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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549



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FORM 10-Q

|           |                                                                                           
|---------- | ------------------------------------------------------------------------------------------
|(Mark One)
|x          | QUARTERLY
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT OF 1934 
|           |                                                                                           
|           | For
 the quarterly period ended March 31, 2008                                            
|           |                                                                                           
|           | 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.                                
|                                                      
|(Exact Name of Registrant as Specified in Its Charter)

|                                                                |  |                                       |           
|--------------------------------------------------------------- |  | ------------------------------------- | ----------
|Pennsylvania                                                    |  | 20-8613037                           
|                                                                |  |                                      
|(State or Other Jurisdiction of
 Incorporation or Organization) |  | (I.R.S. Employer Identification
 No.)
|                                                                |  |                                      
|180 Old York Road                                               |  |                                      
|Jenkintown, Pennsylvania                                        |  | 19046                                
|                                                                |  |                                      
|(Address of Principal Executive
 Offices)                       |  |                                       | (Zip Code)

|                                                                                 
|---------------------------------------------------------------------------------
|(215) 886-8280                                                                   
|                                                                                 
|(Registrants Telephone Number, Including Area Code)                             
|                                                                                 
|Not Applicable                                                                   
|                                                                                 
|(Former name, former address or former fiscal year if changed since
 last report)

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of accelerated filer, large accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):

|                                               |                            |                             
|---------------------------------------------- | -------------------------- | ----------------------------
|                                               | Large
 accelerated filer o | Accelerated
 filer x        
|                                               |                            |                             
|                                               | Non-accelerated
 filer o   | Smaller
 reporting company o
|(Do
 not check if a smaller reporting company) |                           

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

Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date: As of May 5, 2008, 24,449,972 shares
of the Registrants common stock were outstanding.

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|                       
|-----------------------
|ABINGTON
 BANCORP, INC.
|                       
|TABLE OF CONTENTS      
|                       

|                               |                                                                                                                 |  |    |     
|------------------------------ | --------------------------------------------------------------------------------------------------------------- |  | -- | ----
|                               |                                                                                                                 |  |    | Page
|                               |                                                                                                                 |  |    |     
|PART I  FINANCIAL INFORMATION |                                                                                                                 | 
|                               |                                                                                                                 |  |    |     
|                               | ITEM 1.   
 FINANCIAL STATEMENTS                                                                                |  |   
|                               |                                                                                                                 |  |    |     
|                               | Unaudited Consolidated Statements of
 Financial Condition as of March 31, 2008 and
 December 31, 2007           |  | 1  |     
|                               |                                                                                                                 |  |    |     
|                               | Unaudited Consolidated Statements of Income
 for the Three Months Ended March 31,
 2008 and 2007                |  | 2  |     
|                               |                                                                                                                 |  |    |     
|                               | Unaudited Consolidated Statements of
 Stockholders Equity for the Three Months Ended 
 March 31, 2008 and 2007 |  | 3  |     
|                               |                                                                                                                 |  |    |     
|                               | Unaudited Consolidated Statements of Cash
 Flows for the Three Months Ended March 31,
 2008 and 2007            |  | 4  |     
|                               |                                                                                                                 |  |    |     
|                               | Notes to Unaudited
 Consolidated Financial Statements                                                           |  | 5  |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS                |  | 29 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                            |  | 41 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 4.  CONTROLS AND PROCEDURES                                                                                |  | 45 |     
|                               |                                                                                                                 |  |    |     
|PART II  OTHER INFORMATION    |                                                                                                                 |  |   
|                               |                                                                                                                 |  |    |     
|                               | ITEM 1.  Legal Proceedings                                                                                      |  | 45 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 1A.  Risk Factors                                                                                          |  | 45 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 45 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 3.  Defaults upon Senior Securities                                                                        |  | 46 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 4.  Submission of Matters to a Vote of Security Holders                                                    |  | 46 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 5.  Other Information                                                                                      |  | 46 |     
|                               |                                                                                                                 |  |    |     
|                               | ITEM 6.  Exhibits                                                                                               |  | 46 |     
|                               |                                                                                                                 |  |    |     
|                               | SIGNATURES                                                                                                      |  | 47 |     
|                               |                                                                                                                 |  |    |     
|                               | CERTIFICATIONS                                                                                                  |  |    |     

---



|                                                        
|--------------------------------------------------------
|ABINGTON
 BANCORP, INC.                                 
|                                                        
|UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|                                                        

|                                                                                                                        |  |                |               |                   |   |               |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------------- | ----------------- | - | ------------- | -
|                                                                                                                        |  | March 31, 2008 |               | December 31, 2007 |  
|                                                                                                                        |  |                |               |                   |  
|ASSETS                                                                                                                  |  |                |               |                   |   |               |  
|Cash and due from banks                                                                                                 |  | $              | 23,325,047    |                   | $ | 22,342,499    |  
|Interest-bearing bank balances                                                                                          |  |                | 45,530,912    |                   |   | 45,712,962    |  
|                                                                                                                        |  |                |               |                   |   |               |  
|Total cash and cash equivalents                                                                                         |  |                | 68,855,959    |                   |   | 68,055,461    |  
|Investment securities held to maturity (estimated fair
value2008,
 $20,810,251; 2007, $20,656,427)                     |  |                | 20,390,728    |                   |   | 20,391,268    |  
|Investment securities available for sale (amortized cost2008,
$91,243,603;
 2007, $98,202,711)                         |  |                | 92,730,585    |                   |   | 98,780,774    |  
|Mortgage-backed securities held to maturity (estimated fair
 value2008, $54,210,350; 2007, $45,627,107)                |  |                | 55,078,813    |                   |   | 46,891,843    |  
|Mortgage-backed securities available for sale (amortized
cost2008,
 $106,032,446; 2007, $94,400,607)                   |  |                | 107,244,647   |                   |   | 94,124,123    |  
|Loans receivable, net of allowance for loan losses (2008, $1,850,101;
 2007, $1,811,121)                                |  |                | 693,615,876   |                   |   | 682,038,113   |  
|Accrued interest receivable                                                                                             |  |                | 5,017,220     |                   |   | 4,977,909     |  
|Federal Home Loan Bank stockat cost                                                                                    |  |                | 10,892,400    |                   |   | 10,958,700    |  
|Cash surrender value - bank owned life insurance                                                                        |  |                | 37,774,178    |                   |   | 37,298,126    |  
|Property and equipment, net                                                                                             |  |                | 10,850,652    |                   |   | 10,759,799    |  
|Real estate owned                                                                                                       |  |                | 2,630,603     |                   |   | 1,558,000     |  
|Deferred tax asset                                                                                                      |  |                | 1,256,026     |                   |   | 1,892,051     |  
|Prepaid expenses and other assets                                                                                       |  |                | 1,674,460     |                   |   | 1,942,454     |  
|                                                                                                                        |  |                |               |                   |   |               |  
|TOTAL ASSETS                                                                                                            |  | $              | 1,108,012,147 |                   | $ | 1,079,668,621 |  
|                                                                                                                        |  |                |               |                   |   |               |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                    |  |                |               |                   |   |               |  
|LIABILITIES:                                                                                                            |  |                |               |                   |   |               |  
|Deposits:                                                                                                               |  |                |               |                   |   |               |  
|Noninterest-bearing                                                                                                     |  | $              | 41,559,242    |                   | $ | 37,027,767    |  
|Interest-bearing                                                                                                        |  |                | 592,560,628   |                   |   | 572,584,934   |  
|                                                                                                                        |  |                |               |                   |   |               |  
|Total deposits                                                                                                          |  |                | 634,119,870   |                   |   | 609,612,701   |  
|Advances from Federal Home Loan Bank                                                                                    |  |                | 187,853,499   |                   |   | 189,557,572   |  
|Other borrowed money                                                                                                    |  |                | 20,480,887    |                   |   | 17,453,060    |  
|Accrued interest payable                                                                                                |  |                | 4,749,787     |                   |   | 3,498,235     |  
|Advances from borrowers for taxes and
insurance                                                                         |  |                | 3,428,455     |                   |   | 2,978,650     |  
|Accounts payable and accrued expenses                                                                                   |  |                | 7,368,461     |                   |   | 6,653,343     |  
|                                                                                                                        |  |                |               |                   |   |               |  
|Total liabilities                                                                                                       |  |                | 858,000,959   |                   |   | 829,753,561   |  
|                                                                                                                        |  |                |               |                   |   |               |  
|COMMITMENTS AND CONTINGENCIES                                                                                           |  |                |               |                   |   |               |  
|STOCKHOLDERS EQUITY                                                                                                    |  |                |               |                   |   |               |  
|Preferred stock, $0.01 par value, 20,000,000 shares
authorized, none
 issued                                            |  |                |              |                   |   |              |  
|Common stock, $0.01 par value, 80,000,000 shares
authorized, issued:
 24,460,240 shares, outstanding: 24,449,526 shares |  |                | 244,602       |                   |   | 244,602       |  
|Additional paid-in capital                                                                                              |  |                | 200,826,953   |                   |   | 200,634,467   |  
|Treasury stockat cost, 10,714 shares                                                                                   |  |                | (104,997      | )                 |   | (104,997      | )
|Unallocated common stock held by:                                                                                       |  |                |               |                   |   |               |  
|Employee Stock Ownership Plan (ESOP)                                                                                    |  |                | (15,767,698   | )                 |   | (15,977,458   | )
|Recognition & Retention Plan Trust
(RRP)                                                                                |  |                | (4,545,495    | )                 |   | (1,867,065    | )
|Deferred compensation plans trust                                                                                       |  |                | (1,162,491    | )                 |   | (1,149,610    | )
|Retained earnings                                                                                                       |  |                | 69,143,177    |                   |   | 68,360,520    |  
|Accumulated other comprehensive income
(loss)                                                                           |  |                | 1,377,137     |                   |   | (225,399      | )
|                                                                                                                        |  |                |               |                   |   |               |  
|Total stockholders equity                                                                                              |  |                | 250,011,188   |                   |   | 249,915,060   |  
|                                                                                                                        |  |                |               |                   |   |               |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                              |  | $              | 1,108,012,147 |                   | $ | 1,079,668,621 |  
|                                                                                                                        |  |                |               |                   |   |               |  

See notes to unaudited
consolidated financial statements.

1

---



|                                            
|--------------------------------------------
|ABINGTON BANCORP, INC.                      
|                                            
|UNAUDITED
 CONSOLIDATED STATEMENTS OF INCOME
|                                            

|                                                                     |  |                              |            |      |   |            |  
|-------------------------------------------------------------------- |  | ---------------------------- | ---------- | ---- | - | ---------- | -
|                                                                     |  | Three Months Ended March 31, |           
|                                                                     |  |                              |           
|                                                                     |  | 2008                         |            | 2007 |  
|                                                                     |  |                              |            |      |  
|INTEREST INCOME:                                                     |  |                              |            |      |   |            |  
|Interest on loans                                                    |  | $                            | 10,711,406 |      | $ | 10,368,479 |  
|Interest and dividends on investment and
mortgage-backed securities: |  |                              |            |      |   |            |  
|Taxable                                                              |  |                              | 2,658,306  |      |   | 2,309,349  |  
|Tax-exempt                                                           |  |                              | 296,775    |      |   | 212,727    |  
|Interest and dividends on other interest-earning
assets              |  |                              | 530,883    |      |   | 329,448    |  
|                                                                     |  |                              |            |      |   |            |  
|Total interest income                                                |  |                              | 14,197,370 |      |   | 13,220,003 |  
|INTEREST EXPENSE:                                                    |  |                              |            |      |   |            |  
|Interest on deposits                                                 |  |                              | 4,922,109  |      |   | 5,178,577  |  
|Interest on Federal Home Loan Bank
advances                          |  |                              | 2,247,438  |      |   | 2,354,977  |  
|Interest on other borrowed money                                     |  |                              | 135,302    |      |   | 184,560    |  
|                                                                     |  |                              |            |      |   |            |  
|Total interest expense                                               |  |                              | 7,304,849  |      |   | 7,718,114  |  
|                                                                     |  |                              |            |      |   |            |  
|NET INTEREST INCOME                                                  |  |                              | 6,892,521  |      |   | 5,501,889  |  
|PROVISION FOR LOAN LOSSES                                            |  |                              | 49,140     |      |   | 3,607      |  
|                                                                     |  |                              |            |      |   |            |  
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                  |  |                              | 6,843,381  |      |   | 5,498,282  |  
|                                                                     |  |                              |            |      |   |            |  
|NON-INTEREST INCOME                                                  |  |                              |            |      |   |            |  
|Service charges                                                      |  |                              | 381,909    |      |   | 397,716    |  
|Income on bank owned life insurance                                  |  |                              | 476,052    |      |   | 178,467    |  
|Loss on sale of securities                                           |  |                              | (11,758    | )    |   |           |  
|Other income                                                         |  |                              | 107,081    |      |   | 111,267    |  
|                                                                     |  |                              |            |      |   |            |  
|Total non-interest income                                            |  |                              | 953,284    |      |   | 687,450    |  
|                                                                     |  |                              |            |      |   |            |  
|NON-INTEREST EXPENSES                                                |  |                              |            |      |   |            |  
|Salaries and employee benefits                                       |  |                              | 2,865,186  |      |   | 2,327,544  |  
|Occupancy                                                            |  |                              | 533,941    |      |   | 436,810    |  
|Depreciation                                                         |  |                              | 196,993    |      |   | 184,182    |  
|Professional services                                                |  |                              | 275,948    |      |   | 161,614    |  
|Data processing                                                      |  |                              | 382,590    |      |   | 350,676    |  
|Advertising and promotions                                           |  |                              | 102,452    |      |   | 95,762     |  
|Other                                                                |  |                              | 829,110    |      |   | 640,234    |  
|                                                                     |  |                              |            |      |   |            |  
|Total non-interest expenses                                          |  |                              | 5,186,220  |      |   | 4,196,822  |  
|                                                                     |  |                              |            |      |   |            |  
|INCOME BEFORE INCOME TAXES                                           |  |                              | 2,610,445  |      |   | 1,988,910  |  
|PROVISION FOR INCOME TAXES                                           |  |                              | 692,276    |      |   | 526,478    |  
|                                                                     |  |                              |            |      |   |            |  
|NET INCOME                                                           |  | $                            | 1,918,169  |      | $ | 1,462,432  |  
|                                                                     |  |                              |            |      |   |            |  
|                                                                     |  |                              |            |      |   |            |  
|BASIC EARNINGS PER COMMON SHARE                                      |  | $                            | 0.09       |      | $ | 0.06       | *
|DILUTED EARNINGS PER COMMON SHARE                                    |  | $                            | 0.08       |      | $ | 0.06       | *
|BASIC AVERAGE COMMON SHARES OUTSTANDING:                             |  |                              | 22,352,051 |      |   | 23,361,014 | *
|DILUTED AVERAGE COMMON SHARES OUTSTANDING:                           |  |                              | 22,858,601 |      |   | 23,956,386 | *




* Earnings per share and
average common shares outstanding for the prior period have been adjusted to
reflect the impact of the second-step conversion and reorganization of the
Company, which occurred on June 27, 2007.


See notes to unaudited
consolidated financial statements.

