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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                         ------------------------------

                                    FORM 10-Q

(Mark One)
[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the quarterly period ended September 30, 2005

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from                 TO
                                      -----------------------------------

        Commission file number: 0-51077

                        Abington Community Bancorp, Inc.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


             Pennsylvania                                     02-0724068
-------------------------------------------------    ---------------------------
    (State or Other Jurisdiction of                       (I.R.S. Employer
    Incorporation or Organization)                       Identification No.)


          180 Old York Road
       Jenkintown, Pennsylvania                                  19046
-------------------------------------------------    ---------------------------
(Address of Principal Executive Offices)                      (Zip Code)

                                 (215) 886-8280
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter 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 __X__ No _____

        Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). YES _____ No __X__

        Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes _____ No __X__

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of November 10,
2005, 15,870,000 shares of the Registrant's common stock were issued and
outstanding.

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<S>                                                                             <C>
ABINGTON COMMUNITY BANCORP, INC.

TABLE OF CONTENTS
----------------------------------------------------------------------------------------------------------------

                                                                                                   PAGE

PART I - FINANANCIAL INFORMATION

   ITEM 1. CONDENSED FINANCIAL STATEMENTS

     Unaudited Consolidated Statements of Financial Condition as of September 30, 2005
     and December 31, 2004                                                                          1

     Unaudited Consolidated Statements of Income for the Three and Nine Months Ended
     September 30, 2005 and 2004                                                                    2

     Unaudited Consolidated Statements of Changes in Stockholders' Equity and
     Comprehensive Income for the Nine Months Ended September 30, 2005 and 2004                     3

     Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended
     September 30, 2005 and 2004                                                                    4

     Notes to Unaudited Consolidated Financial Statements                                           5

   ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS                                                              21

   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                               35

   ITEM 4. CONTROLS AND PROCEDURES                                                                  38


PART II - OTHER INFORMATION


   ITEM 1. Legal Proceedings                                                                        39

   ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds                              39

   ITEM 3. Defaults upon Senior Securities                                                          39

   ITEM 4. Submission of Matters to a Vote of Security Holders                                      40

   ITEM 5. Other Information                                                                        40

   ITEM 6. Exhibits                                                                                 40

   SIGNATURES                                                                                       41

   CERTIFICATIONS
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ABINGTON COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
------------------------------------------------------------------------------------------------------------------

                                                                      SEPTEMBER 30, 2005       DECEMBER 31, 2004
                                                                     ---------------------------------------------
<S>                                                                   <C>                      <C>
ASSETS

Cash and due from banks                                               $       18,094,729       $      24,867,784
Interest-bearing bank balances                                                 6,516,474               8,428,048
                                                                      ------------------       -----------------
      Total cash and cash equivalents                                         24,611,203              33,295,832
Investment securities held to maturity (estimated fair
  value--2005, $20,418,189; 2004, $10,336,485)                                20,396,133              10,219,764
Investment securities available for sale (amortized cost--
  2005, $80,916,417; 2004, $77,348,884)                                       78,964,879              76,163,951
Mortgage-backed securities held to maturity (estimated fair
  value--2005, $72,012,247; 2004, $81,322,041)                                73,552,676              81,703,737
Mortgage-backed securities available for sale (amortized cost--
  2005, $87,020,697; 2004, $83,300,963)                                       85,398,931              83,027,943
Loans receivable, net of allowance for loan losses
   (2005, $1,392,243; 2004, $1,412,697)                                      505,789,110             412,655,664
Accrued interest receivable                                                    3,604,620               2,710,162
Federal Home Loan Bank stock--at cost                                         11,605,400              10,450,100
Cash surrender value - bank owned life insurance                              15,330,453                       -
Property and equipment, net                                                    6,033,298               5,533,085
Deferred tax asset                                                             2,343,631               1,313,068
Prepaid expenses and other assets                                              1,044,633                 905,074
                                                                      ------------------       -----------------

TOTAL ASSETS                                                          $      828,674,967       $     717,978,380
                                                                      ==================       =================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Deposits:
    Noninterest-bearing                                               $       37,462,510       $      37,596,228
    Interest-bearing                                                         437,124,600             367,693,829
                                                                      ------------------       -----------------
      Total deposits                                                         474,587,110             405,290,057
  Advances from Federal Home Loan Bank                                       212,580,104             170,666,374
  Other borrowed money                                                        16,738,753              12,865,521
  Accrued interest payable                                                     3,912,433                 910,040
  Advances from borrowers for taxes and insurance                                506,355               2,047,151
  Accounts payable and accrued expenses                                        3,960,829               3,144,536
                                                                      ------------------       -----------------

           Total liabilities                                                 712,285,584             594,923,679
                                                                      ------------------       -----------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, $0.01 par value, 10,000,000 shares authorized,
    none issued                                                                        -                       -
  Common stock, $0.01 par value, 40,000,000 shares authorized,
    issued and outstanding: 15,870,000 in 2005 and 2004                          158,700                 158,700
  Additional paid-in capital                                                  69,070,524              69,096,936
  Unallocated common stock held by:
    Employee Stock Ownership Plan (ESOP)                                      (7,003,098)             (2,046,137)
    Recognition & Retention Plan Trust (RRP)                                  (3,521,593)                      -
    Deferred compensation plans trust                                         (1,050,000)             (1,074,200)
  Retained earnings                                                           61,093,231              57,881,651
  Accumulated other comprehensive loss                                        (2,358,381)               (962,249)
                                                                      ------------------       -----------------

           Total stockholders' equity                                        116,389,383             123,054,701
                                                                      ------------------       -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $      828,674,967       $     717,978,380
                                                                      ==================       =================

See notes to unaudited consolidated financial statements.

                                                         1
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ABINGTON COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)
------------------------------------------------------------------------------------------------------------------------------

                                                      THREE MONTHS ENDED SEPTEMBER 30,      NINE MONTHS ENDED SEPTEMBER 30,
                                                   ------------------------------------  ------------------------------------
                                                         2005               2004               2005                2004
                                                   ------------------------------------  ------------------------------------
<S>                                                 <C>                <C>                <C>                 <C>
INTEREST INCOME:
  Interest on loans                                 $    7,683,975     $    5,743,416     $   20,860,816      $   16,708,624
  Interest and dividends on investment and
    mortgage-backed securities:
      Taxable                                            2,500,970          1,986,157          7,639,385           5,678,580
      Tax-exempt                                           214,482             31,755            471,876              35,265
                                                   ----------------   ----------------   ----------------    ----------------
           Total interest income                        10,399,427          7,761,328         28,972,077          22,422,469

INTEREST EXPENSE:
  Interest on deposits                                   2,668,445          1,665,979          6,826,392           4,779,645
  Interest on Federal Home Loan Bank advances            2,259,801          1,908,494          6,290,844           5,571,236
  Interest on other borrowed money                         122,642             26,508            318,307              54,737
                                                   ----------------   ----------------   ----------------    ----------------

           Total interest expense                        5,050,888          3,600,981         13,435,543          10,405,618
                                                   ----------------   ----------------   ----------------    ----------------

NET INTEREST INCOME                                      5,348,539          4,160,347         15,536,534          12,016,851

PROVISION FOR LOAN LOSSES                                   20,000                  -             20,000              45,000
                                                   ----------------   ----------------   ----------------    ----------------

NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                              5,328,539          4,160,347         15,516,534          11,971,851
                                                   ----------------   ----------------   ----------------    ----------------

NON-INTEREST INCOME
  Service charges                                          436,938            477,187          1,320,289           1,382,010
  Rental income                                             10,048             12,687             33,998              39,277
  Gain (loss) on derivative instruments, net                37,380           (105,644)            80,050            (154,869)
  Income on bank owned life insurance                      166,113                  -            330,453                   -
  Other income                                             119,890            125,135            347,120             337,563
                                                   ----------------   ----------------   ----------------    ----------------

           Total non-interest income                       770,369            509,365          2,111,910           1,603,981
                                                   ----------------   ----------------   ----------------    ----------------

NON-INTEREST EXPENSES
  Salaries and employee benefits                         2,107,339          1,643,103          5,772,441           4,682,746
  Net occupancy                                            429,222            268,963          1,219,505             856,905
  Depreciation                                             133,302            124,310            378,222             374,398
  Data processing                                          306,020            300,560            897,669             902,333
  ATM expense                                               82,174             94,274            250,204             207,461
  Deposit insurance premium                                 31,620             32,721             91,265              84,898
  Advertising and promotions                               132,524             66,047            334,510             226,563
  Other                                                    678,500            514,511          1,980,927           1,483,318
                                                   ----------------   ----------------   ----------------    ----------------

           Total non-interest expenses                   3,900,701          3,044,489         10,924,743           8,818,622
                                                   ----------------   ----------------   ----------------    ----------------

INCOME BEFORE INCOME TAXES                               2,198,207          1,625,223          6,703,701           4,757,210
                                                   ----------------   ----------------   ----------------    ----------------

PROVISION FOR INCOME TAXES                                 603,819            570,900          1,962,253           1,610,740
                                                   ----------------   ----------------   ----------------    ----------------

NET INCOME                                          $    1,594,388     $    1,054,323     $    4,741,448      $    3,146,470
                                                   ================   ================   ================    ================

EARNINGS PER COMMON SHARE:
     BASIC                                          $         0.10            n/a         $         0.31             n/a
     DILUTED                                        $         0.10            n/a         $         0.31             n/a

AVERAGE COMMON SHARES OUTSTANDING:
     BASIC                                              15,244,232            n/a             15,366,869             n/a
     DILUTED                                            15,485,363            n/a             15,448,129             n/a

See notes to unaudited consolidated financial statements.

                                                               2
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ABINGTON COMMUNITY BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
-----------------------------------------------------------------------------------------------------------------------------------

                                                         COMMON
                                                          STOCK
                                                         ACQUIRED                      ACCUMULATED
                                        ADDITIONAL         BY                             OTHER          TOTAL
                            COMMON        PAID-IN        BENEFIT        RETAINED      COMPREHENSIVE   STOCKHOLDERS'   COMPREHENSIVE
                             STOCK        CAPITAL         PLANS         EARNINGS          LOSS           EQUITY           INCOME
                           ---------    -----------    ------------    -----------    ------------    -------------   -------------
<C>                        <C>          <C>            <C>             <C>             <C>            <C>              <C>
BALANCE--JANUARY 1, 2005   $ 158,700    $69,096,936    $ (3,120,337)   $57,881,651     $  (962,249)   $ 123,054,701

  Comprehensive income:
    Net income                     -              -               -      4,741,448               -        4,741,448    $ 4,741,448
    Net realized holding
     loss on available for
     sale securities
     arising during the
     period, net of tax
     benefit of $719,219           -              -               -              -      (1,396,132)      (1,396,132)    (1,396,132)
                                                                                                                      -------------

  Comprehensive income                                                                                                 $ 3,345,316
                                                                                                                      =============
  Cash dividends paid              -              -               -     (1,529,868)              -       (1,529,868)
  Shares released from
     deferred compensation
     plans trust                   -              -          24,200              -               -           24,200
  Amortization of RRP shares       -        (12,815)        176,975              -               -          164,160
  ESOP shares committed to
     be released                   -        (13,597)        368,585              -               -          354,988
  Common stock acquired by
     RRP                           -              -      (3,698,568)             -               -       (3,698,568)
  Common stock acquired by
     ESOP                          -              -      (5,325,546)             -               -       (5,325,546)
                           ---------    -----------    ------------    -----------    ------------    -------------

BALANCE--SEPTEMBER 30,
2005                       $ 158,700    $69,070,524    $(11,574,691)   $61,093,231     $(2,358,381)   $ 116,389,383
                           =========    ===========    ============    ===========    ============    =============

<CAPTION>

                                                         COMMON
                                                          STOCK
                                                         ACQUIRED                      ACCUMULATED
                                        ADDITIONAL         BY                             OTHER          TOTAL
                            COMMON        PAID-IN        BENEFIT        RETAINED      COMPREHENSIVE   STOCKHOLDERS'   COMPREHENSIVE
                             STOCK        CAPITAL         PLANS         EARNINGS          LOSS           EQUITY           INCOME
                           ---------    -----------    ------------    -----------    ------------    -------------   -------------
<S>                        <C>          <C>            <C>             <C>            <C>             <C>             <C>
BALANCE--JANUARY 1, 2004   $       -    $         -    $         -     $53,426,380     $  (192,112)   $  53,234,268

  Comprehensive income:
    Net income                     -              -              -       3,146,470               -        3,146,470    $ 3,146,470
    Net realized holding
     loss on available for
     sale securities
     arising during the
     period, net of tax
     benefit of $183,674           -              -               -              -        (356,183)        (356,183)      (356,183)
                           ---------    -----------    ------------    -----------    ------------    -------------   ------------

BALANCE--SEPTEMBER 30,
2004                       $            $              $               $56,572,850    $   (548,295)   $  56,024,555    $ 2,790,287
                           =========    ===========    ============    ===========    ============    =============   ============


See notes to unaudited consolidated financial statements.

