     |   | 3,094,000 |   | 3,080,000 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
|                                                           | Diluted -                                                            |                                          |              |          |   |   |   |   |   |
|                                                           | Net income per share                                                 | $                                             | .42               |          | $ | .36 |   | $ | .80 |   | $ | .71 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           | Weighted average  common shares and share equivalents                | 3,236,000       |              | 3,158,000     |   | 3,222,000     |   | 3,203,000 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                           |                                                                 |                                          |              |          |   |   |   |   |
| Dividends per  share                                      | $                                                                    | .10                                           |              | $             | .09 |   | $ | .20 |   | $ | .18 |   |
|                                                           |                                                                      |                                          |                   |          |  |   |  |   |
|                                                                |                                                                      |                                               |                   |               |  |  |  |  |  |  |  |  |  |  |

Seeaccompanying notes to unaudited consolidated financial statements.

ABINGTONBANCORP, INC.CONSOLIDATED STATEMENTS OFCHANGES IN STOCKHOLDERS' EQUITY(Unaudited)
|                                                                        |            |   |       |   |     |   |     |   | Net        |   |        |   |   |   |
|-----------------------------------------------------------------------------|-----------------|--------|------------|--------|----------|--------|----------|--------|------------|--------|-------------|--------|--------|--------|
|                                                                        |            |   |       |   |     |   |     |   | Unrealized |   |        |   |   |   |
|                                                                        |            |   |       |   |     |   |     |   | Gain       |   |        |   |   |   |
|                                                                        |            |   |       |   |     |   |     |   | (Loss)  on |   |        |   |   |   |
|                                                                        |            |   | Additional |   |     |   |     |   | Available  |   |        |   |   |   |
|                                                                        | Common          |   | Paid-in    |   | Retained |   | Treasury |   | for  Sale  |   | Compensa-   |   |   |   |
|                                                                        | Stock           |   | Capital    |   | Earnings |   | Stock    |   | Securities |   | tion  Plans |   | Total  |   |
|                                                                             |                 |        |            |        |          |        |          |        |            |        |             |        |        |   |
|                                                                        | (In  thousands) |
|                                                                        |            |
| Balance at December  31, 2000                                               | $               | 488    |       | $      | 22,915   |   | $        | 29,570 |       | $      | (17,584     | )      | $      | (1,195 | ) | $ | 111 |   | $ | 34,305 |   |
| Net income                                                                  | -               |   | -          |   | 2,576    |   | -        |   | -          |   | -           |   | 2,576  |   |
| Issuance of stock                                                           | 4               |   | 102        |   | -        |   | -        |   | -          |   | -           |   | 106    |   |
| Change in obligation  related to directors’ deferred stock plan        | -               |   | -          |   | -        |   | -        |   | -          |   | 6           |   | 6      |   |
| Increase in unrealized  loss on available for sale securities, net of taxes | -               |   | -          |   | -        |   | -        |   | (384       | )      | -           |   | (384   | )      |
| Repurchase of common  stock                                                 | -               |   | -          |   | -        |   | -        |   | -          |   | -           |   | -      |   |
| Dividends declared  ($.20 per share)                                        | -               |   | -          |   | (623     | )      | -        |   | -          |   | -           |   | (623   | )      |
|                                                                        |                 |   |            |   |          |   |          |   |            |   |             |   |        |   |
| Balance at June 30,  2001                                                   | $               | 492    |       | $      | 23,017   |   | $        | 31,523 |       | $      | (17,584     | )      | $      | (1,579 | ) | $ | 117 |   | $ | 35,986 |   |
|                                                                        |                 |   |            |   |          |   |          |   |            |   |             |   |        |   |
|                                                                        |            |   |       |   |     |   |     |   |       |   |        |   |   |   |
| Balance at December  31, 1999                                               | $               | 483    |       | $      | 22,610   |   | $        | 26,176 |       | $      | (15,885     | )      | $      | (5,581 | ) | $ | 29 |   | $ | 27,832 |   |
| Net income                                                                  | -               |   | -          |   | 2,275    |   | -        |   | -          |   | -           |   | 2,275  |   |
| Change in obligation  related to directors’ deferred stock plan        | -               |   | -          |   | -        |   | -        |   | -          |   | 21          |   | 21     |   |
| Amortization of  unearned compensation – ESOP                          | -               |   | 28         |   | -        |   | -        |   | -          |   | 42          |   | 70     |   |
| Decrease in unrealized  loss on available for sale securities, net of taxes | -               |   | -          |   | -        |   | -        |   | 1,005      |   | -           |   | 1,005  |   |
| Issuance of stock                                                           | 2               |   | 49         |   | -        |   | -        |   | -          |   | -           |   | 51     |   |
| Repurchase of common  stock                                                 | -               |   | -          |   | -        |   | (1,699   | )      | -          |   | -           |   | (1,699 | )      |
| Dividends declared  ($.18 per share)                                        | -               |   | -          |   | (546     | )      | -        |   | -          |   | -           |   | (546   | )      |
|                                                                        |                 |   |            |   |          |   |          |   |            |   |             |   |        |   |
| Balance at June 30,  2000                                                   | $               | 485    |       | $      | 22,687   |   | $        | 27,905 |       | $      | (17,584     | )      | $      | (4,576 | ) | $ | 92 |   | $ | 29,009 |   |
|                                                                        |                 |   |            |   |          |   |          |   |            |   |             |   |        |   |

             Seeaccompanying notes to unaudited consolidated financial statements.

ABINGTONBANCORP, INC.CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME(Unaudited)
|                                                                                                                             |               |   |             |   |   |    |   |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------------------|--------|------------------|--------|--------|---------|--------|--------|
|                                                                                                                             | Three Months Ended |   | Six Months Ended |   |
|                                                                                                                             | June 30,           |   | June 30,         |   |
|                                                                                                                             |               |   |             |   |   |    |   |   |
|                                                                                                                             | 2001               |   | 2000             |   | 2001   |    | 2000   |   |
|                                                                                                                             |                    |   |                  |   |        |    |        |   |
| (Dollars  in thousands)                                                                                                          |               |   |             |   |   |    |   |   |
|                                                                                                                             |               |   |             |   |   |    |   |   |
| Net  income, as reported                                                                                                         | $                  | 1,343  |             | $      | 1,142  |    | $      | 2,576  |   | $ | 2,275 |   |
| Change  in unrealized gains/(losses) on available for sale securities, net of taxes                                              | (1,518             | )      | (313             | )      | (425   | )       | 1,202  |   |
| Less:  Reclassification adjustment for available   for sale securities gains/(losses) included in net income, net of  taxes | (88                | )      | 38               |   | (41    |  ) | 197    |   |
|                                                                                                                             |                    |   |                  |   |        |    |        |   |
|                                                                                                                             |               |   |             |   |   |    |   |   |
| Comprehensive  income (loss)                                                                                                     | $                  | (87    | )                | $      | 791    |    | $      | 2,192  |   | $ | 3,280 |   |
|                                                                                                                             |                    |   |                  |   |        |    |        |   |

             Seeaccompanying notes to unaudited consolidated financial statements.

ABINGTON BANCORP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

|                                                                                     | Six  Months Ended                                    |          |
|------------------------------------------------------------------------------------------|------------------------------------------------------|---------------|
|                                                                                     | June  30,                                            |          |
|                                                                                     |                                                      |          |
|                                                                                     | 2001                                                 |          | 2000 |   |
|                                                                                     | (In  thousands)                                      |          |
|                                                                                     |                                                 |          |
| Cash flows from  operating activities:                                                   |                                                 |          |   |   |
| Net income                                                                               | $                                                    | 2,576         |   | $ | 2,275 |   |
| Adjustments to  reconcile net income to net cash provided (used) by operating activities |                                                 |     |   |     |
| Provision for possible  loan losses                                                      | 330                                                  |          | 60 |   |
| (Gain) loss on sales  and write-down of other real estate owned, net                     | -                                                    |     | - |     |
| Amortization,  accretion and depreciation, net                                           | 734                                                  |          | 973 |   |
| (Gain) loss on sales  of securities, net                                                 | 63                                                   |          | (303 | ) |
| Loans originated for  sale in the secondary market                                       | (86,731                                              | )             | (29,500 | ) |
| Proceeds from sales of  loans                                                            | 84,483                                               |          | 29,029 |   |
| (Gain) loss on sales  of mortgage loans, net                                             | (1,364                                               | )             | (542 | ) |
| Other, net                                                                               | 15,459                                               |          | (3,374 | ) |
|                                                                                     |                                                      |          |  |   |
|                                                                                     | Net cash provided by  (used in) operating activities | $             | 15,550 |   | $ | (1,382 | ) |
|                                                                                     |                                                 |          |   |   |   |
| Cash flows from  investing activities:                                                   |                                                 |          |   |   |
| Proceeds from sales of  available for sale securities                                    | 37,558                                               |     | 977 |     |
| Proceeds from  principal payments on and maturities of available for sale securities     | 41,972                                               |     | 10,970 |     |
| Purchase of available  for sale securities                                               | (126,240                                             | )             | (41,205 | ) |
| Loans  (originated/purchased) paid, net                                                  | (19,628                                              | )             | 3,229 |   |
| Purchases of FHLB  stock                                                                 | -                                                    |          | - |   |

See accompanying notes to unauditedconsolidated financial statements.

