##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    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: 0-52705
 Abington Bancorp, Inc.
  Pennsylvania
    
    20-8613037(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 180 Old York RoadJenkintown, Pennsylvania
    
    19046(Address of Principal Executive Offices)
    
    (Zip Code)
 (Registrants
Telephone Number, Including Area Code)
 (Former name, former
address or former fiscal year if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




---



##### 



ABINGTON BANCORP, INC.
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSUnaudited Consolidated Statements of Financial Condition as of June 30, 2010 and
December 31, 2009
    
    
    1Unaudited Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2010 and 2009
    
    
    2Unaudited Consolidated Statements of Stockholders Equity for the Six Months Ended
June 30, 2010 and 2009
    
    
    3Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2010 and 2009
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    33ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    53ITEM 4. CONTROLS AND PROCEDURES
    
    
    56PART II  OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    56ITEM 1A. Risk Factors
    
    
    56ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56ITEM 3. Defaults upon Senior Securities
    
    
    57ITEM 4. (Removed and Reserved)
    
    
    57ITEM 5. Other Information
    
    
    57ITEM 6. Exhibits
    
    
    57SIGNATURES
    
    
    58CERTIFICATIONSExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




---



##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 June 30, 2010
    
    
    December 31, 2009ASSETSCash and due from banks
    
    $
    20,834,307
    
    
    $
    18,941,066Interest-bearing deposits in other banks
    
    
    46,142,520
    
    
    
    25,773,173Total cash and cash equivalents
    
    
    66,976,827
    
    
    
    44,714,239Investment securities held to maturity (estimated fair
value2010, $21,044,139; 2009, $20,787,269)
    
    
    20,385,862
    
    
    
    20,386,944Investment securities available for sale (amortized cost
2010, $128,762,983; 2009, $82,905,101)
    
    
    130,841,606
    
    
    
    84,317,271Mortgage-backed securities held to maturity (estimated fair
value2010, $68,280,985; 2009, $77,297,497)
    
    
    66,539,614
    
    
    
    77,149,936Mortgage-backed securities available for sale (amortized cost
2010, $141,665,630; 2009, $133,916,731)
    
    
    147,183,045
    
    
    
    138,628,592Loans receivable, net of allowance for loan losses
(2010, $7,157,174; 2009, $9,090,353)
    
    
    735,537,658
    
    
    
    764,559,941Accrued interest receivable
    
    
    4,255,150
    
    
    
    4,279,032Federal Home Loan Bank stockat cost
    
    
    14,607,700
    
    
    
    14,607,700Cash surrender value  bank owned life insurance
    
    
    41,867,700
    
    
    
    40,983,202Property and equipment, net
    
    
    10,004,493
    
    
    
    10,423,190Real estate owned
    
    
    13,142,000
    
    
    
    22,818,856Deferred tax asset
    
    
    2,533,631
    
    
    
    4,711,447Prepaid expenses and other assets
    
    
    14,337,278
    
    
    
    10,531,771TOTAL ASSETS
    
    $
    1,268,212,564
    
    
    $
    1,238,112,121LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-bearing
    
    $
    46,184,830
    
    
    $
    45,146,650Interest-bearing
    
    
    836,021,367
    
    
    
    805,053,843Total deposits
    
    
    882,206,197
    
    
    
    850,200,493Advances from Federal Home Loan Bank
    
    
    127,168,843
    
    
    
    146,739,435Other borrowed money
    
    
    26,520,068
    
    
    
    16,673,480Accrued interest payable
    
    
    3,345,529
    
    
    
    1,807,334Advances from borrowers for taxes and insurance
    
    
    5,122,621
    
    
    
    3,142,470Accounts payable and accrued expenses
    
    
    11,343,709
    
    
    
    5,366,909Total liabilities
    
    
    1,055,706,967
    
    
    
    1,023,930,121COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred stock, $0.01 par value, 20,000,000 shares authorized
none issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 80,000,000 shares authorized;
24,460,240 shares issued; outstanding: 20,354,522 shares in 2010,
21,049,025 shares in 2009
    
    
    244,602
    
    
    
    244,602Additional paid-in capital
    
    
    202,171,910
    
    
    
    201,922,651Treasury stockat cost, 4,105,718 shares in 2010,
3,411,215 shares in 2009
    
    
    (33,261,628
    )
    
    
    (27,446,596
    )Unallocated common stock held by:Employee Stock Ownership Plan (ESOP)
    
    
    (13,879,858
    )
    
    
    (14,299,378
    )Recognition & Retention Plan Trust (RRP)
    
    
    (3,087,320
    )
    
    
    (3,918,784
    )Deferred compensation plans trust
    
    
    (1,022,056
    )
    
    
    (995,980
    )Retained earnings
    
    
    56,458,349
    
    
    
    54,804,913Accumulated other comprehensive income
    
    
    4,881,598
    
    
    
    3,870,572Total stockholders equity
    
    
    212,505,597
    
    
    
    214,182,000TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,268,212,564
    
    
    $
    1,238,112,121
   1




---



##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009INTEREST INCOME:Interest on loans
    
    $
    9,816,008
    
    
    $
    10,149,228
    
    
    $
    19,815,235
    
    
    $
    20,177,861Interest and dividends on investment and
mortgage-backed securities:Taxable
    
    
    2,674,497
    
    
    
    3,002,420
    
    
    
    5,372,474
    
    
    
    6,285,351Tax-exempt
    
    
    388,246
    
    
    
    402,809
    
    
    
    786,273
    
    
    
    803,584Interest and dividends on other interest-earning assets
    
    
    19,761
    
    
    
    14,000
    
    
    
    25,653
    
    
    
    26,930Total interest income
    
    
    12,898,512
    
    
    
    13,568,457
    
    
    
    25,999,635
    
    
    
    27,293,726INTEREST EXPENSE:Interest on deposits
    
    
    3,232,872
    
    
    
    4,046,805
    
    
    
    6,521,455
    
    
    
    8,088,202Interest on Federal Home Loan Bank advances
    
    
    1,413,977
    
    
    
    1,903,687
    
    
    
    2,968,343
    
    
    
    3,988,271Interest on other borrowed money
    
    
    20,324
    
    
    
    21,757
    
    
    
    34,616
    
    
    
    36,335Total interest expense
    
    
    4,667,173
    
    
    
    5,972,249
    
    
    
    9,524,414
    
    
    
    12,112,808NET INTEREST INCOME
    
    
    8,231,339
    
    
    
    7,596,208
    
    
    
    16,475,221
    
    
    
    15,180,918PROVISION FOR LOAN LOSSES
    
    
    
    
    
    
    3,404,721
    
    
    
    563,445
    
    
    
    3,521,412NET INTEREST
INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    8,231,339
    
    
    
    4,191,487
    
    
    
    15,911,776
    
    
    
    11,659,506NON-INTEREST INCOMEService charges
    
    
    326,956
    
    
    
    397,419
    
    
    
    623,334
    
    
    
    786,665Income on bank owned life insurance
    
    
    446,012
    
    
    
    453,212
    
    
    
    884,498
    
    
    
    901,766Net (loss) gain on real estate owned
    
    
    (131,921
    )
    
    
    153,248
    
    
    
    (713,196
    )
    
    
    169,082Other income
    
    
    164,721
    
    
    
    127,932
    
    
    
    366,462
    
    
    
    290,838Total non-interest income
    
    
    805,768
    
    
    
    1,131,811
    
    
    
    1,161,098
    
    
    
    2,148,351NON-INTEREST EXPENSESSalaries and employee benefits
    
    
    3,030,727
    
    
    
    2,809,910
    
    
    
    5,960,509
    
    
    
    5,767,269Occupancy
    
    
    711,988
    
    
    
    524,702
    
    
    
    1,424,708
    
    
    
    1,103,996Depreciation
    
    
    227,810
    
    
    
    225,889
    
    
    
    457,535
    
    
    
    448,074Professional services
    
    
    576,209
    
    
    
    360,740
    
    
    
    1,020,120
    
    
    
    698,400Data processing
    
    
    431,789
    
    
    
    412,967
    
    
    
    854,411
    
    
    
    792,779Deposit insurance premium
    
    
    494,416
    
    
    
    960,357
    
    
    
    854,919
    
    
    
    1,154,504Advertising and promotions
    
    
    148,884
    
    
    
    106,521
    
    
    
    256,257
    
    
    
    181,056Director compensation
    
    
    225,509
    
    
    
    225,109
    
    
    
    445,455
    
    
    
    448,855Other
    
    
    549,406
    
    
    
    627,874
    
    
    
    1,090,145
    
    
    
    1,249,541Total non-interest expenses
    
    
    6,396,738
    
    
    
    6,254,069
    
    
    
    12,364,059
    
    
    
    11,844,474INCOME (LOSS) BEFORE INCOME TAXES
    
    
    2,640,369
    
    
    
    (930,771
    )
    
    
    4,708,815
    
    
    
    1,963,383PROVISION (BENEFIT) FOR INCOME TAXES
    
    
    668,090
    
    
    
    (553,002
    )
    
    
    1,128,176
    
    
    
    188,783NET INCOME (LOSS)
    
    $
    1,972,279
    
    
    $
    (377,769
    )
    
    $
    3,580,639
    
    
    $
    1,774,600BASIC EARNINGS (LOSS) PER COMMON SHARE
    
    $
    0.10
    
    
    $
    (0.02
    )
    
    $
    0.19
    
    
    $
    0.09DILUTED EARNINGS (LOSS) PER COMMON SHARE
    
    $
    0.10
    
    
    $
    (0.02
    )
    
    $
    0.18
    
    
    $
    0.09BASIC AVERAGE COMMON SHARES OUTSTANDING:
    
    
    18,920,983
    
    
    
    19,713,494
    
    
    
    18,957,926
    
    
    
    20,129,506DILUTED AVERAGE COMMON SHARES OUTSTANDING:
    
    
    19,395,076
    
    
    
    19,713,494
    
    
    
    19,383,467
    
    
    