                                                                 3
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ABINGTON COMMUNITY BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------

                                                                Nine Months Ended September 30,
                                                               --------------------------------
                                                                    2005               2004
                                                               --------------------------------
<S>                                                            <C>                <C>
OPERATING ACTIVITIES:
  Net income                                                   $   4,741,448      $   3,146,470
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Provision for loan losses                                         20,000             45,000
    Depreciation                                                     378,222            374,397
    Amortization of ESOP and RRP                                     519,148                  -
    Unrealized gain on derivative instruments                       (121,000)          (340,500)
    Impairment charge on investment securities                         2,500                  -
    Deferred income tax (benefit) expense                           (311,344)            93,380
    Amortization of:
      Deferred loan fees                                            (952,360)        (1,262,965)
      Premiums and discounts, net                                    191,451            276,459
    Income from bank owned life insurance                           (330,453)                 -
    Changes in assets and liabilities which (used)
     provided cash:
      Accrued interest receivable                                   (894,458)          (246,041)
      Prepaid expenses and other assets                             (103,559)        (2,120,891)
      Accrued interest payable                                     3,002,393          1,693,145
      Accounts payable and accrued expenses                          925,493          2,056,478
                                                               -------------      -------------

           Net cash provided by operating activities               7,067,481          3,714,932
                                                               -------------      -------------

INVESTING ACTIVITIES:
  Principal collected on loans                                   104,026,521        105,773,362
  Disbursements for loans                                       (196,227,607)      (135,904,163)
  Purchases of:
    Mortgage-backed securities held to maturity                   (8,774,897)       (10,956,924)
    Mortgage-backed securities available for sale                (20,553,403)       (29,305,178)
    Investments held to maturity                                 (10,178,366)       (10,220,792)
    Investments available for sale                                (4,069,474)       (24,244,942)
    Federal Home Loan Bank stock                                  (4,307,100)        (1,908,700)
    Property and equipment                                          (878,435)          (155,348)
    Bank owned life insurance                                    (15,000,000)                 -
  Proceeds from:
    Maturities of mortgage-backed securities available
      for sale                                                     1,211,522            101,504
    Maturities of investments available for sale                     500,000         36,297,000
    Principal repayments of mortgage-backed securities
      held to maturity                                            16,775,938          6,396,352
    Principal repayments of mortgage-backed securities
      available for sale                                          15,582,154         22,131,149
    Redemption of Federal Home Loan Bank stock                     3,151,800            979,300
                                                               -------------      -------------

           Net cash used in investing activities                (118,741,347)       (41,017,380)
                                                               -------------      -------------

FINANCING ACTIVITIES:
  Net (decrease) increase in demand deposits and
    savings accounts                                             (13,834,306)        10,785,787
  Net increase in certificate accounts                            83,131,359         15,611,273
  Net increase in other borrowed money                             3,873,232         10,636,200
  Advances from Federal Home Loan Bank                           383,559,008        311,045,000
  Repayments of advances from Federal Home Loan Bank            (341,645,278)      (299,188,909)
  Net decrease in advances from borrowers
    for taxes and insurance                                       (1,540,796)        (1,783,631)
  Acquisition of stock for ESOP and RRP                           (9,024,114)                 -
  Payment of cash dividend                                        (1,529,868)                 -
                                                               -------------      -------------

           Net cash provided by financing activities             102,989,237         47,105,720
                                                               -------------      -------------

NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                                                (8,684,629)         9,803,272

CASH AND CASH EQUIVALENTS--Beginning of period                    33,295,832         19,695,625
                                                               -------------      -------------

CASH AND CASH EQUIVALENTS--End of period                       $  24,611,203      $  29,498,897
                                                               =============      =============

SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
  Cash paid during the year for:
    Interest on deposits and other borrowings                  $  10,433,150      $   8,712,473
                                                               =============      =============
    Income taxes                                               $   2,250,000      $   1,600,000
                                                               =============      =============
  Release of stock from deferred compensation
    plans trust                                                $      24,200      $           -
                                                               =============      =============

See notes to unaudited consolidated financial statements.

                                               4
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ABINGTON COMMUNITY BANCORP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.      FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

        BASIS OF FINANCIAL STATEMENT PRESENTATION-- Abington Community Bancorp,
        Inc. (the "Company") is a Pennsylvania corporation, which was organized
        to be a mid-tier holding company for Abington Savings Bank. Abington
        Savings Bank is a Pennsylvania-chartered, FDIC-insured savings bank,
        which conducts business under the name "Abington Bank" (the "Bank" or
        "Abington Bank"). The Company was organized in conjunction with the
        Bank's reorganization from the mutual savings bank to the mutual holding
        company structure in December 2004. Abington Mutual Holding Company, a
        Pennsylvania corporation, is the mutual holding company parent of the
        Company. Abington Mutual Holding Company owns 55% of the Company's
        outstanding common stock and must continue to own at least a majority of
        the voting stock of the Company. The Bank is a wholly owned subsidiary
        of the Company. The Company's results of operations are primarily
        dependent on the results of the Bank and the Bank's wholly owned
        subsidiaries, ASB Investment Co., Keswick Services II and its wholly
        owned subsidiaries, and Abington Corp. The consolidated financial
        statements include the accounts of the Company and its wholly owned
        subsidiaries. The consolidated financial statements presented for
        periods prior to December 2004 include the accounts of the Bank and its
        wholly owned subsidiaries. All significant intercompany balances and
        transactions have been eliminated.

        The Bank's executive offices are in Jenkintown, Pennsylvania, with seven
        other branches and four limited service facilities located in nearby
        Montgomery County and Bucks County neighborhoods. The Bank is
        principally engaged in the business of accepting customer deposits and
        investing these funds in loans that include residential mortgage,
        commercial, consumer and construction loans. The principal business of
        ASB Investment Co. is to hold certain investment securities for the
        Bank. Keswick Services II and its subsidiaries manage the Bank's real
        estate, including real estate rentals. Abington Corp. is a dormant
        subsidiary.

        The accompanying unaudited consolidated financial statements were
        prepared in accordance with the instructions to Form 10-Q, and
        therefore, do not include all the information or footnotes necessary for
        a complete presentation of financial position, results of operations,
        changes in equity and comprehensive income and cash flows in conformity
        with accounting principles generally accepted in the United States of
        America. However, all normal recurring adjustments that, in the opinion
        of management, are necessary for a fair presentation of the consolidated
        financial statements have been included. These financial statements
        should be read in conjunction with the audited consolidated financial
        statements of the Company and the accompanying notes thereto included in
        the Company's Annual Report on Form 10-K for the period ended December
        31, 2004. The results for the nine months ended September 30, 2005 are
        not necessarily indicative of the results that may be expected for the
        fiscal year ending December 31, 2005, or any other period.

        USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS--The
        preparation of financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets
        and liabilities at the date of the financial statements and the reported
        amounts of income and expenses during the reporting period. Actual


                                       5
<PAGE>

        results could differ from those estimates. The Company's most
        significant estimates are the allowance for loan losses and deferred
        income taxes.

        ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS--The Company recognizes
        all derivatives as either assets or liabilities in the statements of
        financial condition and measures those instruments at fair value. The
        accounting for changes in the fair value of a derivative depends on the
        intended use of the derivative and the resulting designation.

        The Company previously entered into interest rate cap and swap
        agreements in order to manage its exposure to fluctuations in interest
        rates on a portion of its fixed rate loans and variable rate deposits.
        The agreements do not qualify for hedge accounting under Statement of
        Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR
        DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. Gains and losses in the
        fair value of the cap and swap agreements, as well as amounts paid or
        received under the agreements, are recognized in a separate line item,
        gain (loss) on derivative instruments, net, included in non-interest
        income in the Company's consolidated statements of income during the
        period in which they accrue. The Company does not hold any derivative
        financial instruments for trading purposes.

        At September 30, 2005, the Company is party to one swap agreement with a
        term expiring in December 2005. Under this agreement, the Company either
        receives or pays on a quarterly basis, the amount by which the three
        month LIBOR exceeds or falls below 2.59% on the notional amount of $15
        million. This agreement effectively changed a portion of the Company's
        variable rate money market accounts to a fixed rate of interest. The
        Company had also been party to an additional swap agreement with a term
        that expired in June 2005. Under this agreement, the Company either
        received or paid, on a quarterly basis, the amount by which the ten-year
        Constant Maturity Treasury ("CMT") exceeded or fell below 5.57% on the
        notional amount of $15 million. This agreement effectively changed a
        portion of the Company's fixed rate mortgage portfolio to a variable
        rate of interest.

        The fair value of the swap agreements was $36,000 and negative $85,000
        at September 30, 2005, and December 31, 2004, respectively. During the
        three months ended September 30, 2005 and 2004, the Company received
        from and paid to the contra parties $34,500 and $115,644, respectively,
        under the agreements. During the nine months ended September 30, 2005
        and 2004, the Company paid to the contra parties $41,000 and $495,000,
        respectively, under the agreements. In addition, the unrealized gain on
        derivatives recognized in gain (loss) on derivative instruments, net in
        the Company's unaudited consolidated statements of income was $38,000
        and $10,000 for the three months ended September 30, 2005 and 2004,
        respectively. The unrealized gain on derivatives recognized in gain
        (loss) on derivative instruments, net in the Company's unaudited
        consolidated statements of income was $121,000 and $340,500 for the nine
        months ended September 30, 2005 and 2004, respectively.

        BANK OWNED LIFE INSURANCE ("BOLI")-- In March 2005, the Company
        purchased $15 million in Bank Owned Life Insurance as a mechanism for
        funding various employee benefit costs. The Company is the beneficiary
        of this policy that insures the lives of certain officers of its
        subsidiaries. The Company has recognized the cash surrender value under
        the insurance policy as an asset in the consolidated statements of
        financial condition. Changes in the cash surrender value are recorded in
        other non-interest income in the consolidated statements of income.

        STOCK-BASED COMPENSATION-- In December 2004, the FASB issued SFAS No.
        123R (revised 2004), SHARE-BASED PAYMENT, which revises SFAS No. 123,
        ACCOUNTING FOR STOCK-BASED COMPENSATION, and supersedes APB Opinion No.
        25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. This Statement


                                       6
<PAGE>

        requires an entity to recognize the cost of employee services received
        in share-based payment transactions and measure the cost on the
        grant-date fair value of the award. That cost will be recognized over
        the period during which an employee is required to provide service in
        exchange for the award. The provisions of SFAS No. 123R were adopted by
        the Company as of July 1, 2005.

        At September 30, 2005, the Company has two stock-based compensation
        plans, the 2005 Recognition and Retention Plan and the 2005 Stock Option
        Plan. Share awards were first issued under these plans in July 2005.
        These plans are more fully described in Note 7.

        The Company also has an employee stock ownership plan ("ESOP"). This
        plan is more fully described in Note 7. Shares awarded under the ESOP
        are accounted for in accordance with AICPA Statement of Position ("SOP")
        93-6, EMPLOYERS' ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP Plans. As ESOP
        shares are committed to be released and allocated among participants,
        the Company recognizes compensation expense equal to the average market
        price of the shares over the period earned.

        RECENT ACCOUNTING PRONOUNCEMENTS-- In March 2004, the FASB ratified the
        consensus reached by the Emerging Issues Task Force ("EITF") in Issue
        03-1, THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION
        TO CERTAIN INVESTMENTS. EITF 03-1 provides guidance for determining when
        an investment is considered impaired, whether impairment is
        other-than-temporary, and measurement of an impairment loss. In June
        2005, the Board decided not to provide additional guidance on the
        meaning of other-than-temporary impairment, but directed the Staff to
        issue proposed FSP EITF 03-1-a, IMPLEMENTATION GUIDANCE FOR THE
        APPLICATION OF PARAGRAPH 16 OF EITF ISSUE NO. 03-1, as final. The final
        FSP will supersede Issue 03-1 and EITF Topic No. D-44, RECOGNITION OF
        OTHER-THAN-TEMPORARY IMPAIRMENT UPON THE PLANNED SALE OF A SECURITY
        WHOSE COST EXCEEDS FAIR VALUE. The final FSP (retitled FSP FAS 115-1,
        THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO
        CERTAIN INVESTMENTS) will replace the guidance set forth in paragraphs
        10-18 of Issue 03-1 with references to existing other-than-temporary
        impairment guidance, such as FASB Statement No. 115, ACCOUNTING FOR
        CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, SEC Staff Accounting
        Bulletin No. 59, ACCOUNTING FOR NONCURRENT MARKETABLE EQUITY SECURITIES,
        and APB Opinion No. 18, THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS
        IN COMMON STOCK. FSP FAS 115-1 will codify the guidance set forth in
        EITF Topic D-44 and clarify that an investor should recognize an
        impairment loss no later than when the impairment is deemed other than
        temporary, even if a decision to sell has not been made.

        The Board has indicated that FSP FAS 115-1 will be effective for
        other-than-temporary impairment analysis conducted in periods beginning
        after December 15, 2005. The Board directed the staff to proceed to a
        draft of a final FSP for vote by written ballot. The Company is
        continuing to evaluate the impact of these pronouncements and does not
        anticipate that the guidance will have a material impact on the Company.


                                       7
<PAGE>

2.      EARNINGS PER SHARE

        Basic earnings per common share is computed based on the weighted
        average number of shares outstanding. Diluted earnings per share is
        computed based on the weighted average number of shares outstanding and
        common share equivalents ("CSEs") that would arise from the exercise of
        dilutive securities. Earnings per share were calculated as follows:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED SEPTEMBER 30, 2005
                                                      ----------------------------------------
                                                              BASIC             DILUTED
                                                       ------------------  ------------------
<S>                                                     <C>                 <C>
        Net income                                      $      1,594,388    $      1,594,388
        Weighted average shares outstanding                   15,244,232          15,244,232
        Effect of common share equivalents                             -             241,131
                                                        ----------------    ----------------
        Adjusted weighted average shares used in
          earnings per share computation                      15,244,232          15,485,363
                                                        ----------------    ----------------

        Earnings per share                              $           0.10    $           0.10
                                                        ================    ================


                                                        NINE MONTHS ENDED SEPTEMBER 30, 2005
                                                      ----------------------------------------
                                                              BASIC             DILUTED
                                                       ------------------  ------------------

        Net income                                      $      4,741,448    $      4,741,448
        Weighted average shares outstanding                   15,366,869          15,366,869
        Effect of common share equivalents                             -              81,260
                                                        ----------------    ----------------
        Adjusted weighted average shares used in
          earnings per share computation                      15,366,869          15,448,129
                                                        ----------------    ----------------

        Earnings per share                              $           0.31    $           0.31
                                                        ================    ================
</TABLE>

        No common shares of the Company were outstanding during the three or
        nine months ended September 30, 2004.