2

---



|                                                         
|---------------------------------------------------------
|ABINGTON
  BANCORP, INC.                                 
|UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|                                                         

|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ---------- | -------------- | - | ------------------------------ |  | ---------------- | ----------- | ---------------------------------------------- | - | ------------------- | - | --------------------------------------------------- | ----------- | ------------------------------ | - | ---------- | - | - | ---------- | - | - | ----------- | -
|                                                                                                                         |  | Common
  Stock
  Shares |            | Common
  Stock |   | Additional
  Paid-in
  Capital |  | Treasury
  Stock |             | Common
  Stock
  Acquired by
  Benefit
  Plans |   | Retained
  Earnings |   | Accumulated
  Other
  Comprehensive
  Income (Loss) |             | Total
  Stockholders
  Equity |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |  
|BALANCEJANUARY 1, 2008                                                                                                  |  |                         | 24,460,240 |                | $ | 244,602                        |  | $                | 200,634,467 |                                                | $ | (104,997            | ) | $                                                   | (18,994,133 | )                              | $ | 68,360,520 |   | $ | (225,399   | ) | $ | 249,915,060 |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Comprehensive income:                                                                                                    |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Net income                                                                                                               |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     |            |                                |   | 1,918,169  |   |   |           |   |   | 1,918,169   |  
|Net unrealized holding gain on available for sale securities arising
  during the period, net of tax expense of $815,185 |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     |            |                                |   |           |   |   | 1,582,419  |   |   | 1,582,419   |  
|Amortization of unrecognized prior service costs on defined benefit
  pension plan, net of tax expense of $10,364        |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   | 20,117     |   |   | 20,117      |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Comprehensive income                                                                                                     |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   | 3,520,705   |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Cash dividends declared, ($0.05 per share)                                                                               |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     |            |                                |   | (1,135,512 | ) |   |           |   |   | (1,135,512  | )
|Stock options expense                                                                                                    |  |                         |           |                |   |                               |  |                  | 197,283     |                                                |   |                    |   |                                                     |            |                                |   |           |   |   |           |   |   | 197,283     |  
|Common stock released from benefit plans                                                                                 |  |                         |           |                |   |                               |  |                  | (4,797      | )                                              |   |                    |   |                                                     | 569,193     |                                |   |           |   |   |           |   |   | 564,396     |  
|Common stock acquired by benefit plans                                                                                   |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     | (3,050,744  | )                              |   |           |   |   |           |   |   | (3,050,744  | )
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|BALANCEMARCH 31, 2008                                                                                                   |  |                         | 24,460,240 |                | $ | 244,602                        |  | $                | 200,826,953 |                                                | $ | (104,997            | ) | $                                                   | (21,475,684 | )                              | $ | 69,143,177 |   | $ | 1,377,137  |   | $ | 250,011,188 |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|                                                                                                                         |  | Common
  Stock
  Shares |            | Common
  Stock |   | Additional
  Paid-in
  Capital |  | Treasury
  Stock |             | CommonStock
  Acquired by
  Benefit
  Plans    |   | Retained
  Earnings |   | Accumulated
  Other
  Comprehensive
  Loss          |             | Total
  Stockholders
  Equity |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |  
|BALANCEJANUARY 1, 2007                                                                                                  |  |                         | 15,870,000 |                | $ | 158,700                        |  | $                | 69,674,243  |                                                | $ | (8,317,848          | ) | $                                                   | (10,054,685 | )                              | $ | 65,252,214 |   | $ | (2,610,400 | ) | $ | 114,102,224 |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Comprehensive income:                                                                                                    |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Net income                                                                                                               |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     |            |                                |   | 1,462,432  |   |   |           |   |   | 1,462,432   |  
|Net unrealized holding gain on available for sale securities arising
  during the period, net of tax expense of $235,118 |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     |            |                                |   |           |   |   | 456,407    |   |   | 456,407     |  
|Amortization of unrecognized prior service costs on defined benefit
  pension plan, net of tax expense of $10,364        |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   | 20,117     |   |   | 20,117      |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Comprehensive income                                                                                                     |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   | 1,938,956   |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|Cash dividends declared, ($0.04 per share)*                                                                              |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     |            |                                |   | (889,866   | ) |   |           |   |   | (889,866    | )
|Stock options expense                                                                                                    |  |                         |           |                |   |                               |  |                  | 97,740      |                                                |   |                    |   |                                                     |            |                                |   |           |   |   |           |   |   | 97,740      |  
|Common stock released from benefit plans                                                                                 |  |                         |           |                |   |                               |  |                  | 48,470      |                                                |   |                    |   |                                                     | 310,391     |                                |   |           |   |   |           |   |   | 358,861     |  
|Common stock acquired by benefit plans                                                                                   |  |                         |           |                |   |                               |  |                  |            |                                                |   |                    |   |                                                     | (5,711      | )                              |   |           |   |   |           |   |   | (5,711      | )
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  
|BALANCEMARCH 31, 2007                                                                                                   |  |                         | 15,870,000 |                | $ | 158,700                        |  | $                | 69,820,453  |                                                | $ | (8,317,848          | ) | $                                                   | (9,750,005  | )                              | $ | 65,824,780 |   | $ | (2,133,876 | ) | $ | 115,602,204 |  
|                                                                                                                         |  |                         |            |                |   |                                |  |                  |             |                                                |   |                     |   |                                                     |             |                                |   |            |   |   |            |   |   |             |  

|                                                                                                                                                                                            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                                                                           
|*  Dividends per share for the
  prior period has been adjusted to reflect the impact of the second-step
  conversion and reorganization of the Company, which occurred on June 27,
  2007.
|                                                                                                                                                                                            | 
|See notes to unaudited
  consolidated financial statements.                                                                                                                                

3

---



|                                               
|-----------------------------------------------
|ABINGTON
  BANCORP, INC.                       
|                                               
|UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|                                               

|                                                                                    |  |                              |             |      |   |              |  
|----------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | ---- | - | ------------ | -
|                                                                                    |  | Three Months Ended March 31, |            
|                                                                                    |  |                              |            
|                                                                                    |  | 2008                         |             | 2007 |  
|                                                                                    |  |                              |             |      |  
|OPERATING ACTIVITIES:                                                               |  |                              |             |      |   |              |  
|Net income                                                                          |  | $                            | 1,918,169   |      | $ | 1,462,432    |  
|Adjustments to reconcile net income to net cash provided by operating
  activities: |  |                              |             |      |   |              |  
|Provision for loan losses                                                           |  |                              | 49,140      |      |   | 3,607        |  
|Depreciation                                                                        |  |                              | 196,993     |      |   | 184,182      |  
|Share-based compensation expense                                                    |  |                              | 759,079     |      |   | 454,001      |  
|Loss on sale of investment securities                                               |  |                              | 11,758      |      |   |             |  
|Deferred income tax benefit                                                         |  |                              | (189,524    | )    |   | (103,981     | )
|Amortization of:                                                                    |  |                              |             |      |   |              |  
|Deferred loan fees                                                                  |  |                              | (173,102    | )    |   | (174,832     | )
|Premiums and discounts, net                                                         |  |                              | 34,299      |      |   | 14,070       |  
|Income from bank owned life insurance                                               |  |                              | (476,052    | )    |   | (178,467     | )
|Changes in assets and liabilities which (used) provided
cash:                       |  |                              |             |      |   |              |  
|Accrued interest receivable                                                         |  |                              | (39,311     | )    |   | (338,742     | )
|Prepaid expenses and other assets                                                   |  |                              | 267,994     |      |   | 2,024,956    |  
|Accrued interest payable                                                            |  |                              | 1,251,552   |      |   | 2,547,469    |  
|Accounts payable and accrued expenses                                               |  |                              | 732,718     |      |   | 558,334      |  
|                                                                                    |  |                              |             |      |   |              |  
|Net cash provided by operating activities                                           |  |                              | 4,343,713   |      |   | 6,453,029    |  
|                                                                                    |  |                              |             |      |   |              |  
|INVESTING ACTIVITIES:                                                               |  |                              |             |      |   |              |  
|Principal collected on loans                                                        |  |                              | 34,592,073  |      |   | 29,835,261   |  
|Disbursements for loans                                                             |  |                              | (47,023,260 | )    |   | (53,554,134  | )
|Purchases of:                                                                       |  |                              |             |      |   |              |  
|Mortgage-backed securities held to maturity                                         |  |                              | (9,861,264  | )    |   |             |  
|Mortgage-backed securities available for sale                                       |  |                              | (18,278,032 | )    |   |              |  
|Investments available for sale                                                      |  |                              | (11,139,335 | )    |   | (9,037,976   | )
|Federal Home Loan Bank stock                                                        |  |                              | (496,400    | )    |   | (205,400     | )
|Property and equipment                                                              |  |                              | (287,846    | )    |   | (850,399     | )
|Proceeds from:                                                                      |  |                              |             |      |   |              |  
|Sales and maturities of mortgage-backed securities available for
sale               |  |                              | 1,960,836   |      |   |             |  
|Maturities of investments available for sale                                        |  |                              | 18,099,000  |      |   | 4,000,000    |  
|Principal repayments of mortgage-backed securities held to
maturity                 |  |                              | 1,658,314   |      |   | 1,978,898    |  
|Principal repayments of mortgage-backed securities available for
sale               |  |                              | 4,655,263   |      |   | 3,119,893    |  
|Redemption of Federal Home Loan Bank stock                                          |  |                              | 562,700     |      |   | 579,000      |  
|Additions to real estate owned                                                      |  |                              | (95,217     | )    |   |             |  
|                                                                                    |  |                              |             |      |   |              |  
|Net cash used in investing activities                                               |  |                              | (25,653,168 | )    |   | (24,134,857  | )
|                                                                                    |  |                              |             |      |   |              |  
|FINANCING ACTIVITIES:                                                               |  |                              |             |      |   |              |  
|Net increase in demand deposits and savings accounts                                |  |                              | 10,345,868  |      |   | 11,375,937   |  
|Net increase in certificate accounts                                                |  |                              | 14,161,301  |      |   | 17,476,920   |  
|Net increase in other borrowed money                                                |  |                              | 3,027,827   |      |   | 2,043,498    |  
|Advances from Federal Home Loan Bank                                                |  |                              | 32,805,000  |      |   | 260,305,000  |  
|Repayments of advances from Federal Home Loan Bank                                  |  |                              | (34,509,073 | )    |   | (270,124,125 | )
|Net increase in advances from borrowers for taxes and
insurance                     |  |                              | 449,805     |      |   | 317,609      |  
|Acquisition of stock for benefit plans                                              |  |                              | (3,035,263  | )    |   |             |  
|Payment of cash dividend                                                            |  |                              | (1,135,512  | )    |   | (889,866     | )
|                                                                                    |  |                              |             |      |   |              |  
|Net cash provided by financing activities                                           |  |                              | 22,109,953  |      |   | 20,504,973   |  
|                                                                                    |  |                              |             |      |   |              |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                           |  |                              | 800,498     |      |   | 2,823,145    |  
|                                                                                    |  |                              |             |      |   |              |  
|CASH AND CASH EQUIVALENTSBeginning of period                                       |  |                              | 68,055,461  |      |   | 44,565,252   |  
|                                                                                    |  |                              |             |      |   |              |  
|CASH AND CASH EQUIVALENTSEnd of period                                             |  | $                            | 68,855,959  |      | $ | 47,388,397   |  
|                                                                                    |  |                              |             |      |   |              |  
|                                                                                    |  |                              |             |      |   |              |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                  |  |                              |             |      |   |              |  
|Cash paid during the year for:                                                      |  |                              |             |      |   |              |  
|Interest on deposits and other borrowings                                           |  | $                            | 6,053,297   |      | $ | 5,170,645    |  
|                                                                                    |  |                              |             |      |   |              |  
|Income taxes                                                                        |  | $                            | 130,000     |      | $ |             |  
|                                                                                    |  |                              |             |      |   |              |  
|Non-cash transfer of loans to real estate owned                                     |  | $                            | 977,386     |      | $ |             |  
|                                                                                    |  |                              |             |      |   |              |  

See notes to unaudited
consolidated financial statements.

4

---



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 on
 June 27, 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 subsidiary,
 ASB Investment Co. The consolidated financial statements include the accounts
 of the Company and its wholly owned subsidiaries. All significant
 intercompany balances and transactions have been eliminated.
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                     | The Banks
 executive offices are in Jenkintown, Pennsylvania, with eleven other branches
 and six 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. Keswick Services II, and its wholly owned
 subsidiaries, and Abington Corp. are currently inactive subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                     | Abington
 Community Bancorp, Inc., a Pennsylvania corporation, was the former mid-tier
 holding company for the Bank. Abington Community Bancorp was organized in
 conjunction with the Banks reorganization from the mutual savings bank to
 the mutual holding company structure in December 2004. Abington Mutual
 Holding Company, a Pennsylvania corporation, was the mutual holding company
 parent of Abington Community Bancorp, Inc. and originally owned 55% of
 Abington Community Bancorps outstanding stock. As a result of treasury stock
 purchases, this stake increased to approximately 57% of Abington Community
 Bancorps outstanding stock at the time of the Banks second-step conversion.                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                     | On June 27,
 2007, a second-step conversion was completed after which Abington Mutual
 Holding Company and Abington Community Bancorp, Inc. ceased to exist and
 Abington Bancorp, Inc. was organized as the new stock-form holding company for
 the Bank and successor to Abington Community Bancorp. A total of 13,965,600
 new shares of the Company were sold at $10 per share in the subscription,
 community and syndicated community offerings through which the Company
 received proceeds of approximately $134.7 million, net of offering costs of
 approximately $5.0 million. As part of the conversion, each outstanding
 public share of Abington Community Bancorp, Inc. (that is, shares owned by
 stockholders other than Abington Mutual Holding Company) was exchanged for
 1.6 shares of Company Common Stock. The exchange resulted in an additional
 10,494,640 outstanding shares of common stock of the Company for a total of
 24,460,240 outstanding shares as of the closing of the second-step
 conversion. Treasury stock held was cancelled.                                                

5

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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, 2007, which are
 included in the Companys Annual Report on Form 10-K for the year ended
 December 31, 2007. The results for the three months ended March 31, 2008 are
 not necessarily indicative of the results that may be expected for the fiscal
 year ending December 31, 2008, or any other period.                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Use of Estimates in the Preparation of
 Financial StatementsThe preparation of
 financial statements in conformity with accounting principles generally
 accepted in the United States of America requires management to make
 estimates and assumptions that affect the reported amounts of assets and
 liabilities and disclosure of contingent assets and liabilities at the date
 of the financial statements and the reported amounts of income and expenses
 during the reporting period. Actual 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 the
 intent and ability of the Company to retain its investment in the security
 for a period of time sufficient to allow for an anticipated recovery in 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 is determined to be
 other-than-temporary, the value of the security is reduced and a
 corresponding charge to earnings is recognized. No impairment charge was
 recognized during the three months ended March 31, 2008 or 2007.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The allowance
 consists of specific allowances for impaired loans, a general allowance on
 all classified 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 loans which are not impaired relates to loans that are
 classified as either doubtful,
 substandard or special mention. Such classifications are based on identified
 weaknesses that increase the credit risk of the loan. The general allowance
 on non-classified 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.     

