<PAGE>

                                  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 March 31, 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 Incorporation           (I.R.S. Employer
             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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of May 13, 2005,
15,870,000 shares of the Registrant's common stock were issued and outstanding.

<PAGE>
<TABLE>
<CAPTION>

ABINGTON COMMUNITY BANCORP, INC.

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

                                                                                                                 PAGE
<S>                                                                                                             <C>
PART I - FINANANCIAL INFORMATION

   ITEM 1. CONDENSED FINANCIAL STATEMENTS

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

     Unaudited Consolidated Statements of Income for the Three Months Ended
     March 31, 2005 and 2004                                                                                       2

     Unaudited Consolidated Statement of Changes in Stockholders' Equity and
     Comprehensive Income for the Three Months Ended March 31, 2005                                                3

     Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31,
     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                                                                             17

   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                              27

   ITEM 4. CONTROLS AND PROCEDURES                                                                                 31


PART II - OTHER INFORMATION


   ITEM 1. Legal Proceedings                                                                                       31

   ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds                                             31

   ITEM 3. Defaults upon Senior Securities                                                                         31

   ITEM 4. Submission of Matters to a Vote of Security Holders                                                     31

   ITEM 5. Other Information                                                                                       32

   ITEM 6. Exhibits                                                                                                32

   SIGNATURES                                                                                                      33

   CERTIFICATIONS                                                                                                  34
</TABLE>

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<TABLE>
<CAPTION>

ABINGTON COMMUNITY BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
---------------------------------------------------------------------------------------------------------------------------------

                                                                                March 31, 2005             December 31, 2004
                                                                          -------------------------------------------------------
<S>                                                                       <C>                          <C>
ASSETS

Cash and due from banks                                                   $               16,962,483   $               24,867,784
Interest-bearing bank balances                                                            13,135,718                    8,428,048
                                                                          --------------------------   --------------------------
      Total cash and cash equivalents                                                     30,098,201                   33,295,832
Investment securities held to maturity (estimated fair
  value--2005, $10,182,007; 2004, $10,336,485)                                            10,219,050                   10,219,764
Investment securities available for sale (amortized cost--
  2005, $80,869,352; 2004, $77,348,884)                                                   78,792,326                   76,163,951
Mortgage-backed securities held to maturity (estimated fair
  value--2005, $82,653,560; 2004, $81,322,041)                                            83,929,985                   81,703,737
Mortgage-backed securities available for sale (amortized cost--
  2005, $93,841,656; 2004, $83,300,963)                                                   92,405,793                   83,027,943
Loans receivable, net of allowance for loan loss
   (2005, $1,397,411; 2004, $1,412,697)                                                  415,342,202                  412,655,664
Accrued interest receivable                                                                3,006,552                    2,710,162
Federal Home Loan Bank stock--at cost                                                     10,090,300                   10,450,100
Cash surrender value - bank owned life insurance                                          15,002,465                            -
Property and equipment, net                                                                5,457,986                    5,533,085
Deferred tax asset                                                                         2,088,388                    1,313,068
Prepaid expenses and other assets                                                          1,696,877                      905,074
                                                                          --------------------------   --------------------------

TOTAL ASSETS                                                              $              748,130,125   $              717,978,380
                                                                          ==========================   ==========================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Deposits:
    Noninterest-bearing                                                   $               38,735,552   $               37,596,228
    Interest-bearing                                                                     383,252,143                  367,693,829
                                                                          --------------------------   --------------------------
      Total deposits                                                                     421,987,695                  405,290,057
  Advances from Federal Home Loan Bank                                                   180,367,480                  170,666,374
  Other borrowed money                                                                    18,763,558                   12,865,521
  Accrued interest payable                                                                 1,759,249                      910,040
  Advances from borrowers for taxes and insurance                                          2,260,644                    2,047,151
  Accounts payable and accrued expenses                                                    3,925,405                    3,144,536
                                                                          --------------------------   --------------------------

           Total liabilities                                                             629,064,031                  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                                                              69,096,866                   69,096,936
  Unallocated common stock held by:
    Employee Stock Ownership Plan (ESOP)                                                  (6,089,299)                  (2,046,137)
    Deferred compensation plans trust                                                     (1,074,200)                  (1,074,200)
  Retained earnings                                                                       59,292,535                   57,881,651
  Accumulated other comprehensive loss                                                    (2,318,508)                    (962,249)
                                                                          --------------------------   --------------------------

           Total stockholders' equity                                                   119,066,094                   123,054,701
                                                                          --------------------------   --------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $              748,130,125   $              717,978,380
                                                                          ==========================   ==========================
</TABLE>

See notes to unaudited consolidated financial statements.

                                        1

<PAGE>
<TABLE>
<CAPTION>

ABINGTON COMMUNITY BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------------------------------------------------

                                                             THREE MONTHS ENDED MARCH 31,
                                                        ---------------------------------------
                                                               2005                  2004
                                                        ---------------------------------------
                                                                                 AS RESTATED
                                                                                 (SEE NOTE 8)
<S>                                                     <C>                   <C>
INTEREST INCOME:
  Interest on loans                                     $         6,278,624   $       5,444,626
  Interest and dividends on investment and
    mortgage-backed securities:
      Taxable                                                     2,516,589           1,876,702
      Tax-exempt                                                    111,345               1,755
                                                        -------------------   -----------------

           Total interest income                                  8,906,558           7,323,083

INTEREST EXPENSE:
  Interest on deposits                                            1,969,324           1,524,017
  Interest on Federal Home Loan Bank advances                     1,904,501           1,829,276
  Interest on other borrowed money                                   77,995              10,736
                                                        -------------------   -----------------

           Total interest expense                                 3,951,820           3,364,029
                                                        -------------------   -----------------

NET INTEREST INCOME                                               4,954,738           3,959,054

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

NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                                       4,954,738           3,914,054
                                                        -------------------   -----------------

NON-INTEREST INCOME
  Service charges                                                   436,035             433,791
  Rental income                                                      15,451              13,195
  Gain (loss) on derivative instruments, net                         14,175            (278,342)
  Other income                                                      113,828             103,309
                                                        -------------------   -----------------

           Total non-interest income                                579,489             271,953
                                                        -------------------   -----------------

NON-INTEREST EXPENSES
  Salaries and employee benefits                                  1,800,435           1,620,339
  Net occupancy                                                     405,745             293,750
  Depreciation                                                      123,269             127,791
  Data processing                                                   348,702             300,189
  ATM expense                                                        85,837              28,229
  Deposit insurance premium                                          29,096              28,128
  Advertising and promotions                                         92,084              71,697
  Other                                                             600,175             480,249
                                                        -------------------   -----------------

           Total non-interest expenses                            3,485,343           2,950,372
                                                        -------------------   -----------------

INCOME BEFORE INCOME TAXES                                        2,048,884           1,235,635
                                                        -------------------   -----------------

PROVISION FOR INCOME TAXES                                          638,000             409,675
                                                        -------------------   -----------------

NET INCOME                                              $         1,410,884   $         825,960
                                                        ===================   =================

BASIC EARNINGS PER COMMON SHARE                         $              0.09                 n/a

DILUTED EARNINGS PER COMMON SHARE                       $              0.09                 n/a

AVERAGE COMMON SHARES OUTSTANDING                                15,504,360                 n/a
</TABLE>


See notes to unaudited consolidated financial statements.