 

|                                                                                            | Six  Months Ended |          |
|-------------------------------------------------------------------------------------------------|-------------------|---------------|
|                                                                                            | June  30,         |          |
|                                                                                            |                   |          |
|                                                                                            | 2001              |          | 2000 |   |
|                                                                                            |                   |          |  |   |
|                                                                                            | (In  thousands)   |          |
|                                                                                            |              |          |   |   |
| Purchase of banking  premises and equipment and improvements to other real estate owned         | $                 | (952          | ) | $ | (1,071 | ) |
| Proceeds from sales of  other real estate owned                                                 | -                 |          | - |   |
|                                                                                            |                   |          |  |   |
| Net cash provided by  (used in) investing activities                                            | (67,290           | )             | (27,100 | ) |
|                                                                                            |                   |          |  |   |
|                                                                                            |              |          |   |   |
| Cash flows from  financing activities:                                                          |              |          |   |   |
| Net increase in  deposits                                                                       | 22,896            |          | 28,537 |   |
| Net increase  (decrease) in borrowings with original maturities of three months or less         | 3,564             |          | (55,089 | ) |
| Proceeds from  short-term borrowings with original maturities in excess of three months         | -                 |     | - |   |
| Principal payments on  short-term borrowings with original maturities in excess of three months | (10,000           | )             | (5,000 | ) |
| Proceeds from issuance  of long-term debt                                                       | 70,000            |          | 66,717 |   |
| Principal payments on  long term debt                                                           | (33,067           | )             | (13,000 | ) |
| Proceeds from exercise  of stock options                                                        | 106               |          | 51 |   |
| Purchase of treasury  stock                                                                     | -                 |          | (1,699 | ) |
| Cash paid for  dividends                                                                        | (587              | )             | (523 | ) |
|                                                                                            |                   |          |  |   |
| Net cash provided by  (used in) financing activities                                            | 52,912            |     | 19,994 |   |
|                                                                                            |                   |          |  |   |
| Net increase  (decrease) in cash and cash equivalents                                           | 1,172             |     | (8,488 | ) |
| Cash and cash  equivalents at beginning of period.                                              | 27,609            |     | 33,722 |    |
|                                                                                            |                   |          |  |   |
| Cash and cash  equivalents at end of period                                                     | $                 | 28,781        |   | $ | 25,234 |   |
|                                                                                            |                   |          |  |   |
|                                                                                            |              |          |   |   |
| Supplemental cash flow  information:                                                            |              |          |   |   |
| Interest paid on  deposits                                                                      | $                 | 7,619         |   | $ | 6,072 |   |
| Interest paid on  borrowed funds                                                                | 6,718             |          | 7,319 |   |
| Income taxes paid                                                                               | 1,599             |          | 1,523 |   |
| Transfers of loans to  other real estate owned, net                                             | 355               |          | - |   |

See accompanying notes to unauditedconsolidated financial statements.

ABINGTON BANCORP, INC.NOTES TO UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTSJune 30, 2001

A)         SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statementsinclude the accounts of Abington Bancorp, Inc. (the "Company") (aMassachusetts Corporation) and its wholly–owned subsidiaries, AbingtonSavings Bank (the "Bank") and Abington Bancorp Capital Trust. TheBank also includes its wholly–owned subsidiaries Abington SecuritiesCorporation, which invests primarily in obligations of the United StatesGovernment and its agencies and equity securities, Old Colony MortgageCorporation, which originates and sells residential mortgages to investors on aservicing released basis, and Holt Park Place Development Corporation andNorroway Pond Development Corporation, each typically owning properties beingmarketed for sale.

The accompanying consolidated financialstatements as of June 30, 2001 and for the three and six month periods endedJune 30, 2001 and 2000 have been prepared by the Company without audit, andreflect all adjustments (consisting of normal recurring adjustments) which, inthe opinion of management, are necessary to reflect a fair statement of theresults of the interim periods presented. Certain information and footnote disclosures normally included in theannual consolidated financial statements which are prepared in accordance withaccounting principles generally accepted in the United States have beencondensed or omitted.  Accordingly, theCompany believes that although the disclosures are adequate to make theinformation presented not misleading, these consolidated financial statementsshould be read in conjunction with the footnotes contained in the Company'sconsolidated financial statements as of and for the year ended December 31,2000, which are included in the Company's Annual Report on Form 10-K.  Interim results are not necessarilyindicative of results to be expected for the entire year. All significantintercompany balances and transactions have been eliminated in consolidation.

B)         DIVIDENDDECLARATION

             TheBoard of Directors of Abington Bancorp, Inc. declared a cash dividend of $.10per share to holders of its common stock in June, 2001. This dividend waspayable on July 26, 2001 to stockholders of record as of the close of businesson July 12, 2001.

C)         StockRepurchase Program

On March 27, 1997, the Company announcedthat its Board of Directors had authorized the Company to repurchase up to 10%(375,000 shares) of its currently outstanding common stock from time to time atprevailing market prices.  On February24, 1998, the Company announced that its Board of Directors had authorized theCompany to repurchase an additional 10% (347,000) of its outstanding commonstock, as adjusted for amounts remaining to be repurchased under the March 1997plan.  On March 25, 1999, the Board ofDirectors authorized the Company to repurchase an additional 10% (320,000) ofits outstanding common stock, as adjusted for amounts remaining to be purchasedunder the previously authorized plans. The Board delegated to the discretion of the Company's senior managementthe authority to determine the timing of the repurchase program's commencement,subsequent purchases and the prices at which the repurchases will be made.

As of August 6, 2001, the Company hadrepurchased 932,600 shares of its common stock under these plans at a totalcost of approximately $13,882,000.

D)         Earningsper Share

The primary difference between basic andfully diluted average common shares outstanding for the periods presentedrelates to options issued to officers and directors which are notanti-dilutive.  The calculation ofcommon stock equivalents for fully diluted per share computations excludesoptions which have an exercise price in excess of the average closing price ofthe Company’s stock for the period presented. At June 30, 2001, based on the closing price of the Company’s stock of$15.75, there were approximately 42,000 options with exercise prices of $20.75which would not be considered dilutive for purposes of earnings per share.

E)          BusinessSegments

June30, 2001:(Dollars in thousands)
|                                 | Community |    | Mortgage |   |   |   |        |   |    |   |
|--------------------------------------|-----------|---------|----------|--------|--------|--------|-------------|--------|---------|--------|
|                                 | Banking   |    | Banking  |   | Other  |   | Elimination |   | Total   |   |
|                                 |           |    |          |   |        |   |             |   |         |   |
|                                 |      |    |     |   |   |   |        |   |    |   |
| Securities                           | $         | 336,572 |     | $      | -      |   | $           | -      |    | $      | - |   | $ | 336,572 |   |
| Net loans and loans  held for sale   | 396,655   |    | 8,328    |   | -      |   | (8,290      | )      | 396,693 |   |
| Total assets                         | 802,315   |    | 10,457   |   | 50,274 |   | (61,127     | )      | 801,919 |   |
| Total deposits                       | 479,241   |    | -        |   | -      |   | (1,598      | )      | 477,643 |   |
| Total borrowings                     | 252,629   |    | 8,290    |   | -      |   | (8,290      | )      | 252,629 |   |
| Total liabilities                    | 754,833   |    | 8,864    |   | -      |   | (9,888      | )      | 753,809 |   |
|                                 |      |    |     |   |   |   |        |   |    |   |
| Three  months ended                  |      |    |     |   |   |   |        |   |    |   |
|                                 |      |    |     |   |   |   |        |   |    |   |
| Total interest income                | $         | 12,774  |     | $      | 168    |   | $           | 4      |    | $      | (180 | ) | $ | 12,766 |   |
| Total interest expense               | 7,083     |    | 161      |   | -      |   | (180        | )      | 7,064   |   |
| Net interest income                  | 5,691     |    | 7        |   | 4      |   | -           |   | 5,702   |   |
| Provisions for  possible loan losses | 330       |    | -        |   | -      |   | -           |   | 330     |   |
| Total non–interest  income      | 2,002     |    | 909      |   | -      |   | -           |   | 2,911   |   |
| Total non–interest  expense     | 5,366     |    | 547      |   | 280    |   | -           |   | 6,193   |   |
| Net income (loss)                    | 1,316     |    | 208      |   | (181   | )      | -           |   | 1,343   |   |
|                                 |      |    |     |   |   |   |        |   |    |   |
| Six  months ended                    |      |    |     |   |   |   |        |   |    |   |
|                                 |      |    |     |   |   |   |        |   |    |   |
| Total interest income                | $         | 25,319  |     | $      | 311    |   | $           | 12     |    | $      | (350 | ) | $ | 25,292 |   |
| Total interest expense               | 14,322    |    | 300      |   | -      |   | (350        | )      | 14,272  |   |
| Net interest income                  | 10,997    |    | 11       |   | 12     |   | -           |   | 11,020  |   |
| Provisions for  possible loan losses | 330       |    | -        |   | -      |   | -           |   | 330     |   |
| Total non–interest  income      | 3,993     |    | 1,364    |   | -      |   | -           |   | 5,357   |   |
| Total non–interest  expense     | 10,540    |    | 956      |   | 560    |   | -           |   | 12,056  |   |
| Net income (loss)                    | 2,711     |    | 226      |   | (361   | )      | -           |   | 2,576   |   |