6

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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. 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
 March 31, |          
|                                                                                             |  |                               |          
|                                                                                             |  | 2008                          |           | 2007 |  
|                                                                                             |  |                               |           |      |  
|                                                                                             |  |                               |           |      |  
|Net unrealized gain on securities arising during the period                                  |  | $                             | 1,574,659 |      | $ | 456,407 | 
|Plus: reclassification adjustment for net losses included in net
 income, net of tax         |  |                               | 7,760     |      |   |        | 
|                                                                                             |  |                               |           |      |   |         | 
|                                                                                             |  |                               |           |      |   |         | 
|Net unrealized gain on securities                                                            |  | $                             | 1,582,419 |      | $ | 456,407 | 
|                                                                                             |  |                               |           |      |   |         | 
|Amortization of unrecognized prior service cost on defined benefit
 pension plan, net of tax |  |                               | 20,117    |      |   | 20,117  | 
|                                                                                             |  |                               |           |      |   |         | 
|                                                                                            
|Total other comprehensive income                                                             |  | $                             | 1,602,536 |      | $ | 476,524 | 
|                                                                                             |  |                               |           |      |   |         | 

| |                                                                                 
| | --------------------------------------------------------------------------------
| | The
 components of accumulated other comprehensive income (loss) are as follows:

|                                                    |  |                 |           |                    |   |          |  
|--------------------------------------------------- |  | --------------- | --------- | ------------------ | - | -------- | -
|                                                    |  | March 31,
 2008 |           | December 31,
 2007 |  
|                                                    |  |                 |           |                    |  
|                                                    |  |                 |           |                    |   |          |  
|Net unrealized gain on
 securities                  |  | $               | 1,781,460 |                    | $ | 199,041  |  
|Unrecognized deferred costs of defined benefit plan |  |                 | (404,323  | )                  |   | (424,440 | )
|                                                    |  |                 |           |                    |   |          |  
|                                                    |  |                 |           |                    |   |          |  
|Total accumulated other comprehensive income (loss) |  | $               | 1,377,137 |                    | $ | (225,399 | )
|                                                    |  |                 |           |                    |   |          |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Share-Based CompensationThe
 Company accounts for its share-based compensation awards in accordance with
 Statement of Financial Accounting Standards (SFAS) No. 123R (revised 2004),
 Share-Based Payment. This
 statement requires an entity to recognize the cost of employee services
 received in share-based payment transactions and measures the cost on the
 grant-date fair value of the award. That cost will be recognized over the
 period during which an employee is required to provide service in exchange
 for the award.

7

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At March 31,
 2008, 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 issued under the 2007 plans in January 2008. These plans
 are more fully described in Note 6.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The Company
 also has an employee stock ownership plan (ESOP). This plan is more fully
 described in Note 6. Shares held under the ESOP are accounted for in
 accordance with AICPA Statement of Position (SOP) 93-6, Employers Accounting for Employee Stock Ownership
 Plans. As ESOP shares are committed to be released and allocated
 among participants, the Company recognizes compensation expense equal to the
 average market price of the shares over the period earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 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 months ended March 31, 2008,
 there were 1,357,240 antidilutive CSEs. For the three months ended March 31,
 2007, there were no antidilutive CSEs. Earnings per share and average common
 shares outstanding for the prior period have been adjusted to reflect the
 impact of the second-step conversion and reorganization of the Company, which
 occurred on June 27, 2007. Earnings per share were calculated as follows:

|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 
|------------------------------------------------------------------------ |  | ---------------------------- | ---------- | ------- | - | ---------- |  | ------- | ---------- |  | - | ---------- | 
|                                                                         |  | Three Months Ended March 31, |           
|                                                                         |  |                              |           
|                                                                         |  | 2008                         |            | 2007    |  
|                                                                         |  |                              |            |         |  
|                                                                         |  | Basic                        |            | Diluted |   | Basic      |  | Diluted |           
|                                                                         |  |                              |            |         |   |            |  |         |           
|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 
|Net income                                                               |  | $                            | 1,918,169  |         | $ | 1,918,169  |  | $       | 1,462,432  |  | $ | 1,462,432  | 
|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 
|Weighted average shares outstanding                                      |  |                              | 22,352,051 |         |   | 22,352,051 |  |         | 23,361,014 |  |   | 23,361,014 | 
|Effect of common stock equivalents                                       |  |                              |           |         |   | 506,550    |  |         |           |  |   | 595,372    | 
|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 
|Adjusted weighted average shares used in earnings per share
 computation |  |                              | 22,352,051 |         |   | 22,858,601 |  |         | 23,361,014 |  |   | 23,956,386 | 
|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 
|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 
|Earnings per share                                                       |  | $                            | 0.09       |         | $ | 0.08       |  | $       | 0.06       |  | $ | 0.06       | 
|                                                                         |  |                              |            |         |   |            |  |         |            |  |   |            | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Recent Accounting PronouncementsIn
 September 2006, the Financial Accounting Statndards Board (FASB) ratified
 the consensus reached by the Emerging Issues Task Force (EITF) in Issue
 06-4, Accounting for Deferred Compensation
 and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance
 Arrangements. EITF 06-4 applies to life insurance arrangements
 that provide an employee with a specified benefit that is not limited to the
 employees active service period, including certain bank-owned life insurance
 (BOLI) policies. EITF 06-4 requires an employer to recognize a liability
 and related compensation costs for future benefits that extend to
 postretirement periods. EITF 06-4 is effective for fiscal years beginning
 after December 15, 2007, with earlier application permitted. The Company
 adopted this consensus effective January 1, 2008. During 2007, the Company
 amended its split dollar insurance agreements with employees to increase the
 benefits paid to those employees during their period of employment, but to
 discontinue any postretirement benefits. As a result of the amendments to
 those agreements, the adoption of this consensus did not have any effect on
 our consolidated financial position or results of operations.

8

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In September
 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements, which defines fair value,
 establishes a framework for measuring fair value under GAAP, and expands
 disclosures about fair value measurements. FASB Statement No. 157 applies to
 other accounting pronouncements that require or permit fair value
 measurements. The new guidance is effective for financial statements issued
 for fiscal years beginning after November 15, 2007, and for interim periods
 within those fiscal years. In February 2008, the FASB issued FASB Staff
 Position (FSP) 157-2, Effective Date of
 FASB Statement No. 157, that permits a one-year deferral in
 applying the measurement provisions of Statement No. 157 to non-financial
 assets and non-financial liabilities (non-financial items) that are not
 recognized or disclosed at fair value in an entitys financial statements on
 a recurring basis (at least annually). Therefore, if the change in fair value
 of a non-financial item is not required to be recognized or disclosed in the
 financial statements on an annual basis or more frequently, the effective
 date of application of Statement 157 to that item is deferred until fiscal
 years beginning after November 15, 2008 and interim periods within those
 fiscal years. The Company adopted this statement as of January 1, 2008. This
 adoption did not have any effect on our consolidated financial position or
 results of operations.

In February
2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities. This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value. An entity shall report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. This statement is effective as of the beginning
of an entitys first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS No.157. We elected not to early adopt the provisions of this
statement. We adopted this statement as of January 1, 2008, however, we have
not elected to measure any assets or liabilities at fair value under the
provisions of this statement. The adoption of this statement did not have any
effect on the Companys financial position or results of operations.

In June 2007,
the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on
Share-Based Payment Awards. EITF 06-11 states that an entity should
recognize a realized tax benefit associated with dividends on nonvested equity
shares, nonvested equity share units and outstanding equity share options
charged to retained earnings as an increase in additional paid in capital. The
amount recognized in additional paid in capital should be included in the pool
of excess tax benefits available to absorb potential future tax deficiencies on
share-based payment awards. EITF 06-11 should be applied prospectively to
income tax benefits of dividends on equity-classified share-based payment
awards that are declared in fiscal years beginning after December 15, 2007. The
Company adopted this consensus effective January 1, 2008. The adoption did not
have a material effect on our consolidated financial position or results of
operations.

In November
2007, the Securities and Exchange Commission (the SEC) issued Staff
Accounting Bulletin (SAB) No. 109, Written
Loan Commitments Recorded at Fair Value Through Earnings. SAB No.
109 expresses the views of the staff regarding written loan commitments that
are accounted for at fair value through earnings under generally accepted
accounting principles. To make the staffs views consistent with current
authoritative accounting guidance, SAB 109 revises and rescinds portions of SAB
No. 105, Application of Accounting
Principles to Loan Commitments. Specifically, SAB 109 revises the
SEC staffs views on incorporating expected net future cash flows related to
loan servicing activities in the fair value measurement of a written loan
commitment. SAB 109 retains the staffs views on incorporating expected net
future cash flows related to internally-developed intangible assets in the fair
value measurement of a written loan commitment. The staff expects registrants
to apply the views in Question 1 of SAB 109 on a prospective basis to
derivative loan commitments issued or modified in fiscal quarters beginning
after December 15, 2007. The Company adopted this statement as of January 1, 2008. The
adoption did not have a material effect on the Companys financial position or
results of operations.

9

---



In December
2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations. This statement establishes principles
and requirements for how the acquirer of a business recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree. The statement also
provides guidance for recognizing and measuring the goodwill acquired in the
business combination and determines what information to disclose to enable
users of the financial statements to evaluate the nature and financial effects
of the business combination. The guidance will become effective as of the
beginning of a companys fiscal year beginning after December 15, 2008. The
Company is continuing to evaluate the impact of this statement, but does not
expect that the guidance will have a material effect on our consolidated
financial position or results of operations.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In December
 2007, the FASB issued SFAS No. 160, Noncontrolling
 Interests in Consolidated Financial Statements  an amendment of ARB No. 51.
 This statement establishes accounting and reporting standards for the
 noncontrolling interest in a subsidiary and for the deconsolidation of a
 subsidiary. The guidance will become effective as of the beginning of a
 companys fiscal year beginning after December 15, 2008. The Company is
 continuing to evaluate the impact of this statement, but does not expect that
 the guidance will have a material effect on our consolidated financial
 position or results of operations.                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In March
 2008, the FASB issued SFAS No. 161, Disclosures
 About Derivative Instruments and Hedging Activities  an amendment of FASB
 Statements No. 133. This statement changes the disclosure
 requirements for derivative instruments and hedging activities. Entities are
 required to provide enhanced disclosures about (a) how and why an entity uses
 derivative instruments, (b) how derivative instruments and related hedged
 items are accounted for under Statement 133 and its related interpretations,
 and (c) how derivative instruments and related hedged items affect an
 entitys financial positions, financial performance, and cash flows. This
 statement is effective for financial statements issued for periods beginning
 after November 15, 2008. The Company is continuing to evaluate the impact of
 this statement, but does not expect that the guidance will have any effect on
 our consolidated financial position or results of operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ReclassificationsCertain
 items in the 2007 consolidated financial statements have been reclassified to
 conform to the presentation in the 2008 consolidated financial statements.
 Such reclassifications did not have a material impact on the presentation of
 the overall financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

10

---



|   |                      
|-- | ---------------------
|2. | INVESTMENT SECURITIES

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

|                      |  |                                  |            |                          |   |                           |  |                        |        |   |   |            | 
|--------------------- |  | -------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | ------ | - | - | ---------- | 
|                      |  | Held to Maturity
 March 31, 2008 |           
|                      |  |                                  |           
|                      |  | Amortized
 Cost                  |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |       
|                      |  |                                  |            |                          |   |                           |  |                        |       
|Debt securities:      |  |                                  |            |                          |   |                           |  |                        |        |   |   |            | 
|Municipal bonds       |  | $                                | 20,390,728 |                          | $ | 421,244                   |  | $                      | (1,721 | ) | $ | 20,810,251 | 
|                      |  |                                  |            |                          |   |                           |  |                        |        |   |   |            | 
|Total debt securities |  | $                                | 20,390,728 |                          | $ | 421,244                   |  | $                      | (1,721 | ) | $ | 20,810,251 | 
|                      |  |                                  |            |                          |   |                           |  |                        |        |   |   |            | 

|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|------------------------------------ |  | ---------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | -------- | - | - | ---------- | 
|                                     |  | Available for Sale
 March 31, 2008 |           
|                                     |  |                                    |           
|                                     |  | Amortized
 Cost                    |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |         
|                                     |  |                                    |            |                          |   |                           |  |                        |         
|Debt securities:                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|Agency bonds                         |  | $                                  | 70,881,925 |                          | $ | 1,439,603                 |  | $                      |         |   | $ | 72,321,528 | 
|Corporate bonds and commercial paper |  |                                    | 4,455,337  |                          |   | 3,315                     |  |                        | (35,717  | ) |   | 4,422,935  | 
|Municipal bonds                      |  |                                    | 12,168,012 |                          |   | 226,066                   |  |                        | (20,188  | ) |   | 12,373,890 | 
|Certificates of deposit              |  |                                    | 486,000    |                          |   |                          |  |                        |         |   |   | 486,000    | 
|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|Total debt securities                |  |                                    | 87,991,274 |                          |   | 1,668,984                 |  |                        | (55,905  | ) |   | 89,604,353 | 
|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|Equity securities:                   |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|Common stock                         |  |                                    | 10         |                          |   | 242                       |  |                        |         |   |   | 252        | 
|Mutual funds                         |  |                                    | 3,252,319  |                          |   |                          |  |                        | (126,339 | ) |   | 3,125,980  | 
|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|Total equity securities              |  |                                    | 3,252,329  |                          |   | 242                       |  |                        | (126,339 | ) |   | 3,126,232  | 
|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 
|Total                                |  | $                                  | 91,243,603 |                          | $ | 1,669,226                 |  | $                      | (182,244 | ) | $ | 92,730,585 | 
|                                     |  |                                    |            |                          |   |                           |  |                        |          |   |   |            | 

11

---



|                      |  |                                     |            |                          |   |                           |  |                        |   |  |   |            | 
|--------------------- |  | ----------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | - |  | - | ---------- | 
|                      |  | Held to Maturity
 December 31, 2007 |           
|                      |  |                                     |           
|                      |  | Amortized
 Cost                     |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |  
|                      |  |                                     |            |                          |   |                           |  |                        |  
|Debt securities:      |  |                                     |            |                          |   |                           |  |                        |   |  |   |            | 
|Municipal bonds       |  | $                                   | 20,391,268 |                          | $ | 265,159                   |  | $                      |  |  | $ | 20,656,427 | 
|                      |  |                                     |            |                          |   |                           |  |                        |   |  |   |            | 
|Total debt securities |  | $                                   | 20,391,268 |                          | $ | 265,159                   |  | $                      |  |  | $ | 20,656,427 | 
|                      |  |                                     |            |                          |   |                           |  |                        |   |  |   |            | 

|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|------------------------------------ |  | ------------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | -------- | - | - | ---------- | 
|                                     |  | Available for Sale
 December 31, 2007 |           
|                                     |  |                                       |           
|                                     |  | Amortized
 Cost                       |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |         
|                                     |  |                                       |            |                          |   |                           |  |                        |         
|Debt securities:                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Agency bonds                         |  | $                                     | 84,882,467 |                          | $ | 675,585                   |  | $                      | (70,210  | ) | $ | 85,487,842 | 
|Corporate bonds and commercial paper |  |                                       | 3,483,768  |                          |   | 6,446                     |  |                        | (11,449  | ) |   | 3,478,765  | 
|Municipal bonds                      |  |                                       | 6,035,410  |                          |   | 71,374                    |  |                        | (280     | ) |   | 6,106,504  | 
|Certificates of deposit              |  |                                       | 585,000    |                          |   |                          |  |                        |         |   |   | 585,000    | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Total debt securities                |  |                                       | 94,986,645 |                          |   | 753,405                   |  |                        | (81,939  | ) |   | 95,658,111 | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Equity securities:                   |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Common stock                         |  |                                       | 10         |                          |   | 310                       |  |                        |         |   |   | 320        | 
|Mutual funds                         |  |                                       | 3,216,056  |                          |   |                          |  |                        | (93,713  | ) |   | 3,122,343  | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Total equity securities              |  |                                       | 3,216,066  |                          |   | 310                       |  |                        | (93,713  | ) |   | 3,122,663  | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Total                                |  | $                                     | 98,202,711 |                          | $ | 753,715                   |  | $                      | (175,652 | ) | $ | 98,780,774 | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 

| |                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There were
 no sales of debt or equity securities during the three months ended March 31,
 2008 or 2007.                                                                                                                          
| |                                                                                                                                                                                                                                   
| | No
 impairment charge was recognized on investment securities during the three
 months ended March 31, 2008 or 2007.                                                                                                              
| |                                                                                                                                                                                                                                   
| | Included in
 debt securities are structured notes with federal agencies. These structured
 notes consist of step-up bonds which provide the agency with the right, but
 not the obligation, to call the bonds on the step-up date.