                                        2

<PAGE>
<TABLE>
<CAPTION>

ABINGTON COMMUNITY BANCORP, INC.

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

                                                         COMMON
                                                          STOCK
                                                         ACQUIRED                      ACCUMULATED
                                        ADDITIONAL         BY                             OTHER           TOTAL        COMPRE-
                            COMMON        PAID-IN        BENEFIT        RETAINED      COMPREHENSIVE   STOCKHOLDERS'    HENSIVE
                             STOCK        CAPITAL         PLANS         EARNINGS          LOSS            EQUITY       INCOME

<S>                        <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                     -              -              -       1,410,884               -        1,410,884   $ 1,410,884
    Net realized holding
      loss on available
      for sale securities
      arising during the
      period, net of tax
      benefit of $698,677          -              -              -               -      (1,356,259)      (1,356,259)   (1,356,259)
                                                                                                                      -----------

  Comprehensive income                                                                                                $    54,625
                                                                                                                      ===========
  ESOP shares committed
      to be released               -            (70)       126,385                               -          126,315
  Common stock acquired
      by ESOP                      -              -     (4,169,547)              -               -       (4,169,547)
                           ---------    -----------    ------------    -----------    ------------    -------------

BALANCE--MARCH 31, 2005    $ 158,700    $69,096,866    $(7,163,499)    $59,292,535    $ (2,318,508)   $ 119,066,094
                           =========    ===========    ============    ===========    ============    =============
</TABLE>


See notes to unaudited consolidated financial statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>

ABINGTON COMMUNITY BANCORP, INC.

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

                                                              Three Months Ended March 31,
                                                           --------------------------------
                                                                2005               2004
                                                           --------------------------------
                                                                               As Restated
                                                                               (see note 8)
<S>                                                        <C>                <C>
OPERATING ACTIVITIES:
  Net income                                               $   1,410,884      $     825,960
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Provision for loan losses                                          -             45,000
    Depreciation                                                 123,269            127,791
    ESOP expense                                                 126,315                  -
    Unrealized (gain) loss on derivative instruments             (68,000)           106,750
    Deferred income tax benefit                                  (76,643)           (48,741)
    Amortization of:
      Deferred loan fees                                        (291,085)          (291,800)
      Premiums and discounts, net                                 69,303             65,292
    Income from bank owned life insurance                         (2,465)                 -
    Changes in assets and liabilities which (used)
        provided cash:
      Accrued interest receivable                               (296,390)            74,779
      Prepaid expenses and other assets                         (791,803)           (11,206)
      Accrued interest payable                                   849,209            525,680
      Accounts payable and accrued expenses                      848,869            597,466
                                                           -------------      -------------

           Net cash provided by operating activities           1,901,463          2,016,971
                                                           -------------      -------------

INVESTING ACTIVITIES:
  Principal collected on loans                                48,824,880         33,117,822
  Disbursements for loans                                    (51,220,333)       (32,014,168)
  Purchases of:
    Mortgage-backed securities held to maturity               (7,597,217)       (10,956,924)
    Mortgage-backed securities available for sale            (15,585,382)        (2,009,346)
    Investments available for sale                            (4,020,282)       (12,029,989)
    Federal Home Loan Bank stock                                (695,900)          (563,000)
    Property and equipment                                       (48,170)           (38,715)
    Bank owned life insurance                                (15,000,000)                 -
  Proceeds from:
    Maturities of mortgage-backed securities available
      for sale                                                 1,211,522             90,440
    Maturities of investments available for sale                 500,000         26,500,000
    Principal repayments of mortgage-backed securities
      held to maturity                                         5,317,221          1,315,631
    Principal repayments of mortgage-backed securities
      available for sale                                       3,818,140          4,363,164
    Redemption of Federal Home Loan Bank stock                 1,055,700            813,400
                                                           -------------      -------------
           Net cash (used in) provided by investing
             activities                                      (33,439,821)         8,588,315
                                                           -------------      -------------

FINANCING ACTIVITIES:
  Net (decrease) increase in demand deposits and
    savings accounts                                          (4,046,100)         6,385,518
  Net increase in certificate accounts                        20,743,738          3,514,180
  Net increase in other borrowed money                         5,898,037          5,683,043
  Advances from Federal Home Loan Bank                        73,995,000        179,500,000
  Repayments of advances from Federal Home Loan Bank         (64,293,894)      (191,636,900)
  Net increase in advances from borrowers
    for taxes and insurance                                      213,493            609,563
  Acquisition of stock for ESOP                               (4,169,547)                 -
                                                           -------------      -------------

             Net cash provided by financing activities        28,340,727          4,055,404
                                                           =============      =============

NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                                            (3,197,631)        14,660,690

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

CASH AND CASH EQUIVALENTS--End of period                   $  30,098,201      $  34,356,315
                                                           =============      =============

SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
  Cash paid during the year for:
    Interest on deposits and other borrowings              $   3,102,611      $   2,838,349
                                                           =============      =============
    Income taxes                                           $     750,000      $           -
                                                           =============      =============
</TABLE>

See notes to unaudited consolidated financial statements.


                                        4

<PAGE>

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 three months ended March 31, 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.

        In April 2003, the Financial Accounting Standards Board ("FASB") issued
        SFAS No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND
        HEDGING ACTIVITIES. SFAS No. 149 amends and clarifies accounting for
        derivative instruments and hedging activities under Statement 133. In
        addition, this statement clarifies under what circumstances a contract
        with an initial net investment meets the characteristic of a derivative
        and when a derivative contains a financing component that warrants
        special reporting in the statement of cash flows. This statement is
        effective for contracts entered into or modified after June 30, 2003.
        The adoption of SFAS No. 149 did not have a significant effect on the
        Company's financial position or results of operations.