    20,680,751
   2




---



##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 CommonStock
    
    
    
    
    
    
    AccumulatedCommon
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Acquired by
    
    
    
    
    
    
    Other
    
    
    TotalStock
    
    
    Common
    
    
    Paid-in
    
    
    Treasury
    
    
    Benefit
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Plans
    
    
    Earnings
    
    
    Income
    
    
    EquityBALANCEJANUARY 1, 2010
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    201,922,651
    
    
    $
    (27,446,596
    )
    
    $
    (19,214,142
    )
    
    $
    54,804,913
    
    
    $
    3,870,572
    
    
    $
    214,182,000Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,580,639
    
    
    
    
    
    
    
    3,580,639Net unrealized holding gain on
available for sale securities
arising during the period, net
of tax expense of $500,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    971,524
    
    
    
    971,524Amortization of unrecognized
deferred costs on SERP, net
of tax benefit of $20,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,502
    
    
    
    39,502Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,591,665Treasury stock purchased
(701,351 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,880,430
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,880,430
    )Cash dividends declared,
($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,927,203
    )
    
    
    
    
    
    
    (1,927,203
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (13,970
    )
    
    
    65,398
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,428Excess tax liability on
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (63,591
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,591
    )Stock options expense
    
    
    
    
    
    
    
    
    
    
    435,585
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    435,585Common stock released from
benefit plans
    
    
    
    
    
    
    
    
    
    
    (108,765
    )
    
    
    
    
    
    
    1,256,184
    
    
    
    
    
    
    
    
    
    
    
    1,147,419Common stock acquired by
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,276
    )
    
    
    
    
    
    
    
    
    
    
    (31,276
    )BALANCE
JUNE 30, 2010
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    202,171,910
    
    
    $
    (33,261,628
    )
    
    $
    (17,989,234
    )
    
    $
    56,458,349
    
    
    $
    4,881,598
    
    
    $
    212,505,597
 Common
    
    
    
    
    
    
    AccumulatedStock
    
    
    
    
    
    
    OtherCommon
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Acquired by
    
    
    
    
    
    
    Comprehensive
    
    
    TotalStock
    
    
    Common
    
    
    Paid-in
    
    
    Treasury
    
    
    Benefit
    
    
    Retained
    
    
    Income
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Plans
    
    
    Earnings
    
    
    (Loss)
    
    
    EquityBALANCEJANUARY 1, 2009
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    201,378,465
    
    
    $
    (10,525,100
    )
    
    $
    (21,923,096
    )
    
    $
    66,007,138
    
    
    $
    2,918,576
    
    
    $
    238,100,585Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,774,600
    
    
    
    
    
    
    
    1,774,600Net unrealized holding gain on
available for sale securities
arising during the period, net
of tax expense of $202,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392,635
    
    
    
    392,635Amortization of unrecognized
deferred costs on SERP, net
of tax benefit of $9,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,661
    
    
    
    17,661Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,184,896Treasury stock purchased
(1,626,957 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,097,258
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,097,258
    )Cash dividends declared,
($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,032,922
    )
    
    
    
    
    
    
    (2,032,922
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (11,298
    )
    
    
    42,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,391Excess tax liability on
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (68,037
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,037
    )Stock options expense
    
    
    
    
    
    
    
    
    
    
    444,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    444,901Common stock released from
benefit plans
    
    
    
    
    
    
    
    
    
    
    (116,678
    )
    
    
    
    
    
    
    1,512,469
    
    
    
    
    
    
    
    
    
    
    
    1,395,791Common stock acquired by
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,979
    )
    
    
    
    
    
    
    
    
    
    
    (25,979
    )BALANCEJUNE 30, 2009
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    201,627,353
    
    
    $
    (22,579,669
    )
    
    $
    (20,436,606
    )
    
    $
    65,748,816
    
    
    $
    3,328,872
    
    
    $
    227,933,368
   3




---



##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2010
    
    
    2009OPERATING ACTIVITIES:$
    3,580,639
    
    
    $
    1,774,600Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    563,445
    
    
    
    3,521,412Depreciation
    
    
    457,535
    
    
    
    448,074Stock-based compensation expense
    
    
    1,577,804
    
    
    
    1,598,621Net loss (gain) on real estate owned
    
    
    417,121
    
    
    
    (169,082
    )Deferred income tax expense
    
    
    1,656,983
    
    
    
    403,599Amortization of:Deferred loan fees
    
    
    (648,728
    )
    
    
    (634,765
    )Premiums and discounts, net
    
    
    (90,396
    )
    
    
    (121,333
    )Income from bank owned life insurance
    
    
    (884,498
    )
    
    
    (901,766
    )Changes in assets and liabilities which (used) provided cash:Accrued interest receivable
    
    
    23,882
    
    
    
    297,889Prepaid expenses and other assets
    
    
    (3,805,507
    )
    
    
    (1,569,884
    )Accrued interest payable
    
    
    1,538,195
    
    
    
    1,662,664Accounts payable and accrued expenses
    
    
    6,010,576
    
    
    
    151,120Net cash provided by operating activities
    
    
    10,397,051
    
    
    
    6,461,149INVESTING ACTIVITIES:Principal collected on loans
    
    
    59,774,629
    
    
    
    67,713,411Disbursements for loans
    
    
    (30,667,063
    )
    
    
    (96,104,840
    )Purchases of:Mortgage-backed securities available for sale
    
    
    (34,888,048
    )
    
    
    (7,894,182
    )Investments available for sale
    
    
    (96,722,138
    )
    
    
    (19,036,181
    )Property and equipment
    
    
    (38,838
    )
    
    
    (202,051
    )Additions to real estate owned, net
    
    
    (186,560
    )
    
    
    (389,599
    )Proceeds from:Maturities of mortgage-backed securities held to maturity
    
    
    150,178
    
    
    
    Maturities of mortgage-backed securities available for sale
    
    
    1,883,210
    
    
    
    1,652,051Maturities of investments available for sale
    
    
    50,835,000
    
    
    
    18,194,000Principal repayments of mortgage-backed securities held to maturity
    
    
    10,417,483
    
    
    
    12,536,588Principal repayments of mortgage-backed securities available for sale
    
    
    25,419,334
    
    
    
    21,438,243Sales of real estate owned
    
    
    9,446,295
    
    
    
    1,165,109Net cash used in investing activities
    
    
    (4,576,518
    )
    
    
    (927,451
    )FINANCING ACTIVITIES:Net increase in demand deposits and savings accounts
    
    
    29,273,922
    
    
    
    56,974,397Net increase in certificate accounts
    
    
    2,731,782
    
    
    
    35,137,592Net increase in other borrowed money
    
    
    9,846,588
    
    
    
    11,026,691Advances from Federal Home Loan Bank
    
    
    935,000
    
    
    
    5,935,000Repayments of advances from Federal Home Loan Bank
    
    
    (20,505,592
    )
    
    
    (108,735,460
    )Net increase in advances from borrowers for taxes and insurance
    
    
    1,980,151
    
    
    
    2,008,863Proceeds from exercise of stock options
    
    
    51,428
    
    
    
    31,391Excess tax liability from stock-based compensation
    
    
    (63,591
    )
    
    
    (68,037
    )Purchase of treasury stock
    
    
    (5,880,430
    )
    
    
    (12,097,258
    )Payment of cash dividend
    
    
    (1,927,203
    )
    
    
    (2,032,922
    )Net cash provided by (used in) financing activities
    
    
    16,442,055
    
    
    
    (11,819,743
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    22,262,588
    
    
    
    (6,286,045
    )CASH AND CASH EQUIVALENTSBeginning of period
    
    
    44,714,239
    
    
    
    31,863,344CASH AND CASH EQUIVALENTSEnd of period
    
    $
    66,976,827
    
    
    $
    25,577,299
   4




---



##### Table of Contents



ABINGTON BANCORP, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
 Six Months Ended June 30,2010
    
    
    2009SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest on deposits and other borrowings
    
    $
    7,986,219
    
    
    $
    10,450,144Income taxes
    
    $
    1,000,000
    
    
    $
    750,000Non-cash transfer of loans to real estate owned
    
    $
    
    
    
    $
    16,950,195Acquisition of stock for deferred compensation plans trust
    
    $
    25,979
    
    
    $
    25,719Release of stock from deferred compensation plans trust
    
    $
    5,200
    
    
    $
    242,071
   5




---



##### Table of Contents



ABINGTON BANCORP, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of Financial Statement PresentationAbington Bancorp, Inc. (the Company) is a
Pennsylvania corporation which was organized to be the stock holding company for Abington
Savings Bank in connection with our second-step conversion and reorganization completed in 2007,
which is discussed further below. Abington Savings Bank is a Pennsylvania-chartered,
FDIC-insured savings bank, which conducts business under the name Abington Bank (the Bank or
Abington Bank). As a result of the Banks election pursuant to Section 10(l) of the Home
Owners Loan Act, the Company is a savings and loan holding company regulated by the Office of
Thrift Supervision (the OTS). 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., American Street Lofts LLC, 1210 Chestnut
Realty LLC, and North Front Street Realty LLC. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, which combined constitute one
reportable segment. All significant intercompany balances and transactions have been eliminated.
 The Banks executive offices are in Jenkintown, Pennsylvania, with 12 other branches and seven
limited service facilities located in Montgomery, Bucks and Delaware Counties, Pennsylvania. 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. The principal business of American Street Lofts LLC, 1210 Chestnut Realty LLC, and North
Front Realty LLC is to own and manage certain properties that were acquired as real estate
owned. The Bank also has the following inactive subsidiaries  Keswick Services II, and its
wholly owned subsidiaries, and Abington Corp.
 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 condition, results of operations, changes in
stockholders 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 Abington Bancorp, Inc. and
the accompanying notes thereto for the year ended December 31, 2009, which are included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2009. The results for the
six months ended June 30, 2010 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2010, or any other period.
 The Company follows accounting standards set by the Financial Accounting Standards Board (the
FASB). The FASB sets accounting principles generally accepted in the United States (U.S.
GAAP) that we follow to ensure we consistently report our financial condition, results of
operations and cash flows. The FASB established the FASB Accounting Standards Codification (the
Codification or the ASC) as the source of authoritative accounting principles effective for
interim
and annual periods ended on or after September 15, 2009. The Company adopted the Codification as
of September 30, 2009. The adoption did not have an impact on our financial position or results
of operations.
  6