12

---



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

|                                        |  |                    |            |                        |   |                 |  |                        |            |  |   |            | 
|--------------------------------------- |  | ------------------ | ---------- | ---------------------- | - | --------------- |  | ---------------------- | ---------- |  | - | ---------- | 
|                                        |  | March 31, 2008     |           
|                                        |  |                    |           
|                                        |  | Available for Sale |            | Held to Maturity       |  
|                                        |  |                    |            |                        |  
|                                        |  | Amortized
 Cost    |            | Estimated
 Fair
 Value |   | Amortized
 Cost |  | Estimated
 Fair
 Value |           
|                                        |  |                    |            |                        |   |                 |  |                        |           
|Due in one year or less                 |  | $                  | 5,478,241  |                        | $ | 5,480,605       |  | $                      |           |  | $ |           | 
|Due after one year through
 five years  |  |                    | 60,952,585 |                        |   | 62,151,006      |  |                        |           |  |   |           | 
|Due after five years
 through ten years |  |                    | 21,560,448 |                        |   | 21,972,742      |  |                        |           |  |   |           | 
|Due after ten years                     |  |                    |           |                        |   |                |  |                        | 20,390,728 |  |   | 20,810,251 | 
|                                        |  |                    |            |                        |   |                 |  |                        |            |  |   |            | 
|                                        |  |                    |            |                        |   |                 |  |                        |            |  |   |            | 
|Total                                   |  | $                  | 87,991,274 |                        | $ | 89,604,353      |  | $                      | 20,390,728 |  | $ | 20,810,251 | 
|                                        |  |                    |            |                        |   |                 |  |                        |            |  |   |            | 

The
table below sets forth investment securities which had an unrealized loss position
as of March 31, 2008:

|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|----------------------------------- |  | ------------------------- | ------- | ---------------------- | - | ------------------------- |  | ---------------------- | -------- | - | - | --------- | 
|                                    |  | Less than 12 months       |         | More than 12 months    |  
|                                    |  |                           |         |                        |  
|                                    |  | Gross
 Unrealized
 Losses |         | Estimated
 Fair
 Value |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |         
|                                    |  |                           |         |                        |   |                           |  |                        |         
|Securities held to
 maturity:       |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|Municipal bonds                     |  | $                         | (1,721  | )                      | $ | 403,279                   |  | $                      |         |   | $ |          | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|Total securities held to maturity   |  |                           | (1,721  | )                      |   | 403,279                   |  |                        |         |   |   |          | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|Securities available for
 sale:     |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|Municipal bonds                     |  | $                         | (20,188 | )                      | $ | 2,019,166                 |  | $                      |         |   | $ |          | 
|Other securities                    |  |                           | (34,594 | )                      |   | 2,925,280                 |  |                        | (127,462 | ) |   | 3,624,815 | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|Total securities available for sale |  |                           | (54,782 | )                      |   | 4,944,446                 |  |                        | (127,462 | ) |   | 3,624,815 | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 
|Total                               |  | $                         | (56,503 | )                      | $ | 5,347,725                 |  | $                      | (127,462 | ) | $ | 3,624,815 | 
|                                    |  |                           |         |                        |   |                           |  |                        |          |   |   |           | 

13

---



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | The table
 below sets forth investment securities which had an unrealized loss position
 as of December 31, 2007:

|                                    |  |                           |        |                        |   |                           |  |                        |          |   |   |            | 
|----------------------------------- |  | ------------------------- | ------ | ---------------------- | - | ------------------------- |  | ---------------------- | -------- | - | - | ---------- | 
|                                    |  | Less than 12 months       |        | More than 12 months    |  
|                                    |  |                           |        |                        |  
|                                    |  | Gross
 Unrealized
 Losses |        | Estimated
 Fair
 Value |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |         
|                                    |  |                           |        |                        |   |                           |  |                        |         
|Securities available for
 sale:     |  |                           |        |                        |   |                           |  |                        |          |   |   |            | 
|Agency bonds                        |  | $                         |       |                        | $ |                          |  | $                      | (70,210  | ) | $ | 14,429,790 | 
|Municipal bonds                     |  |                           | (280   | )                      |   | 254,535                   |  |                        |         |   |   |           | 
|Other securities                    |  |                           | (7,218 | )                      |   | 987,130                   |  |                        | (97,944  | ) |   | 3,618,008  | 
|                                    |  |                           |        |                        |   |                           |  |                        |          |   |   |            | 
|                                    |  |                           |        |                        |   |                           |  |                        |          |   |   |            | 
|Total securities available for sale |  | $                         | (7,498 | )                      | $ | 1,241,665                 |  | $                      | (168,154 | ) | $ | 18,047,798 | 
|                                    |  |                           |        |                        |   |                           |  |                        |          |   |   |            | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On a
 quarterly basis, management of the Company reviews the securities in its
 investment portfolio to identify any securities that might have an
 other-than-temporary impairment. At March 31, 2008, investment securities in
 a gross unrealized loss position for twelve months or longer consisted of three
 securities having an aggregate depreciation of 3.4% from the Companys
 amortized cost basis. Investment securities in a gross unrealized loss
 position for less than twelve months at March 31, 2008, consisted of four
 securities having an aggregate depreciation of 1.1% from the Companys
 amortized cost basis. Management has concluded that the unrealized losses
 above are temporary in nature. They are not related to the underlying credit
 quality of the issuers, and (with the exception of equity securities) they
 are on securities that have contractual maturity dates. The principal and
 interest payments on our debt securities have been made as scheduled, and
 there is no evidence that the issuer will not continue to do so. The future
 principal payments will be sufficient to recover the current amortized cost
 of the securities. The unrealized losses above are primarily related to
 market interest rates. The current declines in market value are not
 significant, and management of the Company believes that these values will
 recover as market interest rates decline. The unrealized losses on the equity
 securities that do not have maturities or principal payments are also
 primarily related to market interest rates, as well as to the current market
 environment surrounding these securities. Management of the Company believes
 that the value of these securities will also recover over time as long-term
 market interest rates move and as the market environment improves. The
 current decline in these equity securities is less than 4.0% below the
 Companys cost basis. The Company has the intent and ability to hold each of
 these investments for the time necessary to recover its cost.

14

---



|   |                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------
|3. | MORTGAGE-BACKED SECURITIES                                                                            
|   |                                                                                                       
|   | The
 amortized cost and estimated fair value of mortgage-backed securities are
 summarized as follows:

|                                    |  |                                  |            |                          |   |                           |  |                        |            |   |   |            | 
|----------------------------------- |  | -------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | ---------- | - | - | ---------- | 
|                                    |  | Held to Maturity
 March 31, 2008 |           
|                                    |  |                                  |           
|                                    |  | Amortized
 Cost                  |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |           
|                                    |  |                                  |            |                          |   |                           |  |                        |           
|FNMA pass-through certificates      |  | $                                | 29,185,256 |                          | $ | 128,877                   |  | $                      | (268,542   | ) | $ | 29,045,591 | 
|FHLMC pass-through certificates     |  |                                  | 13,870,330 |                          |   |                          |  |                        | (290,265   | ) |   | 13,580,065 | 
|Collateralized mortgage obligations |  |                                  | 12,023,227 |                          |   | 5,233                     |  |                        | (443,766   | ) |   | 11,584,694 | 
|                                    |  |                                  |            |                          |   |                           |  |                        |            |   |   |            | 
|                                    |  |                                  |            |                          |   |                           |  |                        |            |   |   |            | 
|Total                               |  | $                                | 55,078,813 |                          | $ | 134,110                   |  | $                      | (1,002,573 | ) | $ | 54,210,350 | 
|                                    |  |                                  |            |                          |   |                           |  |                        |            |   |   |            | 

|                                     |  |                                    |             |                          |   |                           |  |                        |          |   |   |             | 
|------------------------------------ |  | ---------------------------------- | ----------- | ------------------------ | - | ------------------------- |  | ---------------------- | -------- | - | - | ----------- | 
|                                     |  | Available for sale
 March 31, 2008 |            
|                                     |  |                                    |            
|                                     |  | Amortized
 Cost                    |             | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |         
|                                     |  |                                    |             |                          |   |                           |  |                        |         
|GNMA pass-through
 certificates      |  | $                                  | 3,291       |                          | $ | 421                       |  | $                      |         |   | $ | 3,712       | 
|FNMA pass-through
 certificates      |  |                                    | 35,975,615  |                          |   | 449,082                   |  |                        | (5,385   | ) |   | 36,419,312  | 
|FHLMC pass-through
 certificates     |  |                                    | 58,809,345  |                          |   | 709,688                   |  |                        | (159,765 | ) |   | 59,359,268  | 
|Collateralized mortgage
 obligations |  |                                    | 11,244,195  |                          |   | 227,589                   |  |                        | (9,429   | ) |   | 11,462,355  | 
|                                     |  |                                    |             |                          |   |                           |  |                        |          |   |   |             | 
|                                     |  |                                    |             |                          |   |                           |  |                        |          |   |   |             | 
|Total                                |  | $                                  | 106,032,446 |                          | $ | 1,386,780                 |  | $                      | (174,579 | ) | $ | 107,244,647 | 
|                                     |  |                                    |             |                          |   |                           |  |                        |          |   |   |             | 

15

---



|                                     |  |                                     |            |                          |   |                           |  |                        |            |   |   |            | 
|------------------------------------ |  | ----------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | ---------- | - | - | ---------- | 
|                                     |  | Held to Maturity
 December 31, 2007 |           
|                                     |  |                                     |           
|                                     |  | Amortized
 Cost                     |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |           
|                                     |  |                                     |            |                          |   |                           |  |                        |           
|FNMA pass-through
 certificates      |  | $                                   | 20,236,408 |                          | $ |                          |  | $                      | (479,332   | ) | $ | 19,757,076 | 
|FHLMC pass-through
 certificates     |  |                                     | 14,284,056 |                          |   |                          |  |                        | (431,116   | ) |   | 13,852,940 | 
|Collateralized mortgage
 obligations |  |                                     | 12,371,379 |                          |   | 19,205                    |  |                        | (373,493   | ) |   | 12,017,091 | 
|                                     |  |                                     |            |                          |   |                           |  |                        |            |   |   |            | 
|                                     |  |                                     |            |                          |   |                           |  |                        |            |   |   |            | 
|Total                                |  | $                                   | 46,891,843 |                          | $ | 19,205                    |  | $                      | (1,283,941 | ) | $ | 45,627,107 | 
|                                     |  |                                     |            |                          |   |                           |  |                        |            |   |   |            | 

|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|------------------------------------ |  | ------------------------------------- | ---------- | ------------------------ | - | ------------------------- |  | ---------------------- | -------- | - | - | ---------- | 
|                                     |  | Available for sale
 December 31, 2007 |           
|                                     |  |                                       |           
|                                     |  | Amortized
 Cost                       |            | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |         
|                                     |  |                                       |            |                          |   |                           |  |                        |         
|GNMA pass-through
 certificates      |  | $                                     | 318,366    |                          | $ | 12,954                    |  | $                      | (239     | ) | $ | 331,081    | 
|FNMA pass-through
 certificates      |  |                                       | 21,441,471 |                          |   | 155,943                   |  |                        | (105,997 | ) |   | 21,491,417 | 
|FHLMC pass-through
 certificates     |  |                                       | 60,765,390 |                          |   | 239,573                   |  |                        | (637,497 | ) |   | 60,367,466 | 
|Collateralized mortgage
 obligations |  |                                       | 11,875,380 |                          |   | 112,742                   |  |                        | (53,963  | ) |   | 11,934,159 | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 
|Total                                |  | $                                     | 94,400,607 |                          | $ | 521,212                   |  | $                      | (797,696 | ) | $ | 94,124,123 | 
|                                     |  |                                       |            |                          |   |                           |  |                        |          |   |   |            | 

| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the
 three months ended March 31, 2008 a gross loss of approximately $12,000 was
 recognized on the sale of certain mortgage-backed securities. Proceeds from
 these sales were approximately $753,000. There were no sales of
 mortgage-backed securities during the three months ended March 31, 2007.
| |                                                                                                                                                                                                                                                                                                                
| | No
 impairment charge was recognized on mortgage-backed securities during the
 three months ended March 31, 2008 and 2007.                                                                                                                                                                                     

16

---



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | The table
 below sets forth mortgage-backed securities which had an unrealized loss position
 as of March 31, 2008:

|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|---------------------------------------- |  | ------------------------- | ------ | ---------------------- | - | ------------------------- |  | ---------------------- | ---------- | - | - | ---------- | 
|                                         |  | Less than 12 months       |        | More than 12 months    |  
|                                         |  |                           |        |                        |  
|                                         |  | Gross
 Unrealized
 Losses |        | Estimated
 Fair
 Value |   | Gross
 Unrealized
 Losses |  | Estimated
 Fair
 Value |           
|                                         |  |                           |        |                        |   |                           |  |                        |           
|Securities held to maturity:             |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|FNMA pass-through certificates           |  | $                         |       |                        | $ |                          |  | $                      | (268,542   | ) | $ | 12,668,293 | 
|FHLMC pass-through certificates          |  |                           |       |                        |   |                          |  |                        | (290,265   | ) |   | 13,580,065 | 
|Real estate mortgage investment conduits |  |                           |       |                        |   |                          |  |                        | (443,766   | ) |   | 10,641,640 | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|Total securities held to maturity        |  |                           |       |                        |   |                          |  |                        | (1,002,573 | ) |   | 36,889,998 | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|Securities available for
 sale:          |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|FNMA pass-through certificates           |  | $                         | (1,834 | )                      | $ | 165,844                   |  | $                      | (3,551     | ) | $ | 115,678    | 
|FHLMC pass-through certificates          |  |                           |       |                        |   |                          |  |                        | (159,765   | ) |   | 11,500,192 | 
|Real estate mortgage investment conduits |  |                           |       |                        |   |                          |  |                        | (9,429     | ) |   | 728,615    | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|Total securities available for sale      |  |                           | (1,834 | )                      |   | 165,844                   |  |                        | (172,745   | ) |   | 12,344,485 | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 
|Total                                    |  | $                         | (1,834 | )                      | $ | 165,844                   |  | $                      | (1,175,318 | ) | $ | 49,234,483 | 
|                                         |  |                           |        |                        |   |                           |  |                        |            |   |   |            | 

17

---



The table
below sets forth mortgage-backed securities which had an unrealized loss
position as of December 31, 2007:

|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|----------------------------------- |  | --------------------------- | ------- | ------------------------ | - | --------------------------- |  | ------------------------ | ---------- | - | - | ---------- | 
|                                    |  | Less than 12 months         |         | More than 12 months      |  
|                                    |  |                             |         |                          |  
|                                    |  | Gross
  Unrealized
  Losses |         | Estimated
  Fair
  Value |   | Gross
  Unrealized
  Losses |  | Estimated
  Fair
  Value |           
|                                    |  |                             |         |                          |   |                             |  |                          |           
|Securities held to maturity:        |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|FNMA pass-through certificates      |  | $                           |        |                          | $ |                            |  | $                        | (479,332   | ) | $ | 19,757,076 | 
|FHLMC pass-through certificates     |  |                             |        |                          |   |                            |  |                          | (431,116   | ) |   | 13,852,940 | 
|Collateralized mortgage obligations |  |                             |        |                          |   |                            |  |                          | (373,493   | ) |   | 11,060,065 | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|Total securities held to maturity   |  |                             |        |                          |   |                            |  |                          | (1,283,941 | ) |   | 44,670,081 | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|Securities available for sale:      |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|GNMA pass-through certificates      |  |                             | (239    | )                        |   | 48,119                      |  |                          |           |   |   |           | 
|FNMA pass-through certificates      |  |                             | (71,928 | )                        |   | 7,898,284                   |  |                          | (34,069    | ) |   | 5,342,063  | 
|FHLMC pass-through certificates     |  |                             | (9,753  | )                        |   | 5,321,623                   |  |                          | (627,744   | ) |   | 37,492,936 | 
|Collateralized mortgage obligations |  |                             |        |                          |   |                            |  |                          | (53,963    | ) |   | 4,140,352  | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|Total securities available for sale |  |                             | (81,920 | )                        |   | 13,268,026                  |  |                          | (715,776   | ) |   | 46,975,351 | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 
|Total                               |  | $                           | (81,920 | )                        | $ | 13,268,026                  |  | $                        | (1,999,717 | ) | $ | 91,645,432 | 
|                                    |  |                             |         |                          |   |                             |  |                          |            |   |   |            | 

On a quarterly
basis, management of the Company reviews the securities in its investment
portfolio to identify any securities that might have an other-than-temporary
impairment. At March 31, 2008, mortgage-backed securities in a gross unrealized
loss position for twelve months or longer consisted of 24 securities having an
aggregate depreciation of 4.3% from the Companys amortized cost basis.
Mortgage-backed securities in a gross unrealized loss position for less than
twelve months at March 31, 2008, consisted of one security having an aggregate
depreciation of 1.1% from the Companys amortized cost basis. Management has
concluded that the unrealized losses above are temporary in nature. There is no
exposure to subprime loans in our mortgage-backed securities portfolio. The
losses are not related to the underlying credit quality of the issuers, and
they are on securities that have contractual maturity dates. The principal and
interest payments on our mortgage-backed securities have been made as
scheduled, and there is no evidence that the issuer will not continue to do so.
The future principal payments will be sufficient to recover the current
amortized cost of the securities. The unrealized losses above are primarily
related to market interest rates. The current declines in market value are not
significant, and management of the Company believes that these values will
recover as market interest rates decline. The Company has the intent and
ability to hold each of these investments for the time necessary to recover its
cost.