        At March 31, 2005, the Company is party to two swap agreements with
        terms expiring in June 2005, and December 2005, respectively. Under the
        June 2005 agreement, the Company either receives or pays, on a quarterly
        basis, the amount by which the ten-year Constant Maturity Treasury
        ("CMT") exceeds or falls 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. Under the
        December 2005, 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 fair value of the swap agreements was a negative $17,000 and a
        negative $85,000 at March 31, 2005, and December 31, 2004, respectively.
        During the three months ended March 31, 2005 and 2004, the Company paid
        to the contra parties $53,825 and $171,592, respectively, under the
        agreements. In addition, the unrealized gain (loss) on derivatives
        recognized in gain (loss) on derivative instruments, net in the
        Company's unaudited consolidated statements of income was $68,000 and
        $(106,750) for the three months ended March 31, 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.


                                       6
<PAGE>

        RECENT ACCOUNTING PRONOUNCEMENTS-- In March 2004, the FASB Emerging
        Issues Task Force ("EITF") reached a consensus on EITF No. 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
        September 2004, the FASB issued FSP 03-1-1, which delayed the effective
        date for the measurement and recognition guidance contained in
        paragraphs 10-20 of Issue 03-1 due to additional proposed guidance.
        Management is continuing to monitor the developments surrounding EITF
        03-1. The amount of other-than-temporary impairment to be recognized
        depends on market conditions, management's intent and ability to hold
        investments until a forecasted recovery. Management is following current
        guidance, which has not had a material impact on the Company.

        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 requires an entity to
        recognize the cost of employee services received in share-based payment
        transactions and measure the cost on a 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 will be effective for the Company's
        consolidated financial statements issued for periods beginning after
        January 1, 2006. Management is currently evaluating the effects of the
        adoption of this Statement on its financial statements. The Company did
        not issue and does not have outstanding any stock-based compensation
        during the three-month periods ended March 31, 2005 and 2004.

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. During the three months ended March 31, 2005, the
        Company did not issue and does not have outstanding any CSEs.

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED MARCH 31, 2005
                                                    ------------------------------------
                                                        BASIC                DILUTED
                                                     -----------          -------------
<S>                                                  <C>                  <C>
        Net income                                   $ 1,410,884          $   1,410,884
        Weighted average shares outstanding           15,504,360             15,504,360
        Effect of unvested common stock awards                 -                      -
                                                     -----------          -------------
        Adjusted weighted average shares used in
          earnings per share computation              15,504,360             15,504,360
                                                     -----------          -------------


        Earnings per share                           $      0.09          $        0.09
                                                     ===========          =============
</TABLE>

        No common shares of the Company were outstanding during the three months
        ended March 31, 2004.

                                        7
<PAGE>

3.      INVESTMENT SECURITIES

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

<TABLE>
<CAPTION>
                                                                        HELD TO MATURITY
                                                                         March 31, 2005
                                               ----------------------------------------------------------------------
                                                                      GROSS           GROSS          ESTIMATED
                                                    AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                                      COST            GAINS          LOSSES            VALUE
<S>                                                <C>               <C>            <C>             <C>
        Debt securities:
          Municipal bonds                          $ 10,219,050      $  10,784      $  (47,827)     $ 10,182,007
                                                   ------------      ---------      -----------     ------------

                   Total debt securities           $ 10,219,050      $  10,784      $  (47,827)     $ 10,182,007
                                                   ============      =========      ===========     ============



                                                                       AVAILABLE FOR SALE
                                                                         March 31, 2005
                                               ----------------------------------------------------------------------
                                                                      GROSS           GROSS          ESTIMATED
                                                    AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                                      COST            GAINS          LOSSES            VALUE

        Debt securities:
          Agency bonds                             $ 74,989,955      $  18,760      $(1,986,500)    $ 73,022,215
          Corporate bonds and
            commercial paper                            999,819          6,189             (793)       1,005,215
          Municipal bonds                               180,000          2,446                -          182,446
          Certificates of deposit                     1,282,000              -                -        1,282,000
                                                   ------------      ---------      -----------     ------------

                   Total debt securities             77,451,774         27,395       (1,987,293)      75,491,876
                                                   ------------      ---------      -----------     ------------

        Equity securities:
          Common stock                                    2,510            535           (2,500)             545
          Mutual funds                                3,415,068              -         (115,163)       3,299,905
                                                   ------------      ---------      -----------     ------------

                   Total equity securities            3,417,578            535         (117,663)       3,300,450
                                                   ------------      ---------      -----------     ------------

        Total                                      $ 80,869,352      $  27,930      $(2,104,956)    $ 78,792,326
                                                   ============      =========      ===========     ============
</TABLE>

                                       8
<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
                                                   ============      =========      ===========     ============



                                                                       AVAILABLE FOR SALE
                                                                        December 31, 2004
                                               ----------------------------------------------------------------------
                                                                      GROSS           GROSS          ESTIMATED
                                                    AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                                      COST            GAINS          LOSSES            VALUE

        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>

                                       9
<PAGE>

        The table below sets forth investment securities which have an
        unrealized loss position as of March 31, 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                                $   (47,827)        $ 6,453,823
                                                  -----------         -----------

           Total securities held to maturity          (47,827)          6,453,823
                                                  -----------         -----------

Securities available for sale:
   Government agency securities                   $  (390,635)        $25,109,365             $(1,595,865)        $45,894,090
   Other securities                                      (793)            498,415                (117,663)          3,299,905
                                                  -----------         -----------             -----------         -----------

           Total securities available for sale       (391,428)         25,607,780              (1,713,528)         49,193,995
                                                  -----------         -----------             -----------         -----------

Total                                             $  (439,255)        $32,061,603             $(1,713,528)        $49,193,995
                                                  ===========         ===========             ===========         ===========
</TABLE>

        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>

        At March 31, 2005, securities in a gross unrealized loss position for
        twelve months or longer consist of 24 securities having an aggregate
        depreciation of 3.4% from the Company's amortized cost basis. Securities
        in a gross unrealized loss position for less than twelve months at March
        31, 2005, consist of 29 securities having an aggregate depreciation of
        1.4% from the Company's amortized cost basis. Management believes that
        the estimated fair value of the securities disclosed above is primarily
        dependent upon the movement in market interest rates. Although the fair
        value will fluctuate as market interest rates move, the majority of the
        Company's investment portfolio consists of securities from
        municipalities and government agencies considered to be low-risk. If
        held to maturity, the contractual principal and interest payments of the
        securities are expected to be received in full and the value of the
        securities is expected to recover. As such, no loss in value is expected
        over the lives of the securities. Although not all of the securities are
        classified as held to maturity, the Company has the ability to hold
        these securities until they mature and the value recovers, and the
        Company


                                       10
<PAGE>

        does not intend to sell the securities at a loss. Thus, the unrealized
        losses are not considered other-than-temporary. The determination of
        whether a decline in market value is other-than-temporary is necessarily
        a matter of subjective judgment. The timing and amount of any realized
        losses reported in the Company's financial statements could vary if
        actual outcomes differ from conclusions reached by management in
        determining whether an other-than-temporary impairment exists.