---



##### Table of Contents



In accordance with the subsequent events topic of the ASC, the Company evaluates events and
transactions that occur after the balance sheet date for potential recognition in the financial
statements. The effect of all subsequent events that provide additional evidence of conditions
that existed at the balance sheet date are recognized in the financial statements as of June 30,
2010.
 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 results could differ from those estimates. The Companys most significant
estimates are the allowance for loan losses, the assessment of other-than-temporary impairment
of investment and mortgage-backed securities and deferred income taxes.
 Other-Than-Temporary Impairment of SecuritiesSecurities are evaluated on at least a quarterly
basis, and more frequently when market conditions warrant such an evaluation, to determine
whether a decline in their value is other-than-temporary. To determine whether a loss in value
is other-than-temporary, management utilizes criteria such as the reasons underlying the
decline, the magnitude and duration of the decline and whether or not management intends to sell
or expects that it is more likely than not that it will be required to sell the security prior
to an anticipated recovery of the fair value. The term other-than-temporary is not intended to
indicate that the decline is permanent, but indicates that the prospects for a near-term
recovery of value is not necessarily favorable, or that there is a lack of evidence to support a
realizable value equal to or greater than the carrying value of the investment. Once a decline
in value for a debt security is determined to be other-than-temporary, the other-than-temporary
impairment is separated into (a) the amount of the total other-than-temporary impairment related
to a decrease in cash flows expected to be collected from the debt security (the credit loss)
and (b) the amount of the total other-than-temporary impairment related to all other factors.
The amount of the total other-than-temporary impairment related to the credit loss is recognized
in earnings. The amount of the total other-than-temporary impairment related to all other
factors is recognized in other comprehensive income. For equity securities, the full amount of
the other-than-temporary impairment is recognized in earnings. No impairment charges were
recognized during the three or six months ended June 30, 2010 or 2009.
 Allowance for Loan LossesThe allowance for loan losses is increased by charges to income
through the provision for loan losses and decreased by charge-offs (net of recoveries). The
allowance is maintained at a level that management considers adequate to provide for losses
based upon evaluation of the known and inherent risks in the loan portfolio. Managements
periodic evaluation of the adequacy of the allowance is based on the Companys past loan loss
experience, the volume and composition of lending conducted by the Company, adverse situations
that may affect a borrowers ability to repay, the estimated value of any underlying collateral,
current economic conditions and other factors affecting the known and inherent risk in the
portfolio. Managements evaluation of these factors is done separately for each type of loan.
  7




---



##### Table of Contents



The allowance consists of specific allowances for impaired loans, a general allowance, or in
some cases a specific allowance, on all classified and criticized loans which are not impaired
and a general allowance on the remainder of the portfolio. Although we determine the amount of
each element of the allowance separately, the entire allowance for loan losses is available for
the entire portfolio. The
allowance on impaired loans is established for the amount by which the discounted cash flows,
observable market price or fair value of collateral if the loan is collateral dependent is lower
than the carrying value of the loan. The general valuation allowance on classified and
criticized loans which are not impaired relates to loans that are assigned to categories such as
doubtful, substandard or special mention, based on identified weaknesses that increase the
credit risk of the loan. The general allowance on non-classified and non-criticized loans is
established to recognize the inherent losses associated with lending activities, but which,
unlike specific allowances, have not been allocated to particular problem loans. This allowance
is based on historical loss experience adjusted for qualitative factors including the
composition of the loan portfolio, collateral value trends and current economic conditions.
 The Company measures impaired loans based on the present value of expected future cash flows
discounted at the loans effective interest rate, the loans observable market price, or the
fair value of the collateral if the loan is collateral dependent. During the periods presented,
loan impairment was evaluated based on the fair value of the loans collateral. The
determination of fair value for the collateral underlying a loan is more fully described in Note
9. Impairment losses are included in the provision for loan losses.
 Comprehensive IncomeThe Company presents as a component of comprehensive income the amounts
from transactions and other events which currently are excluded from the consolidated statements
of income and are recorded directly to stockholders equity. These amounts consist of unrealized
holding gains on available for sale securities and amortization of unrecognized deferred costs
of the Companys defined benefit pension plan.
 The components of other comprehensive income are as follows:
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net unrealized gain (loss) on securities
arising during the period, net of tax
    
    $
    751,480
    
    
    $
    (292,960
    )
    
    $
    971,524
    
    
    $
    392,635Plus: reclassification adjustment for net (gain)
loss included in net income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized gain on securities,
net of tax
    
    $
    751,480
    
    
    $
    (292,960
    )
    
    $
    971,524
    
    
    $
    392,635Amortization of deferred costs on
supplemental retirement plan, net of tax
    
    
    19,751
    
    
    
    8,831
    
    
    
    39,502
    
    
    
    17,661Total other comprehensive income (loss),
net of tax
    
    $
    771,231
    
    
    $
    (284,129
    )
    
    $
    1,011,026
    
    
    $
    410,296
  8




---



##### Table of Contents



The components of accumulated other comprehensive income are as follows:
 June 30,
    
    
    December 31,2010
    
    
    2009Net unrealized gain on securities
    
    $
    5,013,384
    
    
    $
    4,041,860Unrecognized deferred costs of supplemental
retirement plan
    
    
    (131,786
    )
    
    
    (171,288
    )Total accumulated other comprehensive income
    
    $
    4,881,598
    
    
    $
    3,870,572
 Share-Based CompensationThe Company accounts for its share-based compensation awards in
accordance with the stock compensation topic of the ASC. Under ASC Topic 718, Compensation 
Stock Compensation(ASC 718), the Company recognizes the cost of employee services received in
share-based payment transactions and measures the cost based on the grant-date fair value of the
award. That cost will be recognized over the period during which an employee is required to
provide service in exchange for the award.
 At June 30, 2010, the Company has four share-based compensation plans, the 2005 and the 2007
Recognition and Retention Plans and the 2005 and 2007 Stock Option Plans. Share awards were
first issued under the 2005 plans in July 2005. Share awards were first issued under the 2007
plans in January 2008. These plans are more fully described in Note 7.
 The Company also has an employee stock ownership plan (ESOP). This plan is more fully
described in Note 7. Shares held under the ESOP are also accounted for under ASC 718. As ESOP
shares are committed to be released and allocated among participants, the Company recognizes
compensation expense equal to the average market price of the shares over the period earned.
  9




---



##### Table of Contents



Earnings per shareEarnings per share (EPS) consists of two separate components, basic EPS and
diluted EPS. Basic EPS is computed based on the weighted average number of shares of common
stock outstanding for each period presented. Diluted EPS is calculated based on the weighted
average number of shares of common stock outstanding plus dilutive common stock equivalents
(CSEs). CSEs consist of shares that are assumed to have been purchased with the proceeds from
the exercise of stock options, as well as unvested common stock awards. Common stock equivalents
which are considered antidilutive are not included for the purposes of this calculation. For the
three and six months ended June 30, 2010, there were 1,258,080 and 1,277,780 antidilutive CSEs,
respectively. Due to the net loss recognized for the three months ended June 30, 2009, the
inclusion of any CSEs would decrease the amount of net loss per share for the periods and would
be antidilutive. Consequently, all 2,202,120 outstanding options are antidilutive for the three
months ended June 30, 2009. For the six months ended June 30, 2009, there were 1,284,440
antidilutive CSEs. Earnings (loss) per share were calculated as follows:
 Three Months Ended June 30,2010
    
    
    2009Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedNet income (loss)
    
    $
    1,972,279
    
    
    $
    1,972,279
    
    
    $
    (377,769
    )
    
    $
    (377,769
    )Weighted average shares outstanding
    
    
    18,920,983
    
    
    
    18,920,983
    
    
    
    19,713,494
    
    
    
    19,713,494Effect of common stock equivalents
    
    
    
    
    
    
    474,093
    
    
    
    
    
    
    
    Adjusted weighted average shares used
in earnings per share computation
    
    
    18,920,983
    
    
    
    19,395,076
    
    
    
    19,713,494
    
    
    
    19,713,494Earnings (loss) per share
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    (0.02
    )
    
    $
    (0.02
    )
 Six Months Ended June 30,2010
    
    
    2009Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedNet income
    
    $
    3,580,639
    
    
    $
    3,580,639
    
    
    $
    1,774,600
    
    
    $
    1,774,600Weighted average shares outstanding
    
    
    18,957,926
    
    
    
    18,957,926
    
    
    
    20,129,506
    
    
    
    20,129,506Effect of common stock equivalents
    
    
    
    
    
    
    425,541
    
    
    
    
    
    
    
    551,245Adjusted weighted average shares used
in earnings per share computation
    
    
    18,957,926
    
    
    
    19,383,467
    
    
    
    20,129,506
    
    
    
    20,680,751Earnings per share
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    0.09
    