18

---



|   |                                             
|-- | --------------------------------------------
|4. | LOANS RECEIVABLE - NET                      
|   |                                             
|   | Loans
  receivable consist of the following:

|                                          |  |                |             |                   |   |             |  
|----------------------------------------- |  | -------------- | ----------- | ----------------- | - | ----------- | -
|                                          |  | March 31, 2008 |             | December 31, 2007 |  
|                                          |  |                |             |                   |  
|                                          |  |                |             |                   |   |             |  
|One-to
  four-family residential          |  | $              | 435,882,262 |                   | $ | 424,141,281 |  
|Multi-family
  residential and commercial |  |                | 72,063,057  |                   |   | 77,137,944  |  
|Construction                              |  |                | 174,572,027 |                   |   | 168,711,266 |  
|Home equity
  lines of credit             |  |                | 26,979,266  |                   |   | 33,091,306  |  
|Commercial
  business loans               |  |                | 32,272,202  |                   |   | 29,373,909  |  
|Consumer
  non-real estate loans          |  |                | 6,287,616   |                   |   | 7,913,758   |  
|                                          |  |                |             |                   |   |             |  
|                                          |  |                |             |                   |   |             |  
|Total loans                               |  |                | 748,056,430 |                   |   | 740,369,464 |  
|                                          |  |                |             |                   |   |             |  
|Less:                                     |  |                |             |                   |   |             |  
|Construction loans in process             |  |                | (51,978,111 | )                 |   | (55,798,973 | )
|Deferred loan fees, net                   |  |                | (612,342    | )                 |   | (721,257    | )
|Allowance for loan losses                 |  |                | (1,850,101  | )                 |   | (1,811,121  | )
|                                          |  |                |             |                   |   |             |  
|                                          |  |                |             |                   |   |             |  
|Loans
  receivablenet                    |  | $              | 693,615,876 |                   | $ | 682,038,113 |  
|                                          |  |                |             |                   |   |             |  

|                                                                      |  |                                     |           |                                |   |           |  
|--------------------------------------------------------------------- |  | ----------------------------------- | --------- | ------------------------------ | - | --------- | -
|Following is
  a summary of changes in the allowance for loan losses: |  |                                     |           |                               
|                                                                      |  |                                     |           |                                |   |           |  
|                                                                      |  | Three Months Ended
  March 31, 2008 |           | Year Ended
  December 31, 2007 |  
|                                                                      |  |                                     |           |                                |  
|                                                                      |  |                                     |           |                                |   |           |  
|Balancebeginning of year                                             |  | $                                   | 1,811,121 |                                | $ | 1,602,613 |  
|Provision for loan losses                                             |  |                                     | 49,140    |                                |   | 457,192   |  
|Charge-offs                                                           |  |                                     | (16,469   | )                              |   | (275,321  | )
|Recoveries                                                            |  |                                     | 6,309     |                                |   | 26,637    |  
|                                                                      |  |                                     |           |                                |   |           |  
|(Charge-offs)/recoveriesnet                                          |  |                                     | (10,160   | )                              |   | (248,684  | )
|                                                                      |  |                                     |           |                                |   |           |  
|                                                                      |  |                                     |           |                                |   |           |  
|Balanceend of period                                                 |  | $                                   | 1,850,101 |                                | $ | 1,811,121 |  
|                                                                      |  |                                     |           |                                |   |           |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
  provision for loan losses charged to expense is based upon past loan loss
  experience and an evaluation of losses in the current loan portfolio,
  including the evaluation of impaired loans. A loan is considered to be
  impaired when, based upon current information and events, it is probable that
  the Company will be unable to collect all amounts due according to the contractual
  terms of the loan. An insignificant delay or insignificant shortfall in
  amount of payments does not necessarily result in the loan being identified
  as impaired. For this purpose, delays less than 90 days are considered to be
  insignificant. During the periods presented, loan impairment was evaluated
  based on the fair value of the loans collateral. Impairment losses are
  included in the provision for loan losses. Large groups of smaller balance,
  homogeneous loans are collectively evaluated for impairment. Loans
  collectively evaluated for impairment include smaller balance commercial real
  estate loans, residential real estate loans and consumer loans.

19

---



As of March
31, 2008 and December 31, 2007, the recorded investment in loans that were
considered to be impaired was as follows.

|                                               |  |                 |           |                     |   |           | 
|---------------------------------------------- |  | --------------- | --------- | ------------------- | - | --------- | 
|                                               |  | March 31
  2008 |           | December 31,
  2007 |  
|                                               |  |                 |           |                     |  
|                                               |  |                 |           |                     |   |           | 
|Impaired
  collateral-dependent loans          |  | $               | 467,869   |                     | $ | 1,445,255 | 
|                                               |  |                 |           |                     |   |           | 
|Average balance of impaired
  loans            |  | $               | 1,305,346 |                     | $ | 3,996,347 | 
|                                               |  |                 |           |                     |   |           | 
|Interest income recognized
  on impaired loans |  | $               |          |                     | $ | 175,950   | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result
  of the Companys measurement of impaired loans, no allowance for loan losses
  was established for the impaired loans recorded at March 31, 2008 or December
  31, 2007. No reserve was considered necessary based on the appraised values
  of the properties collateralizing these loans, as well as the value of
  additional collateral available.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Non-accrual
  loans at March 31, 2008 and December 31, 2007, amounted to approximately
  $468,000 and $1.4 million, respectively. Commercial loans and commercial real
  estate loans are placed on non-accrual at the time the loan is 90 days
  delinquent unless the credit is well secured and in the process of
  collection. Commercial loans are charged off when the loan is deemed
  uncollectible. Residential real estate loans are typically placed on
  non-accrual only when the loan is 120 days delinquent and not well secured
  and in the process of collection. Other consumer loans are typically charged off
  at 90 days delinquent. In all cases, loans must be placed on non-accrual or
  charged off at an earlier date if collection of principal or interest is
  considered doubtful. Non-performing loans, which consist of non-accruing
  loans plus accruing loans 90 days or more past due, at March 31, 2008 and
  December 31, 2007, amounted to approximately $561,000 and $1.6 million,
  respectively. Real estate owned at March 31, 2008 and December 31, 2007
  amounted to approximately $2.6 million and $1.6 million, respectively. During
  the first quarter of 2008, the collateral property underlying three
  commercial real estate loans to one borrower was acquired as real estate
  owned at a value of approximately $977,000. These loans had previously been
  classified as non-accrual. No loss was recognized in conjunction with these
  acquisitions.

Interest
payments on impaired loans and non-accrual loans are typically applied to
principal unless the ability to collect the principal amount is fully assured,
in which case interest is recognized on the cash basis. For the three months
ended March 31, 2008 and 2007 no cash basis interest income was recognized.
Interest income foregone on non-accrual loans for the three months ended March
31, 2008 and 2007 was approximately $24,000 and $54,000, respectively.

20

---



|   |                                                                                              
|-- | ---------------------------------------------------------------------------------------------
|5. | DEFERRED INCOME TAXES                                                                        
|   |                                                                                              
|   | Items that
  gave rise to significant portions of the deferred tax balances are as
  follows:

|                                                 |  |                |            |                   |   |           |  
|------------------------------------------------ |  | -------------- | ---------- | ----------------- | - | --------- | -
|                                                 |  | March 31, 2008 |            | December 31, 2007 |  
|                                                 |  |                |            |                   |  
|                                                 |  |                |            |                   |   |           |  
|Deferred tax assets:                             |  |                |            |                   |   |           |  
|Allowance for loan losses                        |  | $              | 629,034    |                   | $ | 615,781   |  
|Deferred compensation                            |  |                | 1,776,037  |                   |   | 1,624,419 |  
|Property and equipment                           |  |                | 101,933    |                   |   | 90,375    |  
|                                                 |  |                |            |                   |   |           |  
|                                                 |  |                |            |                   |   |           |  
|Total deferred tax assets                        |  |                | 2,507,004  |                   |   | 2,330,575 |  
|                                                 |  |                |            |                   |   |           |  
|                                                 |  |                |            |                   |   |           |  
|Deferred tax liabilities:                        |  |                |            |                   |   |           |  
|Unrealized gain on securities
available-for-sale |  |                | (917,723   | )                 |   | (102,538  | )
|Deferred loan fees, net                          |  |                | (316,700   | )                 |   | (319,199  | )
|Other                                            |  |                | (16,555    | )                 |   | (16,787   | )
|                                                 |  |                |            |                   |   |           |  
|                                                 |  |                |            |                   |   |           |  
|Total deferred tax liabilities                   |  |                | (1,250,978 | )                 |   | (438,524  | )
|                                                 |  |                |            |                   |   |           |  
|                                                 |  |                |            |                   |   |           |  
|Net deferred tax asset                           |  | $              | 1,256,026  |                   | $ | 1,892,051 |  
|                                                 |  |                |            |                   |   |           |  

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | PENSION, PROFIT SHARING AND STOCK COMPENSATION PLANS                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In addition
  to the plans disclosed below, the Company also maintains an executive
  deferred compensation plan for selected executive officers, which was frozen
  retroactive to January 1, 2005, a board of directors deferred compensation
  plan for directors, and a 401(k) retirement plan for substantially all of its
  employees. Further detail of these plans can be obtained from the Companys
  Annual Report on Form 10-K for the period ended December 31, 2007.

21

---



| |                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Supplemental Retirement Plan                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                               
| | The Company
  maintains a nonqualified, unfunded, defined benefit pension plan for the
  Board of Directors and certain officers. The components of net periodic
  pension cost and other changes in the amounts recognized in accumulated other
  comprehensive income (loss) are as follows:

|                                                                                                                    |  |                              |         |      |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | ---- | - | ------- | -
|                                                                                                                    |  | Three Months Ended March 31, |        
|                                                                                                                    |  |                              |        
|                                                                                                                    |  | 2008                         |         | 2007 |  
|                                                                                                                    |  |                              |         |      |  
|                                                                                                                    |  |                              |         |      |   |         |  
|Components of net periodic pension cost:                                                                            |  |                              |         |      |   |         |  
|Service cost                                                                                                        |  | $                            | 35,623  |      | $ | 35,586  |  
|Interest cost                                                                                                       |  |                              | 38,896  |      |   | 35,933  |  
|Expected return on assets                                                                                           |  |                              |        |      |   |        |  
|Amortization of prior service cost                                                                                  |  |                              | 30,481  |      |   | 30,481  |  
|                                                                                                                    |  |                              |         |      |   |         |  
|Net periodic pension cost                                                                                           |  | $                            | 105,000 |      | $ | 102,000 |  
|                                                                                                                    |  |                              |         |      |   |         |  
|Other changes in plan assets and benefit obligations recognized in
  accumulated other comprehensive income (loss): |  |                              |         |      |   |         |  
|Amortization of prior service cost                                                                                  |  |                              | (20,117 | )    |   | (20,117 | )
|                                                                                                                    |  |                              |         |      |   |         |  
|Total recognized in accumulated other comprehensive income
(loss)                                                   |  |                              | (20,117 | )    |   | (20,117 | )
|                                                                                                                    |  |                              |         |      |   |         |  
|Total recognized in net periodic pension cost and accumulated other
  comprehensive income (loss)                   |  | $                            | 84,883  |      | $ | 81,883  |  
|                                                                                                                    |  |                              |         |      |   |         |  

|                                                                                                       |  |                              |      |      |  |      |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ---- | ---- |  | ---- | -
|The
  following weighted average assumptions were used in calculating the net
  periodic pension cost: | 
|                                                                                                       | 
|                                                                                                       |  | Three Months Ended March 31, |     
|                                                                                                       |  |                              |     
|                                                                                                       |  | 2008                         |      | 2007 | 
|                                                                                                       |  |                              |      |      | 
|                                                                                                       |  |                              |      |      |  |      |  
|Discount rate                                                                                          |  |                              | 5.89 | %    |  | 5.75 | %
|Rate of return on assets                                                                               |  |                              | n/a  |      |  | n/a  |  
|Rate of increase in future
  board fees/salary levels                                                  |  |                              | 4.00 | %    |  | 4.00 | %
|                                                                                                       |  |                              |      |      |  |      |  

Amounts
  related to the plan have been recognized in the balance sheet in accumulated
  other comprehensive income (loss), net of tax, as follows:

|                                                                          |  |                  |          |                     |   |          |  
|------------------------------------------------------------------------- |  | ---------------- | -------- | ------------------- | - | -------- | -
|                                                                          |  | March 31,
  2008 |          | December 31,
  2007 |  
|                                                                          |  |                  |          |                     |  
|                                                                          |  |                  |          |                     |   |          |  
|Amount recognized in accumulated other
  comprehensive income (loss) for: |  |                  |          |                     |   |          |  
|Net actuarial loss                                                        |  | $                | (47,326  | )                   | $ | (47,326  | )
|Prior service cost                                                        |  |                  | (356,997 | )                   |   | (377,114 | )
|                                                                          |  |                  |          |                     |   |          |  
|Total recognized in accumulated other
  comprehensive income (loss)       |  | $                | (404,323 | )                   | $ | (424,440 | )
|                                                                          |  |                  |          |                     |   |          |  