June30, 2000(Dollars in thousands)

|                                 | Community |    | Mortgage |   |   |   |        |    |    |   |
|--------------------------------------|-----------|---------|----------|--------|--------|--------|-------------|---------|---------|--------|
|                                 | Banking   |    | Banking  |   | Other  |   | Elimination |    | Total   |   |
|                                 |           |    |          |   |        |   |             |    |         |   |
|                                 |      |    |     |   |   |   |        |    |    |   |
| Securities                           | $         | 266,909 |     | $      | -      |   | $           | -       |    | $      | - |   | $ | 266,909 |   |
| Net loans and loans  held for sale   | 386,386   |    | 4,605    |   | -      |   | (4,557      | )       | 386,434 |   |
| Total assets                         | 716,738   |    | 6,093    |   | 46,195 |   | (52,357     | )       | 716,669 |   |
| Total deposits                       | 420,591   |    | -        |   | -      |   | (2,362      | )       | 418,229 |   |
| Total borrowings                     | 253,379   |    | 4,557    |   | -      |   | (4,557      | )       | 253,379 |   |
| Total liabilities                    | 677,791   |    | 4,724    |   | 16     |   | (6,919      | )       | 675,612 |   |
|                                 |      |    |     |   |   |   |        |    |    |   |
| Three  months ended                  |      |    |     |   |   |   |        |    |    |   |
|                                 |      |    |     |   |   |   |        |    |    |   |
| Total interest income                | $         | 11,952  |     | $      | 93     |   | $           | 11      |    | $      | (104 | ) | $ | 11,952 |   |
| Total interest expense               | 6,953     |    | 91       |   | -      |   | (104        | )       | 6,940   |   |
| Net interest income                  | 4,999     |    | 2        |   | 11     |   | -           |    | 5,012   |   |
| Provisions for  possible loan losses | 60        |    | -        |   | -      |   | -           |    | 60      |   |
| Total non–interest  income      | 1,874     |    | 408      |   | -      |   | (109        | )       | 2,173   |   |
| Total non–interest  expense     | 4,655     |    | 376      |   | 314    |   | -           |    | 5,345   |   |
| Net income (loss)                    | 1,404     |    | 9        |   | (199   | )      | (72         | )  | 1,142   |   |
|                                 |      |    |     |   |   |   |        |    |    |   |
| Six  months ended                    |      |    |     |   |   |   |        |    |    |   |
|                                 |      |    |     |   |   |   |        |    |    |   |
| Total interest income                | $         | 23,529  |     | $      | 160    |   | $           | 38      |    | $      | (210 | ) | $ | 23,517 |   |
| Total interest expense               | 13,635    |    | 144      |   | -      |   | (210        | )       | 13,569  |   |
| Net interest income                  | 9,894     |    | 16       |   | 38     |   | -           |    | 9,948   |   |
| Provisions for  possible loan losses | 60        |    | -        |   | -      |   | -           |    | 60      |   |
| Total non–interest  income      | 3,428     |    | 701      |   | -      |   | (159        | )       | 3,970   |   |
| Total non–interest  expense     | 8,929     |    | 771      |   | 628    |   | -           |    | 10,328  |   |
| Net income (loss)                    | 2,823     |    | (54      | )      | (389   | )      | (105        | )       | 2,275   |   |

F)          PensionPlan Curtailment

As part of a program to redesign theCompany's employee retirement benefits, the Board of Directors voted October10, 2000 to freeze the Company's Pension Plan effective as of October 31, 2000and terminate the Pension Plan effective on December 31, 2000.  In connection therewith, the Company hasamended the Pension Plan to improve the benefit formula for current employeesand permit payment of lump sums from the Pension Plan.

Assets of the Pension Plan, afterconsidering the impact of amendments, asset returns and other associatedadministrative expenses are expected to be adequate to be able to satisfy theobligations of the Pension Plan, as amended. Any residual excess will be refunded to the Company subject to exciseand income taxes.

As part of the redesign of retirementbenefits, the Bank added, effective in January 2001, a 3% automaticcontribution to the 401(k) plan for all employees even for employees who do notseparately contribute to that plan. Such contribution is being made for alleligible participants based on their W-2 compensation.

These excess assets of the Plan, asestimated, on October 31, 2000 were approximately $1 million.

G)         Adoptionof SFAS No. 141 and 142

In June 2001, the FASB issued SFAS No.141, Business Combinations, and SFAS No. 142, Goodwill and Other IntangibleAssets.  SFAS No. 141 requires that allbusiness combinations initiated after June 30, 2001, to be accounted for usingthe purchase method of accounting.  Thishas eliminated the pooling of interest method as an option for accounting formergers and acquisitions.  SFAS No. 142provides guidance for the accounting for goodwill.  Under the new guidance, goodwill is no longer required to beamortized over its estimated useful life. Rather, goodwill will be subject to at least an annual assessment forimpairment by applying a fair-value based test. SFAF No. 142 does not amend noraffect the rules governing the detection of identifiable intangibles withdefinite lives and the rules which provide guidance on their amortization andvaluation.

This pronouncement will be effectiveimmediately for any new goodwill acquired after June 30, 2001 and will apply togoodwill acquired prior to June 30, 2001 as of January 1, 2002.  As of June 30, 2001, the Company’sintangible assets are comprised of goodwill in the amount of $1,813,000 andcore deposit intangibles of $671,000. It is anticipated that the adoption of SFAS No., 142 will result inreductions in goodwill amortization expense of approximately $296,000 in 2002with an after-tax impact on net income of approximately $270,000.

MANAGEMENT'SDISCUSSION AND ANALYSIS OFCONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company's results of operationsdepend primarily on its net interest income after provision for possible loanlosses, its revenue from other banking services and non–interestexpenses.  The Company's net interestincome depends upon the net interest rate spread between the yield on theCompany's loan and investment portfolios and the cost of funds, consistingprimarily of interest expense on deposits and Federal Home Loan Bankadvances.  The interest rate spread isaffected by the match between the maturities or repricing intervals of theCompany's assets and liabilities, the mix and composition of interest sensitiveassets and liabilities, economic factors influencing general interest rates,loan prepayment speeds, loan demand and savings flows, as well as the effect ofcompetition for deposits and loans.  TheCompany's net interest income is also affected by the performance of its loanportfolio, amortization or accretion of premiums or discounts on purchasedloans and mortgage–backed securities, and the level of non–earningassets.  Revenues from loan fees andother banking services depend upon the volume of new transactions and themarket level of prices for competitive 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 is affected by themix and volume of assets and liabilities, the movement and level of interestrates and interest spread, which is the difference between the average yieldreceived on earning assets and the average rate paid on deposits andborrowings. The Company's net interest rate spread was 3.17% and 3.12%  for the quarter and six months ended June30, 2001, respectively and 2.96% for both the quarter and six months ended June30, 2000, respectively.  The interestrate spread was positively affected in the aforementioned period in 2001  as compared to the corresponding periods in2000 generally due to a steeper yield curve which has resulted in costs offunding dropping at a faster rate than available yields on earningsassets.  Please see later discussion in“Management’s Discussion and Analysis” for more detailed explanations of theinterest rate environment.

The level of nonaccrual (impaired) loansand other real estate owned can have an impact on net interest income butbalances in these categories have generally been immaterial in 2001 and2000.  At June 30, 2001, the Company had$631,000 in non-accrual loans, and $355,000 in other real estate owned,compared to $549,000 in non-accrual loans and no other real estate owned as ofDecember 31, 2000 and $310,000 in non-accrual loans and no other real estateowned as of June 30, 2000.

MANAGEMENT'SDISCUSSION AND ANALYSIS

The table below presents the componentsof interest income and expense for the major categories of assets andliabilities for the periods indicated.
|                           | Three  Months Ended                      |   | Six  Months Ended |   |
|--------------------------------|------------------------------------------|--------|-------------------|--------|
|                           | June  30                                 |   | June  30          |   |
|                           |                                          |   |                   |   |
|                           | **2001**                                 |   | **2000**          |   | **2001** |   | **2000** |   |
|                           | ****                                     |   | ****              |   | **** |   | **** |   |
|                           | (In  thousands)                          |   |
|                           |                                     |   |
| Interest and dividend  income: |                                     |   |              |   |   |   |   |   |
|                           | Interest and fees on  loans              | $      | 7,166             |   | $ | 7,361 |   | $ | 14,407 |   | $ | 14,656 |   |
|                           | Interest on  mortgage-backed investments | 4,102  |              | 3,037  |   | 7,629 |   | 5,823 |   |
|                           | Interest on bonds and  obligations       | 1,218  |              | 1,289  |   | 2,670 |   | 2,543 |   |
|                           | Dividend income                          | 264    |              | 253    |   | 556 |   | 468 |   |
|                           | Interest on short-term  investments      | 16     |              | 12     |   | 30 |   | 27 |   |
|                           |                                          |   |                   |   |  |   |  |   |
|                           | Total interest and  dividend income      | $      | 12,766            |   | $ | 11,952 |   | $ | 25,292 |   | $ | 23,517 |   |
|                           |                                          |   |                   |   |  |   |  |   |
|                           |                                     |   |              |   |   |   |   |   |
| Interest expense:              |                                     |   |              |   |   |   |   |   |
|                           | Interest on deposits                     | $      | 3,788             |   | $ | 3,098 |   | $ | 7,619 |   | $ | 6,100 |   |
|                           | Interest on short-term  borrowings       | 370    |              | 2,102  |   | 892 |   | 4,091 |   |
|                           | Interest on long-term  debt              | 2,906  |              | 1,740  |   | 5,761 |   | 3,378 |   |
|                           |                                          |   |                   |   |  |   |  |   |
|                           | Total interest expense                   | 7,064  |              | 6,940  |   | 14,272 |   | 13,569 |   |
|                           |                                          |   |                   |   |  |   |  |   |
|                           |                                     |   |              |   |   |   |   |   |
| Net interest income            | $                                        | 5,702  |              | $      | 5,012 |   | $ | 11,020 |   | $ | 9,948 |   |
|                           |                                          |   |                   |   |  |   |  |   |
|                                |                                          |        |                   |        |  |  |  |  |  |  |  |  |  |  |  |