                                       8
<PAGE>

3.      INVESTMENT SECURITIES

        The amortized cost and estimated fair value of investment securities are
        summarized as follows:

<TABLE>
<CAPTION>
                                                                   HELD TO MATURITY
                                                                  SEPTEMBER 30, 2005
                                       -------------------------------------------------------------------
                                                             GROSS           GROSS          ESTIMATED
                                           AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                             COST            GAINS          LOSSES            VALUE
                                          ------------      ---------      -----------     ------------
<S>                                       <C>               <C>            <C>             <C>
        Debt securities:
          Municipal bonds                 $ 20,396,133      $  86,692      $   (64,636)    $ 20,418,189
                                          ------------      ---------      -----------     ------------

             Total debt securities        $ 20,396,133      $  86,692      $   (64,636)    $ 20,418,189
                                          ============      =========      ===========     ============

<CAPTION>

                                                                   AVAILABLE FOR SALE
                                                                   SEPTEMBER 30, 2005
                                       -------------------------------------------------------------------
                                                             GROSS           GROSS          ESTIMATED
                                           AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                             COST            GAINS          LOSSES            VALUE
                                          ------------      ---------      -----------     ------------
<S>                                       <C>               <C>            <C>             <C>
        Debt securities:
          Agency bonds                    $ 74,990,570      $  16,880      $(1,832,465)    $ 73,174,985
          Corporate bonds and
            commercial paper                   999,577          1,801             (328)       1,001,050
          Municipal bonds                      180,000          1,006                -          181,006
          Certificates of deposit            1,282,000              -                -        1,282,000
                                          ------------      ---------      -----------     ------------

             Total debt securities          77,452,147         19,687       (1,832,793)      75,639,041
                                          ------------      ---------      -----------     ------------

        Equity securities:
          Common stock                              10            349                -              359
          Mutual funds                       3,464,260              -         (138,781)       3,325,479
                                          ------------      ---------      -----------     ------------

             Total equity securities         3,464,270            349         (138,781)       3,325,838
                                          ------------      ---------      -----------     ------------

        Total                             $ 80,916,417      $  20,036      $(1,971,574)    $ 78,964,879
                                          ============      =========      ===========     ============
</TABLE>

                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                                  HELD TO MATURITY
                                                                 DECEMBER 31, 2004
                                       -------------------------------------------------------------------
                                                              GROSS            GROSS          ESTIMATED
                                           AMORTIZED        UNREALIZED      UNREALIZED          FAIR
                                             COST             GAINS           LOSSES           VALUE
                                       ----------------  --------------  --------------  -----------------
<S>                                       <C>               <C>            <C>             <C>
        Debt securities:
          Municipal bonds                 $ 10,219,764      $ 116,721      $         -     $ 10,336,485
                                          ------------      ---------      -----------     ------------

             Total debt securities        $ 10,219,764      $ 116,721      $         -     $ 10,336,485
                                          ============      =========      ===========     ============

<CAPTION>

                                                                AVAILABLE FOR SALE
                                                                 DECEMBER 31, 2004
                                       -------------------------------------------------------------------
                                                              GROSS            GROSS          ESTIMATED
                                           AMORTIZED        UNREALIZED      UNREALIZED          FAIR
                                             COST             GAINS           LOSSES           VALUE
                                       ----------------  --------------  --------------  -----------------
<S>                                       <C>               <C>            <C>             <C>
        Debt securities:
          Agency bonds                    $ 71,489,648      $  55,440      $(1,152,448)    $ 70,392,640
          Corporate bonds and
            commercial paper                   999,940         14,306           (1,951)       1,012,295
          Municipal bonds                      180,000          3,960                -          183,960
          Certificates of deposit            1,282,000              -                -        1,282,000
                                          ------------      ---------      -----------     ------------

             Total debt securities          73,951,588         73,706       (1,154,399)      72,870,895
                                          ------------      ---------      -----------     ------------

        Equity securities:
          Common stock                           2,510            702           (2,500)             712
          Mutual funds                       3,394,786              -         (102,442)       3,292,344
                                          ------------      ---------      -----------     ------------

             Total equity securities         3,397,296            702         (104,942)       3,293,056
                                          ------------      ---------      -----------     ------------

        Total                             $ 77,348,884      $  74,408      $(1,259,341)    $ 76,163,951
                                          ============      =========      ===========     ============
</TABLE>

                                       10
<PAGE>

        The amortized cost and estimated fair value of debt securities by
        contractual maturity are shown below. Expected maturities will differ
        from contractual maturities because borrowers may have the right to call
        or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30, 2005
                                                   ----------------------------------
                                                                         ESTIMATED
                                                        AMORTIZED          FAIR
                                                          COST            VALUE
<S>                                                  <C>              <C>
        Due in one year or less                      $  18,063,244    $  17,826,656
        Due after one year through five years           46,398,333       45,312,045
        Due after five years through ten years          10,990,570       10,483,460
        Due after ten years                             22,396,133       22,435,069
                                                     -------------    -------------

        Total                                        $  97,848,280    $  96,057,230
                                                     =============    =============
</TABLE>

        The table below sets forth investment securities which have an
        unrealized loss position as of September 30, 2005:

<TABLE>
<CAPTION>

                                                          LESS THAN 12 MONTHS              MORE THAN 12 MONTHS
                                                  --------------------------------  --------------------------------
                                                       GROSS          ESTIMATED           GROSS          ESTIMATED
                                                     UNREALIZED         FAIR            UNREALIZED         FAIR
                                                       LOSSES           VALUE             LOSSES           VALUE
                                                  ---------------  ---------------  ---------------  ---------------
<S>                                                  <C>             <C>               <C>              <C>
        Securities held to maturity:
           Municipal bonds                           $  (64,636)     $ 10,113,873     $         -      $          -
                                                     ----------      ------------     -----------      ------------

                Total securities held
                  to maturity                           (64,636)       10,113,873               -                 -
                                                     ----------      ------------     -----------      ------------

        Securities available for sale:
           Government agency securities              $ (157,940)     $ 13,342,060     $(1,674,525)     $ 57,816,045
           Other securities                                   -                 -        (139,109)        3,824,484
                                                     ----------      ------------     -----------      ------------

                Total securities available
                  for sale                             (157,940)       13,342,060      (1,813,634)       61,640,529
                                                     ----------      ------------     -----------      ------------

        Total                                        $ (222,576)     $ 23,455,933     $(1,813,634)     $ 61,640,529
                                                     ==========      ============     ===========      ============
</TABLE>

                                       11
<PAGE>

        The table below sets forth investment securities which have an
        unrealized loss position as of December 31, 2004:

<TABLE>
<CAPTION>
                                                          LESS THAN 12 MONTHS              MORE THAN 12 MONTHS
                                                  --------------------------------  --------------------------------
                                                       GROSS          ESTIMATED           GROSS          ESTIMATED
                                                     UNREALIZED         FAIR            UNREALIZED         FAIR
                                                       LOSSES           VALUE             LOSSES           VALUE
                                                  ---------------  ---------------  ---------------  ---------------
<S>                                                  <C>             <C>               <C>              <C>
        Securities available for sale:
           Government agency securities              $ (392,850)     $ 30,607,150    $   (759,598)     $ 30,230,050
           Other securities                              (1,951)          497,195        (104,942)        3,292,344
                                                     -----------     ------------    -------------     ------------

             Total securities available for sale       (394,801)       31,104,345        (864,540)       33,522,394
                                                     -----------     ------------    -------------     ------------

        Total                                        $ (394,801)     $ 31,104,345    $   (864,540)     $ 33,522,394
                                                     ===========     ============    =============     ============
</TABLE>

        On a quarterly basis, management of the Company formally reviews the
        securities in its investment portfolio to identify any securities that
        might have an other-than-temporary impairment. At September 30, 2005,
        securities in a gross unrealized loss position for twelve months or
        longer consist of 30 securities having an aggregate depreciation of 2.9%
        from the Company's amortized cost basis. Securities in a gross
        unrealized loss position for less than twelve months at September 30,
        2005, consist of 27 securities having an aggregate depreciation of 0.9%
        from the Company's amortized cost basis. Management has concluded that
        the unrealized losses above are temporary in nature. They are not
        related to the underlying credit quality of the issuers, and (with the
        exception of equity securities) they are on securities that have
        contractual maturity dates. The principal and interest payments on our
        debt securities have been made as scheduled, and there is no evidence
        that the issuer will not continue to do so. The future principal
        payments will be sufficient to recover the current amortized cost of the
        securities. The unrealized losses above are primarily related to market
        interest rates. The current declines in market value are not
        significant, and management of the Company believes that these values
        will recover as market interest rates move. The Company has the intent
        and ability to hold these investments for the time necessary to recover
        its cost.


                                       12
<PAGE>

4.      MORTGAGE-BACKED SECURITIES

        The amortized cost and estimated fair value of mortgage-backed
        securities are summarized as follows:

<TABLE>
<CAPTION>
                                                                  HELD TO MATURITY
                                                                SEPTEMBER 30, 2005
                                         ----------------------------------------------------------------
                                                              GROSS          GROSS           ESTIMATED
                                            AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                               COST            GAINS         LOSSES            VALUE
                                         ---------------    -----------    -----------    ---------------
<S>                                      <C>                <C>            <C>            <C>
        FNMA pass-through
          certificates                   $    29,727,280    $         -    $  (737,069)   $    28,990,211
        FHLMC pass-through
          certificates                        21,185,979              -       (663,928)        20,522,051
        Real estate mortgage
          investment conduits                 22,639,417        102,163       (241,595)        22,499,985
                                         ---------------    -----------    -----------    ---------------

                   Total                 $    73,552,676    $   102,163    $(1,642,592)   $    72,012,247
                                         ===============    ===========    ===========    ===============

<CAPTION>

                                                                AVAILABLE FOR SALE
                                                                SEPTEMBER 30, 2005
                                         ----------------------------------------------------------------
                                                              GROSS          GROSS           ESTIMATED
                                            AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                               COST            GAINS         LOSSES            VALUE
                                         ---------------    -----------    -----------    ---------------
<S>                                      <C>                <C>            <C>            <C>
        GNMA pass-through
          certificates                   $       648,237    $    21,664    $      (197)   $       669,704
        FNMA pass-through
          certificates                        11,176,206         69,782        (76,394)        11,169,594
        FHLMC pass-through
          certificates                        68,665,424         94,641     (1,590,101)        67,169,964
        Real estate mortgage
          investment conduits                  6,530,830          2,889       (144,050)         6,389,669
                                         ---------------    -----------    -----------    ---------------

                   Total                 $    87,020,697    $   188,976    $(1,810,742)   $    85,398,931
                                         ===============    ===========    ===========    ===============
</TABLE>

                                       13
<PAGE>
<TABLE>
<CAPTION>
                                                                 HELD TO MATURITY
                                                                 DECEMBER 31, 2004
                                         ----------------------------------------------------------------
                                                              GROSS          GROSS           ESTIMATED
                                            AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                               COST            GAINS         LOSSES            VALUE
                                         ---------------    -----------    -----------    ---------------
<S>                                      <C>                <C>            <C>            <C>
        FNMA pass-through
          certificates                   $    33,609,534    $   135,032    $  (409,512)   $    33,335,054
        FHLMC pass-through
          certificates                        23,539,633         85,073       (216,836)        23,407,870
        Real estate mortgage
          investment conduits                 24,554,570         28,116         (3,569)        24,579,117
                                         ---------------    -----------    -----------    ---------------

                   Total                 $    81,703,737    $   248,221    $  (629,917)   $    81,322,041
                                         ===============    ===========    ===========    ===============

<CAPTION>

                                                                AVAILABLE FOR SALE
                                                                 DECEMBER 31, 2004
                                         ----------------------------------------------------------------
                                                              GROSS          GROSS           ESTIMATED
                                            AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                               COST            GAINS         LOSSES            VALUE
                                         ---------------    -----------    -----------    ---------------
<S>                                      <C>                <C>            <C>            <C>
        GNMA pass-through
          certificates                   $       887,920    $    38,887    $         -    $       926,807
        FNMA pass-through
          certificates                        13,314,817        289,367        (30,370)        13,573,814
        FHLMC pass-through
          certificates                        59,823,297        420,808       (944,709)        59,299,396
        Real estate mortgage
          investment conduits                  9,274,929          7,117        (54,120)         9,227,926
                                         ---------------    -----------    -----------    ---------------

                   Total                 $    83,300,963    $   756,179    $(1,029,199)   $    83,027,943
                                         ===============    ===========    ===========    ===============
</TABLE>


                                       14
<PAGE>

        The table below sets forth mortgage-backed securities which have an
        unrealized loss position as of September 30, 2005:

<TABLE>
<CAPTION>
                                                             LESS THAN 12 MONTHS               MORE THAN 12 MONTHS
                                                       -------------------------------   -------------------------------
                                                           GROSS          ESTIMATED          GROSS          ESTIMATED
                                                         UNREALIZED         FAIR           UNREALIZED         FAIR
                                                           LOSSES           VALUE            LOSSES           VALUE
                                                       --------------  ---------------   --------------  ---------------
<S>                                                    <C>             <C>               <C>             <C>
        Securities held to maturity:
          FNMA pass-through
            certificates                               $     (166,646) $    16,069,905   $     (570,423) $    12,920,306
          FHLMC pass-through
            certificates                                     (286,985)      10,452,985         (376,943)      10,069,066
          Real estate mortgage
            investment conduits                              (241,595)      12,214,995                -                -
                                                       --------------  ---------------   --------------  ---------------