22

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | In 2004, the
 Bank established an employee stock ownership plan (ESOP) for substantially
 all of its full-time employees. Certain senior officers of the Bank have been
 designated as Trustees of the ESOP. Shares of the Companys common stock
 purchased by the ESOP are held in a suspense account until released for
 allocation to participants. Shares released are allocated to each eligible
 participant based on the ratio of each such participants base compensation
 to the total base compensation of all eligible plan participants. As the
 unearned shares are committed to be released and allocated among
 participants, the Company recognizes compensation expense equal to the
 average market price of the shares. Under this plan, during 2004 and 2005 the
 ESOP acquired 914,112 shares (as adjusted for the exchange ratio as part of
 the June 2007 second-step conversion) of common stock for approximately $7.4
 million, an average price of $8.06 per share (as adjusted). These shares are
 expected to be released over a 15-year period. In June 2007, the ESOP
 acquired an additional 1,042,771 shares of the Companys common stock for
 approximately $10.4 million, an average price of $10.00 per share. These
 shares are expected to be released over a 30-year period. No additional
 purchases are expected to be made by the ESOP. At March 31, 2008, the ESOP
 held approximately 1.8 million unallocated shares of Company common stock
 with a fair value of $17.9 million and approximately 122,000 allocated shares
 with a fair value of $1.3 million. During the three-month periods ended March
 31, 2008 and 2007 approximately 24,000 and 15,000 shares, respectively, were
 committed to be released to participants, resulting in recognition of
 approximately $233,000 and $184,000 in compensation expense, respectively.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Recognition and Retention Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | In June
 2005, the shareholders of Abington Community Bancorp approved the adoption of
 the 2005 Recognition and Retention Plan (the 2005 RRP). As a result of the
 second-step conversion, the 2005 RRP became a stock benefit plan of the
 Company and the shares of Abington Community Bancorp held by the 2005 RRP
 were converted to shares of Company common stock. Certain senior officers of
 the Bank have been designated as Trustees of the 2005 RRP. The 2005 RRP
 provides for the grant of shares of common stock of the Company to certain
 officers, employees and directors of the Company. In order to fund the 2005
 RRP, the 2005 Recognition Plan Trust (the 2005 Trust) acquired 457,056
 shares (adjusted for the second-step conversion exchange ratio) of common
 stock in the open market for approximately $3.7 million, an average price of
 $8.09 per share (as adjusted). The Company made sufficient contributions to
 the 2005 Trust to fund the purchase of these shares. No additional purchases
 are expected to be made by the 2005 Trust under this plan. Pursuant to the
 terms of the plan, all 457,056 shares acquired by the 2005 Trust have been
 granted to certain officers, employees and directors of the Company. 2005 RRP
 shares generally vest at the rate of 20% per year over five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In January
 2008, the shareholders of the Company approved the adoption of the 2007
 Recognition and Retention Plan (the 2007 RRP). In order to fund the 2007
 RRP, the 2007 Recognition Plan Trust (the 2007 Trust) will acquire 520,916
 shares of the Companys common stock in the open market. The Company will
 make sufficient contributions to the 2007 Trust to fund the purchase of these
 shares. As of March 31, 2008, the 2007 Trust had acquired 304,401 shares for
 approximately $3.0 million, an average price of $9.97 per share. Pursuant to
 the terms of the plan, 517,200 shares acquired by the 2007 Trust were granted
 to certain officers, employees and directors of the Company in January 2008,
 with 3,716 shares remaining available for future grant. 2007 RRP shares
 generally vest at the rate of 20% per year over five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

23

---



| |                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A summary of
 the status of the shares under the 2005 and 2007 RRP as of March 31, 2008 and
 2007, and changes during the three months ended March 31, 2008 and 2007 are
 presented below. The number of shares and weighted average grant date fair
 value for the prior period have been adjusted for the exchange ratio as a
 result of our second-step conversion:

|                                        |  |                              |         |                                          |   |                   |  |                                          |         |  |   |      | 
|--------------------------------------- |  | ---------------------------- | ------- | ---------------------------------------- | - | ----------------- |  | ---------------------------------------- | ------- |  | - | ---- | 
|                                        |  | Three Months Ended March 31, |        
|                                        |  |                              |        
|                                        |  | 2008                         |         | 2007                                     |  
|                                        |  |                              |         |                                          |  
|                                        |  | Number of
 shares            |         | Weighted
 average grant
 date fair value |   | Number of
 shares |  | Weighted
 average grant
 date fair value |        
|                                        |  |                              |         |                                          |   |                   |  |                                          |        
|                                        |  |                              |         |                                          |   |                   |  |                                          |         |  |   |      | 
|Nonvested at the beginning
 of the year |  |                              | 274,874 |                                          | $ | 7.54              |  |                                          | 366,285 |  | $ | 7.54 | 
|Granted                                 |  |                              | 517,200 |                                          |   | 9.11              |  |                                          |        |  |   |     | 
|Vested                                  |  |                              |        |                                          |   |                  |  |                                          |        |  |   |     | 
|Forfeited                               |  |                              |        |                                          |   |                  |  |                                          |        |  |   |     | 
|Nonvested at the end of the
 period     |  |                              | 792,074 |                                          | $ | 8.57              |  |                                          | 366,285 |  | $ | 7.54 | 
|                                        |  |                              |         |                                          |   |                   |  |                                          |         |  |   |      | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Compensation
 expense on RRP shares granted is recognized ratably over the five year
 vesting period in an amount which totals the market price of the common stock
 at the date of grant. During the three-month periods ended March 31, 2008 and
 2007, approximately 40,000 and 23,000 shares, respectively, were amortized to
 expense, based on the proportional vesting of the awarded shares, resulting
 in recognition of approximately $329,000 and $172,000 in compensation
 expense, respectively. A tax benefit of approximately $112,000 and $59,000,
 respectively, was recognized during these periods. As of March 31, 2008,
 approximately $6.1 million in additional compensation expense will be recognized
 over the remaining lives of the RRP awards. At March 31, 2008, the weighted
 average remaining lives of the RRP awards was approximately 3.9 years.                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | In June
 2005, the shareholders of Abington Community Bancorp also approved the adoption
 of the 2005 Stock Option Plan (the 2005 Option Plan). As a result of the
 second-step conversion, the 2005 Option Plan became a stock benefit plan of
 the Company. Unexercised options which were previously granted under the 2005
 Option Plan were adjusted by the 1.6 exchange ratio as a result of the
 second-step conversion and have been converted into options to acquire
 Company common stock. The 2005 Option Plan authorizes the grant of stock
 options to officers, employees and directors of the Company to acquire shares
 of common stock with an exercise price equal to the fair market value of the
 common stock on the grant date. Options will generally become vested and
 exercisable at the rate of 20% per year over five years and are generally
 exercisable for a period of ten years after the grant date. As of March 31,
 2008, a total of 1,142,640 shares of common stock have been reserved for
 future issuance pursuant to the 2005 Option Plan of which 7,460 shares remain
 available for grant.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | In January
 2008, the shareholders of the Company also approved the adoption of the 2007
 Stock Option Plan (the 2007 Option Plan). Options will generally become
 vested and exercisable at the rate of 20% per year over five years and are
 generally exercisable for a period of ten years after the grant date. As of
 March 31, 2008, a total of 1,302,990 shares of common stock have been
 reserved for future issuance pursuant to the 2007 Option Plan of which
 1,247,500 shares were granted in January 2008 and of which 55,490 shares
 remain available for future grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | A summary of
 the status of the Companys stock options under the 2005 and 2007 Option
 Plans as of March 31, 2008 and 2007, and changes during the three months
 ended March 31, 2008 and 2007  are
 presented below. The number of options and weighted average exercise price
 for the prior period have been adjusted for the exchange ratio as a result of
 our second-step conversion:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

24

---



|                                          |  |                              |           |                                   |   |                   |  |                                   |           |  |   |      | 
|----------------------------------------- |  | ---------------------------- | --------- | --------------------------------- | - | ----------------- |  | --------------------------------- | --------- |  | - | ---- | 
|                                          |  | Three Months Ended March 31, |          
|                                          |  |                              |          
|                                          |  | 2008                         |           | 2007                              |  
|                                          |  |                              |           |                                   |  
|                                          |  | Number of
 shares            |           | Weighted
 average
 exercise price |   | Number of
 shares |  | Weighted
 average
 exercise price |          
|                                          |  |                              |           |                                   |   |                   |  |                                   |          
|                                         
|Outstanding at the
 beginning of the year |  |                              | 1,135,180 |                                   | $ | 7.74              |  |                                   | 1,065,680 |  | $ | 7.62 | 
|Granted                                   |  |                              | 1,247,500 |                                   |   | 9.11              |  |                                   |          |  |   |     | 
|Exercised                                 |  |                              |          |                                   |   |                  |  |                                   |          |  |   |     | 
|Forfeited                                 |  |                              |          |                                   |   |                  |  |                                   |          |  |   |     | 
|                                          |  |                              |           |                                   |   |                   |  |                                   |           |  |   |      | 
|Outstanding at the end of
 the period     |  |                              | 2,382,680 |                                   | $ | 8.46              |  |                                   | 1,065,680 |  | $ | 7.62 | 
|                                          |  |                              |           |                                   |   |                   |  |                                   |           |  |   |      | 
|Exercisable at the end of
 the period     |  |                              | 418,224   |                                   | $ | 7.57              |  |                                   | 205,088   |  | $ | 7.52 | 
|                                          |  |                              |           |                                   |   |                   |  |                                   |           |  |   |      | 

| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | The
 following table summarizes all stock options outstanding (as adjusted for the
 exchange ratio) under the Option Plan as of March 31, 2008:

|                 |  |                     |           |                                   |   |                                               |  |                   |     |                                   |   |           |  |   |       | 
|---------------- |  | ------------------- | --------- | --------------------------------- | - | --------------------------------------------- |  | ----------------- | --- | --------------------------------- | - | --------- |  | - | ----- | 
|                 |  | Options Outstanding |           | Options Exercisable               |  
|                 |  |                     |           |                                   |  
|Exercise Price   |  | Number of
 Shares   |           | Weighted
 Average
 Exercise Price |   | Weighted Average
 Remaining
 Contractual Life |  | Number of
 Shares |     | Weighted
 Average
 Exercise Price |  
|                 |  |                     |           |                                   |   |                                               |  |                   |     |                                   |  
|                 |  |                     |           |                                   |   | (in
years)                                    |  |                   |     |                                   |  
|                
|$7.51            |  |                     | 1,018,240 |                                   | $ | 7.51                                          |  |                   | 7.3 |                                   |   | 407,296   |  | $ | 7.51  | 
|8.35             |  |                     | 7,200     |                                   |   | 8.35                                          |  |                   | 7.7 |                                   |   | 2,880     |  |   | 8.35  | 
|9.11             |  |                     | 1,247,500 |                                   |   | 9.11                                          |  |                   | 9.8 |                                   |   |          |  |   |      | 
|9.63             |  |                     | 69,500    |                                   |   | 9.63                                          |  |                   | 9.4 |                                   |   |          |  |   |      | 
|10.18            |  |                     | 40,240    |                                   |   | 10.18                                         |  |                   | 8.6 |                                   |   | 8,048     |  |   | 10.18 | 
|                 |  |                     |           |                                   |   |                                               |  |                   |     |                                   |   |           |  |   |       | 
|Total            |  |                     | 2,382,680 |                                   | $ | 8.46                                          |  |                   | 8.7 |                                   |   | 418,224   |  | $ | 7.57  | 
|                 |  |                     |           |                                   |   |                                               |  |                   |     |                                   |   |           |  |   |       | 
|Intrinsic
 value |  | $                   | 4,438,502 |                                   |   |                                               |  |                   |     |                                   | $ | 1,151,302 |  |   |       | 
|                 |  |                     |           |                                   |   |                                               |  |                   |     |                                   |   |           |  |   |       | 

| |                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
 estimated fair value of options granted in January 2008 was $2.13 per share.
 The fair value was estimated on the date of grant in accordance with SFAS No.
 123R using the Black-Scholes Single Option Pricing Model with the following
 weighted average assumptions used:

|                         |  |  |              |  
|------------------------ |  |  | ------------ | -
|Dividend yield           |  |  | 1.88         | %
|Expected volatility      |  |  | 23.25        | %
|Risk-free interest rate  |  |  | 3.13
 - 3.49 | %
|Expected life of options |  |  | 4
 - 7 years |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The dividend
 yield was calculated based on the dividend amount and stock price existing at
 the grant date taking into consideration expected increases in the dividend
 and stock price over the lives of the options. The actual dividend yield may
 differ from this assumption. The risk-free interest rate used was based on
 the rates of treasury securities with maturities equal to the expected lives
 of the options.

25

---



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | As the
 Company has a limited history of granting option awards, management made
 certain assumptions regarding the exercise behavior of recipients without the
 use of any prior exercise behavior as a basis. Assumptions of exercise
 behavior were made on an individual basis for directors and executive
 officers and general assumptions were made for the remainder of employees. In
 making these assumptions, management considered the age and financial status
 of recipients in addition to other qualitative factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The expected
 volatility was based on and calculated from the historical volatility of our
 stock, as it was determined that this would be the most reliable estimate of
 future stock volatility. The actual future volatility may differ from our
 historical volatility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | During the
 three months ended March 31, 2008 and 2007, approximately $197,000 and
 $98,000, respectively, was recognized in compensation expense for the Option
 Plans. A tax benefit of approximately $18,000 and $9,000, respectively, was
 recognized during each of these periods. At March 31, 2008, approximately
 $3.7 million in additional compensation expense for awarded options remained
 unrecognized. The weighted average period over which this expense will be
 recognized is approximately 4.0 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|7. | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Bank had
 approximately $8.8 million in outstanding mortgage loan commitments at March
 31, 2008. The commitments are expected to be funded within 90 days with
 approximately $8.8 million in fixed rate loans with interest rates ranging
 from 5.375% to 6.5%. The Bank had approximately $5.0 million in outstanding
 mortgage loan commitments at December 31, 2007. These loans were not
 originated for resale. Also outstanding at March 31, 2008 and December 31,
 2007, were unused lines of credit totaling approximately $66.2 million and
 $65.2 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Letters of
 credit are conditional commitments issued by the Bank guaranteeing payments
 of drafts in accordance with the terms of the letter of credit agreements.
 Commercial letters of credit are used primarily to facilitate trade or
 commerce and are also issued to support public and private borrowing
 arrangements, bond financings and similar transactions. Standby letters of
 credit are conditional commitments issued by the Bank to guarantee the
 performance of a customer to a third party. Collateral may be required to
 support letters of credit based upon managements evaluation of the
 creditworthiness of each customer. The credit risk involved in issuing
 letters of credit is substantially the same as that involved in extending
 loan facilities to customers. Most of the Banks letters of credit expire
 within one year. At March 31, 2008 and December 31, 2007, the Bank had
 letters of credit outstanding of approximately $17.0 million and $17.2 million,
 respectively, of which $15.6 million and $15.8 million, respectively, were
 standby letters of credit. At March 31, 2008 and December 31, 2007, the
 uncollateralized portion of the letters of credit extended by the Bank was
 approximately $99,000 and $97,000, respectively. At March 31, 2008 and
 December 31, 2007, all of the uncollateralized letters of credit were for
 standby letters of credit.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company
 is subject to various pending claims and contingent liabilities arising in
 the normal course of business which are not reflected in the accompanying
 consolidated financial statements. Management considers that the aggregate
 liability, if any, resulting from such matters will not be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Among the
 Companys contingent liabilities, are exposures to limited recourse
 arrangements with respect to the Banks sales of whole loans and
 participation interests. At March 31, 2008, the exposure, which represents a
 portion of credit risk associated with the sold interests, amounted to $185,000.
 The exposure is for the life of the related loans and payable, on our
 proportional share, as losses are incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

26

---



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. | FAIR VALUE MEASUREMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company
 uses fair value measurements to record fair value adjustments to certain
 assets to determine fair value disclosures. Investment and mortgage-backed
 securities available for sale are recorded at fair value on a recurring
 basis. Additionally, from time to time, the Company may be required to record
 at fair value other assets on a nonrecurring basis, such as impaired loans,
 real estate owned and certain other assets. These nonrecurring fair value
 adjustments typically involve application of lower-of-cost-or-market
 accounting or write-downs of individual assets.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Under SFAS
 No. 157, Fair Value Measurements,
 the Company groups its assets at fair value in three levels, based on the
 markets in which the assets are traded and the reliability of the assumptions
 used to determine fair value. These levels are:                                                                                                                                                                                                                                                                                                                                                

| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under SFAS
 No. 157, the Company bases its fair values on the price that would be
 received to sell an asset or paid to transfer a liability in an orderly
 transaction between market participants at the measurement date. It is our
 policy to maximize the use of observable inputs and minimize the use of
 unobservable inputs when developing fair value measurements, in accordance
 with the fair value hierarchy in SFAS No. 157.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Fair value
 measurements for assets where there exists limited or no observable market
 data and, therefore, are based primarily upon the Companys or other
 third-partys estimates, are often calculated based on the characteristics of
 the asset, the economic and competitive environment and other such factors.
 Therefore, the results cannot be determined with precision and may not be
 realized in an actual sale or immediate settlement of the asset.
 Additionally, there may be inherent weaknesses in any calculation technique,
 and changes in the underlying assumptions used, including discount rates and
 estimates of future cash flows, that could significantly affect the results
 of current or future valuations. At March 31, 2008, the Company did not have
 any assets that were measured at fair value on a recurring basis that use
 Level 3 measurements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Following is
 a description of valuation methodologies used for assets recorded at fair
 value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Investment and Mortgage-backed Securities
 Available for SaleInvestment and
 mortgage-backed securities available for sale are recorded at fair value on a
 recurring basis. Fair value measurements for these securities are typically obtained
 from independent pricing services that we have engaged for this purpose. When
 available, we, or our independent pricing service, use quoted market prices to measure
  fair value. If market prices are not available, fair value measurement is
  based upon models that incorporate available trade, bid and other market
  information and for structured securities, cash flow and, when available,
  loan performance data. Because many fixed income securities do not trade on a
  daily basis, our independent pricing services applications apply available
  information as applicable through processes such as benchmark curves, benchmarking
  of like securities, sector groupings and matrix pricing to prepare
  evaluations. For each asset class, pricing applications and models are based
  on information from market sources and integrate relevant credit information.
  All of our securities available for sale are valued using either of the
  foregoing methodologies to determine fair value adjustments recorded to our
  financial statements. Level 1 securities include equity securities such as
  common stock and mutual funds traded on active exchanges. Level 2 securities
  include corporate bonds, agency bonds, municipal bonds, certificates of
  deposit, mortgage-backed securities, and collateralized mortgage obligations.