Abreakdown of the components of the Company's net interest-rate spread is asfollows:
|                                                      | Three  Months Ended                     |          | Six  Months Ended |          |
|-----------------------------------------------------------|-----------------------------------------|---------------|-------------------|---------------|
|                                                      | June  30                                |          | June  30          |          |
|                                                      |                                         |          |                   |          |
|                                                      | **2001**                                |          | **2000**          |          | **2001** |   | **2000** |   |
|                                                      | ****                                    |          | ****              |          | **** |   | **** |   |
|                                                      | (In  thousands)                         |          |
|                                                      |                                    |          |
| Weighted average yield  earned on:                        |                                    |          |              |          |   |   |   |   |
|                                                      | Loans                                   | 7.70          | %                 | 7.64          | % | 7.74 | % | 7.61 | % |
|                                                      | Mortgage-backed  investments            | 6.62          |              | 6.64          |   | 6.74 |   | 6.59 |   |
|                                                      | Bonds and obligations                   | 7.69          |              | 6.74          |   | 7.46 |   | 6.77 |   |
|                                                      | Marketable and other  equity securities | 4.77          |              | 4.72          |   | 5.02 |   | 4.50 |   |
|                                                      | Short-term investments                  | 4.31          |              | 8.23          |   | 5.10 |   | 4.64 |   |
|                                                      |                                    |          |              |          |   |   |   |   |   |
| Weighted average yield  earned on interest-earning assets | 7.22                                    |     | 7.17              |     | 7.29 |     | 7.14 |    |
|                                                      |                                    |          |              |          |   |   |   |   |
| Weighted average rate  paid on:                           |                                    |          |              |          |   |   |   |   |
|                                                      | NOW and non-interest  NOW deposits      | .36           |              | .42           |   | .38 |   | .43 |   |
|                                                      | Savings deposits                        | 2.15          |              | 2.25          |   | 2.18 |   | 2.24 |   |
|                                                      | Time deposits                           | 5.91          |              | 5.32          |   | 5.95 |   | 5.24 |   |
|                                                      | Total deposits                          | 3.23          |              | 3.03          |   | 3.30 |   | 3.03 |   |
|                                                      | Short-term borrowings                   | 4.41          |              | 6.12          |   | 5.13 |   | 5.94 |   |
|                                                      | Long-term debt                          | 5.96          |              | 6.16          |   | 6.14 |   | 6.14 |   |
|                                                      |                                    |          |              |          |   |   |   |   |   |
| Weighted average rate  paid on deposits and borrowings    | 4.05                                    |     | 4.21              |     | 4.17 |     | 4.18 |    |
|                                                      |                                    |          |              |          |   |   |   |   |
| Net interest-rate  spread                                 | 3.17                                    | %             | 2.96              | %             | 3.12 | % | 2.96 | % |
|                                                           |                                         |               |                   |               |  |  |  |  |  |  |  |  |

RATE/VOLUME ANALYSIS

The following tables present, for theperiods indicated, the change in interest income and the change in interestexpense attributable to the change in interest rates and the change in thevolume of earning assets and interest–bearing liabilities. The changeattributable to both volume and rate has been allocated proportionately to thechange due to volume and the change due to rate.
|                           | Three  Months Ended June 30         |   |
|--------------------------------|-------------------------------------|--------|
|                           |                                     |   |
|                           | 2001  vs. 2000                      |   |
|                           | Increase  (decrease)                |   |   |   |
|                           |                                     |   |   |   |
|                           | Due  to                             |   |   |   |
|                           |                                     |   |   |   |
|                           | Volume                              |   | Rate |   | Total |   |
|                           |                                     |   |  |   |  |   |
|                           |                                |   |   |   |   |   |
| Interest and dividend  income: |                                |   |   |   |   |   |
|                           |                                |   |   |   |   |   |
|                           | Loans                               | $      | (299 | ) | $ | 104 |   | $ | (195 | ) |
|                           | Mortgage-backed  investments        | 1,088  |   | (23 | ) | 1,065 |   |
|                           | Bonds and obligations               | (360   | ) | 289 |   | (71 | ) |
|                           | Equity securities                   | 10     |   | 1 |   | 11 |   |
|                           | Short-term investments              | 14     |   | (10 | ) | 4 |   |
|                           |                                     |   |  |   |  |   |
|                           |                                |   |   |   |   |   |
|                           | Total interest and  dividend income | 453    |   | 361 |   | 814 |   |
|                           |                                     |   |  |   |  |   |
| Interest expense:              |                                |   |   |   |   |   |
|                           | NOW deposits                        | 28     |   | (31 | ) | (3 | ) |
|                           | Savings deposits                    | 108    |   | (52 | ) | 56 |   |
|                           | Time deposits                       | 540    |   | 97 |   | 637 |   |
|                           | Short-term borrowings               | (1,585 | ) | (147 | ) | (1,732 | ) |
|                           | Long-term debt                      | 1,263  |   | (97 | ) | 1,166 |   |
|                           |                                     |   |  |   |  |   |
|                           | Total interest expense              | 354    |   | (230 | ) | 124 |   |
|                           |                                     |   |  |   |  |   |
|                           |                                |   |   |   |   |   |
| Net interest income            | $                                   | 99     |   | $ | 591 |   | $ | 690 |   |
|                           |                                     |   |  |   |  |   |
|                                |                                     |        |  |  |  |  |  |  |  |  |  |

 

 

|                           | Six  Months Ended June 30           |   |
|--------------------------------|-------------------------------------|--------|
|                           |                                     |   |
|                           | 2001  vs. 2000                      |   |
|                           | Increase  (decrease)                |   |   |   |
|                           |                                     |   |   |   |
|                           | Due  to                             |   |   |   |
|                           |                                     |   |   |   |
|                           | Volume                              |   | Rate |   | Total |   |
|                           |                                     |   |  |   |  |   |
|                           |                                |   |   |   |   |   |
| Interest and dividend  income: |                                |   |   |   |   |   |
|                           |                                |   |   |   |   |   |
|                           | Loans                               | $      | (579 | ) | $ | 330 |   | $ | (249 | ) |
|                           | Mortgage-backed  investments        | 1,733  |   | 73 |   | 1,806 |   |
|                           | Bonds and obligations               | (188   | ) | 315 |   | 127 |   |
|                           | Equity securities.                  | 46     |   | 42 |   | 88 |   |
|                           | Short-term investments              | -      |   | 3 |   | 3 |   |
|                           |                                |        |   |  |   |  |   |
|                           |                                |   |   |   |   |   |   |
|                           | Total interest and  dividend income | 1,012  |   | 763 |   | 1,775 |   |
|                           |                                     |   |  |   |  |   |
|                           |                                |   |   |   |   |   |
| Interest expense:              |                                |   |   |   |   |   |
|                           | NOW deposits                        | 45     |   | (36 | ) | 9 |   |
|                           | Savings deposits                    | 191    |   | (52 | ) | 139 |   |
|                           | Time deposits                       | 941    |   | 430 |   | 1,371 |   |
|                           | Short-term borrowings               | (2,930 | ) | (269 | ) | (3,199 | ) |
|                           | Long-term debt                      | 2,382  |   | 1 |   | 2,383 |   |
|                           |                                |        |   |  |   |  |   |
|                           | Total interest expense              | 629    |   | 74 |   | 703 |   |
|                           |                                |        |   |  |   |  |   |
|                           |                                |   |   |   |   |   |   |
| Net interest income            | $                                   | 383    |   | $ | 689 |   | $ | 1,072 |   |
|                           |                                     |   |  |   |  |   |
|                                |                                     |        |  |  |  |  |  |  |  |  |  |

COMPARISON OF THE THREE MONTHS ENDED JUNE30, 2001 AND 2000

GENERAL. Net income for the quarter ended June 30, 2001 was $1,343,000 or $.42per diluted share compared to net income of $1,142,000 or $.36 per dilutedshare in the corresponding period of 2000, a net increase of $201,000 or 17.6%in net income or 16.7% in diluted earnings per share.  The overall increase in net income was mainly attributable toincreases in net interest income, customer service fees and gains on sales ofmortgage loans partially offset by decreases in net security gains andincreases in provisions for possible loan losses and non-interest expenses.

INTEREST AND DIVIDEND INCOME.  Interest and dividend income increased$814,000 or 6.8% during the three month period ended June 30, 2001, as comparedto the same period in 2000.  Theincrease was attributable to increases in the volume of earning assets and theyield earned on those assets.  Thebalance of average earning assets for the three month period ended June 30,2001 was approximately $707,043,000 as compared to $666,699,000 for the sameperiod in 2000, an overall increase of $40,344,000 or 6.1%.

The increase in earning assets wasprimarily driven by the combined increase in average mortgage-backedinvestments and bond investments which were $248,024,000 and $63,366,000,respectively for the quarter ended June 30, 2001 as compared to $182,822,000and $76,513,000, respectively for the same period in 2000.  These balances when combined increased$52,055,000 or 20.1%.  The yield onmortgage-backed investments and investment securities was 6.62% and 7.69%,respectively, in the three months ended June 30, 2001 as compared to 6.64% and6.74%, respectively, in the same period of 2000.  With regards to bond investments, an agency investment securitywhich the Company had purchased at a discount was called by the issuer,resulting in a discount being taken into income of approximately $147,000 inthe second quarter of 2001.  This hadthe effect of increasing the yield on investment securities approximately 93basis points in the same period. Throughout 2000 and through the first three months of 2001, yields onsecurities generally increased due to the rising interest rate environmentwhich existed for most of 2000.  FromJune 1999 to July 2000, the Federal Reserve Bank increased rates 175 basispoints.  While the investments purchasedby the Company are generally not tied to prime, many other rates and indiceswhich do impact the yield on assets purchased also increased in thistimeframe.  From January 2001 throughJune 2001, the Federal Reserve Bank lowered rates 225 basis points which inturn, to a lesser degree, began to influence the yields on assets purchased bythe Company into the second quarter of 2001 as compared to the prior year.