              Total securities held to maturity              (695,226)      38,737,885         (947,366)      22,989,372
                                                       --------------  ---------------   --------------  ---------------

        Securities available for sale:
          GNMA pass-through
            certificates                               $         (197) $       141,713   $            -  $             -
          FNMA pass-through
            certificates                                            -                -          (76,394)       3,831,793
          FHLMC pass-through
            certificates                                     (450,076)      35,698,027       (1,140,025)      27,739,042
          Real estate mortgage
            investment conduits                              (113,209)       4,569,568          (30,841)       1,706,572
                                                       --------------  ---------------   --------------  ---------------

              Total securities available for sale            (563,482)      40,409,308       (1,247,260)      33,277,407
                                                       --------------  ---------------   --------------  ---------------

        Total                                          $   (1,258,708) $    79,147,193   $   (2,194,626) $    56,266,779
                                                       ==============  ===============   ==============  ===============
</TABLE>


                                       15
<PAGE>

        The table below sets forth mortgage-backed securities which have an
        unrealized loss position as of December 31, 2004:

<TABLE>
<CAPTION>
                                                             LESS THAN 12 MONTHS               MORE THAN 12 MONTHS
                                                       -------------------------------   -------------------------------
                                                           GROSS          ESTIMATED          GROSS          ESTIMATED
                                                         UNREALIZED         FAIR           UNREALIZED         FAIR
                                                           LOSSES           VALUE            LOSSES           VALUE
                                                       --------------  ---------------   --------------  ---------------
<S>                                                    <C>             <C>               <C>             <C>
        Securities held to maturity:
          FNMA pass-through
            certificates                               $      (20,751) $     7,643,729   $     (388,761) $    15,249,573
          FHLMC pass-through
            certificates                                     (209,218)       9,637,313           (7,618)       1,919,570
          Real estate mortgage
            investment conduits                                (3,569)       4,992,416                -                -
                                                       --------------  ---------------   --------------  ---------------

              Total securities held to maturity              (233,538)      22,273,458         (396,379)      17,169,143
                                                       --------------  ---------------   --------------  ---------------

        Securities available for sale:
          FNMA pass-through
            certificates                               $      (21,656) $     4,175,153   $       (8,714) $       532,675
          FHLMC pass-through
            certificates                                     (136,048)      13,137,255         (808,661)      30,845,239
          Real estate mortgage
            investment conduits                               (41,400)       7,297,748          (12,720)       1,783,796
                                                       --------------  ---------------   --------------  ---------------

              Total securities available for sale            (199,104)      24,610,156         (830,095)      33,161,710
                                                       --------------  ---------------   --------------  ---------------

        Total                                          $     (432,642) $    46,883,614   $   (1,226,474) $    50,330,853
                                                       ==============  ===============   ==============  ===============
</TABLE>

        On a quarterly basis, management of the Company formally reviews the
        securities in its investment portfolio to identify any securities that
        might have an other-than-temporary impairment. At September 30, 2005,
        securities in a gross unrealized loss position for twelve months or
        longer consist of 26 securities having an aggregate depreciation of 3.8%
        from the Company's amortized cost basis. Securities in a gross
        unrealized loss position for less than twelve months at September 30,
        2005, consist of 23 securities having an aggregate depreciation of 1.6%
        from the Company's amortized cost basis. Management has concluded that
        the unrealized losses above are temporary in nature. They are not
        related to the underlying credit quality of the issuers, and they are on
        securities that have contractual maturity dates. The principal and
        interest payments on our mortgage-backed securities have been made as
        scheduled, and there is no evidence that the issuer will not continue to
        do so. The future principal payments will be sufficient to recover the
        current amortized cost of the securities. The unrealized losses above
        are primarily related to market interest rates. The current declines in
        market value are not significant, and management of the Company believes
        that these values will recover as market interest rates move. The
        Company has the intent and ability to hold these investments for the
        time necessary to recover its cost.


                                       16
<PAGE>

5.      LOANS RECEIVABLE - NET

        Loans receivable consist of the following:

<TABLE>
<CAPTION>
                                                    SEPTEMBER 30, 2005     DECEMBER 31, 2004
                                                   --------------------   -------------------
<S>                                                <C>                    <C>
        One-to four-family residential             $        309,070,895   $       243,705,065
        Multi-family residential and commercial              77,988,463            74,642,109
        Construction                                        120,600,089            83,253,027
        Home equity lines of credit                          42,250,034            32,048,508
        Commercial business loans                             9,253,180             8,539,781
        Consumer non-real estate loans                        4,396,652             3,433,536
                                                   --------------------   -------------------

                   Total loans                              563,559,313           445,622,026

        Less:
          Construction loans in process                     (55,044,108)          (30,130,703)
          Deferred loan fees                                 (1,333,852)           (1,422,962)
          Allowance for loan loss                            (1,392,243)           (1,412,697)
                                                   --------------------   -------------------

        Loans receivable--net                      $        505,789,110   $       412,655,664
                                                   ====================   ===================
</TABLE>

        Following is a summary of changes in the allowance for loan losses:

<TABLE>
<CAPTION>
                                                  NINE MONTHS ENDED          YEAR ENDED
                                               ----------------------   ---------------------
                                                 SEPTEMBER 30, 2005       DECEMBER 31, 2004
                                               ----------------------   ---------------------

<S>                                            <C>                      <C>
        Balance--beginning of year             $            1,412,697   $           1,455,889
          Provision for loan losses                            20,000                  45,000
          Charge-offs                                         (53,961)               (146,736)
          Recoveries                                           13,507                  58,544
                                               ----------------------   ---------------------
            Charge-offs/recoveries--net                       (40,454)                (88,192)
                                               ----------------------   ---------------------

        Balance--end of period                 $            1,392,243   $           1,412,697
                                               ======================   =====================
</TABLE>

        The provision for loan losses charged to expense is based upon past loan
        and loss experience and an evaluation of losses in the current loan
        portfolio, including the evaluation of impaired loans. A loan is
        considered to be impaired when, based upon current information and
        events, it is probable that the Company will be unable to collect all
        amounts due according to the contractual terms of the loan. An
        insignificant delay or insignificant shortfall in amount of payments
        does not necessarily result in the loan being identified as impaired.
        For this purpose, delays less than 90 days are considered to be
        insignificant. During the periods presented, loan impairment was
        evaluated based on the fair value of the loans' collateral. Large groups
        of smaller balance, homogeneous loans are collectively evaluated for
        impairment, except for those loans restructured under a troubled debt
        restructuring. Loans collectively evaluated for impairment include
        smaller balance commercial real estate loans, residential real estate
        loans and consumer loans. At September 30, 2005 and December 31, 2004,
        the Company had no loans that were determined to be impaired.


                                       17
<PAGE>

        Commercial business loans and commercial real estate loans are placed on
        nonaccrual status at the time the loan is 90 days delinquent unless the
        credit is well secured and in the process of collection. Commercial
        loans are charged off when the loan is deemed uncollectible. Residential
        real estate loans are typically placed on nonaccrual status only when
        the loan is 90 days delinquent and not well secured. Other consumer
        loans are typically charged off when they become 90 days delinquent. In
        all cases, loans must be placed on nonaccrual status or charged off at
        an earlier date if collection of principal or interest is considered
        doubtful. At September 30, 2005 and December 31, 2004, we had no
        nonaccrual loans. Non-performing loans, which consist of non-accruing
        loans plus accruing loans 90 days or more past due, at September 30,
        2005 and December 31, 2004, amounted to approximately $320,000, and
        $227,000, respectively.

        Interest payments on impaired loans and nonaccrual loans are typically
        applied to principal unless the ability to collect the principal amount
        is fully assured, in which case interest is recognized on the cash
        basis. For the nine months ended September 30, 2005 and 2004, no cash
        basis interest income was recognized. Interest income foregone on
        nonaccrual loans was zero and $7,000 for the nine-month periods ended
        September 30, 2005, and 2004, respectively.

6.      DEFERRED INCOME TAXES

        Items that gave rise to significant portions of the deferred tax
        accounts are as follows:

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30, 2005     DECEMBER 31, 2004
                                                           --------------------   -------------------
<S>                                                        <C>                    <C>
        Deferred tax assets:
          Allowance for loan losses                        $            473,363   $           480,317
          Deferred compensation                                       1,036,801               839,320
          Unrealized loss on securities available-for-sale
            and cap and swap contracts                                1,202,683               524,604
                                                           --------------------   -------------------

                   Total deferred tax assets                          2,712,847             1,844,241
                                                           --------------------   -------------------

        Deferred tax liabilities:
          Property and equipment                                        (91,017)             (201,066)
          Deferred loan fees                                           (256,367)             (259,767)
          Other                                                         (21,832)              (70,340)
                                                           --------------------   -------------------

                   Total deferred tax liabilities                      (369,216)             (531,173)
                                                           --------------------   -------------------

        Net deferred tax asset                             $          2,343,631   $         1,313,068
                                                           ====================   ===================
</TABLE>

7.      PENSION AND PROFIT SHARING PLANS

        In addition to the plans disclosed below, the Company also maintains an
        executive deferred compensation plan for selected executive officers, a
        board of directors deferred compensation for directors, and a 401(k)
        plan for substantially all of its employees. Further detail of these
        plans can be obtained from the Company's Annual Report on Form 10-K for
        the period ended December 31, 2004.


                                       18
<PAGE>

        SUPPLEMENTAL RETIREMENT PLAN
        The Company maintains a nonqualified, unfunded, defined benefit pension
        plan for the Board of Directors and certain officers. The components of
        the Company's net periodic cost for the plan is as follows:

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED SEPTEMBER 30,
                                                               ---------------------------------------
                                                                      2005                 2004
                                                               ------------------   ------------------
<S>                                                            <C>                  <C>
        Components of net periodic benefit cost:
        Service cost                                           $           73,965   $           71,324
        Interest cost                                                      86,993               83,886
        Expected return on assets                                               -                    -
        Amortization of prior service cost                                 91,042               87,790
                                                               ------------------   ------------------

        Net periodic pension cost                              $          252,000   $          243,000
                                                               ==================   ==================

        Weighted average assumptions:

        Discount rate                                                        6.50%                6.50%
        Rate of return on assets                                              n/a                  n/a
        Rate of increase in future board fees/salary levels                  4.00%                4.00%
</TABLE>

        EMPLOYEE STOCK OWNERSHIP PLAN
        In 2004, the Company established an employee stock ownership plan
        ("ESOP") for substantially all of its full-time employees. Shares of the
        Company's common stock purchased by the ESOP are held in a suspense
        account until released for allocation to participants. Shares are
        expected to be released over a 15-year period. Shares released are
        allocated to each eligible participant based on the ratio of each such
        participant's base compensation to the total base compensation of all
        eligible plan participants. As the unearned shares are committed to be
        released and allocated among participants, the Company recognizes
        compensation expense equal to the average market price of the shares. As
        of September 30, 2005, 571,320 shares of the Company's common stock had
        been purchased for approximately $7.4 million by the ESOP. Of these
        shares, 418,820 were purchased in the nine months ended September 30,
        2005 for approximately $5.3 million. No additional purchases are
        expected to be made by the ESOP under this plan. The average purchase
        price of the 571,320 shares held at September 30, 2005 was $12.90 per
        share. The fair value of these shares at September 30, 2005 was
        approximately $7.2 million. During the three months and nine months
        ended September 30, 2005, approximately 9,500 and 28,500 shares,
        respectively, were committed to be released to participants resulting in
        recognition of approximately $120,000 and $355,000 in compensation
        expense, respectively.

        RECOGNITION AND RETENTION PLAN
        In June 2005, the shareholders of the Company approved the adoption of
        the 2005 Recognition and Retention Plan (the "RRP"). The RRP provides
        for the grant of shares of common stock of the Company to certain
        officers, employees and directors of the Company. In order to fund the
        RRP, the Recognition Plan Trust (the "Trust") purchased 285,660 shares
        of the Company's common stock in the open market for approximately $3.7
        million, an average price of $12.95 per share. The Company made
        sufficient contributions to the Trust to fund these purchases. No
        additional purchases are expected to be made by the Trust under this
        plan. Pursuant to the terms of the plan, all 285,660 shares acquired by
        the Trust were granted to certain officers, employees and directors of
        the Company in July 2005. RRP shares will generally vest at the rate of
        20% per year over five years. As of September 30, 2005, no shares have
        been fully vested, exercised or forfeited.


                                       19
<PAGE>

        Compensation expense on RRP shares granted is recognized ratably over
        the five year vesting period in an amount which totals the market price
        of the Company's stock at the date of grant. During the three months and
        nine months ended September 30, 2005, approximately 14,000 shares were
        amortized to expense, based on the proportional vesting of the awarded
        shares. During the three months and nine months ended September 30,
        2005, approximately $164,000 was recognized in compensation expense for
        the plan.

        STOCK OPTIONS

        In June 2005, the shareholders of the Company also approved the adoption
        of the 2005 Stock Option Plan (the "Option Plan"). The Option Plan
        authorizes the grant of stock options to officers, employees and
        directors of the Company to acquire shares of common stock with an
        exercise price equal to the fair market value of the common stock on the
        grant date. Options will generally become vested and exercisable at the
        rate of 20% per year over five years. A total of 714,150 shares of
        common stock have been reserved for future issuance pursuant to the
        Option Plan of which 72,550 shares remain unawarded.