27

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Real Estate OwnedReal estate owned includes foreclosed
  properties securing commercial and construction loans. Real estate properties
  acquired through foreclosure are initially recorded at the fair value of the
  property at the date of foreclosure. After foreclosure, valuations are
  periodically performed by management and the real estate is carried at the
  lower of cost or fair value less estimated costs to sell. Fair value is
  generally based upon independent market prices or appraised value of the
  collateral. Our appraisals are typically performed by independent third party
  appraisers. For appraisals of commercial and construction properties,
  comparable properties within the area may not be available. In such
  circumstances, our appraisers will rely on certain judgments in determining
  how a specific property compares in value to other properties that are not
  identical in design or in geographic area. Our current portfolio of real
  estate owned is comprised of such properties and, accordingly, we classify
  real estate owned as Level 3. Our increase in real estate owned during the
  quarter was due solely to additions to that category of asset. No valuation
  allowances or changes in value were recognized during the quarter.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The table
  below presents the balances of asset measured at fair value on a recurring
  basis:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                              |  |                |             |         |   |           |  |         |             |  |   |   | 
|--------------------------------------------- |  | -------------- | ----------- | ------- | - | --------- |  | ------- | ----------- |  | - | - | 
|                                              |  | March 31, 2008 |            
|                                              |  |                |            
|                                              |  | Total          |             | Level 1 |   | Level 2   |  | Level 3 |            
|                                              |  |                |             |         |   |           |  |         |            
|                                              |  |                |             |         |   |           |  |         |             |  |   |   | 
|Investments securities available for sale     |  | $              | 92,730,585  |         | $ | 3,126,232 |  | $       | 89,604,353  |  | $ |  | 
|Mortgage-backed securities available for sale |  |                | 107,244,647 |         |   |          |  |         | 107,244,647 |  |   |  | 
|                                              |  |                |             |         |   |           |  |         |             |  |   |   | 
|                                             
|Total                                         |  | $              | 199,975,232 |         | $ | 3,126,232 |  | $       | 196,849,000 |  | $ |  | 
|                                              |  |                |             |         |   |           |  |         |             |  |   |   | 

28

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| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For assets
  measured at fair value on a nonrecurring basis in 2008 that were still held
  at the end of the period, the following table provides the level of valuation
  assumptions used to determine each adjustment an the carrying value of the
  related individual assets or portfolios at March 31, 2008:

|                  |  |                |           |         |   |         |  |         |   |                          |   |           |  |   |   | 
|----------------- |  | -------------- | --------- | ------- | - | ------- |  | ------- | - | ------------------------ | - | --------- |  | - | - | 
|                  |  | March 31, 2008 |          
|                  |  |                |          
|                  |  | Total          |           | Level 1 |   | Level 2 |  | Level 3 |   | Total
  Gains
  (Losses) |  
|                  |  |                |           |         |   |         |  |         |   |                          |  
|                  |  |                |           |         |   |         |  |         |   |                          |   |           |  |   |   | 
|Real estate owned |  | $              | 2,630,603 |         | $ |        |  | $       |  |                          | $ | 2,630,603 |  | $ |  | 
|                  |  |                |           |         |   |         |  |         |   |                          |   |           |  |   |   | 
|                 
|Total             |  | $              | 2,630,603 |         | $ |        |  | $       |  |                          | $ | 2,630,603 |  | $ |  | 
|                  |  |                |           |         |   |         |  |         |   |                          |   |           |  |   |   | 

ITEM 2.  MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OverviewThe Company was formed by the Bank in
connection with the Banks second-step conversion and reorganization, completed
on June 27, 2007. Previously, Abington Community Bancorp was the mid-tier
holding company for the Bank, and Abington Mutual Holding Company owned
approximately 57% of Abington Community Bancorps outstanding stock. Upon
completion of the second-step reorganization, Abington Community Bancorp, Inc.
and Abington Mutual Holding Company ceased to exist and the Company became the
holding company for the Bank. The Bank is now a wholly owned subsidiary of the
Company.

The Companys
results of operations are primarily dependent on the results of the Bank. The
Banks results of operations depend to a large extent on net interest income,
which is the difference between the income earned on its loan and investment
portfolios and the cost of funds, which is the interest paid on deposits and
borrowings. Results of operations are also affected by our provisions for loan
losses, service charges and other non-interest income and non-interest expense.
Non-interest expense principally consists of salaries and employee benefits,
office occupancy and equipment expense, professional services expense, data
processing expense, advertising and promotions and other expense. Our results
of operations are also significantly affected by general economic and
competitive conditions, particularly changes in interest rates, government
policies and actions of regulatory authorities. Future changes in applicable
laws, regulations or government policies may materially impact our financial
condition and results of operations. The Bank is subject to regulation by the
Federal Deposit Insurance Corporation (FDIC) and the Pennsylvania Department
of Banking. The Banks executive offices and loan processing office are in
Jenkintown, Pennsylvania, with eleven other full service branches and six
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, primarily residential
mortgages.

We earned net
income of $1.9 million for the quarter ended March 31, 2008, representing an
increase of $456,000 or 31.2% over the comparable 2007 period. Basic and
diluted earnings per share increased to $0.09 and $0.08, respectively, for the
quarter compared to $0.06 and $0.06, respectively, for the first quarter of
2007. Earnings per share for the 2007 period have been adjusted to reflect the
impact of the second-step conversion and reorganization of the Company, which
occurred on June 27, 2007.

Net interest
income was $6.9 million for the three months ended March 31, 2008, representing
an increase of $1.4 million or 25.3% over the comparable 2007 period. Although
our average interest rate spread decreased slightly to 1.90% for the first
quarter of 2008 from 1.93% for the first quarter of 2007, our net interest
margin increased 22 basis points to 2.72% for the first quarter of 2008 from
2.50% for the first quarter of 2007. Our total interest income for the three
months ended March 31, 2008 increased $977,000 or 7.4% over the comparable 2007
period. Our total interest expense for the three months ended March 31, 2008
decreased $413,000 or 5.4% over the comparable 2007 period to $7.3 million,
further increasing our net interest income quarter-over-quarter.

29

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Our total
non-interest income for the first quarter of 2008 amounted to $953,000,
representing an increase of $266,000 or 38.7% from the first quarter of 2007.
Our total non-interest expenses for the first quarter of 2008 amounted to $5.2
million, representing an increase of $989,000 or 23.6% from the first quarter
of 2007.

The Companys
total assets increased $28.3 million, or 2.6%, to $1.1 billion at March 31,
2008 compared to $1.1 billion at December 31, 2007, due primarily to increases
in the aggregate balance of investment and mortgage-backed securities and loans
receivable. Our total deposits increased $24.5 million or 4.0% to $634.1
million at March 31, 2008 compared to $609.6 million at December 31, 2007 with
growth in all types of deposit accounts. Our total stockholders equity
increased slightly to $250.0 million at March 31, 2008 from $249.9 million at
December 31, 2007.

Critical Accounting
Policies, Judgments and EstimatesIn reviewing and understanding financial
information for Abington Bancorp, Inc., you are encouraged to read and
understand the significant accounting policies used in preparing our
consolidated financial statements. These policies are described in Note 1 of
the notes to our unaudited consolidated financial statements. The accounting
and financial reporting policies of Abington Bancorp, Inc. conform to
accounting principles generally accepted in the United States of America and to
general practices within the banking industry. The preparation of the Companys
consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Management evaluates these estimates and assumptions on an ongoing
basis including those related to the allowance for loan losses and deferred
income taxes. Management bases its estimates on historical experience and
various other factors and assumptions that are believed to be reasonable under
the circumstances. These form the bases for making judgments on the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.

Allowance for Loan
LossesThe
allowance for loan losses is 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. This evaluation is inherently subjective as
it requires material estimates including, among others, the amount and timing
of expected future cash flows on impacted loans, exposure at default, value of
collateral, and estimated losses on our commercial and residential loan
portfolios. All of these estimates may be susceptible to significant change.

The allowance
consists of specific allowances for impaired loans, a general allowance on all
classified 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.

30

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We establish
an allowance on certain impaired loans 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. A loan is
considered to be impaired when, based upon current information and events, it
is probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan. An insignificant delay or
insignificant shortfall in amount of payments does not necessarily result in
the loan being identified as impaired.

We establish a
general valuation allowance on classified loans which are not impaired. We
segregate these loans by category and assign allowance percentages to each
category based on inherent losses associated with each type of lending and
consideration that these loans, in the aggregate, represent an above-average
credit risk and that more of these loans will prove to be uncollectible compared
to loans in the general portfolio. The categories used by the Company include
Doubtful, Substandard and Special Mention. Classification of a loan
within such categories is based on identified weaknesses that increase the
credit risk of the loan.

We establish a
general allowance on non-classified loans to recognize the inherent losses
associated with lending activities, but which, unlike specific allowances, have
not been allocated to particular problem loans. This general valuation
allowance is determined by segregating the loans by loan category and assigning
allowance percentages based on our historical loss experience, delinquency
trends, and managements evaluation of the collectibility of the loan
portfolio.

The allowance
is adjusted for significant factors that, in managements judgment, affect the
collectibility of the portfolio as of the evaluation date. These significant
factors may include changes in lending policies and procedures, changes in
existing general economic and business conditions affecting our primary lending
areas, credit quality trends, collateral value, loan volumes and
concentrations, seasoning of the loan portfolio, loss experience in particular
segments of the portfolio, duration of the current business cycle, and bank
regulatory examination results. The applied loss factors are reevaluated each
reporting period to ensure their relevance in the current economic environment.

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

Fair Value
MeasurementsWe
use fair value measurements to record fair value adjustments to certain assets
and to determine fair value disclosures. Investment and mortgage-backed
securities available for sale are recorded at fair value on a recurring basis.
Additionally, from time to time, we may be required to record at fair value
other assets on a nonrecurring basis, such as impaired loans, real estate owned
and certain other assets. These nonrecurring fair value adjustments typically
involve application of lower-of-cost-or-market accounting or write-downs of
individual assets.

31

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Under SFAS No.
157, Fair Value Measurements, we
group our assets at fair value in three levels, based on the markets in which
the assets are traded and the reliability of the assumptions used to determine
fair value. These levels are:

| |   |                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                

Under SFAS No.
157, we base our fair values on the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. It is our policy to maximize the use of
observable inputs and minimize the use of unobservable inputs when developing
fair value measurements, in accordance with the fair value hierarchy in SFAS
No. 157. Fair value measurements for most of our assets are obtained from
independent pricing services that we have engaged for this purpose. When
available, we, or our independent pricing service, use quoted market prices to
measure fair value. If market prices are not available, fair value measurement
is based upon models that incorporate available trade, bid and other market
information. Substantially all of our financial instruments use either of the
foregoing methodologies to determine fair value adjustments recorded to our
financial statements. In certain cases, however, when market observable inputs for
model-based valuation techniques may not be readily available, we are required
to make judgments about assumptions market participants would use in estimating
the fair value of financial instruments.

The degree of
management judgment involved in determining the fair value of a financial
instrument is dependent upon the availability of quoted market prices or
observable market parameters. For financial instruments that trade actively and
have quoted market prices or observable market parameters, there is minimal
subjectivity involved in measuring fair value. When observable market prices
and parameters are not fully available, management judgment is necessary to
estimate fair value. In addition, changes in the market conditions may reduce
the availability of quoted prices or observable data. When market data is not
available, we use valuation techniques requiring more management judgment to
estimate the appropriate fair value measurement. Therefore, the results cannot
be determined with precision and may not be realized in an actual sale or
immediate settlement of the asset. Additionally, there may be inherent
weaknesses in any calculation technique, and changes in the underlying
assumptions used, including discount rates and estimates of future cash flows, that
could significantly affect the results of current or future valuations. At
March 31, 2008, we did not have any assets that were measured at fair value on
a recurring basis that use Level 3 measurements.

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 the intent and ability of the Company to retain its investment in the
security for a period of time sufficient to allow for an anticipated recovery
in 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 is determined to be
other-than-temporary, the value of the security is reduced and a corresponding
charge to earnings is recognized.

32

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

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

COMPARISON OF FINANCIAL CONDITION AT MARCH
31, 2008 AND DECEMBER 31, 2007

The Companys
total assets increased $28.3 million, or 2.6%, to $1.1 billion at March 31,
2008 compared to $1.1 billion at December 31, 2007. Net loans receivable
increased $11.6 million or 1.7% during the first quarter of 2008. The largest
loan growth occurred in one- to four-family residential loans, which increased
$11.7 million, and construction loans, which increased $5.9 million.
Additionally, commercial business loans increased $2.9 million. These increases
were partially offset by a $6.1 million decrease in home equity lines of
credit, a $5.1 million decrease in multi-family residential and commercial real
estate loans, and a $1.6 million decrease in consumer non-real estate loans.
Our mortgage-backed securities increased $21.3 million as purchases of $28.1
million outpaced repayments, maturities and sales aggregating $8.3 million
during the quarter. Our investment securities decreased $6.1 million in the
aggregate due primarily to $18.0 million in calls and maturities of agency
bonds partially offset by $4.0 million in purchases of additional agency bonds
and $6.1 million of municipal bonds.

Our total
deposits increased $24.5 million or 4.0% to $634.1 million at March 31, 2008
compared to $609.6 million at December 31, 2007. The increase was due to growth
in all types of deposit accounts. Although the largest increase in absolute dollars
was in certificate of deposit accounts, which grew $14.1 million during the
quarter, savings and money market accounts grew $6.2 million and checking
accounts grew $4.1 million, resulting in an increase of $10.3 million in core
deposits. Our other borrowed money, which is comprised of securities repurchase
agreements entered into with certain commercial checking account customers,
increased $3.0 million during the first quarter of 2008. Advances from the
Federal Home Loan Bank decreased $1.7 million to $187.9 million at March 31,
2008.