The average balance of loans decreased to$372,034,000 for the three months ended June 30, 2001 from $385,321,000 for thesame period in 2000, a decline of $13,287,000 or 3.4%.  These balances declined as a result of fewerresidential loans being purchased and/or originated for the Company's loanportfolio in 2000.  The yield on loansincreased to 7.70% in the second quarter of 2001 as compared to 7.64% for thesame period in 2000.  This was generallydue to the rising rate environment which existed for most of 2000, whichimpacted new loan originations and adjustable rate loans.  This increase was also reflective ofincreases in commercial loans which generally earn higher rates thanresidential loans.  Commercial loanswere $90,329,000 at June 30, 2001 as compared to $73,240,000 at June 30, 2000,an increase of 23.3%.

INTEREST EXPENSE.  Interest expense for the quarter ended June30, 2001 increased $124,000 or 1.8% compared to the same period in 2000,generally due to increases in the average balances of deposits and increases inthe rates paid on time deposits, offset in part by decrease in the rates paidon borrowed funds and core deposits. The average balance of core and time deposits rose to $272,496,000 and$197,170,000, respectively, for the second quarter of 2001 as compared to $238,356,000and $170,989,000, respectively, for the corresponding period in 2000, forincreases of 14.3% and 15.3%, respectively. The increases noted for the threemonth period ended June 30, 2001, generally relate to the attractiveness of theCompany's retail products and services to the marketplace it serves as well asreflecting some of the fallout from "in market" bank merger activityin mid-2000 which has displaced many customers who have sought an alternativeto their previous banking relationship. The Company will continue to closelymanage its cost of deposits by continuing to seek methods of acquiring new coredeposits and maintaining its current core deposits while prudently adding timedeposits at reasonable rates in comparison to local markets and other fundingalternatives, including borrowings. The average balances of borrowed fundsdecreased overall during the second quarter of 2001 as compared to 2000, to$228,626,000 from $250,420,000, a decrease of 8.7%. The decrease in borrowingswas achieved due to the Company's success in attracting deposits over the pastyear.

The blended weighted average rate paid ondeposits and borrowed funds was 4.05% for the three months ended June 30, 2001as compared to 4.21% for the same period in 2000. The overall weighted averagerates paid on borrowed funds decreased to approximately 5.73% for the quarterended June 30, 2001 from 6.14% in 2000. This decrease is reflective of actions taken by the Federal Reserve Bankin 2001.  From January 2001 to June2001, the Federal Reserve lowered the inter-bank borrowing rate 225 basispoints. The weighted average rates paid on deposits was 3.23% for the quarterended June 30, 2001 as compared to 3.03% for the same period in 2000.  The overall cost of deposits has increased inthe second quarter of 2001 generally due to the intense competition on thepricing of time deposits which has existed since the third quarter of2000.  It is anticipated, given thecurrent rate environment, that the rates paid on time deposits and borrowedfunds could decline from current levels in future quarters or as they arerefinanced as they reach maturity.  TheCompany will continue to evaluate the use of borrowing as an alternativefunding source for asset growth in future periods. See "Asset/LiabilityManagement" for further discussion of the competitive market for depositsand overall strategies for uses of borrowed funds.

NON-INTERESTINCOME.  Total non-interest incomeincreased $738,000 or 34.0% in the second quarter of 2001 in comparison to thesame period in 2000.  Customer servicefees, which were $1,959,000 for the quarter ended June 30, 2001 as compared to$1,611,000 for 2000, for an increase of $348,000 or 21.6%, rose primarily dueto growth in deposit accounts, primarily NOW and checking account portfoliosand continued success in cross-selling customers other products and services,debit card activity, and sales of mutual funds and annuities. Loan servicingfees and gains on sales of mortgage loans were $66,000 and $904,000,respectively, for the second quarter of 2001 as compared to $76,000 and$299,000, respectively, for the same period in 2000.  Gains on sales of loans increased $605,000 or 202.3% in thesecond quarter of 2001 as compared to the same period in 2000.  This generally is reflective of the improvedmarket for loan originations and related higher volume of loans beingoriginated and sold in the second quarter of 2001 as compared to the sameperiod in 2000.  The favorable marketwas due to lower available residential mortgage rates in the late first quarterof 2001 and through most of the second quarter.  While mortgage rates remain lower than they were for most of2000, it is anticipated that volumes of loans originated for sale should belower, given current market conditions, resulting in lower loan gains in futurequarters.  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 of $10,000 or 13.2%.

Realized losses on securities, net, were$135,000 for the second quarter of 2001 as compared to gains of $58,000 for2000 for a decrease of $193,000.  Theresults from the second quarter 2001 include $106,000 of gains generated generallyfrom the sale of higher coupon mortgage-backed investments and discountedcallable agency securities which were at a higher risk of being prepaid orcalled within the year.  These gainswere offset by realized losses on the sales of equity securities, primarily inthe technology and telecommunication sectors. These securities were sold as part of management’s strategy tore-position the Company’s equity portfolio in light of current marketconditions and as part of an overall tax strategy.

NON-INTEREST EXPENSES.  Non-interest expenses for the quarter endedJune 30, 2001 increased $848,000 or 15.9% compared to the same period in 2000.Salaries and employee benefits increased 25.3% or $655,000.  This increase was attributable to severalfactors, including increases in incentive compensation and benefit accruals(approximately $151,000) relating to commissions on insurance sales (theCompany received regulatory approval to sell annuities in May 2000); increasedsalaries, commissions, payroll taxes and benefits associated with increasedresidential mortgage volumes; increased costs associated with the opening ofthe Canton branch in November 2000); increases in retirement and insurancebenefits ($86,000); and other general increases in salaries and customerservice related staff levels.  These increasescorrespond with the Company's strategic focus of attracting core deposits andnew customer relationships.  Occupancyexpenses increased $58,000 or 7.5%.  Theincrease was in part due to higher costs associated with the Canton and Hanoverbranches (approximately $54,000) and higher costs associated with facilitiesmaintenance and utilities in the second quarter of 2001 as compared to the sameperiod in 2000.  Other non-interestexpenses, including trust preferred expenses, also increased $135,000 or 6.8%for the quarter ended June 30, 2001 in comparison to the same period in2000.  Other operating expensesincreased generally as the result of costs associated with the third-partyservice bureau contract for computer mainframe systems and services (approximately$183,000), and other costs associated with customer volumes and general costincreases, offset in part by lower expenses associated with the systemsconversion which occurred in the second quarter of 2000 (approximately$170,000) for which there was no corresponding expense in 2001.

PROVISION FOR POSSIBLE LOAN LOSSES.  The provision for possible loan losses forthe quarter ended June 30, 2001 was $330,000 as compared to $60,000 for thecorresponding period in 2000.  Thelevels of provision in both periods are generally attributable to the continuedstrength of asset quality factors that management uses to measure and evaluatethe adequacy of loan loss reserve levels, which include delinquency rates,charge offs, problem or "watched" assets and anticipated losses.  The increase in the provision for possibleloan losses for the quarter ended June 30, 2001 was primarily influenced byspecific exposure on a commercial credit. Management believes that the current status of overall asset quality anddelinquency (.30% at June 30, 2001 as compared to .22% at December 31, 2000 and .21% at June 30, 2000) to be strong. The resulting level of loan loss reserves were approximately 1.04% ofperiod end loans at June 30, 2001 as compared to 1.02% and .98% at December 31,and June 30, 2000, respectively.

PROVISION FOR INCOME TAXES. The Company'seffective income tax rate for the quarter ended June 30, 2001 was 35.7%compared to 35.8% for the quarter ended June 30, 2000. The lower effective taxrate in comparison to statutory rates for both periods is reflective of incomeearned by certain non-bank subsidiaries which are taxed, for state taxpurposes, at lower rates.

COMPARISON OF THE SIX MONTHS ENDED JUNE30, 2001 AND 2000

GENERAL. Net income for the six-months ended June 30, 2001 was $2,576,000 or $.80per diluted share compared to net income of $2,275,000 or $.71 per dilutedshare in the corresponding period of 2000, a net increase of $301,000 or 13.2%on a net income basis or an increase of $.09 or 12.7% on a per diluted sharebasis.  The overall increase in netincome was mainly attributable to increases in net interest income, customerservice fees and increases in gains on sales of mortgage loans partially offsetby increases in provisions for possible loan losses and non-interest expensesand decreases in gains on securities.

INTEREST AND DIVIDEND INCOME.  Interest and dividend income increased$1,775,000 or 7.5% during the six-month period ended June 30, 2001, as comparedto the same period in 2000.  The increasewas attributable to increase in earning assets and increases in the yieldearned on those assets.  The balance ofaverage earning assets for the six month period ended June 30, 2001 wasapproximately $693,577,000 as compared to $658,846,000 for the same period in2000, an overall increase of $34,731,000 or 5.3%.  Overall yields increased to 7.29% for the six months ended June30, 2001 as compared to 7.14% for the corresponding period in 2000.