4.      MORTGAGE-BACKED SECURITIES

        The amortized cost and estimated fair value of mortgage-backed
        securities are summarized as follows:
<TABLE>
<CAPTION>
                                                                        HELD TO MATURITY
                                                                         MARCH 31, 2005
                                               ----------------------------------------------------------------------
                                                                      GROSS           GROSS          ESTIMATED
                                                    AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                                      COST            GAINS          LOSSES            VALUE
<S>                                                <C>               <C>            <C>             <C>

        FNMA pass-through
          certificates                             $ 32,353,297      $       -      $  (757,146)    $ 31,596,151
        FHLMC pass-through
          certificates                               22,912,145              -         (544,526)      22,367,619
        Real estate mortgage
          investment conduits                        28,664,543        131,162         (105,915)      28,689,790
                                                   ------------      ---------      -----------     ------------

                   Total                           $ 83,929,985      $ 131,162      $(1,407,587)    $ 82,653,560
                                                   ============      =========      ===========     ============



                                                                       AVAILABLE FOR SALE
                                                                         MARCH 31, 2005
                                               ----------------------------------------------------------------------
                                                                      GROSS           GROSS          ESTIMATED
                                                    AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                                      COST            GAINS          LOSSES            VALUE

        GNMA pass-through
          certificates                             $    801,992      $  31,572      $         -     $    833,564
        FNMA pass-through
          certificates                               12,808,967        167,490          (90,292)      12,886,165
        FHLMC pass-through
          certificates                               72,610,386        189,653       (1,584,650)      71,215,389
        Real estate mortgage
          investment conduits                         7,620,311          5,631         (155,267)       7,470,675
                                                   ------------      ---------      -----------     ------------

                   Total                           $ 93,841,656      $ 394,346      $(1,830,209)    $ 92,405,793
                                                   ============      =========      ===========     ============
</TABLE>

                                       11
<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
                                                   ============      =========      ===========     ============



                                                                       AVAILABLE FOR SALE
                                                                        DECEMBER 31, 2004
                                               ----------------------------------------------------------------------
                                                                      GROSS           GROSS          ESTIMATED
                                                    AMORTIZED       UNREALIZED     UNREALIZED           FAIR
                                                      COST            GAINS          LOSSES            VALUE

        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>

                                       12
<PAGE>

        The table below sets forth mortgage-backed securities which have an
        unrealized loss position as of March 31, 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:
   Mortgage-backed securities                     $  (435,009)        $45,125,759             $  (972,578)        $23,014,292
                                                  -----------         -----------             -----------         -----------

           Total securities held to maturity         (435,009)         45,125,759                (972,578)         23,014,292
                                                  -----------         -----------             -----------         -----------

Securities available for sale:
   Mortgage-backed securities and
      collateralized mortgage obligations         $  (589,895)        $35,948,215             $(1,240,314)        $32,767,106
                                                  -----------         -----------             -----------         -----------

           Total securities available for sale       (589,895)         35,948,215              (1,240,314)         32,767,106
                                                  -----------         -----------             -----------         -----------

Total                                             $(1,024,904)        $81,073,974             $(2,212,892)        $55,781,398
                                                  ===========         ===========             ===========         ===========
</TABLE>

        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:
   Mortgage-backed securities                     $  (233,538)        $22,273,458             $  (396,379)        $17,169,143
                                                  -----------         -----------             -----------         -----------

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

Securities available for sale:
   Mortgage-backed securities and
      collateralized mortgage obligations         $  (199,104)        $24,610,156             $  (830,095)        $33,161,710
                                                  -----------         -----------             -----------         -----------

           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>

                                       13
<PAGE>

        At March 31, 2005, securities in a gross unrealized loss position for
        twelve months or longer consist of 21 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 March
        31, 2005, consist of 22 securities having an aggregate depreciation of
        1.2% from the Company's amortized cost basis. Management believes that
        the estimated fair value of the securities disclosed above is primarily
        dependent upon the movement in market interest rates. Although the fair
        value will fluctuate as market interest rates move, all of the Company's
        mortgage-backed securities portfolio consists of securities from FNMA,
        FHLMC and GNMA considered to be low-risk. If held to maturity, the
        contractual principal and interest payments of the securities are
        expected to be received in full and the value of the securities is
        expected to recover. As such, no loss in value is expected over the
        lives of the securities. Although not all of the securities are
        classified as held to maturity, the Company has the ability to hold
        these securities until they mature and the value recovers, and the
        Company does not intend to sell the securities at a loss. Thus, the
        unrealized losses are not considered other-than-temporary. The
        determination of whether a decline in market value is
        other-than-temporary is necessarily a matter of subjective judgment. The
        timing and amount of any realized losses reported in the Company's
        financial statements could vary if actual outcomes differ from
        conclusions reached by management in determining whether an
        other-than-temporary impairment exists.

5.      ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED              YEAR ENDED
                                               ------------------------ ------------------------------
                                                    MARCH 31, 2005             DECEMBER 31, 2004
                                                 --------------------     --------------------------
<S>                                              <C>                      <C>
        Balance--beginning of year               $          1,412,697     $                1,455,889
          Provision for loan losses                                 -                         45,000
          Charge-offs                                         (20,694)                      (146,736)
          Recoveries                                            5,408                         58,544
                                                 --------------------     --------------------------
            Charge-offs/recoveries--net                       (15,286)                       (88,192)
                                                 --------------------     --------------------------

        Balance--end of period                   $          1,397,411     $                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. Impairment
        losses are included in the provision for loan losses. 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 March 31, 2005 and December 31, 2004, the
        Company had no loans that were determined to be impaired.