    
    $
    0.09
 Recent Accounting PronouncementsIn March 2010, the FASB issued Accounting Standards Update
(ASU) 2010-11, Scope Exception Related to Embedded Credit Derivatives, which updates ASC 815,
Derivatives and Hedging. The updated guidance addresses application of the embedded derivative
scope exception in ASC 815-15-15-8 and 15-9 and primarily affects entities that hold or issue
investments in financial instruments that contain embedded credit derivative features. The ASU
includes a transition provision which permits entities to make a special one-time election to
apply the fair value option to any investments in a beneficial interest in securitized financial
asset, regardless of whether such investments contain embedded derivative features. The amended
guidance is effective for the Company on July 1, 2010. The adoption of this guidance is not
expected to have any impact on our financial position or results of operations.
 In April 2010, the FASB issued ASU 2010-18, Effect of a Loan Modification When the Loan Is Part
of a Pool That Is Accounted for as a Single Asset, which updates ASC 310, Receivables. The
amendments in this update affect any entity that acquires loans subject to ASC Subtopic 310-30,
Receivables: Loans and Debt Securities Acquired with Deteriorated Credit Quality, that accounts
for some or all of those loans within pools, and that subsequently modifies one or more of those
loans after acquisition. Under this updated guidance, modifications of loans that are accounted
for within a pool under Subtopic 310-30 do not result in the removal of those loans from the
pool even if the modification of those loans would otherwise be considered a troubled debt
restructuring. An entity will continue to be required to consider whether the pool of assets in
which the loan is included is impaired if expected cash flows for the pool change. The amended
guidance is effective prospectively for modifications occurring in the first interim or annual
period ending on or after July 15, 2010. The
Company adopted this guidance effective July 1, 2010. The adoption is not expected to have any
impact on our financial position or results of operations.
  10




---



##### Table of Contents



In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses, which updated ASC 310, Receivables. The updated
guidance requires more robust and disaggregated disclosures about the credit quality of an
entitys financing receivables and its allowance for credit losses, including a rollforward
schedule of the allowance for credit losses for the period on a portfolio segment basis, as well
as additional information about the aging and credit quality of receivables by class of
financing receivables as of the end of the period. The new and amended disclosures that relate
to information as of the end of a reporting period will be effective for the Company as of
December 31, 2010. The disclosures that include information for activity that occurs during a
reporting period will be effective for the first interim reporting period beginning after
December 31, 2010. The Company is continuing to evaluate this guidance. While the guidance will
impact the presentation of certain disclosures within our financial statements, we do not expect
that the guidance will have any impact on our financial position or results of operations.
 ReclassificationsCertain items in the 2009 consolidated financial statements have been
reclassified to conform to the presentation in the 2010 consolidated financial statements. Such
reclassifications did not have a material impact on the presentation of the overall financial
statements.
 2.
    
    INVESTMENT SECURITIES
 The amortized cost and estimated fair value of investment securities are summarized as follows:
 Held to MaturityJune 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Municipal bonds
    
    $
    20,385,862
    
    
    $
    658,277
    
    
    $
    
    
    
    $
    21,044,139Total debt securities
    
    $
    20,385,862
    
    
    $
    658,277
    
    
    $
    
    
    
    $
    21,044,139
  11




---



##### Table of Contents



Available for SaleJune 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Agency bonds
    
    $
    104,253,197
    
    
    $
    1,199,249
    
    
    $
    
    
    
    $
    105,452,446Corporate bonds and
commercial paper
    
    
    2,103,514
    
    
    
    19,306
    
    
    
    
    
    
    
    2,122,820Municipal bonds
    
    
    19,682,491
    
    
    
    819,389
    
    
    
    (136
    )
    
    
    20,501,744Certificates of deposit
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    99,000Total debt securities
    
    
    126,138,202
    
    
    
    2,037,944
    
    
    
    (136
    )
    
    
    128,176,010Equity securities:Mutual funds
    
    
    2,624,781
    
    
    
    40,815
    
    
    
    
    
    
    
    2,665,596Total equity securities
    
    
    2,624,781
    
    
    
    40,815
    
    
    
    
    
    
    
    2,665,596Total
    
    $
    128,762,983
    
    
    $
    2,078,759
    
    
    $
    (136
    )
    
    $
    130,841,606
 Held to MaturityDecember 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Municipal bonds
    
    $
    20,386,944
    
    
    $
    400,325
    
    
    $
    
    
    
    $
    20,787,269Total debt securities
    
    $
    20,386,944
    
    
    $
    400,325
    
    
    $
    
    
    
    $
    20,787,269
  12




---



##### Table of Contents



Available for SaleDecember 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Agency bonds
    
    $
    55,863,999
    
    
    $
    691,337
    
    
    $
    (95,669
    )
    
    $
    56,459,667Corporate bonds and
commercial paper
    
    
    3,123,496
    
    
    
    6,286
    
    
    
    (8,342
    )
    
    
    3,121,440Municipal bonds
    
    
    21,238,185
    
    
    
    817,838
    
    
    
    (848
    )
    
    
    22,055,175Certificates of deposit
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    99,000Total debt securities
    
    
    80,324,680
    
    
    
    1,515,461
    
    
    
    (104,859
    )
    
    
    81,735,282Equity securities:Common stock
    
    
    10
    
    
    
    
    
    
    
    (1
    )
    
    
    9Mutual funds
    
    
    2,580,411
    
    
    
    1,569
    
    
    
    
    
    
    
    2,581,980Total equity securities
    
    
    2,580,421
    
    
    
    1,569
    
    
    
    (1
    )
    
    
    2,581,989Total
    
    $
    82,905,101
    
    
    $
    1,517,030
    
    
    $
    (104,860
    )
    
    $
    84,317,271
 There were no sales of debt or equity securities during the three or six months ended June
30, 2010 or 2009. No impairment charges were recognized on investment securities during the
three or six months ended June 30, 2010 or 2009.
 All municipal bonds included in debt securities are bank-qualified municipal bonds.
 The amortized cost and estimated fair value of debt securities by contractual maturity are shown
below. Expected maturities will differ from contractual maturities because the parties may have
the right to call or prepay obligations with or without call or prepayment penalties.
 June 30, 2010Available for Sale
    
    
    Held to MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    6,137,065
    
    
    $
    6,186,089
    
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    112,704,482
    
    
    
    114,410,215
    
    
    
    
    
    
    
    Due after five years through ten years
    
    
    7,296,655
    
    
    
    7,579,706
    
    
    
    12,792,858
    
    
    
    13,242,570Due after ten years
    
    
    
    
    
    
    
    
    
    
    7,593,004
    
    
    
    7,801,569Total
    
    $
    126,138,202
    
    
    $
    128,176,010
    
    
    $
    20,385,862
    
    
    $
    21,044,139
  13




---



##### Table of Contents



Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities available for sale:Municipal bonds
    
    $
    (136
    )
    
    $
    250,000
    
    
    $
    
    
    
    $
    Total securities
available for sale
    
    
    (136
    )
    
    
    250,000
    
    
    
    
    
    
    
    
  Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities available for sale:Agency bonds
    
    $
    (95,669
    )
    
    $
    18,299,480
    
    
    $
    
    
    
    $
    Corporate bonds and
commercial paper
    
    
    (8,342
    )
    
    
    1,127,220
    
    
    
    
    
    
    
    Municipal bonds
    
    
    (848
    )
    
    
    251,938
    
    
    
    
    
    
    
    Equity securities
    
    
    (1
    )
    
    
    9
    
    
    
    
    
    
    
    Total securities
available for sale
    
    
    (104,860
    )
    
    
    19,678,647
    
    
    
    
    
    
    
    
   14




---



##### Table of Contents



3.
    
    MORTGAGE-BACKED SECURITIES
  Held to MaturityJune 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    15,571,439
    
    
    $
    645,802
    
    
    $
    
    
    
    $
    16,217,241FNMA pass-through
certificates
    
    
    24,252,971
    
    
    
    1,544,088
    
    
    
    
    
    
    
    25,797,059FHLMC pass-through
certificates
    
    
    11,478,780
    
    
    
    431,346
    
    
    
    
    
    
    
    11,910,126Collateralized
mortgage
obligations
    
    
    15,236,424
    
    
    
    13,327
    
    
    
    (893,192
    )
    
    
    14,356,559Total
    
    $
    66,539,614
    
    
    $
    2,634,563
    
    
    $
    (893,192
    )
    
    $
    68,280,985
 Available for saleJune 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    2,203
    
    
    $
    316
    
    
    $
    
    
    
    $
    2,519FNMA pass-through
certificates
    
    
    37,867,717
    
    
    
    2,527,203
    
    
    
    
    
    
    
    40,394,920FHLMC pass-through
certificates
    
    
    37,666,363
    
    
    
    2,300,828
    
    
    
    (6,850
    )
    
    
    39,960,341Collateralized
mortgage
obligations
    
    
    66,129,347
    
    
    
    743,108
    
    
    
    (47,190
    )
    
    
    66,825,265Total
    
    $
    141,665,630
    
    
    $
    5,571,455
    
    
    $
    (54,040
    )
    
    $
    147,183,045
  15




---



##### Table of Contents



Held to MaturityDecember 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    18,607,580
    
    
    $
    374,179
    
    
    $
    (198,784
    )
    
    $
    18,782,975FNMA pass-through
certificates
    
    
    27,817,665
    
    
    
    1,031,598
    
    
    
    
    
    
    
    28,849,263FHLMC pass-through
certificates
    
    
    13,242,317
    
    
    
    258,707
    
    
    
    (26,483
    )
    
    
    13,474,541Collateralized
mortgage
obligations
    
    
    17,482,374
    
    
    
    
    
    
    
    (1,291,656
    )
    
    
    16,190,718Total
    
    $
    77,149,936
    
    
    $
    1,664,484
    
    
    $
    (1,516,923
    )
    
    $
    77,297,497
 Available for saleDecember 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    2,464
    
    
    $
    369
    
    
    $
    
    
    
    $
    2,833FNMA pass-through
certificates
    
    
    45,813,997
    
    
    
    2,265,098
    
    
    
    
    
    
    
    48,079,095FHLMC pass-through
certificates
    
    
    48,863,220
    
    
    
    2,363,183
    
    
    
    (24,953
    )
    
    
    51,201,450Collateralized
mortgage
obligations
    
    
    39,237,050
    
    
    
    354,656
    
    
    
    (246,492
    )
    
    
    39,345,214Total
    
    $
    133,916,731
    
    
    $
    4,983,306
    
    
    $
    (271,445
    )
    
    $
    138,628,592
    16




---



##### Table of Contents



Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities held to maturity:Collateralized mortgage
obligations
    
    $
    (129,550
    )
    
    $
    7,701,374
    
    
    $
    (763,642
    )
    