The increase in earning assets wasprimarily driven by the combined increases in the combined average balances ofmortgage-backed investments and bond investments which were $226,219,000 and$71,563,000, respectively for the six months ended June 30, 2001 as compared to$176,753,000 and $75,094,000, respectively, for the corresponding period in2000.  These balances, when combined,increased $45,935,000 or 18.2%.  Theyields on mortgage-backed investments and investment securities were 6.74% and7.46% for the six months ended June 30, 2001 as compared to 6.59% and 6.77% forthe same period in 2000.  The yield oninvestment securities for the six months ended June 30, 2001 was influenced bytwo agency issued bonds which had been purchased at a discount and were calledduring the first six months of 2001. This resulted in $221,000 of discounts being taken into income in theperiod which influenced the yield by 62 basis points in 2001.  Adjusted for these discounts, the yield onbond investments would have been 6.84% for the six months ended June 30,2001.  The yields on bothmortgage-backed investments and investment securities have been favorablyinfluenced by the rate environment which has existed throughout most of 2000and into the first three months of 2001. During this period, the yield on securities purchased were generallyhigher than in the previous two years primarily due to the rising interest rateenvironment which existed for most of 2000. From June 1999 through July 2000, the Federal Reserve Bank raised theinter-bank borrowing rate by 175 basis points. While the investments purchased by the Company are generally not tied tothis rate, many other rates and indices which do impact the yield on assetspurchased also increased, generally due to a lesser degree in thattimeframe.  From January 2001 through June2001, the Federal Reserve Bank lowered the inter-bank borrowing rate 225 basispoints which in turn, but to a lesser degree, has begun to influence yields onassets purchased in the second quarter of 2001, particularly in relation to theyields available for comparable securities a year ago.

The average balance of loans decreased to$372,464,000 for the six months ended June 30, 2001 from $385,022,000 for thesame period in 2000, for a decrease of $12,558,000 or 3.3%.  The balances declined as a result of fewerresidential loans being purchased and/or originated for the Company’s loanportfolio in 2000 and through the first quarter of 2001.  The yield on loans increased to 7.74% forthe six-months ended June 30, 2001 compared to 7.61% for the correspondingperiod in 2000.  This was generally dueto the rising rate environment which existed for most of 2000, which impactednew loan originations and adjustable rate loans.  This increase was also reflective of increases in commercialloans which generally earn higher rates than residential loans.  Commercial loans were $90,329,000 at June30, 2001 as compared to $73,240,000 at June 30, 2000, an increase of 23.3%.

INTEREST EXPENSE.  Interest expense for the six months endedJune 30, 2001 increased $703,000 or 5.2% compared to the same period in 2000,generally due to increases in the average balances of deposits and funds aswell as the rates paid on time deposits, offset in part by decreases inborrowed funds and the rates paid on borrowed funds.  The average balance of core and time deposits rose to$264,665,000 and $196,995,000, respectively, for the second quarter of 2001 ascompared to $230,537,000 and $171,468,000, respectively, for the correspondingperiod in 2000, for increases of 14.8% and 14.9%, respectively.  The increases noted for the six months endedJune 30, 2001 as compared to the same period in 2000 relate to theattractiveness of the Company’s retail products and services in the marketplaceit serves as well as reflecting some of the fallout from “in market” bankmerger activity in mid-2000 which displaced many customers who have sought analternative to their prior banking relationship.  The Company will continue to closely manage its cost of depositsby continuing to seek methods of acquiring new core deposits and maintainingits current core deposits while prudently adding time deposits at reasonablerates in comparison to local markets and other funding alternatives, includingborrowings.  The average balances ofborrowed funds decreased overall during the six month period ending June 30,2001 as compared to 2000, to $222,437,000 from $247,782,000 a decrease of10.2%.  The decrease in borrowings wasachieved due to the Company’s success in attracting deposits over the pastyear.

The blended average rate paid on depositsand borrowed funds was 4.17% in the six month period ended June 2001 ascompared to 4.18% for the same period in 2000. The overall weighted average rates paid on borrowed funds declined to5.98% for the six months ended June 30, 2001 from 6.03% for the correspondingperiod in 2000.  This decrease isreflective of actions taken by the Federal Reserve Bank in 2001.  From January 2001 through June 2001, theFederal Reserve Bank lowered the inter-bank borrowing rates 225 basis points.  The weighted average rates paid on depositswas 3.30% for the six months ended June 30, 2001 as compared to 3.03% for thesame period in 2000.  The overall costof deposits has increased in the first six months of 2001 as compared to thecorresponding period in 2000, despite the declining rate environment which hasexisted thus far in 2001 generally due to intense competition on the pricing oftime deposits which has existed since the third quarter of 2000.  It is anticipated, given the current interestrate environment, that the rates paid on time deposits and borrowed funds coulddecline from current levels in future periods as they reach maturity.  The Company will continue to evaluate theuse of borrowings as an alternative funding source for asset growth in futureperiods.  See “Asset/LiabilityManagement” for further discussion of the competitive market for deposits andoverall strategies for the uses of borrowed funds.

NON-INTEREST INCOME.  Total non-interest income increased$1,387,000 or 34.9% in the first six months of 2001 in comparison to the sameperiod in 2000.  Customer services fees,which were $3,672,000 for the six months ended June 30, 2001 as compared to$2,736,000 for 2000, for an increase of $936,000 or 34.2%, rose primarily dueto  growth in deposit accounts,primarily NOW and checking account portfolios and continued success incross-selling customers other products and services, debit card activity andsales of mutual funds and annuities (the Company received regulatory approval tosell insurance annuities in May 2000). The sales of mutual funds and insurance annuities accounted for $429,000of the aforementioned increase in customer service fees. Loan servicing feesand gains on sales of mortgage loans were $144,000 and $1,364,000,respectively, for the first six months of 2001 compared to $159,000 and$542,000, respectively, for the same period in 2000.  This generally is reflective of the improved market forresidential loan originations in 2001 as compared to 2000 and related highervolume of loans being originated and sold in the first six months of 2001 ascompared to the same period in 2000. This favorable market was due to lower available mortgage rates in thelate first quarter of 2001 and through most of the second quarter.  While mortgage rates remain lower than theywere for most of 2000, it is anticipated that volumes of loans originated forsale should be lower, given current market conditions, resulting in lower loangains in future quarters.  As theCompany has been selling loans generally on a servicing release basis since1996, the portfolio of loans serviced for others has declined which has causedthe continued drop in loan servicing income of $15,000 or 9.4%.

Losses on securities, net, were $63,000in the first six months of 2001 as compared to gains of $303,000 for the sameperiod in 2000, for a decrease of $366,000. These results for the first six months of 2001, included $598,000 ofgains generated by the sales of higher coupon mortgage-backed investments and discountedcallable agency securities which were deemed to be at a higher risk of beingprepaid or called within the next year. These gains were offset by net realized losses on the Company’s sales ofvarious equity securities, particularly in the technology and telecommunicationsectors as part of management’s strategy to re-position the equity portfolioholdings given current market conditions and as part of overall taxplanning.  Additionally, managementrealized a loss on a corporate bond. This loss was recorded to reflect management’s change in its intent withregard to investment which has a current market value below the amortized cost.

NON-INTEREST EXPENSE.  Non-interest expenses for the six-monthsended June 30, 2001 increased $1,728,000 or 16.7% compared to the same periodin 2000.  Salaries and employee benefitsincreased $1,200,000 or 23.5%.  Thisincrease was attributable to several factors, including increases to incentiveand benefit expenses associated with greater sales volumes and revenuesassociated with commissions on brokerage and annuity sales (approximately$209,000); increases in salaries, commissions and benefits associated with theincrease in mortgage loan sales volumes and related gains on sales(approximately $175,000); increases in insurance and retirement benefits(approximately $206,000); the opening of the Canton branch in November 2000(approximately $118,000) and other general increases in salaries and customerservice related staff levels.  Theseincreases correspond with the Company’s strategic focus of attracting coredeposits and new customer service relationships.  Occupancy expenses were at the same level for the six monthsended June 30, 2001 as compared to the same period in 2000.  The amounts for 2001 included increasesassociated with the new Hanover and Canton branches (approximately $90,000) andhigher snow removal and utilities costs (approximately $42,000).  These increases were offset by a reductionin computer mainframe related expenses which were incurred in 2000 but not inthe six month period ended June 30, 2001 as the Company converted its computersystems to a third party service bureau in June 2000.  The increases associated with payments to the third party servicebureau were approximately $435,000 and are included in other non-interestexpenses.  Other non-interest expenses,including trust preferred expenses, also increased $513,000 or 14.5% in thefirst six months of 2001 as compared to the same period in 2000.  This increase, which includes the aforementionedservice bureau expense increase, also increased due to other costs associatedwith customer service volumes.  Theeffect of these increases was offset in part by the reduction in conversionrelated expenses (approximately $170,000) which were incurred in the six-monthsended June 30, 2000 for which there was no corresponding expense for the sameperiod in 2001.

PROVISION FOR POSSIBLE LOAN LOSSES. Theprovision for possible loan losses for the six months ended June 30, 2001 was$330,000 as compared to $60,000 for the same period in 2000.  The levels of provision in both periods isattributable to continued strength of asset quality factors, such asdelinquency, charge-offs, non-performing and “watched” assets that managementuses to measure and evaluate the adequacy of loan loss reserve levels.  The provision for possible loan losses forthe six month ended June 30, 2001 was primarily influenced by exposure on aspecific commercial loan.  Managementbelieves that the current status of overall asset quality and delinquency (.30%at June 30, 2001 as compared with .22% at December 31, 2000 and .21% at June30, 2000) to be strong.  The resultinglevel of loan loss reserves were approximately 1.04% of period end loans atJune 30,2001as compared to 1.02% and .98% at December 31, and June 30, 2000, respectively.

PROVISION FOR INCOME TAXES.  The Company’s effective income tax rate forthe six months ended June 30, 2001 was 35.5% compared to 35.6% for the sixmonths ended June 30, 2000.  The lowereffective 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.