        Commercial business loans and commercial real estate loans are placed on
        nonaccrual 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


                                       14
<PAGE>

        loans are typically placed on nonaccrual only when the loan is 90 days
        delinquent and not well secured and in the process of collection. Other
        consumer loans are typically charged off when they become 90 days
        delinquent. In all cases, loans must be placed on nonaccrual or charged
        off at an earlier date if collection of principal or interest is
        considered doubtful. At March 31, 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 March 31, 2005
        and December 31, 2004, amounted to approximately $281,000, 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 three months ended March 31, 2005 and 2004, no cash basis
        interest income was recognized. Interest income foregone on nonaccrual
        loans was zero and $7,000 for the three-month periods ended March 31,
        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>
                                                                          MARCH 31, 2005         DECEMBER 31, 2004
                                                                     --------------------------------------------------
<S>                                                                       <C>                      <C>
        Deferred tax assets:
          Allowance for loan losses                                       $      475,120           $      480,317
          Deferred compensation                                                  879,959                  839,320
          Unrealized loss on securities available-for-sale
            and cap and swap contracts                                         1,200,163                  524,604
          Other                                                                   25,544                        -
                                                                          --------------           --------------

                   Total deferred tax assets                                   2,580,786                1,844,241
                                                                          --------------           --------------

        Deferred tax liabilities:
          Property and equipment                                                (209,566)                (201,066)
          Deferred loan fees                                                    (258,917)                (259,767)
          Other                                                                  (23,915)                 (70,340)
                                                                          --------------           --------------

                   Total deferred tax liabilities                               (492,398)                (531,173)
                                                                          --------------           --------------

        Net deferred tax asset                                            $    2,088,388           $    1,313,068
                                                                          ==============           ==============
</TABLE>

                                       15
<PAGE>

7.      PENSION AND PROFIT SHARING PLANS

        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>
                                                                     THREE MONTHS ENDED MARCH 31,
                                                             -----------------------------------------------
                                                                      2005                   2004
                                                               --------------------  ---------------------
<S>                                                            <C>                   <C>
        Components of net periodic benefit cost:
        Service cost                                           $             24,655  $              23,775
        Interest cost                                                        28,998                 27,962
        Expected return on assets                                                 -                      -
        Amortization of prior service cost                                   30,347                 29,263
                                                               --------------------  ---------------------

        Net periodic pension cost                              $             84,000  $              81,000
                                                               ====================  =====================

        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>

        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 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 released and
        allocated among participants, the Company recognizes compensation
        expense equal to the current market price of the shares released. As of
        March 31, 2005, 468,300 shares of the Company's common stock had been
        purchased for approximately $6.2 million by the ESOP towards its
        anticipated total of 571,320 shares for the ESOP. Of these shares,
        315,800 were purchased in the quarter ended March 31, 2005 for
        approximately $4.2 million. In April and May 2005, the ESOP purchased
        the remaining 103,020 shares for an additional $1.2 million. The average
        purchase price of the 468,300 shares held at March 31, 2005 and the
        571,320 shares held after all purchases were made were $13.27 and $12.90
        per share, respectively. The fair value of the 468,300 shares held by
        the ESOP at March 31, 2005 was approximately $6.0 million. During the
        quarter ended March 31, 2005, approximately 9,500 shares were committed
        to be released to participants resulting in recognition of approximately
        $126,000 in compensation expense.

8.      RESTATMENT OF FINANCIAL STATEMENT - CORRECTION OF AN ERROR

        Subsequent to the issuance of the Company's Form S-1 filed June 10,
        2004, Company's management determined that certain derivatives that had
        been accounted for as cash flow hedges during the 2004 period under SFAS
        No. 133 did not qualify for hedge accounting. The unrealized gains
        (losses) on the derivatives, net of related taxes, were inappropriately
        included in other comprehensive income. Accordingly, the Company
        restated the consolidated financial statements to include unrealized
        gains (losses) on derivatives in the income statement. The restatement
        is described in further detail in the Company's prospectus included in
        its amended registration statement on Form S-1 filed on October 19,
        2004.


                                       16
<PAGE>

        The following is a summary of the effects of the restatement on the
        consolidated income statement for the three-month period ended March 31,
        2004:

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                            ----------------------------
                                                                  MARCH 31, 2004
                                                            ----------------------------
                                                            AS ORIGINALLY
                                                              REPORTED     AS RESTATED
<S>                                                          <C>           <C>
        INTEREST INCOME:
           Interest on loans                                 $ 5,326,876   $ 5,444,626

        INTEREST EXPENSE:
           Interest on Federal Home Loan Bank advances         1,883,118     1,829,276

        NET INTEREST
          INCOME                                               3,787,462     3,959,054

        Loss on derivative instruments, net                                   (278,342)

        INCOME BEFORE INCOME TAXES                             1,342,425     1,235,635

        PROVISIONS FOR INCOME  TAXES                             445,970       409,675

        NET INCOME                                               896,455       825,960
</TABLE>

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


                                       17
<PAGE>

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 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. The Pennsylvania Department of Banking and 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


                                       18
<PAGE>

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.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2005 AND DECEMBER 31, 2004

The Company's total assets increased $30.2 million, or 4.2%, to $748.1 million
at March 31, 2005 compared to $718.0 million at December 31, 2004. During the
first quarter of 2005, the Company purchased $15.0 million of bank owned life
insurance ("BOLI"), 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 mortgage-backed securities, both held-to-maturity and
available-for-sale, increased by an aggregate of $11.6 million or 7.0% to an
aggregate of $176.3 million at March 31, 2005 compared to an aggregate of $164.7
million at December 31, 2004. During the first quarter of 2005, purchases of
$23.2 million in the aggregate were partially offset by $10.3 million in
repayments and maturities of our held-to-maturity and available-for-sale
mortgage-backed securities. Our net loans receivable remained relatively
consistent, increasing by $2.7 million or 0.7% to $415.3 million at March 31,
2005 compared to $412.7 million at December 31, 2004.

The $16.7 million or 4.1% increase in deposits from December 31, 2004 to March
31, 2005 resulted mainly from a $20.7 million increase in certificate of deposit
accounts. The increase in certificates of deposits was also accompanied by a
$4.4 million increase in savings and money market accounts which were partially
offset by an $8.4 million decrease in checking accounts. Our advances from the
Federal Home Loan Bank ("FHLB") increased $9.7 million or 5.7% during the first
quarter of 2005 to $180.4 million at March 31, 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 $5.9 million
increase in other borrowed money to $18.8 million at March 31, 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 $4.0 million to $119.1 million at March 31,
2005 compared to $123.1 million at December 31, 2004. The decrease was primarily
due to the purchase of 318,500 shares of the Company's common stock for an
aggregate of $4.2 million by the Company's Employee Stock Ownership Plan
("ESOP"), partially offset by a commitment to release approximately 9,500
unallocated ESOP shares with an aggregate cost of approximately $126,000.
Additionally, accumulated other comprehensive loss increased $1.4 million during
the first quarter of 2005, based on changes in the fair value of our
available-for-sale investment portfolio. These decreases to stockholders' equity
were partially offset by a $1.4 million increase in retained earnings resulting
from first quarter net income.