    $
    3,155,962Total securities held to maturity
    
    
    (129,550
    )
    
    
    7,701,374
    
    
    
    (763,642
    )
    
    
    3,155,962Securities available for sale:FHLMC pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    (6,850
    )
    
    
    713,705Collateralized mortgage
obligations
    
    
    (47,190
    )
    
    
    2,689,710
    
    
    
    
    
    
    
    Total securities available for
sale
    
    
    (47,190
    )
    
    
    2,689,710
    
    
    
    (6,850
    )
    
    
    713,705Total
    
    $
    (176,740
    )
    
    $
    10,391,084
    
    
    $
    (770,492
    )
    
    $
    3,869,667
  17




---



##### Table of Contents



Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities held to maturity:GNMA pass-through
certificates
    
    $
    (198,784
    )
    
    $
    10,122,441
    
    
    $
    
    
    
    $
    FHLMC pass-through
certificates
    
    
    (26,483
    )
    
    
    4,787,594
    
    
    
    
    
    
    
    Collateralized mortgage
obligations
    
    
    (322,627
    )
    
    
    8,755,414
    
    
    
    (969,029
    )
    
    
    7,435,304Total securities held to maturity
    
    
    (547,894
    )
    
    
    23,665,449
    
    
    
    (969,029
    )
    
    
    7,435,304Securities available for sale:FHLMC pass-through
certificates
    
    
    (21,372
    )
    
    
    2,060,797
    
    
    
    (3,581
    )
    
    
    1,225,716Collateralized mortgage
obligations
    
    
    (194,886
    )
    
    
    13,186,239
    
    
    
    (51,606
    )
    
    
    3,340,759Total securities available for
sale
    
    
    (216,258
    )
    
    
    15,247,036
    
    
    
    (55,187
    )
    
    
    4,566,475Total
    
    $
    (764,152
    )
    
    $
    38,912,485
    
    
    $
    (1,024,216
    )
    
    $
    12,001,779
   18




---



##### Table of Contents



4.
    
    LOANS RECEIVABLE AND REAL ESTATE OWNED
  June 30, 2010
    
    
    December 31, 2009One-to four-family residential
    
    $
    412,382,137
    
    
    $
    432,004,572Multi-family residential and
commercial
    
    
    143,004,094
    
    
    
    135,482,758Construction
    
    
    164,962,819
    
    
    
    203,642,336Home equity lines of credit
    
    
    40,659,078
    
    
    
    36,273,685Commercial business loans
    
    
    19,745,759
    
    
    
    18,876,987Consumer non-real estate loans
    
    
    699,849
    
    
    
    2,358,063Total loans
    
    
    781,453,736
    
    
    
    828,638,401Less:Construction loans in process
    
    
    (38,284,274
    )
    
    
    (54,198,647
    )Deferred loan fees, net
    
    
    (474,630
    )
    
    
    (789,460
    )Allowance for loan losses
    
    
    (7,157,174
    )
    
    
    (9,090,353
    )Loans receivablenet
    
    $
    735,537,658
    
    
    $
    764,559,941
  Six Months Ended
    
    
    Year Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    December 31, 2009
    
    
    June 30, 2009Balancebeginning of year
    
    $
    9,090,353
    
    
    $
    11,596,784
    
    
    $
    11,596,784Provision for loan losses
    
    
    563,445
    
    
    
    18,736,847
    
    
    
    3,521,412Charge-offs
    
    
    (3,713,606
    )
    
    
    (21,394,378
    )
    
    
    (4,512,361
    )Recoveries
    
    
    1,216,982
    
    
    
    151,100
    
    
    
    142,816Charge-offsnet
    
    
    (2,496,624
    )
    
    
    (21,243,278
    )
    
    
    (4,369,545
    )Balanceend of period
    
    $
    7,157,174
    
    
    $
    9,090,353
    
    
    $
    10,748,651
   19




---



##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009Impaired collateral-dependent loans with a
valuation allowance
    
    $
    16,854,788
    
    
    $
    18,111,166Impaired collateral-dependent loans with no
valuation allowance
    
    
    5,102,773
    
    
    
    10,237,145Total Impaired collateral-dependent loans
    
    $
    21,957,561
    
    
    $
    28,348,311Average impaired loan balance
    
    $
    27,010,198
    
    
    $
    23,575,378Valuation allowance on impaired loans
    
    $
    3,233,086
    
    
    $
    3,605,504Interest income recognized on impaired loans
    
    $
    
    
    
    $
    
    20




---



##### Table of Contents



Six Months Ended
    
    
    Year EndedJune 30, 2010
    
    
    December 31, 2009Balancebeginning of period
    
    $
    22,818,856
    
    
    $
    1,739,599Additions
    
    
    
    
    
    
    25,582,818Capitalized improvements
    
    
    186,560
    
    
    
    1,129,046Valuation adjustments
    
    
    (166,981
    )
    
    
    (4,501,580
    )Dispositions
    
    
    (9,696,435
    )
    
    
    (1,131,027
    )Balanceend of period
    
    $
    13,142,000
    
    
    $
    22,818,856
   21




---



##### Table of Contents



5.
    
    DEPOSITS
  June 30, 2010
    
    
    December 31, 2009Type of Account
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCertificates
    
    $
    459,505,760
    
    
    
    52.1
    %
    
    $
    456,773,978
    
    
    
    53.8
    %Passbook and MMDA
    
    
    290,277,233
    
    
    
    32.9
    
    
    
    265,487,994
    
    
    
    31.2NOW
    
    
    86,238,374
    
    
    
    9.8
    
    
    
    82,791,871
    
    
    
    9.7DDA
    
    
    46,184,830
    
    
    
    5.2
    
    
    
    45,146,650
    
    
    
    5.3Total
    
    $
    882,206,197
    
    
    
    100.0
    %
    
    $
    850,200,493
    
    
    
    100.0
    %
 6.
    
    DEFERRED INCOME TAXES
  June 30,
    
    
    December 31,2010
    
    
    2009Deferred tax assets:Allowance for loan losses
    
    $
    2,433,439
    
    
    $
    3,090,720Deferred compensation
    
    
    2,147,858
    
    
    
    2,048,647Write-down of impaired investments
    
    
    295,526
    
    
    
    295,526Write-down of real estate owned
    
    
    224,168
    
    
    
    1,530,537Other assets
    
    
    350,454
    
    
    
    181,702Total deferred tax assets
    
    
    5,451,445
    
    
    
    7,147,132Deferred tax liabilities:Unrealized gain on securities
available-for-sale
    
    
    (2,582,653
    )
    
    
    (2,082,171
    )Deferred loan fees
    
    
    (325,205
    )
    
    
    (333,723
    )Other liabilities
    
    
    (9,956
    )
    
    
    (19,791
    )Total deferred tax liabilities
    
    
    (2,917,814
    )
    
    
    (2,435,685
    )Net deferred tax asset
    
    $
    2,533,631
    
    
    $
    4,711,447
 7.
    
    PENSION, PROFIT SHARING AND STOCK COMPENSATION PLANS
   22




---



##### Table of Contents



Employee Stock Ownership Plan
  Recognition and Retention Plans
    23




---



##### Table of Contents



Six Months Ended June 30,2010
    
    
    2009Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average grant
    
    
    Number of
    
    
    average grantshares
    
    
    date fair value
    
    
    shares
    
    
    date fair valueNonvested at the beginning of the
year
    
    
    481,272
    
    
    $
    8.79
    
    
    
    661,763
    
    
    $
    8.72Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested
    
    
    (94,940
    )
    
    
    9.11
    
    
    
    (97,140
    )
    
    
    9.11Forfeited
    
    
    (3,876
    )
    
    
    7.95
    
    
    
    
    
    
    
    Nonvested at the end of the period
    
    
    382,456
    
    
    $
    8.71
    
    
    
    564,623
    
    
    $
    8.65
  Stock Options
    24




---



##### Table of Contents



Six Months Ended June 30,2010
    
    
    2009Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average
    
    
    Number of
    
    
    averageshares
    
    
    exercise price
    
    
    shares
    
    
    exercise priceOutstanding at the beginning of the
year
    
    
    2,198,888
    
    
    $
    8.47
    
    
    
    2,206,296
    
    
    $
    8.48Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (6,848
    )
    
    
    7.51
    
    
    
    (4,176
    )
    
    
    7.51Forfeited
    
    
    (8,340
    )
    
    
    8.06
    
    
    
    
    
    
    
    Outstanding at the end of the period
    
    
    2,183,700
    
    
    $
    8.47
    
    
    
    2,202,120
    
    
    $
    8.48Exercisable at the end of the period
    
    
    1,240,920
    
    
    $
    8.21
    
    
    
    813,424
    
    
    $
    8.05
  Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted Average
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Remaining
    
    
    Number of
    
    
    AverageExercise Price
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Shares
    
    
    Exercise Price(in years)$6.00 - $7.00
    
    
    12,500
    
    
    $
    6.72
    
    
    
    9.5
    
    
    
    
    
    
    $
    7.01 - 8.00
    
    
    905,920
    
    
    
    7.51
    
    
    
    5.0
    
    
    
    724,736
    
    
    
    7.518.01 - 9.00
    
    
    7,200
    
    
    
    8.35
    
    
    
    5.4
    
    
    
    5,760
    
    
    
    8.359.01 - 10.00
    
    
    1,218,800
    
    
    
    9.15
    
    
    
    7.6
    
    
    
    486,600
    
    
    
    9.14Over 10.00
    
    
    39,280
    
    
    
    10.18
    
    
    
    6.4
    
    
    
    23,824
    
    
    
    10.18Total
    
    
    2,183,700
    
    
    $
    8.47
    
    
    
    6.5
    
    
    
    1,240,920
    
    
    $
    8.21Intrinsic value
    
    $
    1,123,827
    
    
    
    
    
    
    
    
    
    
    $
    879,062
    25




---



##### Table of Contents



8.
    
    COMMITMENTS AND CONTINGENCIES
       26




---



##### Table of Contents



9.
    