        A summary of the status of the Company's stock options under the Option
        Plan as of September 30, 2005 and changes during the nine months ended
        September 30, 2005 are presented below:

<TABLE>
<CAPTION>
                                                                   NINE MONTHS ENDED SEPTEMBER 30, 2005
                                                                ------------------------------------------
                                                                                         WEIGHTED AVERAGE
                                                                  NUMBER OF SHARES       EXERCISE PRICE
                                                                --------------------  --------------------
<S>                                                             <C>                   <C>
        Outstanding at the beginning of the year                                   -  $                  -
        Granted                                                              641,600                 12.01
        Exercised                                                                  -                     -
        Forfeited                                                                  -                     -
                                                                --------------------  --------------------

        Outstanding at the end of the period                                 641,600  $              12.01
                                                                ====================  ====================

        Exercisable at the end of the period                                       -  $                  -
                                                                ====================  ====================
</TABLE>

        The following table summarizes all stock options outstanding under the
        Option Plan as of September 30, 2005:

<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                              --------------------------------------------------  ------------------------------
                                                WEIGHTED       WEIGHTED AVERAGE                     WEIGHTED
                                NUMBER OF       AVERAGE           REMAINING         NUMBER OF       AVERAGE
          Exercise Price         SHARES      EXERCISE PRICE    CONTRACTUAL LIFE      SHARES      EXERCISE PRICE
        ------------------    ------------  ----------------  ------------------  ------------  ----------------
                                                                 (in years)
<S>                           <C>           <C>               <C>                 <C>           <C>
              $12.01               641,600  $          12.01                 9.8             -  $              -
                              ------------  ----------------  ------------------  ------------  ----------------

               Total               641,600  $          12.01                 9.8             -  $              -
                              ============  ================  ==================  ============  ================
</TABLE>

                                       20
<PAGE>

        The estimated fair value of options granted during 2005 was $2.89 per
        share. The fair value was estimated on the date of grant in accordance
        with SFAS No. 123R using the binomial model with the following
        assumptions used:

                                                 NINE MONTHS ENDED
                                                 SEPTEMBER 30, 2005
                                               ---------------------

                Dividend yield                                 1.7%
                Expected volatility                           23.6%
                Risk-free interest rate                        3.9%
                Expected life of options                 5.64 years

        During the three months and nine months ended September 30, 2005,
        approximately $89,000 was recognized in compensation expense for the
        Option Plan.

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW--The Company was formed by the Bank in connection with the Bank's
reorganization into the mutual holding company form and commenced operations in
December 2004. The Company's results of operations are primarily dependent on
the results of the Bank, which is a wholly owned subsidiary of the Company. The
Bank's results of operations depend to a large extent on net interest income,
which is the difference between the income earned on its loan and investment
portfolios and the cost of funds, which is the interest paid on deposits and
borrowings. Results of operations are also affected by our provisions for loan
losses, gains or losses on derivative instruments, service charges and other
non-interest income and non-interest expense. Non-interest expense principally
consists of salaries and employee benefits, office occupancy and equipment
expense, data processing expense, advertising and promotions and other expense.
Our results of operations are also significantly affected by general economic
and competitive conditions, particularly changes in interest rates, government
policies and actions of regulatory authorities. Future changes in applicable
laws, regulations or government policies may materially impact our financial
condition and results of operations. The Bank is subject to regulation by the
Federal Deposit Insurance Corporation ("FDIC") and the Pennsylvania Department
of Banking. The Bank's executive offices and loan processing office are in
Jenkintown, Pennsylvania, with seven other branches and four limited service
facilities located in nearby Montgomery County neighborhoods. The Bank is
principally engaged in the business of accepting customer deposits and investing
these funds in loans, primarily residential mortgages.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES--In reviewing and
understanding financial information for Abington Community Bancorp, Inc., you
are encouraged to read and understand the significant accounting policies used
in preparing our consolidated financial statements. These policies are described
in Note 1 of the notes to our consolidated financial statements. The accounting
and financial reporting policies of Abington Community Bancorp, Inc. conform to
accounting principles generally accepted in the United States of America and to
general practices within the banking industry. The preparation of the Company's
consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Management evaluates these estimates and assumptions on an ongoing basis
including those related to the allowance for loan losses and deferred income
taxes. Management bases its estimates on historical experience and various other
factors and assumptions that are believed to be reasonable under the
circumstances. These form the bases for making judgments on


                                       21
<PAGE>

the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

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

While management uses the best information available to make loan loss allowance
valuations, adjustments to the allowance may be necessary based on changes in
economic and other conditions, changes in the composition of the loan portfolio
or changes in accounting guidance. In times of economic slowdown, either
regional or national, the risk inherent in the loan portfolio could increase
resulting in the need for additional provisions to the allowance for loan losses
in future periods. An increase could also be necessitated by an increase in the
size of the loan portfolio or in any of its components even though the credit
quality of the overall portfolio may be improving. Historically, our estimates
of the allowance for loan loss have approximated actual losses incurred. In
addition, the Pennsylvania Department of Banking and the FDIC, as an integral
part of their examination processes, periodically review our allowance for loan
losses. Either the Pennsylvania Department of Banking or the FDIC may require
the recognition of adjustment to the allowance for loan losses based on their
judgment of information available to them at the time of their examinations. To
the extent that actual outcomes differ from management's estimates, additional
provisions to the allowance for loan losses may be required that would adversely
impact earnings in future periods.

INCOME TAXES--Management makes estimates and judgments to calculate some of our
tax liabilities and determine the recoverability of some of our deferred tax
assets, which arise from temporary differences between the tax and financial
statement recognition of revenues and expenses. Management also estimates a
reserve for deferred tax assets if, based on the available evidence, it is more
likely than not that some portion or all of the recorded deferred tax assets
will not be realized in future periods. These estimates and judgments are
inherently subjective. Historically, our estimates and judgments to calculate
our deferred tax accounts have not required significant revision from
management's initial estimates.

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


                                       22
<PAGE>

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2005 AND DECEMBER 31, 2004

The Company's total assets increased $110.7 million, or 15.4%, to $828.7 million
at September 30, 2005 compared to $718.0 million at December 31, 2004. During
the first nine months of 2005, net loans receivable increased $93.1 million or
22.6% to $505.8 million. All categories of loans increased, with the largest
growth occurring in one- to four-family residential loans and construction
loans. Our loan growth is due to a mix of traditional loan originations, loan
participations with other financial institutions, and loan purchases as part of
the Company's long-term strategy to leverage our capital through loan growth.
For the nine months ended September 30, 2005, total cash and cash equivalents
decreased $8.7 million as excess cash was used to fund new loans and to purchase
shares of the Company's stock in the open market for our stock benefit plans.
Our investments securities, both held-to-maturity and available-for-sale,
increased by an aggregate of $13.0 million or 15.0% to an aggregate of $99.4
million at September 30, 2005 compared to an aggregate of $86.4 million at
December 31, 2004. Our mortgage-backed securities, both held-to-maturity and
available-for-sale, decreased by an aggregate of $5.8 million or 3.5% to an
aggregate of $159.0 million at September 30, 2005 compared to an aggregate of
$164.7 million at December 31, 2004. During the first nine months of 2005,
purchases of investment and mortgage-backed securities of $43.6 million in the
aggregate were partially offset by $34.1 million in repayments of our
held-to-maturity and available-for-sale investment and mortgage-backed
securities. Additionally, the Company purchased $15.0 million of bank owned life
insurance ("BOLI") during the first quarter of 2005, which is reflected in the
Company's balance sheet at its cash surrender value. The BOLI is intended to
fund various benefit programs of the Company.

Our total deposits increased $69.3 million or 17.1% to $474.6 million at
September 30, 2005 from $405.3 million at December 31, 2004 as a result of an
$83.1 million increase in certificate accounts that was partially offset by
decreases in savings and money market accounts and checking accounts. The shift
towards higher rate time deposits is a result of the increased rates now
available on those products relative to other deposit products in the current
interest rate environment. The Company, however, continues to remain focused on
maintaining and growing its base of core deposits over the long term. Our
advances from the Federal Home Loan Bank ("FHLB") increased $41.9 million or
24.6% during the first nine months of 2005 to $212.6 million at September 30,
2005 compared to $170.7 million at December 31, 2004. We utilize advances from
the FHLB as an alternative to retail deposits to fund operations and additional
asset growth. The $3.9 million increase in other borrowed money to $16.7 million
at September 30, 2005 compared to $12.9 million at December 31, 2004 reflects an
increase in the amount of securities repurchase agreements entered into with
certain commercial checking account customers.

Our stockholders' equity decreased $6.7 million to $116.4 million at September
30, 2005 compared to $123.1 million at December 31, 2004. The decrease was
primarily due to the purchase of approximately 419,000 shares of the Company's
common stock for an aggregate of $5.3 million by the Company's employee stock
ownership plan ("ESOP") and the purchase of approximately 286,000 shares of the
Company's common stock for an aggregate of $3.7 million by the Company's 2005
Recognition and Retention Plan Trust ("RRP"). These purchases were partially
offset by a commitment to release approximately 29,000 unallocated ESOP shares
and the amortization of 14,000 RRP shares for aggregate costs of approximately
$355,000 and $164,000, respectively. The payment of the Company's quarterly cash
dividends of $0.05 per share in June and September reduced retained earnings by
$1.5 million in the aggregate. These decreases to stockholders' equity were
partially offset by our net income for the first nine months of 2005, resulting
in a net increase to retained earnings of $3.2 million. Additionally, our
accumulated other comprehensive loss increased $1.4 million due to decreases in
the fair market values of our available for sale securities.


                                       23
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of funds are from deposits, amortization of loans, loan
prepayments and pay-offs, mortgage-backed securities and other investments, and
other funds provided from operations. While scheduled payments from the
amortization of loans and mortgage-backed securities and maturing investment
securities are relatively predictable sources of funds, deposit flows and loan
prepayments can be greatly influenced by general interest rates, economic
conditions and competition. We also maintain excess funds in short-term,
interest-bearing assets that provide additional liquidity. At September 30,
2005, our cash and cash equivalents amounted to $24.6 million. In addition, at
such date we had $17.8 million in investment securities scheduled to mature
within the next 12 months. Our available for sale investment and mortgage-backed
securities amounted to an aggregate of $164.4 million at September 30, 2005.

We use our liquidity to fund existing and future loan commitments, to fund
maturing certificates of deposit and demand deposit withdrawals, to invest in
other interest-earning assets, and to meet operating expenses. At September 30,
2005, we had certificates of deposit maturing within the next 12 months
amounting to $145.0 million. Based upon historical experience, we anticipate
that a significant portion of the maturing certificates of deposit will be
redeposited with us. For the nine months ended September 30, 2005, and the year
ended December 31, 2004, the average balance of our outstanding FHLB advances
was $188.6 million and $169.7 million, respectively. At September 30, 2005, we
had $212.6 million in outstanding FHLB advances and we had $297.2 million in
additional FHLB advances available to us.

In addition to cash flow from loan and securities payments and prepayments as
well as from sales of available for sale securities, we have significant
borrowing capacity available to fund liquidity needs. We have increased our
utilization of borrowings in recent years as an alternative to deposits as a
source of funds. Our borrowings consist primarily of advances from the Federal
Home Loan Bank of Pittsburgh, of which we are a member. Under terms of the
collateral agreement with the Federal Home Loan Bank, we pledge substantially
all of our residential mortgage loans and mortgage-backed securities as well as
all of our stock in the Federal Home Loan Bank as collateral for such advances.

Our stockholders' equity amounted to $116.4 million at September 30, 2005,
inclusive of $69.3 million in net proceeds from the Company's initial public
offering completed on December 16, 2004. The capital raised in the offering has
provided us with additional flexibility to grow and diversify. A substantial
amount of the net proceeds that had been initially invested conservatively in
instruments that yield a market rate have been redeployed into loans. As part of
our long-term strategic plan to leverage our capital through retail deposit and
loan growth, we anticipate opening a new branch in Warrington, Bucks County,
Pennsylvania in December 2005. Planning is also under way for two additional
branches, which are projected to open within the next twelve months. A portion
of the net proceeds from the offering has been used to buy shares of the
Company's common stock for our ESOP and RRP. As noted above, our ESOP purchased
approximately 419,000 shares of the Company's common stock in the open market
for an aggregate of $5.3 million and our RRP purchased approximately 286,000
shares of the Company's common stock for an aggregate of $3.7 million in the
nine months ended September 20, 2005. Additionally, the Company paid quarterly
cash dividends of $0.05 per share in June and September, aggregating $1.5
million.


                                       24
<PAGE>

The following table summarizes the Bank's capital ratios as of the dates
indicated and compares them to current regulatory requirements.

<TABLE>
<CAPTION>
                                               Actual Ratios At
                                         -----------------------------
                                         September 30,   December 31,     Regulatory      To Be Well
                                             2005            2004          Minimum      Capitalized
                                         -------------  --------------   -------------  --------------
<S>                                      <C>            <C>              <C>            <C>
    CAPITAL RATIOS:
    Tier 1 leverage ratio                    10.47%          12.73%          4.00%           5.00%
    Tier 1 risk-based capital ratio          17.05           21.24           4.00            6.00
    Total risk-based capital ratio           17.33           21.57           8.00           10.00
</TABLE>

DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument includes futures, forwards, interest rate
swaps, option contracts, and other financial instruments with similar
characteristics. On occasion, we have used interest rate caps and swap
agreements to manage our exposure to fluctuations in interest rates on a portion
of our fixed-rate loans and variable rate deposits. We have used interest rate
swap agreements to economically hedge interest rate risk resulting from our
portfolio of interest-earning loans and interest-bearing deposit liabilities. We
do not hold any derivative financial instruments for trading purposes.