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 March 31, 2005,
our cash and cash equivalents amounted to $30.1 million. In addition, at such
date we had $3.2 million in


                                       19
<PAGE>

investment securities scheduled to mature within the next 12 months. Our
available for sale investment and mortgage-backed securities amounted to an
aggregate of $171.2 million at March 31, 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 March 31,
2005, we had certificates of deposit maturing within the next 12 months
amounting to $92.5 million. Based upon historical experience, we anticipate that
a significant portion of the maturing certificates of deposit will be
redeposited with us. For the three months ended March 31, 2005, and the year
ended December 31, 2004, the average balance of our outstanding FHLB advances
was $174.0 million and $169.7 million, respectively. At March 31, 2005, we had
$180.4 million in outstanding FHLB advances and we had $266.1 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 $119.1 million at March 31, 2005, inclusive
of $69.3 million in net proceeds from the Company's initial public offering on
December 16, 2004. The capital raised in the offering has provided us with
additional flexibility to grow and diversify. Proceeds have been conservatively
invested in instruments that yield a market rate until we can deploy them 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 the second half of 2005. Planning is
also under way for two additional branches, which are projected to open within
the next twelve months. Additionally, a portion of the net proceeds from the
offering has been used to buy shares of the Company's common stock for our ESOP.
As noted above, our ESOP purchased approximately 318,500 shares of the Company's
common stock in the open market for an aggregate of $4.2 million in the quarter
ended March 31, 2005.

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
                                        -------------   ------------
                                          March 31,     December 31,    Regulatory      To Be Well
                                             2005           2004          Minimum      Capitalized
                                        -------------   ------------   -------------   ------------
<S>                                               <C>            <C>             <C>           <C>
        CAPITAL RATIOS:
        Tier 1 leverage ratio                  11.75%         12.73%           4.00%         5.00%
        Tier 1 risk-based capital ratio        19.83          21.24            4.00          6.00
        Total risk-based capital ratio         20.15          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


                                       20
<PAGE>

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 March 31, 2005, we are a party to two interest rate swap agreements, which we
entered into in June 2002 and December 2002, respectively, with notional amounts
of $15.0 million each, and with terms expiring in June 2005 and December 2005,
respectively. Previously, we also were a party to one swap agreement, with a
notional amount of $15.0 million, which we entered into in December 2001 and
which expired in December 2004, and 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, had we
experienced a rising 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 agreement that expired in
December 2004 and one of our interest rate swap agreements at March 31, 2005,
also were designed to serve as a hedge 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 with a term expiring in June 2005, we either
pay or receive the amount by which the ten-year CMT falls below or exceeds
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 other 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. Our intent with 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 a negative
$17,000 and a negative $85,000 at March 31, 2005 and December 31, 2004,
respectively. During the three months ended March 31, 2005 and 2004, the Company
paid $53,825 and $171,592, respectively, under the agreements. In addition, the
unrealized gain (loss) on derivatives recognized in gain (loss) on derivative
instruments, net in the Company's unaudited consolidated statements of income
was $68,000 and $(106,750) for the three months ended March 31, 2005 and 2004,
respectively.


                                       21
<PAGE>

The following table summarizes our derivative financial instruments at March 31,
2005.

<TABLE>
<CAPTION>
                                                                  Amount of Commitment Expiration - Per Period
                                                            ---------------------------------------------------------
                                          Total Amount          To             1-3           4-5          After 5
                                           Committed          1 Year          Years         Years          Years
                                       ------------------  -------------  -------------  ------------  --------------
                                                                       (In Thousands)
<S>                                        <C>               <C>             <C>           <C>             <C>
Interest rate cap agreement                $      --         $     --        $    --       $    --         $    --
   (notional amount)
Interest rate swap agreements
   (notional amount)                          30,000           30,000             --            --              --
Interest-rate loan lock
   commitments                                    --               --             --            --              --
</TABLE>

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 March 31, 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 contract. 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 March 31, 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 $86.5 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 financing 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 March 31, 2005 and December 31,
2004, the Bank had letters of credit outstanding of approximately $10.9 million
and $11.3 million, respectively, of which $10.7 million and $10.5 million,
respectively, were standby letters of credit. At March 31, 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.


                                       22
<PAGE>

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 March 31, 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 March 31, 2005.

<TABLE>
<CAPTION>
                                                                   Amount of Commitment Expiration - Per Period
                                                            ---------------------------------------------------------
                                          Total Amount          To             1-3           4-5          After 5
                                           Committed          1 Year          Years         Years          Years
                                       ------------------  -------------  -------------  ------------  --------------
                                                                       (In Thousands)
<S>                                        <C>               <C>             <C>           <C>             <C>
Letters of credit                              $10,865       $ 9,996         $   869        $  --          $    --
Recourse obligations on loans sold                 185            --              --           --              185
Commitments to originate loans                  10,196        10,196              --           --               --
Unused portion of home equity
   lines of credit                              21,927            --              --           --           21,927
Unused portion of commercial
   lines of credit                              10,577        10,577              --           --               --
Undisbursed portion of
   construction loans in process                43,788         9,670          34,118           --               --
                                       ------------------  -------------  -------------  ------------  --------------
      Total commitments                        $97,538       $40,439         $34,987        $  --          $22,112
                                       ==================  =============  =============  ============  ==============
</TABLE>

The following table summarizes our contractual cash obligations at March 31,
2005.

<TABLE>
<CAPTION>
                                                                             Payments Due By Period
                                                            ---------------------------------------------------------
                                          Total Amount          To             1-3           4-5          After 5
                                           Committed          1 Year          Years         Years          Years
                                       ------------------  -------------  -------------  ------------  --------------
                                                                       (In Thousands)
<S>                                        <C>               <C>             <C>           <C>             <C>
Certificates of deposit                     $203,515         $ 92,519        $ 85,831      $12,220         $12,945
                                       ------------------  -------------  -------------  ------------  --------------
FHLB advances                                180,367           24,310          19,014       60,876          76,167
Repurchase agreements                         18,764           18,764              --           --              --
                                       ------------------  -------------  -------------  ------------  --------------
   Total debt                                199,131           43,074          19,014       60,876          76,167
                                       ------------------  -------------  -------------  ------------  --------------
Operating lease obligations                    4,259              466             901          667           2,225
                                       ------------------  -------------  -------------  ------------  --------------
   Total contractual obligations            $406,905         $136,059        $105,746      $73,763         $91,337
                                       ==================  =============  =============  ============  ==============
</TABLE>


                                       23
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND
2004

GENERAL. We had net income of $1.4 million for the quarter ended March 31, 2005,
representing an increase of 70.8% over the comparable 2004 period. Earnings per
share on the Company's 15,870,000 outstanding common shares (of which 7,141,500
shares were sold to the public in the Company's initial public offering in
December 2004) was $0.09 for the quarter ended March 31, 2005. Our results for
the first 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 resulting increase in interest income was partially offset by an
increase in interest expense. Although our net interest spread decreased to
2.29% for the quarter ended March 31, 2005 from 2.40% for the quarter ended
March 31, 2004, our net interest margin increased to 2.80% from 2.73% for the
same periods, respectively. In addition, we reported a gain on derivative
instruments for the quarter ended March 31, 2005 compared to a loss for the
quarter ended March 31, 2004, which was primarily responsible for a 113.1%
increase in non-interest income. Our non-interest expense for the quarter ended
March 31, 2005 also increased as a result of increases in all categories of
non-interest expense with the exception of depreciation expense which decreased
slightly.