    FAIR VALUE MEASUREMENTS
  Fair Value Measurements and Disclosures
 
    
    Level 1  Valuation is based upon quoted prices for identical instruments traded in
active markets.
 
    
    Level 2  Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market.
 
    
    Level 3  Valuation is generated from model-based techniques that use significant
assumptions not observable in the market. These unobservable assumptions reflect the
Companys own estimates of assumptions that market participants would use in pricing
the asset.
    27




---



##### Table of Contents



Cash and Cash Equivalents
 Investment and Mortgage-backed Securities Available for Sale
 Loans Receivable
 Impaired Loans
  28




---



##### Table of Contents



Accrued Interest Receivable
 FHLB Stock
 Real Estate Owned
 Deposits
 Advances from Federal Home Loan Bank
 Other Borrowed Money
 Accrued Interest Payable
 Commitments to Extend Credit and Letters of Credit
  29




---



##### Table of Contents



June 30, 2010Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available for sale:Debt securities:Agency bonds
    
    $
    105,452,446
    
    
    $
    
    
    
    $
    105,452,446
    
    
    $
    Corporate bonds and
commercial paper
    
    
    2,122,820
    
    
    
    
    
    
    
    2,122,820
    
    
    
    Municipal bonds
    
    
    20,501,744
    
    
    
    
    
    
    
    20,501,744
    
    
    
    Certificates of deposit
    
    
    99,000
    
    
    
    
    
    
    
    99,000
    
    
    
    Equity securities:Mutual funds
    
    
    2,665,596
    
    
    
    2,665,596
    
    
    
    
    
    
    
    Total investment securities
available for sale
    
    
    130,841,606
    
    
    
    2,665,596
    
    
    
    128,176,010
    
    
    
    Mortgage-backed securities
available for sale:GNMA pass-through
certificates
    
    $
    2,519
    
    
    $
    
    
    
    $
    2,519
    
    
    $
    FNMA pass-through
certificates
    
    
    40,394,920
    
    
    
    
    
    
    
    40,394,920
    
    
    
    FHLMC pass-through
certificates
    
    
    39,960,341
    
    
    
    
    
    
    
    39,960,341
    
    
    
    Collateralized mortgage
obligations
    
    
    66,825,265
    
    
    
    
    
    
    
    66,825,265
    
    
    
    Total mortgage-backed
securities available for sale
    
    
    147,183,045
    
    
    
    
    
    
    
    147,183,045
    
    
    
    Total
    
    $
    278,024,651
    
    
    $
    2,665,596
    
    
    $
    275,359,055
    
    
    $
    
  30




---



##### Table of Contents



December 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available for sale:Debt securities:Agency bonds
    
    $
    56,459,667
    
    
    $
    
    
    
    $
    56,459,667
    
    
    $
    Corporate bonds and
commercial paper
    
    
    3,121,440
    
    
    
    
    
    
    
    3,121,440
    
    
    
    Municipal bonds
    
    
    22,055,175
    
    
    
    
    
    
    
    22,055,175
    
    
    
    Certificates of deposit
    
    
    99,000
    
    
    
    
    
    
    
    99,000
    
    
    
    Equity securities:Common stock
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    Mutual funds
    
    
    2,581,980
    
    
    
    2,581,980
    
    
    
    
    
    
    
    Total investment securities
available for sale
    
    
    84,317,271
    
    
    
    2,581,989
    
    
    
    81,735,282
    
    
    
    Mortgage-backed securities
available for sale:GNMA pass-through
certificates
    
    $
    2,833
    
    
    $
    
    
    
    $
    2,833
    
    
    $
    FNMA pass-through
certificates
    
    
    48,079,095
    
    
    
    
    
    
    
    48,079,095
    
    
    
    FHLMC pass-through
certificates
    
    
    51,201,450
    
    
    
    
    
    
    
    51,201,450
    
    
    
    Collateralized mortgage
obligations
    
    
    39,345,214
    
    
    
    
    
    
    
    39,345,214
    
    
    
    Total mortgage-backed
securities available for sale
    
    
    138,628,592
    
    
    
    
    
    
    
    138,628,592
    
    
    
    Total
    
    $
    222,945,863
    
    
    $
    2,581,989
    
    
    $
    220,363,874
    
    
    $
    
  31




---



##### Table of Contents



June 30, 2010Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans:Multi-family
residential and
commercial
    
    $
    1,273,736
    
    
    $
    
    
    
    $
    
    
    
    $
    1,273,736Construction
    
    
    12,347,966
    
    
    
    
    
    
    
    
    
    
    
    12,347,966Total impaired loans
    
    
    13,621,702
    
    
    
    
    
    
    
    
    
    
    
    13,621,702Real estate owned
    
    
    13,142,000
    
    
    
    
    
    
    
    
    
    
    
    13,142,000Total
    
    $
    26,763,702
    
    
    $
    
    
    
    $
    
    
    
    $
    26,763,702
 December 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans:Multi-family
residential and
commercial
    
    $
    3,646,396
    
    
    $
    
    
    
    $
    
    
    
    $
    3,646,396Construction
    
    
    10,859,266
    
    
    
    
    
    
    
    
    
    
    
    10,859,266Total impaired loans
    
    
    14,505,662
    
    
    
    
    
    
    
    
    
    
    
    14,505,662Real estate owned
    
    
    22,818,856
    
    
    
    
    
    
    
    
    
    
    
    22,818,856Total
    
    $
    37,324,518
    
    
    $
    
    
    
    $
    
    
    
    $
    37,324,518
  32




---



##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Estimated
    
    
    
    
    
    
    EstimatedCarrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(In Thousands)Assets:Cash and cash equivalents
    
    $
    66,977
    
    
    $
    66,977
    
    
    $
    44,714
    
    
    $
    44,714Investment securities
    
    
    151,227
    
    
    
    151,886
    
    
    
    104,704
    
    
    
    105,105Mortgage-backed securities
    
    
    213,723
    
    
    
    215,464
    
    
    
    215,779
    
    
    
    215,926Loans receivablenet
    
    
    735,538
    
    
    
    747,631
    
    
    
    764,560
    
    
    
    769,058FHLB stock
    
    
    14,608
    
    
    
    14,608
    
    
    
    14,608
    
    
    
    14,608Accrued interest receivable
    
    
    4,255
    
    
    
    4,255
    
    
    
    4,279
    
    
    
    4,279Liabilities:Deposits
    
    $
    882,206
    
    
    $
    867,395
    
    
    $
    850,200
    
    
    $
    836,176Advances from Federal
Home Loan Bank
    
    
    127,169
    
    
    
    133,296
    
    
    
    146,739
    
    
    
    152,773Other borrowed money
    
    
    26,520
    
    
    
    26,520
    
    
    
    16,673
    
    
    
    16,673Accrued interest payable
    
    
    3,346
    
    
    
    3,346
    
    
    
    1,807
    
    
    
    1,807Off balance sheet financial
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  
 ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD LOOKING STATEMENTS
    33




---



##### Table of Contents



Overview
    34




---



##### Table of Contents



Critical Accounting Policies, Judgments and Estimates
 Allowance for Loan Losses
   35




---



##### Table of Contents



36




---



##### Table of Contents



Fair Value Measurements
  
    
    Level 1  Valuation is based upon quoted prices for identical instruments traded in
active markets.
 
    
    Level 2  Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market.
 
    
    Level 3  Valuation is generated from model-based techniques that use significant
assumptions not observable in the market. These unobservable assumptions reflect the
Companys own estimates of assumptions that market participants would use in pricing the
asset.
  37




---



##### Table of Contents



Other-Than-Temporary Impairment of Securities
 Income Taxes
  38




---



##### Table of Contents



COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2010 AND DECEMBER 31, 2009
     39




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
      40




---



##### Table of Contents



Actual Ratios AtJune 30,
    
    
    December 31,
    
    
    Regulatory
    
    
    To Be Well2010
    
    
    2009
    
    
    Minimum
    
    
    CapitalizedCapital Ratios:Tier 1 leverage ratio
    
    
    13.18
    %
    
    
    13.14
    %
    
    
    4.00
    %
    
    
    5.00
    %Tier 1 risk-based capital ratio
    
    
    21.36
    
    
    
    20.04
    
    
    
    4.00
    
    
    
    6.00Total risk-based capital ratio
    
    
    22.28
    
    
    
    21.16
    
    
    
    8.00
    
    
    
    10.00
 SHARE-BASED COMPENSATION
    COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS
   41




---



##### Table of Contents



42




---



##### Table of Contents



Amount of Commitment Expiration  Per PeriodAfter One to
    
    
    After Three toTotal Amounts
    
    
    To
    
    
    Three
    
    
    Five
    
    
    After FiveCommitted
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Years(In Thousands)Letters of credit
    
    $
    49,123
    
    
    $
    23,645
    
    
    $
    25,477
    
    
    $
    
    
    
    $
    1Recourse obligations on loans sold
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Commitments to originate loans
    
    
    4,538
    
    
    
    4,538
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity
lines of credit
    
    
    30,114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,114Unused portion of commercial
lines of credit
    
    
    50,348
    
    
    
    50,348
    
    
    
    
    
    
    
    
    
    
    
    Undisbursed portion of
construction loans in process
    
    
    38,284
    
    
    
    33,283
    
    
    
    5,001
    
    
    
    
    
    
    
    Total commitments
    
    $
    172,592
    
    
    $
    111,814
    
    
    $
    30,478
    
    
    $
    
    
    
    $
    30,300
  Payments Due By PeriodAfter One to
    
    
    After Three toTo
    
    
    Three
    
    
    Five
    
    
    After FiveTotal
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Years(In Thousands)Certificates of deposit
    
    $
    459,506
    
    
    $
    291,004
    
    
    $
    63,897
    
    
    $
    49,482
    
    
    $
    55,123FHLB advances
    
    
    127,169
    
    
    
    36,491
    
    
    
    18,797
    
    
    
    56,548
    
    
    
    15,333Repurchase agreements
    
    
    26,520
    
    
    