ASSET/LIABILITY MANAGEMENT.  The objective of asset/liability managementis to ensure that liquidity, capital and market risk are prudently managed.Asset/liability management is governed by policies reviewed and approvedannually by the Company's Board of Directors (Board). The Board delegatesresponsibility for asset/liability management to the corporate Asset/LiabilityManagement Committee (ALCO). ALCO sets strategic directives that guide theday-to-day asset/liability management activities of the Company. ALCO alsoreviews 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 is the sensitivity ofincome to variations in interest rates over both short-term and long-term timehorizons. The primary objective of interest rate risk management is to controlthis risk within limits approved by the Board and by ALCO. These limits andguidelines reflect the Company's tolerance for interest rate risk. The Companyattempts to control interest rate risk by identifying potential exposures anddeveloping tactical plans to address such potential exposures. The Companyquantifies its interest rate risk exposures using sophisticated simulation andvaluation models, as well as a more simple gap analysis. The Company managesits interest rate exposures by generally using on-balance sheet strategies,which is most easily accomplished through the management of the durations andrate sensitivities of the Company's investments, including mortgage-backedsecurities portfolios, and by extending or shortening maturities of borrowedfunds. Additionally, pricing strategies, asset sales and, in some cases, hedgestrategies are also considered in the evaluation and management of interestrate risk exposures. The Company uses simulation analysis to measure theexposure of net interest income to changes in interest rates over a 1 to 5 yeartime horizon. Simulation analysis involves projecting future interest incomeand expense from the Company's assets, liabilities, and off-balance sheetpositions under various interest rate scenarios.

The Company's limits on interest raterisk specify that if interest rates were to ramp up or down 200 basis pointsover a 12 month period, estimated net interest income for the next 12 monthsshould decline by less than 10%. The following table reflects the Company'sestimated exposure, as a percentage of estimated net interest income for thenext 12 months, which does not materially differ from the impact on net income,on the above basis:

| Rate Change    |   | Estimated  Exposure as a  |   |
|----------------|--------|---------------------------|--------|
| (Basis Points) |   | %  of Net Interest Income |   |
|                |   |                           |   |
| +200           |   | 6.2                       | %      |
| -200           |   | 0.6                       | %      |

Interest rate gap analysis provides astatic view of the maturity and repricing characteristics of the on-balancesheet and off-balance sheet positions. The interest rate gap analysis is prepared by scheduling all assets,liabilities and off-balance sheet positions according to scheduled repricing ormaturity.  Interest rate gap analysiscan be viewed as a short-hand complement to simulation and valuation analysis.

The Company's policy is to match, as wellas possible, the interest rate sensitivities of its assets andliabilities.  Residential mortgage loansthat the Company currently originates or purchases for the Company's ownportfolio are primarily 1-year, 3-year and 5-year adjustable rate mortgages andshorter term (generally 15-year or seasoned 30-year) fixed rate mortgages.  Residential mortgage loans currentlyoriginated by the Company are primarily sold in the secondary market.

The Company also emphasizes loans withterms to maturity or repricing of 3 years or less, such as certain adjustablerate residential mortgage loans, commercial mortgages, business loans,residential construction loans, second mortgages and home equity loans.

Management desires to expand its interestearning asset base in future periods primarily through growth in the Company'sloan portfolio.  Loans comprisedapproximately 53.7% of the average interest earning assets for the first sixmonths of 2001. In the future, the Company intends to continue to becompetitive in the residential mortgage market but plans to place greateremphasis on home equity and commercial loans. The Company also expects tobecome more active in pursuing wholesale opportunities to purchase loans. Duringthe first half of 2001 and 2000, the Company acquired approximately $41,000,000and $0, respectively, of residential first mortgages which are serviced byothers. 

The Company has also used mortgage-backedinvestments (typically with weighted average lives of 5 to 7 years) as avehicle for fixed and adjustable rate investments and as an overallasset/liability tool.  These securitieshave been highly liquid given current levels of prepayments in the underlyingmortgage pools and, as a result, have provided the Company with greaterreinvestment flexibility.  The level ofthe Company's liquid assets and the mix of its investments may vary, dependingupon management's judgment as to market trends, the quality of specificinvestment opportunities and the relative attractiveness of their maturitiesand yields.

Management has been aggressivelypromoting the Company's core deposit products since the second 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 the equitymarkets in general, the Company and many of its peers have begun to see lowerlevels of growth in time deposits as compared to prior years as customersreflect their desire to increase their returns on investment. This pressure hasbeen exacerbated currently by the historically low long-term economic interestrates. Management believes that the markets for future time deposit growth,particularly with terms of 1 to 2 years, will remain highly competitive.Management will continue to evaluate future funding strategies and alternativesaccordingly as well as to continue to focus its efforts on attracting core,retail deposit relationships.

The Company is also a voluntary member ofthe Federal Home Loan Bank ("FHLB") of Boston. This borrowingcapacity assists the Company in managing its asset/liability growth because, attimes, the Company considers it more advantageous to borrow money from the FHLBof Boston than to raise money through non-core deposits (i.e., certificates ofdeposit).  Borrowed funds totaled$252,629,000 at June 30, 2001 compared to $222,132,000 at December 31,2000.  These borrowings are primarilycomprised of FHLB of Boston advances and have primarily funded residential loanoriginations and purchases as well as mortgage-backed investments andinvestment securities.

Additionally, the Company obtainedfunding in June 1998 through the issuance of trust preferred securities whichcarry a higher interest rate than similar FHLB borrowings but at the same timeare included as capital, without diluting earnings per share and are tax deductible.  See “Liquidity and Capital Resources” forfurther discussion.

The following table sets forth maturityand repricing information relating to interest sensitive assets and liabilitiesat June 30, 2001. The balance of such accounts has been allocated among thevarious periods based upon the terms and repricing intervals of the particularassets and liabilities. For example, fixed rate residential mortgage loans andmortgage-backed securities, regardless of "available for sale"classification, are shown in the table in the time periods corresponding toprojected principal amortization computed based on their respective weightedaverage maturities and weighted average rates using prepayment data availablefrom the secondary mortgage market.

Adjustable rate loans and securities areallocated to the period in which the rates would be next adjusted. Thefollowing table does not reflect partial or full prepayment of certain types ofloans and investment securities prior to scheduled contractual maturity.Additionally, all securities or borrowings which are callable at the option ofthe issuer or lender are reflected in the following table based upon thelikelihood of call options being exercised by the issuer on certain investmentsor borrowings in a most likely interest rate environment. Since regularpassbook savings and NOW accounts are subject to immediate withdrawal, suchaccounts have been included in the "Other Savings Accounts" categoryand are assumed to mature within 6 months. This table does not include non-interest bearing 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.

 

| At June 30, 2001                                                                            |
|---------------------------------------------------------------------------------------------|
|                                                                                             |
| Repricing/Maturity                                                                          |
|                                                                                             |
|                                                                                        | (1) |   | (2) |   | (3) |   | (4) |   | (5) |   | (6) |   |   |   |
|                                                                                        | 0-6 MOS |   | 6-12 MOS |   | 1-2 YRS. |   | 2-3 YRS. |   | 3-5 YRS. |   | Over 5  YRS. |   | Total |   |
|                                                                                             |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Dollars  in thousands)                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets  subject to interest rate adjustment:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        | Short-term  investments | $ | 239 |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | 239 |   |
|                                                                                        | Bonds  and obligations | 34,515 |   | 4,968 |   | 16,183 |   | - |   | 1,000 |   | 3,109 |   | 59,775 |   |
|                                                                                        | Mortgage-backed  investments | 43,461 |   | 19,739 |   | 32,967 |   | 28,777 |   | 47,980 |   | 99,420 |   | 272,344 |   |
|                                                                                        | Mortgage  loans subject to rate review | 46,549 |   | 11,254 |   | 25,777 |   | 30,944 |   | 29,147 |   | 885 |   | 144,556 |   |
|                                                                                        | Fixed-rate  mortgage loans | 61,507 |   | 15,227 |   | 30,135 |   | 22,423 |   | 42,657 |   | 61,302 |   | 233,251 |   |
|                                                                                        | Commercial  and other loans | 12,960 |   | 4,401 |   | 1,728 |   | 1,343 |   | 2,127 |   | 503 |   | 23,062 |   |
|                                                                                        |  |   |  |   |  |   |  |   |  |   |  |   |  |   |
|                                                                                        | Total | $ | 199,231 |   | $ | 55,589 |   | $ | 106,790 |   | $ | 83,487 |   | $ | 122,911 |   | $ | 165,219 |   | $ | 733,227 |   |
|                                                                                        |  |   |  |   |  |   |  |   |  |   |  |   |  |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities  subject to interest rate adjustment:                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        | Money  market deposit accounts | $ | 17,956 |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | 17,956 |   |
|                                                                                        | Savings  deposits – term certificates | 71,663 |   | 87,042 |   | 14,664 |   | 5,782 |   | 13,435 |   | 2,247 |   | 194,833 |   |
|                                                                                        | Other  savings accounts | 197,765 |   | - |   | - |   | - |   | - |   | - |   | 197,765 |   |
|                                                                                        | Borrowed  funds | 64,129 |   | 69,000 |   | 40,000 |   | 45,000 |   | 5,000 |   | 29,500 |   | 252,629 |   |
|                                                                                        |  |   |  |   |  |   |  |   |  |   |  |   |  |   |
|                                                                                        | Total | $ | 351,513 |   | $ | 156,042 |   | $ | 54,664 |   | $ | 50,782 |   | $ | 18,435 |   | $ | 31,747 |   | $ | 663,183 |   |
|                                                                                        |  |   |  |   |  |   |  |   |  |   |  |   |  |   |
|                                                                                        | Guaranteed  preferred beneficial interest in junior subordinated debentures | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | 12,124 |   | $ | 12,124 |   |
|                                                                                        |  |   |  |   |  |   |  |   |  |   |  |   |  |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Excess  (deficiency) of rate- sensitive liabilities                                         | (152,282 | ) | (100,453 | ) | 52,126 |   | 32,705 |   | 104,476 |   | 121,348 |   | 57,920 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative  excess (deficiency) of rate-sensitive assets over rate sensitive liabilities(1) | $ | (152,282 | ) | $ | (252,735 | ) | $ | (200,609 | ) | $ | (167,904 | ) | $ | (63,428 | ) | $ | 57,920 |   |   |   |
|                                                                                        |  |   |  |   |  |   |  |   |  |   |  |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rate-sensitive  assets as a percent of rate-sensitive liabilities (cumulative)(1)           | 56.7 | % | 50.2 | % | 64.3 | % | 72.6 | % | 90.0 | % | 108.6 | % |   |   |
|                                                                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

             (1)Cumulative as to the amounts previously repriced or matured. Assets held forsale are reflected in the period in which sales are expected to take place.Securities classified as available for sale are shown at repricing/maturityintervals as if they are to be held to maturity as there is no definitive planof disposition. They are also shown at amortized cost.