INTEREST INCOME. Our total interest income was $8.9 million for the quarter
ended March 31, 2005 compared to $7.3 million for the quarter ended March 31,
2004, a $1.6 million or 21.6% increase. This increase was due to increases in
the average balances of all categories of interest-earning assets, with the
largest increases occurring in the average balances of loans and mortgage-backed
securities, which grew by $53.1 million and $50.0 million, respectively. 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. Despite these overall increases, our average yield on
total interest-earning assets decreased to 5.03% for the quarter ended March 31,
2005 from 5.05% for the quarter ended March 31, 2004. This occurred as loans
receivable, our highest yielding interest-earning asset, decreased as a
proportion of total interest-earning assets to 58.8% of our average
interest-earning assets for the quarter ended March 31, 2005, compared to 62.5%
of our interest-earning assets for the comparable quarter in the prior year.
This change in the mix of our interest-earning assets occurred as capital from
our initial public offering has been disbursed into other investments more
quickly than it has been disbursed into loans.

INTEREST EXPENSE. Our total interest expense was $4.0 million for the quarter
ended March 31, 2005 compared to $3.4 million for the quarter ended March 31,
2004, an increase of $588,000 or 17.5%. The increase in interest expense for the
first quarter of 2005 when compared to the same period in the 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 and other
borrowings. Our average deposit balance increased $51.1 million or 15.5% to
$381.8 million for the quarter ended March 31, 2005 from $330.7 million for the
quarter ended March 31, 2004. This occurred due to increases in the average
balances of all categories of deposit accounts, led by a $34.3 million increase
in the average balance of certificates of deposit. Our average rate on deposits
increased to 2.06% for the quarter ended March 31, 2005 from 1.84% for the
quarter ended March 31, 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 to 3.25% for the
quarter ended March 31, 2005 from 3.07% for the quarter ended March 31, 2004.
Our average rate on interest-bearing liabilities as a whole increased to 2.74%
for the quarter ended March 31, 2005 from 2.65% for the quarter ended March 31,
2004.


                                       24
<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 March 31,
                                           --------------------------------------------------------------------
                                                          2005                              2004
                                           ----------------------------------  --------------------------------
                                              Average                Average    Average                Average
                                              Balance   Interest   Yield/Rate   Balance   Interest   Yield/Rate
                                           ------------ ---------  ----------- ---------  ---------  ----------
                                                                 (Dollars in Thousands)
<S>                       <C>              <C>          <C>              <C>   <C>              <C>        <C>
Interest-earning assets:
     Investment securities(1)              $     89,248 $     740        3.32% $  80,821        605        2.99%
     Mortgage-backed securities                 172,942     1,798        4.16    122,948      1,257        4.09
     Loans receivable(2)                        416,041     6,279        6.04    362,902      5,445        6.00
     Other interest-earning assets               29,906        90        1.20     13,920         16        0.46
                                           ------------ ---------              ---------  ---------
       Total interest-earning assets            708,137     8,907        5.03%   580,591      7,323        5.05%
                                                        ---------  -----------            ---------  ----------
     Cash and non-interest earning
       balances                                  20,381                           13,292
     Other non-interest-earning assets           16,323                            9,485
                                           ------------                        ---------
       Total assets                        $    744,841                        $ 603,368
                                           ============                        =========
Interest-bearing liabilities:
  Deposits:
     Savings and money market accounts      $   128,252       319        0.99% $ 112,336        223       0.79%
     Checking accounts                           51,881        10        0.08     50,985         15       0.12
     Certificate accounts                       201,690     1,640        3.25    167,401      1,286       3.07
                                           ------------ ---------              ---------  ---------
       Total deposits                           381,823     1,969        2.06    330,722      1,524       1.84
  FHLB advances                                 173,977     1,905        4.38    164,809      1,829       4.44
  Other borrowings                               21,131        78        1.48     12,139         11       0.36
                                           ------------ ---------              ---------  ---------
     Total interest-bearing liabilities         576,931 $   3,952        2.74%   507,670  $   3,364       2.65%
                                                        ---------  -----------            ---------  ----------
Non-interest-bearing liabilities:
     Non-interest-bearing demand
       accounts                                  36,527                           34,144
     Real estate tax escrow accounts              2,600                            2,702
     Other liabilities                            6,572                            4,849
                                           ------------                        ---------
       Total liabilities                        622,630                          549,365
     Retained earnings                          122,211                           54,003
                                           ------------                        ---------
       Total liabilities and retained
         earnings                          $    744,841                        $ 603,368
                                           ============                        =========
     Net interest-earning assets           $    131,206                        $  72,921
                                           ============                        =========
     Net interest income                                $   4,955                         $   3,959
                                                        =========                         =========
     Average interest rate spread                                        2.29%                            2.40%
                                                                   ===========                       ==========
     Net interest margin(3)                                              2.80%                            2.73%
                                                                   ===========                       ==========
</TABLE>
---------------------------
(1)     Investment securities for the 2005 period include 26 non-taxable
        municipal bonds with an aggregate average balance of $10.4 million and
        an average yield of 4.3%. Investment securities for the 2004 period
        include one non-taxable municipal bond in the amount of $180,000 and a
        yield of 3.9%. The tax-exempt income from such securities has not been
        calculated on a tax equivalent basis.
(2)     Includes nonaccrual loans during the respective periods. Calculated net
        of deferred fees and discounts, loans in process and allowance for loan
        losses.
(3)     Equals net interest income divided by average interest-earning assets.