    26,520
    
    
    
    
    
    
    
    
    
    
    
    Total debt
    
    
    153,689
    
    
    
    63,011
    
    
    
    18,797
    
    
    
    56,548
    
    
    
    15,333Operating lease obligations
    
    
    4,456
    
    
    
    880
    
    
    
    1,558
    
    
    
    969
    
    
    
    1,049Total contractual obligations
    
    $
    617,651
    
    
    $
    354,895
    
    
    $
    84,252
    
    
    $
    106,999
    
    
    $
    71,505
 COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009
 General.
  43




---



##### Table of Contents



Interest Income.
 Interest Expense.
  44




---



##### Table of Contents



Average Balances, Net Interest Income, and Yields Earned and Rates Paid.
 Three Months Ended June 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(Dollars in Thousands)Interest-earning assets:Investment securities(1)
    
    $
    129,842
    
    
    $
    883
    
    
    
    2.72
    %
    
    $
    84,346
    
    
    $
    800
    
    
    
    3.79
    %Mortgage-backed securities
    
    
    206,866
    
    
    
    2,180
    
    
    
    4.22
    
    
    
    213,407
    
    
    
    2,605
    
    
    
    4.88Loans receivable(2)
    
    
    725,684
    
    
    
    9,816
    
    
    
    5.41
    
    
    
    756,738
    
    
    
    10,149
    
    
    
    5.36Other interest-earning assets
    
    
    75,068
    
    
    
    20
    
    
    
    0.11
    
    
    
    33,243
    
    
    
    14
    
    
    
    0.17Total interest-earning assets
    
    
    1,137,460
    
    
    
    12,899
    
    
    
    4.54
    
    
    
    1,087,734
    
    
    
    13,568
    
    
    
    4.99Cash and non-interest bearing balances
    
    
    23,473
    
    
    
    
    
    
    
    
    
    
    
    22,180Other non-interest-earning assets
    
    
    111,561
    
    
    
    
    
    
    
    
    
    
    
    83,454Total assets
    
    $
    1,272,494
    
    
    
    
    
    
    
    
    
    
    $
    1,193,368Interest-bearing liabilities:Deposits:Savings and money market accounts
    
    $
    291,494
    
    
    
    666
    
    
    
    0.91
    
    
    $
    180,272
    
    
    
    604
    
    
    
    1.34Checking accounts
    
    
    82,350
    
    
    
    10
    
    
    
    0.05
    
    
    
    71,749
    
    
    
    8
    
    
    
    0.04Certificate accounts
    
    
    466,386
    
    
    
    2,557
    
    
    
    2.19
    
    
    
    451,963
    
    
    
    3,435
    
    
    
    3.04Total deposits
    
    
    840,230
    
    
    
    3,233
    
    
    
    1.54
    
    
    
    703,984
    
    
    
    4,047
    
    
    
    2.30FHLB advances
    
    
    132,079
    
    
    
    1,414
    
    
    
    4.28
    
    
    
    178,128
    
    
    
    1,903
    
    
    
    4.27Other borrowings
    
    
    25,686
    
    
    
    21
    
    
    
    0.33
    
    
    
    26,090
    
    
    
    22
    
    
    
    0.34Total interest-bearing liabilities
    
    
    997,995
    
    
    
    4,668
    
    
    
    1.87
    
    
    
    908,202
    
    
    
    5,972
    
    
    
    2.63Non-interest-bearing liabilities:Non-interest-bearing demand accounts
    
    
    44,204
    
    
    
    
    
    
    
    
    
    
    
    40,931Real estate tax escrow accounts
    
    
    4,215
    
    
    
    
    
    
    
    
    
    
    
    4,471Other liabilities
    
    
    11,558
    
    
    
    
    
    
    
    
    
    
    
    9,634Total liabilities
    
    
    1,057,972
    
    
    
    
    
    
    
    
    
    
    
    963,238Stockholders equity
    
    
    214,522
    
    
    
    
    
    
    
    
    
    
    
    230,130Total liabilities and stockholders equity
    
    $
    1,272,494
    
    
    
    
    
    
    
    
    
    
    $
    1,193,368Net interest-earning assets
    
    $
    139,465
    
    
    
    
    
    
    
    
    
    
    $
    179,532Net interest income; average interest rate spread
    
    
    
    
    
    $
    8,231
    
    
    
    2.67
    %
    
    
    
    
    
    $
    7,596
    
    
    
    2.36
    %Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    2.89
    %
    
    
    
    
    
    
    
    
    
    
    2.79
    %
 
 (1)
    
    Investment securities for the 2010 period include 131 tax-exempt municipal bonds with an
aggregate average balance of $40.0 million and an average yield of 3.9%. Investment securities
for the 2009 period include 134 tax-exempt municipal bonds with an aggregate average balance
of $41.8 million and an average yield of 3.9%. The tax-exempt income from such securities has
not been presented on a tax equivalent basis.(2)
    
    Includes non-accrual loans during the respective periods. Calculated net of deferred fees
and discounts and loans in process.(3)
    
    Equals net interest income divided by average interest-earning assets.  45




---



##### Table of Contents



Provision for Loan Losses.
    46




---



##### Table of Contents



47




---



##### Table of Contents



June 30, 2010
    
    
    March 31, 2010
    
    
    December 31, 2009(Dollars in Thousands)Non-accruing loans:One- to four-family residential
    
    $
    
    
    
    $
    
    
    
    $
    237Multi-family residential and commercial real
estate(1)
    
    
    3,502
    
    
    
    4,788
    
    
    
    4,801Construction
    
    
    18,456
    
    
    
    22,659
    
    
    
    23,303Commercial business
    
    
    
    
    
    
    
    
    
    
    Home equity lines of credit
    
    
    
    
    
    
    
    
    
    
    Consumer non-real estate
    
    
    
    
    
    
    
    
    
    
    Total non-accruing loans
    
    
    21,958
    
    
    
    27,447
    
    
    
    28,341Accruing loans 90 days or more past due:One- to four-family residential
    
    
    63
    
    
    
    29
    
    
    
    110Multi-family residential and commercial real estate
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    10,535
    
    
    
    5,998Commercial business
    
    
    
    
    
    
    
    
    
    
    Home equity lines of credit
    
    
    109
    
    
    
    106
    
    
    
    141Consumer non-real estate
    
    
    
    
    
    
    
    
    
    
    Total accruing loans 90 days or more past due
    
    
    172
    
    
    
    10,670
    
    
    
    6,249Total non-performing loans(2)
    
    
    22,130
    
    
    
    38,117
    
    
    
    34,590Real estate owned, net
    
    
    13,142
    
    
    
    21,817
    
    
    
    22,819Total non-performing assets
    
    $
    35,272
    
    
    $
    59,934
    
    
    $
    57,409Total non-performing loans as a percentage of loans
    
    
    2.98
    %
    
    
    5.00
    %
    
    
    4.47
    %Total non-performing loans as a percentage of total
assets
    
    
    1.73
    %
    
    
    3.01
    %
    
    
    2.79
    %Total non-performing assets as a percentage of total
assets
    
    
    2.78
    %
    
    
    4.73
    %
    
    
    4.64
    %
 
 (1)
    
    Included in this category of non-accruing loans at June 30, 2010, March 31, 2010 and
December 31, 2009 is one troubled debt restructuring with a balance of $1.4 million, $2.4
million and $2.5 million, respectively, which was classified as non-accrual at such dates.
We had no other troubled debt restructurings at any of the dates indicated above.(2)
    
    Non-performing loans consist of non-accruing loans plus accruing loans 90 days or more
past due.
  48




---



##### Table of Contents



AllowanceAccruing
    
    
    for LoanType
    
    
    Loan Classification
    
    
    
    
    
    
    Loans 90
    
    
    LossesTotal
    
    
    
    
    
    
    One- to
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Days or
    
    
    Allocated toNo. of
    
    
    Balance
    
    
    Land
    
    
    Four-
    
    
    Multi-
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    
    
    
    
    More Past
    
    
    ConstructionRange
    
    Loans
    
    
    Outstanding
    
    
    Only
    
    
    Family
    
    
    Family
    
    
    Real Estate
    
    
    Doubtful
    
    
    Substandard
    
    
    Mention
    
    
    Non-Accrual(1)
    
    
    Due
    
    
    Loans(Dollars in Thousands)Loans over $10.0 million
    
    
    1
    
    
    $
    18,812
    
    
    $
    
    
    
    $
    
    
    
    $
    18,812
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    18,812
    
    
    $
    
    
    
    $
    
    
    
    $
    Loans $5.0 million to $10.0 million
    
    
    7
    
    
    
    41,488
    
    
    
    
    
    
    
    22,564
    
    
    
    5,000
    
    
    
    13,924
    
    
    
    
    
    
    
    13,375
    
    
    
    10,343
    
    
    
    5,226
    
    
    
    
    
    
    
    2,357Loans $2.5 million to $5.0 million
    
    
    9
    
    
    
    34,182
    
    
    
    3,445
    
    
    
    14,063
    
    
    
    
    
    
    
    16,674
    
    
    
    
    
    
    
    7,995
    
    
    
    6,167
    
    
    
    4,550
    
    
    
    
    
    
    
    1,084Loans $1.0 million to $2.5 million
    
    
    16
    
    
    
    26,832
    
    
    
    8,184
    
    
    
    13,685
    
    
    
    
    
    
    
    4,963
    
    
    
    
    
    
    
    12,021
    
    
    
    2,622
    
    
    
    6,908
    
    
    
    
    
    
    
    1,546Loans under $1.0 million
    
    
    16
    
    
    
    5,365
    
    
    
    1,156
    
    
    
    2,661
    
    
    
    1,548
    
    
    
    
    
    
    
    
    
    
    
    1,795
    
    
    
    1,175
    
    
    
    1,772
    
    
    
    
    
    
    
    94Total construction loans
    
    
    49
    
    
    $
    126,679
    
    
    $
    12,785
    
    
    $
    52,973
    
    
    $
    25,360
    
    
    $
    35,561
    
    
    $
    
    
    