At September 30, 2005, we are a party to one interest rate swap agreement, which
we entered into in December 2002, with a notional amount of $15.0 million and
with a term expiring in December 2005. Previously, we also were a party to two
swap agreements, with notional amounts of $15.0 million each, which we entered
into in December 2001 and June 2002, respectively, and which expired in December
2004 and June 2005, respectively. Previously we were also party to one interest
rate cap agreement, with a notional amount of $15.0 million, which we entered
into in June 2001 and which expired in June 2004. The contra party on each of
our cap and swap agreements is the FHLB of Pittsburgh. We entered into these cap
and swap agreements as a part of our strategy to manage our interest rate risk,
and we intended them to serve as a direct hedge against a specified portion of
our loans or deposits. Under the cap agreement, which was intended to hedge a
portion of our fixed-rate single-family residential mortgage loan portfolio, we
were entitled to receive the amount, if any, by which the ten-year Constant
Maturity Treasury ("CMT") exceeded 7.53% on the notional amount. Given the low
interest rates in recent periods, we did not receive any payments from the cap
agreement. However, in a higher interest rate environment, the cap agreement
would have provided additional income that would have ameliorated the adverse
impact of our fixed-rate, long-term mortgage loans. The premium cost of the cap
was $99,000, which was amortized over its three-year term. Our swap agreements
that expired in December 2004 and June 2005 also were designed to serve as
hedges against our fixed-rate, single-family mortgage loan portfolio. Under the
agreement which expired in December 2004, we either paid or received the amount
by which the ten-year CMT fell below or exceeded 5.92%. Under the agreement
which expired in June 2005, we either paid or received the amount by which the
ten-year CMT fell below or exceeded 5.57%. Again, given the low interest rate
environment in recent periods, these swap agreements have resulted in us making
payments to the contra party. The intent of these two agreements was to
effectively convert a portion of our fixed-rate loan portfolio to a variable
interest rate. Our current interest rate swap agreement was designed to hedge a
portion of our variable rate money market deposit accounts against rising
interest rates. Under this swap agreement, we either pay or receive the amount
by which the three-month LIBOR falls below or exceeds 2.59%. Again, as a result
of market rates in recent periods, we have made payments on this swap agreement
to the contra-party for the majority of the term of the swap. In the most recent
quarter, however, we began receiving payments from the contra-party, and we
expect to continue to receive interest payments from the contra-party over the
remaining term of the swap. Our intent with


                                       25
<PAGE>

this agreement was to effectively convert a portion of our deposits from a
variable rate liability to a fixed-rate liability.

The swaps do not qualify as hedges under SFAS No. 133. As such, the fair value
of the interest rate swaps are reflected as a liability in the accompanying
consolidated statements of financial condition and the change in fair value is
recorded in gain (loss) on derivative instruments, net in the consolidated
statements of income. The fair value of the swap agreements was $36,000 and
negative $85,000 at September 30, 2005, and December 31, 2004, respectively.
During the three months ended September 30, 2005 and 2004, the Company received
from and paid to the contra parties $34,500 and $115,644, respectively, under
the agreements. During the nine months ended September 30, 2005 and 2004, the
Company paid to the contra parties $41,000 and $495,000, respectively, under the
agreements. In addition, the unrealized gain on derivatives recognized in gain
(loss) on derivative instruments, net in the Company's unaudited consolidated
statements of income was $38,000 and $10,000 for the three months ended
September 30, 2005 and 2004, respectively. The unrealized gain on derivatives
recognized in gain (loss) on derivative instruments, net in the Company's
unaudited consolidated statements of income was $121,000 and $340,500 for the
nine months ended September 30, 2005 and 2004, respectively.

COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

We are a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of our customers. These
financial instruments include commitments to extend credit and the unused
portions of lines of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated statements of financial condition. Commitments to extend credit
and lines of credit are not recorded as an asset or liability by us until the
instrument is exercised. At September 30, 2005 and December 31, 2004, we had no
commitments to originate loans for sale.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the loan documents.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the customer. The amount and type of collateral required
varies, but may include accounts receivable, inventory, equipment, real estate
and income-producing commercial properties. At September 30, 2005 and December
31, 2004, commitments to originate loans and commitments under unused lines of
credit, including undisbursed portions of construction loans in process, for
which the Bank is obligated, amounted to approximately $94.7 million and $92.4
million, respectively.

Letters of credit are conditional commitments issued by the Bank guaranteeing
payments of drafts in accordance with the terms of the letter of credit
agreements. Commercial letters of credit are used primarily to facilitate trade
or commerce and are also issued to support public and private borrowing
arrangements, bond financings and similar transactions. Standby letters of
credit are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Collateral may be required to
support letters of credit based upon management's evaluation of the
creditworthiness of each customer. The credit risk involved in issuing letters
of credit is substantially the same as that involved in extending loan
facilities to customers. Most letters of credit expire within one year. At
September 30, 2005 and December 31, 2004, the Bank had letters of credit
outstanding of approximately $13.8 million and $11.3 million, respectively, of
which $12.2 million and $10.5 million, respectively,


                                       26
<PAGE>

were standby letters of credit. At September 30, 2005, the uncollateralized
portion of the letters of credit extended by the Bank was approximately $215,000
of which $99,000 was for standby letters of credit.

The Bank is also subject to various pending claims and contingent liabilities
arising in the normal course of business, which are not reflected in the
unaudited consolidated financial statements. Management considers that the
aggregate liability, if any, resulting from such matters will not be material.

Among the Company's contingent liabilities are exposures to limited recourse
arrangements with respect to the Bank's sales of whole loans and participation
interests. At September 30, 2005, the exposure, which represents a portion of
credit risk associated with the sold interests, amounted to $185,000. The
exposure is for the life of the related loans and payable, on our proportional
share, as losses are incurred.

We anticipate that we will continue to have sufficient funds and alternative
funding sources to meet our current commitments.

The following table summarizes our outstanding commitments to originate loans
and to advance additional amounts pursuant to outstanding letters of credit,
lines of credit and under our construction loans at September 30, 2005.

<TABLE>
<CAPTION>
                                                                     Amount of Commitment Expiration - Per Period
                                                             ------------------------------------------------------------
                                           Total Amounts            To              1-3           4-5         After 5
                                             Committed            1 Year           Years         Years         Years
                                         ------------------  ----------------  -------------  -----------  --------------
                                                                               (In Thousands)
<S>                                          <C>                 <C>             <C>            <C>          <C>
Letters of credit                              $13,836           $12,996         $   835        $   --       $     5
Recourse obligations on loans sold                 185                --              --            --           185
Commitments to originate loans                   7,433             7,433              --            --            --
Unused portion of home equity
   lines of credit                              21,670                --              --            --        21,670
Unused portion of commercial
   lines of credit                              10,588            10,588              --            --            --
Undisbursed portion of
   construction loans in process                55,044            11,484          43,560            --            --
                                                ------            ------          ------        ------       -------
      Total commitments                       $108,756           $42,501         $44,395        $   --       $21,860
                                               =======            ======          ======        ======       =======
</TABLE>


                                       27
<PAGE>

The following table summarizes our contractual cash obligations at September 30,
2005.

<TABLE>
<CAPTION>
                                                                             Payments Due By Period
                                                             ------------------------------------------------------------
                                                                    To              1-3           4-5         After 5
                                               Total              1 Year           Years         Years         Years
                                         ------------------  ----------------  -------------  -----------  --------------
                                                                               (In Thousands)
<S>                                          <C>                 <C>             <C>            <C>          <C>
Certificates of deposit                      $265,903            $144,974        $ 96,948      $ 10,970       $ 13,011
                                              -------             -------          ------        ------         ------
FHLB advances                                 212,580              16,576          68,668        69,141         58,195
Repurchase agreements                          16,739              16,739              --            --             --
                                              -------              ------          ------        ------         ------
   Total debt                                 229,319              33,315          68,668        69,141         58,195
                                              -------              ------          ------        ------         ------
Operating lease obligations                     4,967                 564           1,167           861          2,375
                                                -----                 ---           -----           ---          -----
   Total contractual obligations             $500,189            $178,853        $166,783      $ 80,972       $ 73,581
                                              =======             =======         =======       =======        =======
</TABLE>

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005
AND 2004

GENERAL. We had net income of $1.6 million for the quarter ended September 30,
2005, representing an increase of 51.2% over the comparable 2004 period.
Earnings per share was $0.10 for the quarter ended September 30, 2005. Our
results for the third quarter of 2005 reflect, in part, increases in the average
amount of interest-earning assets combined with increases in the average yield
on such assets. The accompanying increase in interest income was partially
offset by an increase in interest expense that resulted from increases in the
average amount of interest-earning liabilities and the average rate on those
liabilities. Our average interest spread decreased to 2.26% for the quarter
ended September 30, 2005 from 2.36% for the quarter ended September 30, 2004, as
our net interest margin increased to 2.76% from 2.67% for the same periods,
respectively. Our non-interest income increased by 51.2% for the quarter ended
September 30, 2005 when compared to the quarter ended September 30, 2004 due
primarily to a $37,000 gain on derivative instruments in 2005 compared to a loss
on derivative instruments of $106,000 in 2004. Additionally, we recognized
$330,000 of income on BOLI purchased in March 2005. Our non-interest expense for
the quarter ended September 30, 2005 increased 28.1% over the comparable 2004
period, primarily as a result of increases in salaries and employee benefits,
net occupancy expense, advertising and promotions and other non-interest
expense.

INTEREST INCOME. Our total interest income was $10.4 million for the quarter
ended September 30, 2005 compared to $7.8 million for the quarter ended
September 30, 2004, a $2.6 million or 34.0% increase. This increase was due to
increases in the average balances of all categories of interest-earning assets
accompanied by increases in the average yields of all categories of
interest-earning assets. The most substantial growth was seen in our loan
portfolio. Our average loan balance increased $99.4 million or 25.4% to $491.1
million for the quarter ended September 30, 2005 from $391.7 million for the
quarter ended September 30, 2004. Additionally, our average balance of
mortgage-backed securities increased $29.9 million or 22.1% to $164.9 million
and our average balance of investment securities increased $17.8 million or
21.3% to $101.3 million over the same periods. Our average yield on
interest-earning assets increased 38 basis points to 5.36% for the third quarter
of 2005 from 4.98% for the third quarter of 2004 due largely to a 40 basis point
increase in the average yield on loans receivable to 6.26% for the third quarter
of 2005 from 5.86% for the third quarter of 2004.

INTEREST EXPENSE. Our total interest expense was $5.1 million for the quarter
ended September 30, 2005 compared to $3.6 million for the quarter ended
September 30, 2004, an increase of $1.5 million or 40.3%. The increase in
interest expense for the third quarter of 2005 when compared to the same period
in the


                                       28
<PAGE>

prior year resulted mainly from increases in the average balances of deposits
and FHLB advances as well as increases in the average rates paid on deposits,
FHLB advances and other borrowings. Our average deposit balance grew $78.8
million or 22.4% to $430.7 million for the quarter ended September 30, 2005 from
$351.8 million for the quarter ended September 30, 2004. This deposit growth was
primarily due to a $77.5 million or 44.1% increase in the average balance of
certificates of deposit. Our average rate on total deposits increased to 2.48%
for the quarter ended September 30, 2005 from 1.89% for the quarter ended
September 30, 2004, driven largely by the growth in our certificate of deposit
accounts, which generally pay a higher rate of interest than other deposit
products. The average rate on our certificate of deposit accounts increased 50
basis points to 3.62% for the quarter ended September 30, 2005 from 3.12% for
the quarter ended September 30, 2004. Our average rates on FHLB advances and
other borrowings increased to 4.46% and 2.60%, respectively, for the quarter
ended September 30, 2005 from 4.31% and 0.55%, respectively, for the quarter
ended September 30, 2004. Our average rate on interest-bearing liabilities as a
whole increased 48 basis points to 3.10% for the quarter ended September 30,
2005 from 2.62% for the quarter ended September 30, 2004.


                                       29
<PAGE>

AVERAGE BALANCES, NET INTEREST INCOME, AND YIELDS EARNED AND RATES PAID. The
following table shows for the periods indicated the total dollar amount of
interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both
in dollars and rates, and the net interest margin. Tax-exempt income and yields
have not been adjusted to a tax-equivalent basis. All average balances are based
on monthly balances. Management does not believe that the monthly averages
differ significantly from what the daily averages would be.

<TABLE>
<CAPTION>
                                                                             Three Months
                                                                          Ended September 30,
                                           ---------------------------------------------------------------------------------
                                                             2005                                     2004
                                           ---------------------------------------  ----------------------------------------
                                              Average                    Average        Average                    Average
                                              Balance      Interest    Yield/Rate       Balance      Interest    Yield/Rate
                                           -------------  ----------  ------------   -------------  ----------  ------------
                                                                          (Dollars in Thousands)
<S>                                          <C>              <C>           <C>        <C>             <C>           <C>
Interest-earning assets:
     Investment securities(1)                $101,306       $  867          3.42%      $ 83,542       $  604         2.89%
     Mortgage-backed securities               164,879        1,713          4.16        134,997        1,373         4.07
     Loans receivable(2)                      491,095        7,684          6.26        391,692        5,743         5.86
     Other interest-earning assets             18,832          135          2.87         13,192           41         1.24
                                              -------       ------                      -------       ------
       Total interest-earning assets          776,112       10,399          5.36%       623,423        7,761         4.98%
                                                            ------         -----                      ------        -----
     Cash and non-interest earning
       balances                                21,323                                    17,805
     Other non-interest-earning assets         23,609                                    10,523
                                              -------                                   -------
       Total assets                          $821,044                                  $651,751
                                              =======                                   =======
Interest-bearing liabilities:
  Deposits:
     Savings and money market accounts       $125,055          372          1.19%      $123,239          287         0.93%
     Checking accounts                         52,347            6          0.05         52,829            8         0.06
     Certificate accounts                     253,259        2,290          3.62        175,760        1,371         3.12
                                              -------       ------                      -------       ------
       Total deposits                         430,661        2,668          2.48        351,828        1,666         1.89
  FHLB advances                               202,687        2,260          4.46        177,167        1,908         4.31
  Other borrowings                             18,743          122          2.60         19,740           27         0.55
                                              -------       ------                      -------       ------
     Total interest-bearing liabilities       652,091        5,050          3.10%       548,735        3,601         2.62%
                                                            ------         -----                      ------        -----
Non-interest-bearing liabilities:
     Non-interest-bearing demand
       accounts                                40,936                                    39,459
     Real estate tax escrow accounts            1,610                                     1,820
     Other liabilities                          7,438                                     6,900
                                              -------                                   -------
       Total liabilities                      702,075                                   596,914
     Retained earnings                        118,969                                    54,837
                                              -------                                   -------
       Total liabilities and retained
         earnings                            $821,044                                  $651,751
                                              =======                                   =======
     Net interest-earning assets             $124,021                                  $ 74,688
                                              =======                                   =======
     Net interest income                                    $5,349                                    $4,160
                                                            ======                                    ======
     Average interest rate spread                                           2.26%                                    2.36%
                                                                           =====                                    =====
     Net interest margin(3)                                                 2.76%                                    2.67%
                                                                           =====                                    =====
</TABLE>
---------------------------
(1)     Investment securities for the 2005 period include 47 non-taxable
        municipal bonds with an aggregate average balance of $13.4 million and
        an average yield of 4.2%. Investment securities for the 2004 period
        include 26 non-taxable municipal bonds with an aggregate average balance
        of $2.8 million and an average yield of 4.3%. The tax-exempt income from
        such securities has not been presented on a tax equivalent basis.
(2)     Includes nonaccrual loans during the respective periods. Calculated net
        of deferred fees and discounts and loans in process.
(3)     Equals net interest income divided by average interest-earning assets.