                                       25
<PAGE>

PROVISION FOR LOAN LOSSES. We made no provision for loan losses in the first
quarter of 2005 compared to a provision of $45,000 in the first 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. At March 31, 2005, we had $281,000 of
non-performing assets and our allowance for loan losses amounted to $1.4
million. Our non-performing loans as a percentage of total loans receivable was
0.07% at March 31, 2005, 0.05% at December 31, 2004 and 0.10% at March 31, 2004.
For the quarter ended March 31, 2005 our net loan charge-offs amounted to
$15,000. For the quarter ended March 31, 2004 we had net recoveries of $2,000.

NON-INTEREST INCOME. Our total non-interest income amounted to $579,000 for the
three-months ended March 31, 2005 compared to $272,000 for the three-months
ended March 31, 2004. The increase was due primarily to a $14,000 gain on
derivative instruments for the first quarter of 2005 compared to a loss of
$278,000 for the first quarter of 2004. Service charge income, rental income and
other non-interest income remained relatively consistent during the first
quarter of 2005 compared to the first quarter of 2004.

NON-INTEREST EXPENSES. Our total non-interest expense for the quarter ended
March 31, 2005 amounted to $3.5 million, representing an increase of $535,000 or
18.1% from the quarter ended March 31, 2004. The overall increase was due to
increases in all categories of non-interest expense with the exception of
depreciation expense which decreased slightly. Salaries and employee benefits
expense, the largest component of non-interest expense, increased $180,000 or
11.1% in the first quarter of 2005 when compared to the first quarter of 2004.
This increase was due to approximately $137,000 in additional expenses relating
to new employee benefit plans that began in 2005, as well as to normal merit
increases in salaries. Our advertising and promotions expense increased
approximately $20,000 or 28.4% as a result of additional promotions related to
our reorganization to the mutual holding company form. Other non-interest
expense increased approximately $120,000 or 25.0% due in large part to increased
audit and professional fees as the result of becoming a public reporting entity.

INCOME TAX EXPENSE. Income tax expense for the quarter ended March 31, 2005
amounted to $638,000 compared to $410,000 for the quarter ended March 31, 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 31.1% for the first quarter of 2005 from 33.2% for the
first quarter of 2004, primarily as a result of increased investment in
tax-exempt municipal securities as well as the purchase of bank owned life
insurance in March 2005.

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:

        o       statements of goals, intentions and expectations;

        o       statements regarding prospects and business strategy;

        o       statements regarding asset quality and market risk; and

        o       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


                                       26
<PAGE>

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,
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 DISCLOSURE 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 reduced our reliance on certificates of deposit as a
                funding source and increased the amount of our transaction
                accounts;

        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


                                       27
<PAGE>

        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 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 1.82% at March 31, 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
was done, in part, because all of these 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 March 31, 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 March 31,
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.


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                    More than      More than     More than
                                      6 Months      6 Months        1 Year        3 Years       More than
                                      or Less       to 1 Year      to 3 Years    to 5 Years      5 Years     Total Amount
                                   -------------  -------------  -------------  ------------  -------------  ------------
                                                                   (Dollars in Thousands)
<S>                                <C>            <C>            <C>            <C>           <C>            <C>
Interest-earning assets(1):
  Loans receivable(2)              $     143,964  $      27,801  $      91,477  $     70,263  $      83,235  $    416,740
  Mortgage-backed securities              35,420         24,730         60,405        27,354         29,012       176,921
  Investment securities                    7,613          2,986         37,778        19,500         23,211        91,088
  Other interest-earning assets           23,226             --             --            --             --        23,226
                                   -------------  -------------  -------------  ------------  -------------  ------------
     Total interest-earning
       assets                            210,223         55,517        189,660       117,117        135,458       707,975
                                   =============  =============  =============  ============  =============  ============
Interest-bearing liabilities:
  Savings and money market
     accounts                      $      19,446  $      19,446       $ 48,684  $     22,398  $      19,615  $    129,589
  Checking accounts                           --             --             --            --         50,148        50,148
  Certificate accounts                    61,047         31,480         85,831        12,220         12,937       203,515
  FHLB advances                          117,442         11,726         20,155        17,862         13,182       180,367
  Other borrowed money                    18,764             --             --            --             --        18,764
                                   -------------  -------------  -------------  ------------  -------------  ------------
     Total interest-bearing
     liabilities                         216,699         62,652        154,670        52,480         95,882       582,383
                                   =============  =============  =============  ============  =============  ============

Interest-earning assets less
   interest-bearing liabilities    $     (6,476)  $     (7,135)  $      34,990  $     64,637  $      39,756  $    125,592
                                   =============  =============  =============  ============  =============  ============

Cumulative interest-rate
   sensitivity gap(3)              $     (6,476)  $    (13,611)  $      21,379  $     86,016  $     125,592
                                   =============  =============  =============  ============  =============

Cumulative
   interest-rate
   gap as a percentage of total
   assets at March 31, 2005               (0.87)%        (1.82)%          2.86%        11.50%         16.79%
                                   =============  =============  =============  ============  =============

Cumulative interest-earning
   assets as a percentage of
   cumulative interest-bearing
   liabilities at March 31, 2005           97.01%         95.13%        104.93%       117.68%        121.57%
                                   =============  =============  =============  ============  =============
</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 the allowance for loan losses, 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.


                                       29
<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.


                                       30
<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 March 31, 2005, however, the Company's employee stock
        ownership plan 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>
    January 1 - January 31, 2005              213,500            13.10                       366,000                   205,320
    February 1 - February 28, 2005             34,000            13.20                       400,000                   171,320
    March 1 - March 31, 2005                   68,300            13.52                       468,300                   103,020

    Total                                     315,800     $      13.20                       468,300                   103,020
                                              =======      ===============-                  =======                   =======
</TABLE>

(1)     On December 15, 2004, the Board of Directors authorized the Company's
employee stock ownership plan to purchase up to 571,320 shares of the Company's
common stock. A total of 152,500 shares were purchased in December 2004. The
remaining 103,020 shares were purchased by the ESOP in April and May 2005. No
additional purchases will be made by the ESOP under this plan.


        Item 3.         Defaults upon Senior Securities

                        Not applicable.

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

                        Not applicable.


                                       31
<PAGE>

        Item 5.         Other Information

                        Not applicable.

        Item 6.         Exhibits

                        No.             Description
                        ---             -----------
                        31.1            Certification 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 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.


                                       32
<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: May 16, 2005              By:         /s/ Robert W. White
                                        ----------------------------------------
                                                Robert W. White
                                                Chairman, President and
                                                Chief Executive Officer




Date: May 16, 2005              By:         /s/ Jack J. Sandoski
                                        ----------------------------------------
                                                Jack J. Sandoski
                                                Senior Vice President and
                                                Chief Financial Officer



                                       33