Liquidity and Capital Resources

Payments and prepayments on the Company'sloan and mortgage-backed investment portfolios, sales of fixed rate residentialloans, increases in deposits, borrowed funds and maturities of variousinvestments comprise the Company's primary sources of liquidity. The Company isalso a voluntary member of the FHLB of Boston and, as such, is entitled toborrow an amount up to the value of its qualified collateral that has not beenpledged to outside sources. Qualified collateral generally consists ofresidential first mortgage loans, securities issued, insured or guaranteed bythe U.S. Government or its agencies, and funds on deposit at the FHLB ofBoston. Short-term advances may be used for any sound business purpose, whilelong-term advances may be used only for the purpose of providing funds tofinance housing. At June 30, 2001, the Company had approximately $219,000,000in 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's short-term borrowing positionconsists primarily of FHLB of Boston advances with original maturities ofapproximately 1 to 3 months.  TheCompany utilizes borrowed funds as a primary vehicle to manage interest raterisk, due to the ability to easily extend or shorten maturities as needed. Thisenables the Company to adjust its cash needs to the increased prepaymentactivity in its loan and mortgage-backed investment portfolios, as well as toquickly extend maturities when the need to further balance the Company's GAPposition arises.

Non-performing assets were $986,000 atJune 30, 2001, compared to $556,000 at December 31, 2000, an increase of$430,000 or 77.3%.  The Company'spercentage of delinquent loans to total loans was .30% at June 30, 2001, ascompared to .22 at December 31, 2000.

The Company regularly monitors its assetquality to determine the level of its loan loss reserves through periodiccredit reviews by members of the Company's Management Credit Committee.  The Management Credit Committee, whichreports to the Loan Committee of the Company's Board of Directors, also workson the collection of non-accrual loans and disposition of real estate acquiredby foreclosure.  The Company establishesprovisions for loan losses in order to maintain the allowance for loan losses ata level that management estimates is appropriate to absorb future charge-offsof loans deemed uncollectible.  Indetermining the appropriate level of the allowance for loan losses, managementconsiders past and anticipated loss experience, evaluations of real estatecollateral, current and anticipated economic conditions, volume and type oflending and the levels of non-performing and other classified loans.  The amount of the allowance is based onestimates and the ultimate losses may vary from such estimates.

At June 30, 2001, the Company hadoutstanding commitments to originate, sell and purchase residential mortgageloans in the secondary market amounting to $31,500,000, $7,229,000 and$18,123,000, respectively.  The commitmentto purchase residential mortgage loans as of June 30, 2001 are accrued for onthe Company’s Consolidated Balance Sheet and included under the caption “OtherLiabilities.”  The Company also hasoutstanding commitments to grant advances under existing home equity lines ofcredit amounting to $16,273,000. Unadvanced commitments under outstanding commercial and constructionloans totaled $24,830,000 as of June 30, 2001. The Company believes it hasadequate sources of liquidity to fund these commitments.

The Company's total stockholders' equitywas $35,986,000 or 4.5% of total assets at June 30, 2001, compared with$34,305,000 or 4.7% of total assets at December 31, 2000.  The increase in total stockholders' equityof approximately $1,681,000 or 4.9% primarily resulted from income in the firstsix months of 2001, offset in part by increases in the unrealized loss on themarket value of available for sale securities, net of taxes and dividends paidor payable, by the Company.

The Company issued $12,650,000 or 8.25%Trust Preferred Securities in June 1998. Under current regulatory guidelines, trust preferred securities areallowed to represent up to approximately 25% of the Company's Tier 1 capitalwith any excess amounts available as Tier 2 capital.  As of June 30, 2001, all of these securities were included inTier 1 capital.

Bank regulatory authorities haveestablished a capital measurement tool called "Tier 1" leveragecapital.  A 4.00% ratio of Tier 1capital to assets now constitutes the minimum capital standard for most bankingorganizations and a 5.00% Tier 1 leverage capital ratio is required for a"well-capitalized" classification. At June 30, 2001, the Company'sTier 1 leverage capital ratio was approximately 5.87%.  In addition, regulatory authorities havealso implemented risk-based capital guidelines requiring a minimum ratio ofTier 1 capital to risk-weighted assets of 4.00% (6.00% for"well-capitalized") and a minimum ratio of total capital torisk-weighted assets of 8.00% (10.00% for "well-capitalized"). AtJune 30, 2001, the Company's Tier 1 and total risk-based capital ratios wereapproximately 11.67% and 12.70%, respectively. The Company is categorized as"well-capitalized" under the Federal Deposit Insurance CorporationImprovement Act of 1991 (F.D.I.C.I.A.). The Bank is also categorized as"well-capitalized" as of June 30, 2001.

IMPACT OF INFLATION

The Consolidated Financial Statements ofthe Company and related Financial Data presented herein have been prepared inaccordance with accounting principles generally accepted in the United Stateswhich generally require the measurement of financial condition and operatingresults in terms of historical dollars without considering the changes in therelative purchasing power of money over time due to inflation. The primary impactof inflation on operations of the Company is reflected in increased operatingcosts. Unlike most industrial companies, almost all the assets and liabilitiesof a financial institution are monetary in nature. As a result, interest rateshave a more significant impact on a financial institution's performance thanthe effects of general levels of inflation. Interest rates do not necessarilymove in the same direction or in the same magnitude as the price of goods andservices.

 

ITEM3.            QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

             See "Management's Discussionand Analysis - Asset/Liability Management."

Part II. OTHERINFORMATION

Item1.               Legal Proceedings.

The Company is a defendant in variouslegal matters, none of which is believed by management to bematerial 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.

Item4.                Submission of Matters toa Vote of Security Holders.

(c) The following is a brief descriptionof the matters voted upon at the Annual Meeting, including the tabulation ofvotes.

1.          Electionof three directors, each for a three-year term.
|                 |   | Votes  For |   | Votes  Withheld |   |
|----------------------|--------|------------|--------|-----------------|--------|
|                 |   |            |   |                 |   |
| Bruce G. Atwood      |   | 2,611,519  |   | 88,043          |   |
| Ralph B. Carver, Jr. |   | 2,611,417  |   | 88,145          |   |
| Joel S. Geller       |   | 2,615,519  |   | 84,043          |   |
| Laura J. Sen         |   | 2,615,322  |   | 84,240          |   |

Item5.               Other Information.

None.

Item 6.               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 Company's  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    |   | 3.2  By-Laws of the Company, incorporated by reference to the Company's quarterly  report on Form 10-Q for the second quarter of 2000, filed on May 12, 2000.                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.3    |   | 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.                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.4    |   | 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 second 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.                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (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 second 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, 2000 on Form 10-K filed on March 28,  2000.                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| *10.7  |   | Revised  Long Term Performance Incentive Plan dated July, 2001 filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 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.                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (c)  Amendment to lease dated June 30, 2000, incorporated by reference to the  Company's quarterly report on Form 10-Q for the second quarter of 2001, filed  herein.                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 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 Robert M. Lallo, incorporated by reference to the Company's  quarterly report on Form 10-Q for the 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 second  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 March 26, 1998, incorporated by reference to the Company's quarterly  report on Form 10-Q for the first quarter of 1998, filed on May 8, 1998.                       |
|   |   |                                                                                                                                                                                                                                                                   |
| *10.14 |   | 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.                            |
|   |   |                                                                                                                                                                                                                                                                   |
| *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, 2000 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, filed herewith.                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                   |
| *10.19 |   | Defined  Contribution Supplemental Executive Retirement Agreement between the Bank and  Robert M. Lallo dated July 26, 2001, filed herewith.                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                   |
| 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. The Company filed no reports on Form 8-K during the second quarter of 2001.

----

*Management contract or compensatory planor arrangement.

SIGNATURES

Pursuant to the requirements of theSecurities Exchange Act of 1934, the Company has duly caused this report to besigned on its behalf by the undersigned thereunto duly authorized.

|                  | ABINGTON BANCORP, INC.                 |
|-----------------------|----------------------------------------|
|                  | (Company)                              |
|                  |                                   |
| Date:  August 8, 2001 | By   /S/James P. McDonough   |
|                  |                                        |
|                  | James  P. McDonough                    |
|                  | President  and Chief Executive Officer |
|                  |                                   |
| Date:  August 8, 2001 | By   /S/Robert M. Lallo      |
|                  |                                        |
|                  | Robert  M. Lallo                       |
|                  | Treasurer                              |
|                  | (Principal  Financial Officer)         |