                                       30
<PAGE>

PROVISION FOR LOAN LOSSES. We made a $20,000 provision to the allowance for loan
losses during the third quarter of 2005 with no such provision during the third
quarter of 2004. The provision for loan losses is charged to expense as
necessary to bring our allowance for loan losses to a sufficient level to cover
known and inherent losses in the loan portfolio. The provision taken during the
third quarter of 2005 was primarily a result of growth in the loan portfolio
while the overall credit quality of the loan portfolio remains strong. At
September 30, 2005, non-performing loans amounted to 0.06% of loans receivable
and our allowance for loan losses amounted to 435.0% of non-performing loans.

NON-INTEREST INCOME. Our total non-interest income amounted to $770,000 for the
quarter ended September 30, 2005 compared to $509,000 for the quarter ended
September 30, 2004. The increase was due primarily to a $37,000 gain on
derivative instruments in 2005 compared to a $106,000 loss on derivative
instruments in 2004 as well as to $166,000 of income from bank owned life
insurance ("BOLI") recognized during the third quarter of 2005 with no
comparable BOLI income in 2004. These gains were partially offset by a $40,000
decrease in service charge income.

NON-INTEREST EXPENSES. Our total non-interest expense for the quarter ended
September 30, 2005 amounted to $3.9 million, representing an increase of
$856,000 or 28.1% from the quarter ended September 30, 2004. The overall
increase was due to increases in all categories of non-interest expense with the
exception of ATM expense and deposit insurance premiums, which decreased
slightly. Salaries and employee benefits expense increased $464,000 or 28.3% for
the third quarter of 2005 when compared to the third quarter of 2004, primarily
due to additional expenses of $296,000 in the aggregate related to the Company's
ESOP, RRP and 2005 Stock Option Plan ("SOP"). The remainder of the increase in
salaries and employee benefits expense was due to growth in the total number of
employees and normal merit increases in salaries. Net occupancy expense
increased approximately $160,000 or 59.6%, due in part to leases entered into
for the three new branches that are expected to open later this year and next
year. Advertising and promotions expense increased approximately $66,000 due to
additional promotions undertaken to promote loan and deposit growth at the Bank.
Other non-interest expense increased approximately $164,000 or 31.9% due
primarily to increased audit and professional fees primarily as the result of
becoming a public reporting entity as well as to additional expense of $77,000
for SOP and RRP awards to directors.

INCOME TAX EXPENSE. Income tax expense for third quarter of 2005 amounted to
$604,000 compared to $571,000 for the third quarter of 2004. The increase in
income tax expense was due to the increase in our pre-tax income, partially
offset by an improvement in our effective tax rate. Our effective tax rate
decreased to 27.5% for the three months ended September 30, 2005 from 35.1% for
the three months ended September 30, 2004, primarily as a result of increased
investment in tax-exempt municipal securities and bank owned life insurance.

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
2004

GENERAL. We had net income of $4.7 million for the nine months ended September
30, 2005, representing an increase of 50.7% over the comparable 2004 period.
Earnings per share was $0.31 for the nine months ended September 30, 2005. As
was the case for the third quarter of 2005, our results for the first nine
months of 2005 reflect, in part, increases in the average amount of
interest-earning assets combined with increases in the average yield on such
assets. The accompanying increase in interest income was partially offset by an
increase in interest expense that resulted from increases in the average amount
of interest-earning liabilities and the average rate paid on those liabilities.
Our average interest spread decreased slightly to 2.29% for the nine months
ended September 30, 2005 from 2.32% for the nine months ended September 30,
2004, while our net interest margin increased to 2.79% from 2.65% for the same
periods, respectively. Our non-interest income increased by 31.7% for the nine
months ended


                                       31
<PAGE>

September 30, 2005 when compared to the nine months ended September 30, 2004 due
primarily to income on BOLI purchased in March 2005 of $330,000 and a $80,000
gain on derivative instruments for the first nine months of 2005 compared to a
loss of $155,000 for the first nine months of 2004. Our non-interest expense for
the nine months ended September 30, 2005 increased 23.9% over the comparable
2004 period, predominantly from the same factors that increased expenses for the
third quarter of 2005 when compared to the third quarter of 2004, including
increases in salaries and employee benefits, net occupancy expense, advertising
and promotions and other non-interest expense.

INTEREST INCOME. Our total interest income was $29.0 million for the nine months
ended September 30, 2005 compared to $22.4 million for the nine months ended
September 30, 2004, a $6.5 million or 29.2% increase. This increase was due to
increases in the average balances of all categories of interest-earning assets.
The most substantial growth was seen in our loan portfolio. Our average loan
balance increased $74.6 million or 19.8% to $452.2 million for the nine months
ended September 30, 2005 from $377.6 million for the nine months ended September
30, 2004. Additionally, our average balance of mortgage-backed securities
increased $39.6 million or 30.2% to $170.9 million and our average balance of
investment securities increased $14.5 million or 17.8% to $95.8 million over the
same periods. The increases in the average balances of our interest-earning
assets were accompanied by increases in the average yields of all categories of
interest-earning assets. Our average yield on interest-earning assets increased
27 basis points to 5.21% for the first nine months of 2005 from 4.94% for the
first nine months of 2004 due largely to a 25 basis point increase in the
average yield on loans receivable to 6.15% for the first nine months of 2005
from 5.90% for the first nine months of 2004.

INTEREST EXPENSE. Our total interest expense was $13.4 million for the nine
months ended September 30, 2005 compared to $10.4 million for the nine months
ended September 30, 2004, an increase of $3.0 million or 29.1%. The increase in
interest expense for the first nine months of 2005 when compared to the same
period in the prior year resulted from increases in the average balances of and
average rates paid on all categories of interest bearing liabilities. Our
average deposit balance increased $60.9 million or 17.7% to $404.2 million for
the nine months ended September 30, 2005 from $343.3 million for the nine months
ended September 30, 2004. This occurred primarily from a $51.4 million increase
in the average balance of certificates of deposit and a $9.6 million increase in
the average balance of savings and money market accounts. Our average rate on
deposits increased to 2.25% for the nine months ended September 30, 2005 from
1.86% for the nine months ended September 30, 2004, driven largely by the growth
in our certificate of deposit accounts, which generally pay a higher rate of
interest than other deposit products. The average rate on these accounts
increased 34 basis points to 3.42% for the nine months ended September 30, 2005
from 3.08% for the nine months ended September 30, 2004. Our average rates on
FHLB advances and other borrowings increased to 4.45% and 2.03%, respectively,
for the nine months ended September 30, 2005 from 4.38% and 0.42%, respectively,
for the nine months ended September 30, 2004. Our average rate on
interest-bearing liabilities as a whole increased 30 basis points to 2.92% for
the nine months ended September 30, 2005 from 2.62% for the nine months ended
September 30, 2004.


                                       32
<PAGE>

AVERAGE BALANCES, NET INTEREST INCOME, AND YIELDS EARNED AND RATES PAID. The
following table shows for the periods indicated the total dollar amount of
interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both
in dollars and rates, and the net interest margin. Tax-exempt income and yields
have not been adjusted to a tax-equivalent basis. All average balances are based
on monthly balances. Management does not believe that the monthly averages
differ significantly from what the daily averages would be.

<TABLE>
<CAPTION>
                                                                             Nine Months
                                                                         Ended September 30,
                                           ---------------------------------------------------------------------------------
                                                             2005                                     2004
                                           ---------------------------------------  ----------------------------------------
                                              Average                    Average        Average                    Average
                                              Balance      Interest    Yield/Rate       Balance      Interest    Yield/Rate
                                           -------------  ----------  ------------   -------------  ----------  ------------
                                                                          (Dollars in Thousands)
<S>                                          <C>           <C>              <C>         <C>           <C>           <C>
Interest-earning assets:
     Investment securities(1)                $ 95,773      $ 2,377          3.31%      $ 81,312      $ 1,678         2.75%
     Mortgage-backed securities               170,858        5,284          4.12        131,250        3,925         3.99
     Loans receivable(2)                      452,181       20,861          6.15        377,578       16,709         5.90
     Other interest-earning assets             23,190          450          2.59         14,579          111         1.02
                                              -------       ------                      -------       ------
       Total interest-earning assets          742,002       28,972          5.21%       604,719       22,423         4.94%
                                                            ------         -----                      ------        -----
     Cash and non-interest earning
       balances                                20,718                                    15,767
     Other non-interest-earning assets         20,834                                    10,271
                                              -------                                   -------
       Total assets                          $783,554                                  $630,757
                                              =======                                   =======
Interest-bearing liabilities:
  Deposits:
     Savings and money market accounts       $128,472        1,063          1.10%      $118,879          768         0.86%
     Checking accounts                         51,803           21          0.05         51,912           32         0.08
     Certificate accounts                     223,936        5,742          3.42        172,497        3,980         3.08
                                              -------       ------                      -------       ------
       Total deposits                         404,211        6,826          2.25        348,288        4,780         1.86
  FHLB advances                               188,588        6,291          4.45        169,595        5,571         4.38
  Other borrowings                             20,904          318          2.03         17,481           55         0.42
                                              -------       ------                      -------       ------
     Total interest-bearing liabilities       613,703       13,435          2.92%       530,364       10,406         2.62%
                                                            ------         -----                      ------        -----
Non-interest-bearing liabilities:
     Non-interest-bearing demand
       accounts                                39,535                                    37,501
     Real estate tax escrow accounts            2,505                                     2,513
     Other liabilities                          7,439                                     5,900
                                              -------                                   -------
       Total liabilities                      663,182                                   576,278
     Retained earnings                        120,372                                    54,479
                                              -------                                   -------
       Total liabilities and retained
         earnings                            $783,554                                  $630,757
                                              =======                                   =======
     Net interest-earning assets             $128,299                                  $ 74,355
                                              =======                                   =======
     Net interest income                                   $15,537                                   $12,017
                                                            ======                                    ======
     Average interest rate spread                                           2.29%                                    2.32%
                                                                           =====                                    =====
     Net interest margin(3)                                                 2.79%                                    2.65%
                                                                           =====                                    =====
</TABLE>
---------------------------
(1)     Investment securities for the 2005 period include 47 non-taxable
        municipal bonds with an aggregate average balance of $14.8 million and
        an average yield of 4.2%. Investment securities for the 2004 period
        include 26 non-taxable municipal bonds with an aggregate average balance
        of $1.1 million and an average yield of 4.3%. The tax-exempt income from
        such securities has not been presented on a tax equivalent basis.
(2)     Includes nonaccrual loans during the respective periods. Calculated net
        of deferred fees and discounts and loans in process.
(3)     Equals net interest income divided by average interest-earning assets.


                                       33
<PAGE>

PROVISION FOR LOAN LOSSES. We made a $20,000 provision to the allowance for loan
losses in the first nine months of 2005 compared to a provision of $45,000 in
the first nine months of 2004. The provision for loan losses is charged to
expense as necessary to bring our allowance for loan losses to a sufficient
level to cover known and inherent losses in the loan portfolio. Despite our
growth in the loan portfolio, our allowance for loan losses remained sufficient,
even with a decreased provision, due to the high quality of the portfolio. At
September 30, 2005, non-performing loans amounted to 0.06% of loans receivable
and our allowance for loan losses amounted to 435.0% of non-performing loans.

NON-INTEREST INCOME. Our total non-interest income amounted to $2.1 million for
the nine months ended September 30, 2005 compared to $1.6 million for the nine
months ended September 30, 2004. The increase was due primarily to $330,000 of
income from BOLI purchased in March 2005 and an $80,000 gain on derivative
instruments for the first nine months of 2005 compared to a loss of $155,000 for
the first nine months of 2004. These gains were partially offset by a $62,000
decrease in service charge income for the first nine months of 2005 compared to
the first nine months of 2004.