    $
    35,186
    
    
    $
    39,119
    
    
    $
    18,456
    
    
    $
    
    
    
    $
    5,081
 
 (1)
    
    All of the $18.5 million of non-accrual construction loans at June 30, 2010 are classified
substandard.  49




---



##### Table of Contents



Non-interest Income.
 Non-interest Expenses.
 Income Tax Expense.
 COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
 General.
  50




---



##### Table of Contents



Interest Income.
 Interest Expense.
  51




---



##### Table of Contents



Average Balances, Net Interest Income, and Yields Earned and Rates Paid.
 Six Months Ended June 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(Dollars in Thousands)Interest-earning assets:Investment securities(1)
    
    $
    122,057
    
    
    $
    1,694
    
    
    
    2.78
    %
    
    $
    84,347
    
    
    $
    1,677
    
    
    
    3.98
    %Mortgage-backed securities
    
    
    207,798
    
    
    
    4,465
    
    
    
    4.30
    
    
    
    220,701
    
    
    
    5,412
    
    
    
    4.90Loans receivable(2)
    
    
    732,723
    
    
    
    19,815
    
    
    
    5.41
    
    
    
    753,453
    
    
    
    20,178
    
    
    
    5.36Other interest-earning assets
    
    
    61,490
    
    
    
    26
    
    
    
    0.08
    
    
    
    31,941
    
    
    
    27
    
    
    
    0.17Total interest-earning assets
    
    
    1,124,068
    
    
    
    26,000
    
    
    
    4.63
    
    
    
    1,090,442
    
    
    
    27,294
    
    
    
    5.01Cash and non-interest bearing balances
    
    
    21,563
    
    
    
    
    
    
    
    
    
    
    
    22,783Other non-interest-earning assets
    
    
    113,309
    
    
    
    
    
    
    
    
    
    
    
    81,380Total assets
    
    $
    1,258,940
    
    
    
    
    
    
    
    
    
    
    $
    1,194,605Interest-bearing liabilities:Deposits:Savings and money market accounts
    
    $
    282,038
    
    
    
    1,353
    
    
    
    0.96
    
    
    $
    167,979
    
    
    
    1,172
    
    
    
    1.40Checking accounts
    
    
    81,454
    
    
    
    19
    
    
    
    0.05
    
    
    
    69,978
    
    
    
    13
    
    
    
    0.04Certificate accounts
    
    
    463,704
    
    
    
    5,150
    
    
    
    2.22
    
    
    
    440,805
    
    
    
    6,904
    
    
    
    3.13Total deposits
    
    
    827,196
    
    
    
    6,522
    
    
    
    1.58
    
    
    
    678,762
    
    
    
    8,089
    
    
    
    2.38FHLB advances
    
    
    137,506
    
    
    
    2,968
    
    
    
    4.32
    
    
    
    207,007
    
    
    
    3,988
    
    
    
    3.85Other borrowings
    
    
    22,961
    
    
    
    35
    
    
    
    0.30
    
    
    
    22,328
    
    
    
    36
    
    
    
    0.32Total interest-bearing liabilities
    
    
    987,663
    
    
    
    9,525
    
    
    
    1.93
    
    
    
    908,097
    
    
    
    12,113
    
    
    
    2.67Non-interest-bearing liabilities:Non-interest-bearing demand accounts
    
    
    42,871
    
    
    
    
    
    
    
    
    
    
    
    39,907Real estate tax escrow accounts
    
    
    4,028
    
    
    
    
    
    
    
    
    
    
    
    4,225Other liabilities
    
    
    9,868
    
    
    
    
    
    
    
    
    
    
    
    9,362Total liabilities
    
    
    1,044,430
    
    
    
    
    
    
    
    
    
    
    
    961,591Stockholders equity
    
    
    214,510
    
    
    
    
    
    
    
    
    
    
    
    233,014Total liabilities and stockholders equity
    
    $
    1,258,940
    
    
    
    
    
    
    
    
    
    
    $
    1,194,605Net interest-earning assets
    
    $
    136,405
    
    
    
    
    
    
    
    
    
    
    $
    182,345Net interest income; average interest rate spread
    
    
    
    
    
    $
    16,475
    
    
    
    2.70
    %
    
    
    
    
    
    $
    15,181
    
    
    
    2.34
    %Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    2.93
    %
    
    
    
    
    
    
    
    
    
    
    2.78
    %
 
 (1)
    
    Investment securities for the 2010 period include 133 tax-exempt municipal bonds with an
aggregate average balance of $40.0 million and an average yield of 3.9%. Investment securities
for the 2009 period include 134 tax-exempt municipal bonds with an aggregate average balance
of $41.7 million and an average yield of 3.9%. The tax-exempt income from such securities has
not been presented on a tax equivalent basis.(2)
    
    Includes non-accrual loans during the respective periods. Calculated net of deferred fees
and discounts and loans in process.(3)
    
    Equals net interest income divided by average interest-earning assets.  52




---



##### Table of Contents



Provision for Loan Losses.
 Non-interest Income.
 Non-interest Expenses.
 Income Tax Expense.
 
 ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Asset/Liability Management and Market Risk.
   53




---



##### Table of Contents



Gap Analysis.
   54




---



##### Table of Contents



More than
    
    
    More than
    
    
    More than6 Months
    
    
    6 Months
    
    
    1 Year
    
    
    3 Years
    
    
    More than
    
    
    Totalor Less
    
    
    to 1 Year
    
    
    to 3 Years
    
    
    to 5 Years
    
    
    5 Years
    
    
    Amount(Dollars in Thousands)Interest-earning assets (1):Loans receivable (2)
    
    $
    278,427
    
    
    $
    55,028
    
    
    $
    153,681
    
    
    $
    87,031
    
    
    $
    146,570
    
    
    $
    720,737Mortgage-backed securities
    
    
    45,056
    
    
    
    32,309
    
    
    
    80,129
    
    
    
    31,554
    
    
    
    19,157
    
    
    
    208,205Investment securities
    
    
    7,833
    
    
    
    1,480
    
    
    
    95,615
    
    
    
    40,010
    
    
    
    4,211
    
    
    
    149,149Other interest-earning assets
    
    
    60,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,750Total interest-earning assets
    
    
    392,066
    
    
    
    88,817
    
    
    
    329,425
    
    
    
    158,595
    
    
    
    169,938
    
    
    
    1,138,841Interest-bearing liabilities:Savings and money market accounts
    
    $
    43,436
    
    
    $
    43,436
    
    
    $
    109,121
    
    
    $
    50,207
    
    
    $
    44,077
    
    
    $
    290,277Checking accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,238
    
    
    
    86,238Certificate accounts
    
    
    220,264
    
    
    
    76,035
    
    
    
    58,604
    
    
    
    49,481
    
    
    
    55,122
    
    
    
    459,506FHLB advances
    
    
    50,579
    
    
    
    9,283
    
    
    
    29,141
    
    
    
    32,508
    
    
    
    5,658
    
    
    
    127,169Other borrowed money
    
    
    26,520
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,520Total interest-bearing liabilities
    
    
    340,799
    
    
    
    128,754
    
    
    
    196,866
    
    
    
    132,196
    
    
    
    191,095
    
    
    
    989,710Interest-earning assets less interest-bearing
liabilities
    
    $
    51,267
    
    
    $
    (39,937
    )
    
    $
    132,559
    
    
    $
    26,399
    
    
    $
    (21,157
    )
    
    $
    149,131Cumulative interest-rate sensitivity gap (3)
    
    $
    51,267
    
    
    $
    11,330
    
    
    $
    143,889
    
    
    $
    170,288
    
    
    $
    149,131Cumulative interest-rate gap as a percentage
of total assets at June 30, 2010
    
    
    4.04
    %
    
    
    0.89
    %
    
    
    11.35
    %
    
    
    13.43
    %
    
    
    11.76
    %Cumulative interest-earning assets as a
percentage of cumulative interest-bearing
liabilities at June 30, 2010
    
    
    115.04
    %
    
    
    102.41
    %
    
    
    121.59
    %
    
    
    121.32
    %
    
    
    115.07
    %
 
 (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.  55




---



##### Table of Contents



ITEM 4.   CONTROLS AND PROCEDURES
   
 PART II OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a)
    
    Not applicable.(b)
    
    Not applicable.(c)
    
    Purchases of Equity Securities
  56




---



##### Table of Contents



Total Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased
    
    
    of Shares that MayNumber of
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the Plan orPeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    Programs(1)April 1,  April 30, 2010
    
    
    12,474
    
    
    $
    7.93
    
    
    
    12,474
    
    
    
    943,803May 1,
 May 31, 2010
    
    
    36,752
    
    
    
    8.93
    
    
    
    36,752
    
    
    
    907,051June 1,
 June 30, 2010
    
    
    458,448
    
    
    
    8.84
    
    
    
    458,448
    
    
    
    448,603Total
    
    
    507,674
    
    
    $
    8.83
    
    
    
    507,674
    
    
    
    448,603
 (1)
    
    On January 14, 2010, the Company announced a stock repurchase program to repurchase up
to 5% of its outstanding shares, or 1,048,603 shares. This repurchase program is schedule
to terminate as of January 14, 2011. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 No.
    
    Description31.1
    
    
    Rule 13a-14(d) and 15d-14(d) Certification of the Chief Executive Officer.31.2
    
    
    Rule 13a-14(d) and 15d-14(d) Certification of the Chief Financial Officer.32.1
    
    
    Section 1350 Certification.32.2
    
    
    Section 1350 Certification.
 
  57




---



##### Table of Contents



SIGNATURES
  ABINGTON BANCORP, INC.Date: August 6, 2010
    
    By:
    
    /s/ Robert W. WhiteRobert W. WhiteChairman, President andChief Executive OfficerDate: August 6, 2010
    
    By:
    
    /s/ Jack J. SandoskiJack J. SandoskiSenior Vice President andChief Financial Officer
  58