NON-INTEREST EXPENSES. Our total non-interest expense for the nine months ended
September 30, 2005 amounted to $10.9 million, representing an increase of $2.1
million or 23.9% from the nine months ended September 30, 2004. The overall
increase was due to increases in all categories of non-interest expense with the
exception of data processing expense, which decreased slightly. Salaries and
employee benefits expense, the largest component of non-interest expense,
increased $1.1 million or 23.3% for the first nine months of 2005 when compared
to the first nine months of 2004. This increase was primarily due to additional
expense of $531,000 relating to the Company's ESOP, RRP and SOP, all of which
began in 2005. The remainder of the increase in salaries and employee benefits
expense was due to growth in total employees and normal merit increases in
salaries. Our net occupancy expense increased approximately $363,000 or 42.3%,
due in part to the leases entered into for the three new branches. Advertising
and promotions expense increased approximately $108,000 due to additional
promotions undertaken to promote loan and deposit growth at the Bank. Other
non-interest expense increased approximately $498,000 or 33.5% due primarily to
increased audit and professional fees as the result of becoming a public
reporting entity as well as to additional expense of $77,000 for SOP and RRP
awards to directors.

INCOME TAX EXPENSE. Income tax expense for the nine months ended September 30,
2005 amounted to $2.0 million compared to $1.6 million for the nine months ended
September 30, 2004. The increase in income tax expense was due to the increase
in our pre-tax income, partially offset by a decrease in our effective tax rate.
Our effective tax rate decreased to 29.3% for the nine months ended September
30, 2005 from 33.9% for the nine months ended September 30, 2004. The decreased
rate was primarily a result of increased investment in tax-exempt municipal
securities and bank owned life insurance.

FORWARD LOOKING STATEMENTS

This document contains forward-looking statements, which can be identified by
the use of words such as "estimate," "project," "believe," "intend,"
"anticipate," "plan," "seek," "expect" and similar expressions. These
forward-looking statements include: statements of goals, intentions and
expectations, statements regarding prospects and business strategy, statements
regarding asset quality and market risk, and estimates of future costs, benefits
and results.

These forward-looking statements are subject to significant risks, assumptions
and uncertainties, including, among other things, the following: (1) general
economic conditions, (2) competitive pressure among financial services
companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand,
(6) changes in legislation or regulation, (7) changes in accounting principles,
policies and guidelines, (8) litigation liabilities, including costs, expenses,
settlements and judgments, and (9) other economic,


                                       34
<PAGE>

competitive, governmental, regulatory and technological factors affecting our
operations, pricing, products and services.

Because of these and other uncertainties, our actual future results may be
materially different from the results indicated by these forward-looking
statements. We have no obligation to update or revise any forward-looking
statements to reflect any changed assumptions, any unanticipated events or any
changes in the future.

ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY MANAGEMENT AND MARKET RISK. Market risk is the risk of loss from
adverse changes in market prices and rates. Our market risk arises primarily
from the interest rate risk which is inherent in our lending and deposit taking
activities. To that end, management actively monitors and manages interest rate
risk exposure. In addition to market risk, our primary risk is credit risk on
our loan portfolio. We attempt to manage credit risk through our loan
underwriting and oversight policies.

The principal objective of our interest rate risk management function is to
evaluate the interest rate risk embedded in certain balance sheet accounts,
determine the level of risk appropriate given our business strategy, operating
environment, capital and liquidity requirements and performance objectives, and
manage the risk consistent with approved guidelines. We seek to manage our
exposure to risks from changes in interest rates while at the same time trying
to improve our net interest spread. We monitor interest rate risk as such risk
relates to our operating strategies. We have established an Asset/Liability
Committee, which is comprised of our President and Chief Executive Officer,
three Senior Vice Presidents and two Vice Presidents of Lending, and which is
responsible for reviewing our asset/liability policies and interest rate risk
position. The Asset/Liability Committee meets on a regular basis. The extent of
the movement of interest rates is an uncertainty that could have a negative
impact on future earnings.

In recent years, we primarily have utilized the following strategies in our
efforts to manage interest rate risk:

        o       we have increased our originations of shorter term loans and/or
                loans with adjustable rates of interest, particularly
                construction loans, commercial real estate and multi-family
                residential mortgage loans and home equity lines of credit;

        o       we have attempted to match fund a portion of our securities
                portfolio with borrowings having similar expected lives;

        o       we have attempted, where possible, to extend the maturities of
                our deposits and borrowings;

        o       we have invested in securities with relatively short anticipated
                lives, generally three to five years, and increased our holding
                of liquid assets; and

        o       on occasion, we have utilized certain off-balance sheet
                derivative products, consisting of interest rate cap and swap
                agreements, in our efforts to protect our net interest income
                from sudden shifts.

GAP ANALYSIS. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
and liability is said to be interest rate sensitive within a specific time
period if it will


                                       35
<PAGE>

mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that same time period. A gap is
considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities. A gap is considered negative
when the amount of interest rate sensitive liabilities exceeds the amount of
interest rate sensitive assets. During a period of rising interest rates, a
negative gap would tend to affect adversely net interest income while a positive
gap would tend to result in an increase in net interest income. Conversely,
during a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income while a positive gap would tend to affect
adversely net interest income. Our current asset/liability policy provides that
our one-year interest rate gap as a percentage of total assets should not exceed
positive or negative 20%. This policy was adopted by our management and Board
based upon their judgment that it established an appropriate benchmark for the
level of interest-rate risk, expressed in terms of the one-year gap, for the
Bank. In the event our one-year gap position were to approach or exceed the 20%
policy limit, we would review the composition of our assets and liabilities in
order to determine what steps might appropriately be taken, such as selling
certain securities or loans or repaying certain borrowings, in order to maintain
our one-year gap in accordance with the policy. Alternatively, depending on the
then-current economic scenario, we could determine to make an exception to our
policy or we could determine to revise our policy. In recent periods, our
one-year gap position was well within our policy. Our one-year cumulative gap
was a negative 1.30% at September 30, 2005, compared to a positive 0.57% at
December 31, 2004. We have increased our originations of commercial real estate
and multi-family residential real estate loans, construction loans, home equity
lines and commercial business loans. This has been done, in part, because such
loans generally have shorter terms to maturity than single-family residential
mortgage loans and are more likely to have floating or adjustable rates of
interest, thereby increasing the amount of our interest rate sensitive assets in
the one- to three-year time horizon. By increasing the amount of our interest
rate sensitive assets in the one-to three-year time horizon, we felt that we
better positioned ourselves to benefit from a rising interest rate environment
because the average interest rates on our loans would increase as general market
rates of interest were increasing.

The following table sets forth the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at September 30, 2005, which we expect,
based upon certain assumptions, to reprice or mature in each of the future time
periods shown (the "GAP Table"). Except as stated below, the amount of assets
and liabilities shown which reprice or mature during a particular period were
determined in accordance with the earlier of term to repricing or the
contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at September
30, 2005, on the basis of contractual maturities, anticipated prepayments, and
scheduled rate adjustments within a three-month period and subsequent selected
time intervals. The loan amounts in the table reflect principal balances
expected to be redeployed and/or repriced as a result of contractual
amortization and anticipated prepayments of adjustable-rate loans and fixed-rate
loans, and as a result of contractual rate adjustments on adjustable-rate loans.
Annual prepayment rates for adjustable-rate and fixed-rate single-family and
multi-family mortgage loans are assumed to range from 10% to 26%. The annual
prepayment rate for mortgage-backed securities is assumed to range from 9% to
63%. Money market deposit accounts, savings accounts and interest-bearing
checking accounts are assumed to have annual rates of withdrawal, or "decay
rates," of 16%, 12.5% and 0%, respectively.


                                       36
<PAGE>
<TABLE>
<CAPTION>
                                                      More than     More than      More than
                                         6 Months     6 Months        1 Year        3 Years       More than       Total
                                         or Less      to 1 Year     to 3 Years     to 5 Years      5 Years        Amount
                                        ---------    -----------   ------------   ------------   -----------    ----------
                                                                   (Dollars in Thousands)
<S>                                     <C>          <C>           <C>            <C>            <C>            <C>
Interest-earning assets(1):
  Loans receivable(2)                   $ 192,748    $    33,267   $    106,326   $     79,729   $    95,111    $  507,181
   Mortgage-backed
   securities                              32,430         24,453         56,549         23,441        23,026       159,899
  Investment securities                     6,184         15,365         33,899         12,500        33,365       101,313
   Other interest-earning  assets          18,122             --             --             --            --        18,122
                                        ---------    -----------   ------------   ------------   -----------    ----------
     Total interest-earning
       assets                             249,484         73,085        196,774        115,670       151,502       786,515
                                        =========    ===========   ============   ============   ===========    ==========
Interest-bearing liabilities:
  Savings and money market
     accounts                           $  18,010    $    18,010   $     44,979   $     20,693   $    18,087    $  119,779
  Checking accounts                            --             --             --             --        51,443        51,443
  Certificate accounts                     70,244         74,730         96,948         10,970        13,011       265,903
  FHLB advances                           123,332         12,248         45,521          8,468        23,011       212,580
  Other borrowed money                     16,739             --             --             --            --        16,739
                                        ---------    -----------   ------------   ------------   -----------    ----------
     Total interest-bearing
      liabilities                         228,325        104,988        187,448         40,131       105,552       666,444
                                        =========    ===========   ============   ============   ===========    ==========

Interest-earning assets less
   interest-bearing liabilities         $  21,159    $   (31,903)  $      9,326   $     75,539   $    45,950    $  120,071
                                        =========    ===========   ============   ============   ===========    ==========

Cumulative interest-rate
   sensitivity gap(3)                   $  21,159    $   (10,744)  $     (1,418)  $     74,121   $   120,071
                                        =========    ===========   ============   ============   ===========

Cumulative interest-rate
   gap as a percentage of total
   assets at September 30, 2005              2.56%         (1.30)%        (0.17)%         8.97%        14.53%
                                        =========    ===========   ============   ============   ===========

Cumulative interest-earning
   assets as a percentage of
   cumulative interest-bearing
   liabilities at September 30,
   2005                                    109.27%         96.78%         99.73%        113.21%       118.02%
                                        =========    ===========   ============   ============   ===========
</TABLE>
---------------------
(1)     Interest-earning assets are included in the period in which the balances
        are expected to be redeployed and/or repriced as a result of anticipated
        prepayments, scheduled rate adjustments and contractual maturities.

(2)     For purposes of the gap analysis, loans receivable includes
        non-performing loans net of undisbursed loan funds, unamortized
        discounts and deferred loan fees.

(3)     Interest-rate sensitivity gap represents the difference between net
        interest-earning assets and interest-bearing liabilities.


                                       37
<PAGE>

Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable-rate loans, have
features which restrict changes in interest rates both on a short-term basis and
over the life of the asset. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of many borrowers
to service their adjustable-rate loans may decrease in the event of an interest
rate increase.

ITEM 4. - CONTROLS AND PROCEDURES

Our management evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
on such evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rule
13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934) occurred
during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


                                       38
<PAGE>


PART II                            OTHER INFORMATION

Item 1.         Legal Proceedings

                Not applicable.

Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds

(a)     Not applicable.

(b)     Not applicable.

(c)     PURCHASES OF EQUITY SECURITIES

The Company did not make any purchases of its common stock during the quarter
ended September 30, 2005, however, the Company's recognition and retention plan
trust made certain purchases pursuant to a publicly-announced plan as set forth
in the table below.

<TABLE>
<CAPTION>
                                                                              TOTAL NUMBER OF          MAXIMUM NUMBER OF
                                        TOTAL                               SHARES PURCHASED AS       SHARES THAT MAY YET
                                      NUMBER OF                               PART OF PUBLICLY        BE PURCHASED UNDER
                                        SHARES          AVERAGE PRICE        ANNOUNCED PLANS OR           THE PLAN OR
              PERIOD                  PURCHASED        PAID PER SHARE             PROGRAMS                PROGRAMS(1)
-----------------------------------  ------------     -----------------     --------------------     ---------------------
<S>                                      <C>                 <C>                    <C>                     <C>
July 1 - July 31, 2005                       --                 --                      --                  285,660
August 1 - August 31, 2005               88,500              12.82                  88,500                  197,160
September 1 - September 30, 2005        197,160              13.00                 285,660                       --
                                        -------

Total                                   285,660           $  12.95                 285,660                       --
                                        =======            =========               =======                  =======
</TABLE>

(1)     On June 23, 2005, shareholders of the Company voted to approve the 2005
        Recognition and Retention Plan and Trust Agreement ("RRP") authorizing
        the purchase of up to 285,660 shares of the Company's common stock. No
        additional purchases are expected to be made by the RRP under this plan.


Item 3.         Defaults upon Senior Securities

                Not applicable.


                                       39
<PAGE>

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

                Not applicable.

Item 5.         Other Information

                Not applicable.

Item 6.         Exhibits

                No.             Description
                ---             -----------

                31.1            Certification of the Chief Executive Officer
                                pursuant to Rule 13a-14 and 15d-14 of the
                                Securities Exchange Act of 1934, as amended, as
                                adopted pursuant to Section 302 of the
                                Sarbanes-Oxley Act of 2002.

                31.2            Certification of the Chief Financial Officer
                                pursuant to Rule 13a-14 and 15d-14 of the
                                Securities Exchange Act of 1934, as amended, as
                                adopted pursuant to Section 302 of the
                                Sarbanes-Oxley Act of 2002.

                32.1            Certification pursuant to 18 U.S.C. Section
                                1350, as adopted pursuant to Section 906 of the
                                Sarbanes-Oxley Act of 2002.

                32.2            Certification pursuant to 18 U.S.C. Section
                                1350, as adopted pursuant to Section 906 of the
                                Sarbanes-Oxley Act of 2002.


                                       40
<PAGE>

                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        ABINGTON COMMUNITY BANCORP, INC.



Date: November 14, 2005                 By:     /s/ Robert W. White
                                                --------------------------------
                                                Robert W. White
                                                Chairman, President and
                                                Chief Executive Officer



Date: November 14, 2005                 By:     /s/ Jack J. Sandoski
                                                --------------------------------
                                                Jack J. Sandoski
                                                Senior Vice President and
                                                Chief Financial Officer


                                       41