Our total
stockholders equity increased slightly to $250.0 million at March 31, 2008
from $249.9 million at December 31, 2007. Our retained earnings increased
$783,000 during the first quarter of 2008 as our net income of $1.9 million was
partially offset by a reduction of $1.1 million resulting from the payment of
our first quarter dividend of $0.05 per share. Our accumulated other
comprehensive income improved to $1.4 million at March 31, 2008 from a loss of
$225,000 at December 31, 2007 as a result of increased fair values of our
available for sale investment and mortgage-backed securities. These increases
to stockholders equity were partially offset by the purchase of approximately
304,000 shares of the Companys
common stock by the 2007 RRP trust for approximately $3.0 million in the
aggregate, as part of the Companys previously announced plans to fund the 2007
Recognition and Retention Plan.

33

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LIQUIDITY AND CAPITAL RESOURCES

Our primary
sources of funds are from deposits, amortization of loans, loan prepayments and
pay-offs, mortgage-backed securities and other investments, and other funds
provided from operations. While scheduled payments from the amortization of
loans and mortgage-backed securities and maturing investment securities are
relatively predictable sources of funds, deposit flows and loan prepayments can
be greatly influenced by general interest rates, economic conditions and
competition. We also maintain excess funds in short-term, interest-bearing
assets that provide additional liquidity. At March 31, 2008, our cash and cash
equivalents amounted to $68.9 million. In addition, at such date we had $5.5
million in investment securities scheduled to mature within the next 12 months.
Our available for sale investment and mortgage-backed securities amounted to an
aggregate of $200.0 million at March 31, 2008.

We use our
liquidity to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to invest in other
interest-earning assets, and to meet operating expenses. At March 31, 2008, we
had certificates of deposit maturing within the next 12 months amounting to
$336.3 million. Based upon historical experience, we anticipate that a
significant portion of the maturing certificates of deposit will be redeposited
with us. For the three months ended March 31, 2008, and the year ended December
31, 2007, the average balance of our outstanding FHLB advances was $188.7
million and $183.4 million, respectively. At March 31, 2008, we had $187.9
million in outstanding FHLB advances and we had $433.9 million in additional
FHLB advances available to us.

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

Our
stockholders equity amounted to $250.0 million at March 31, 2008, a slight
increase from stockholders equity of $249.9 million at December 31, 2007.
During 2007, however, we raised $134.7 million in net proceeds received from
our second-step conversion and stock offering. Half of these net proceeds,
approximately $67.3 million, were invested in Abington Bank. The net proceeds received
by the Bank have further strengthened its capital position, which already
exceeded all regulatory requirements (see table below). While these proceeds
have been initially invested in short-term, liquid investments to earn a market
rate of return, our long-term plan continues to be to leverage our capital
through retail deposit and loan growth. Specifically, we plan to use the net
proceeds received by the Bank to fund new loans, to invest in mortgage-backed
securities, to finance the expansion of our business activities, including
developing new branch locations and for general corporate purposes. Towards
this goal, we have plans to open a new branch in Hatboro, Pennsylvania in the
second quarter of 2008 after opening four new branches in 2007. Although these
branches will require a period of time to generate sufficient revenues to
offset their costs, our ongoing branch expansion is a key component of our
long-term business strategy. The net proceeds held by the Company are on
deposit with the Bank. In the long term, these proceeds may be used to invest
in securities, to pay dividends to shareholders, to repurchase shares of the
Companys common stock, subject to regulatory restrictions, and to finance the
possible acquisition of financial institutions or branch offices or other
businesses that are related to banking. Although we currently have no plans,
understandings or agreements with respect to any specific acquisitions,
we are constantly considering potential opportunities to increase long-term
shareholder value.

34

---





The following
table summarizes regulatory capital ratios for the Bank as of the dates
indicated and compares them to current regulatory requirements. As a savings
and loan holding company, the Company is not subject to any regulatory capital
requirements.

|                                 |  |                  |   |                   |       |                    |  |                        |   |  |       |   | 
|-------------------------------- |  | ---------------- | - | ----------------- | ----- | ------------------ |  | ---------------------- | - |  | ----- | - | 
|                                 |  | Actual
Ratios At |   |                   |       |                    |  |                        |  
|                                 |  |                  |   |                   |       |                    |  |                        |  
|                                 |  | March
31,
2008   |   | December
31,
2007 |       | Regulatory
Minimum |  | To
Be Well
Capitalized |  
|                                 |  |                  |   |                   |       |                    |  |                        |  
|Capital
 Ratios:                 |  |                  |   |                   |       |                    |  |                        |   |  |       |   | 
|Tier 1 leverage ratio            |  | 15.18            | % |                   | 15.45 | %                  |  | 4.00                   | % |  | 5.00  | % | 
|Tier 1 risk-based capital
 ratio |  | 23.90            |   |                   | 24.22 |                    |  | 4.00                   |   |  | 6.00  |   | 
|Total risk-based capital
 ratio  |  | 24.16            |   |                   | 24.49 |                    |  | 8.00                   |   |  | 10.00 |   | 

SHARE-BASED COMPENSATION

The Company
accounts for its share-based compensation awards in accordance with Statement
of Financial Accounting Standards (SFAS) No. 123R (revised 2004), Share-Based Payment. This statement
requires an entity to recognize the cost of employee services received in
share-based payment transactions and measures the cost on the grant-date fair
value of the award. That cost will be recognized over the period during which
an employee is required to provide service in exchange for the award.

At March 31,
2008, the Company has four share-based compensation plans, the 2005 and the
2007 Recognition and Retention Plans (the 2005 RRP and 2007 RRP) and the
2005 and 2007 Stock Option Plans (the 2005 Option Plan and 2007 Option
Plan). Share awards were first issued under the 2005 plans in July 2005. Share
awards were issued under the 2007 plans in January 2008. See Note 6 in the
Notes to the Unaudited Consolidated Financial Statements herein for a further
description of these plans.

Compensation
expense on Recognition and Retention Plan shares granted is recognized ratably
over the five year vesting period in an amount which totals the market price of
the common stock at the date of grant. During the three-month periods ended
March 31, 2008 and 2007, approximately 40,000 and 23,000 shares, respectively,
were amortized to expense, based on the proportional vesting of the awarded
shares, resulting in recognition of approximately $329,000 and $172,000 in
compensation expense, respectively. A tax benefit of approximately $112,000 and
$59,000, respectively, was recognized during these periods. As of March 31,
2008, approximately $6.1 million in additional compensation expense will be
recognized over the remaining lives of the RRP awards. At March 31, 2008, the
weighted average remaining lives of the RRP awards was approximately 3.9 years.

During the
three months ended March 31, 2008 and 2007, approximately $197,000 and $98,000,
respectively, was recognized in compensation expense for the Option Plans. A
tax benefit of approximately $18,000 and $9,000, respectively, was recognized
during each of these periods. At March 31, 2008, approximately $3.7 million in
additional compensation expense for awarded options remained unrecognized. The
weighted average period over which this expense will be recognized is
approximately 4.0 years.

The Company
also has an employee stock ownership plan (ESOP). See Note 6 in the Notes to
the Unaudited Consolidated Financial Statements herein for a further
description of this plan. Shares awarded under the ESOP are accounted for in
accordance with AICPA Statement of Position (SOP) 93-6, Employers Accounting for Employee Stock Ownership
Plans. As ESOP shares are committed to be released and allocated
among participants, the Company recognizes compensation expense equal to the
average market
price of the shares over the period earned. During the three-month periods
ended March 31, 2008 and 2007 approximately 24,000 and 15,000 shares,
respectively, were committed to be released to participants, resulting in
recognition of approximately $233,000 and $184,000 in compensation expense,
respectively.

35

---



COMMITMENTS AND OFF-BALANCE SHEET
ARRANGEMENTS

We are a party
to financial instruments with off-balance sheet risk in the normal course of
business to meet the financing needs of our customers. These financial
instruments include commitments to extend credit and the unused portions of
lines of credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated statements of financial condition. Commitments to extend credit
and lines of credit are not recorded as an asset or liability by us until the
instrument is exercised. At March 31, 2008 and December 31, 2007, we had no
commitments to originate loans for sale.

Commitments to
extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the loan documents. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customers
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on managements
credit evaluation of the customer. The amount and type of collateral required
varies, but may include accounts receivable, inventory, equipment, real estate
and income-producing commercial properties. At March 31, 2008 and December 31,
2007, commitments to originate loans and commitments under unused lines of
credit, including undisbursed portions of construction loans in process, for
which the Bank is obligated, amounted to approximately $127.0 million and
$126.0 million, respectively.

Letters of
credit are conditional commitments issued by the Bank guaranteeing payments of
drafts in accordance with the terms of the letter of credit agreements.
Commercial letters of credit are used primarily to facilitate trade or commerce
and are also issued to support public and private borrowing arrangements, bond
financings and similar transactions. Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Collateral may be required to support letters of credit based upon
managements evaluation of the creditworthiness of each customer. The credit
risk involved in issuing letters of credit is substantially the same as that
involved in extending loan facilities to customers. Most of the Banks letters
of credit expire within one year. At March 31, 2008 and December 31, 2007, the
Bank had letters of credit outstanding of approximately $17.0 million and $17.2
million, respectively, of which $15.6 million and $15.8 million, respectively,
were standby letters of credit. At March 31, 2008 and December 31, 2007, the
uncollateralized portion of the letters of credit extended by the Bank was
approximately $99,000 and $97,000, respectively. At March 31, 2008 and December
31, 2007, all of the uncollateralized letters of credit were for standby
letters of credit.

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

Among the
Companys contingent liabilities are exposures to limited recourse arrangements
with respect to the Banks sales of whole loans and participation interests. At
March 31, 2008, the exposure, which represents a portion of credit risk
associated with the sold interests, amounted to $185,000. The exposure is for
the life of the related loans and payable, on our proportional share, as losses
are incurred.

36

---



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

The following
table summarizes our outstanding commitments to originate loans and to advance
additional amounts pursuant to outstanding letters of credit, lines of credit
and under our construction loans at March 31, 2008.

|                                                      |  |                         |         |           |                                              |                   |  |                   |        |               |   |   |  |   |        | 
|----------------------------------------------------- |  | ----------------------- | ------- | --------- | -------------------------------------------- | ----------------- |  | ----------------- | ------ | ------------- | - | - |  | - | ------ | 
|                                                      |  |                         |         |           | Amount of Commitment Expiration - Per Period |                  
|                                                      |  |                         |         |           |                                              |                  
|                                                      |  | Total Amounts
Committed |         | To
1 Year |                                              | Over 1 to
3 Years |  | Over 4 to
5 Years |        | After 5
Years |  
|                                                      |  |                         |         |           |                                              |                   |  |                   |        |               |  
|                                                      |  | (In Thousands)          |        
|Letters of credit                                     |  | $                       | 17,024  |           | $                                            | 15,934            |  | $                 | 1,085  |               | $ |  |  | $ | 5      | 
|Recourse obligations on loans sold                    |  |                         | 185     |           |                                              |                  |  |                   |       |               |   |  |  |   | 185    | 
|Commitments to originate loans                        |  |                         | 8,798   |           |                                              | 8,798             |  |                   |       |               |   |  |  |   |       | 
|Unused portion of home equity lines of
 credit        |  |                         | 23,488  |           |                                              |                  |  |                   |       |               |   |  |  |   | 23,488 | 
|Unused portion of commercial lines of
 credit         |  |                         | 42,736  |           |                                              | 42,736            |  |                   |       |               |   |  |  |   |       | 
|Undisbursed portion of construction loans
 in process |  |                         | 51,978  |           |                                              | 24,971            |  |                   | 27,007 |               |   |  |  |   |       | 
|                                                      |  |                         |         |           |                                              |                   |  |                   |        |               |   |   |  |   |        | 
|Total commitments                                     |  | $                       | 144,209 |           | $                                            | 92,439            |  | $                 | 28,092 |               | $ |  |  | $ | 23,678 | 
|                                                      |  |                         |         |           |                                              |                   |  |                   |        |               |   |   |  |   |        | 

The following
table summarizes our contractual cash obligations at March 31, 2008.

|                              |  |                |         |           |                        |                   |  |                   |         |               |   |        |  |   |        | 
|----------------------------- |  | -------------- | ------- | --------- | ---------------------- | ----------------- |  | ----------------- | ------- | ------------- | - | ------ |  | - | ------ | 
|                              |  |                |         |           | Payments Due By Period |                  
|                              |  |                |         |           |                        |                  
|                              |  | Total          |         | To
1 Year |                        | Over 1 to
3 Years |  | Over 4 to 5
Years |         | After 5
Years |  
|                              |  |                |         |           |                        |                   |  |                   |         |               |  
|                              |  | (In Thousands) |        
|Certificates of deposit       |  | $              | 428,804 |           | $                      | 336,342           |  | $                 | 69,941  |               | $ | 9,382  |  | $ | 13,139 | 
|                              |  |                |         |           |                        |                   |  |                   |         |               |   |        |  |   |        | 
|FHLB advances                 |  |                | 187,853 |           |                        | 51,332            |  |                   | 80,336  |               |   | 20,922 |  |   | 35,263 | 
|Repurchase agreements         |  |                | 20,481  |           |                        | 20,481            |  |                   |        |               |   |       |  |   |       | 
|                              |  |                |         |           |                        |                   |  |                   |         |               |   |        |  |   |        | 
|Total debt                    |  |                | 208,334 |           |                        | 71,813            |  |                   | 80,336  |               |   | 20,922 |  |   | 35,263 | 
|                              |  |                |         |           |                        |                   |  |                   |         |               |   |        |  |   |        | 
|Operating lease obligations   |  |                | 7,568   |           |                        | 813               |  |                   | 1,712   |               |   | 1,568  |  |   | 3,475  | 
|                              |  |                |         |           |                        |                   |  |                   |         |               |   |        |  |   |        | 
|Total contractual obligations |  | $              | 644,706 |           | $                      | 408,968           |  | $                 | 151,989 |               | $ | 31,872 |  | $ | 51,877 | 
|                              |  |                |         |           |                        |                   |  |                   |         |               |   |        |  |   |        | 

COMPARISON OF OPERATING RESULTS FOR THE THREE
MONTHS ENDED MARCH 31, 2008 AND 2007

General. We earned
net income of $1.9 million for the quarter ended March 31, 2008, representing
an increase of $456,000 or 31.2% over the comparable 2007 period. Basic and
diluted earnings per share increased to $0.09 and $0.08, respectively, for the
quarter compared to $0.06 and $0.06, respectively, for the first quarter of
2007. Earnings per share for the 2007 period have been adjusted to reflect the
impact of the second-step conversion and reorganization of the Company, which
occurred on June 27, 2007. Net interest income was $6.9 million for the three
months ended March 31, 2008, representing an increase of $1.4 million or 25.3%
over the comparable 2007 period. Although our average interest rate spread
decreased slightly to 1.90% for the first quarter of 2008 from 1.93% for the
first quarter of 2007, our net interest margin increased 22 basis points to
2.72% for the first quarter of 2008 from 2.50% for the first quarter of 2007.

37

---



Interest Income. Our
total interest income for the three months ended March 31, 2008 increased
$977,000 or 7.4% over the comparable 2007 period to $14.2 million, primarily as
a result of growth in the average balances of all categories of
interest-earning assets. The average balance of our interest-earning assets
increased $132.0 million or 15.0% to $1.0 billion for the quarter ended March
31, 2008 from $882.0 million for the quarter ended March 31, 2007. This
increase was partially offset by a decrease in the aggregate average yield on
those assets of 40 basis points to 5.60% for the first quarter of 2008 from
6.00% for the first quarter of 2007. This decrease in yield was primarily
driven by a 51 basis point decrease in the average yield on our loans
receivable.

Interest Expense.
Our total interest expense for the three months ended March 31, 2008 decreased
$413,000 or 5.4% over the comparable 2007 period to $7.3 million, further
increasing our net interest income quarter-over-quarter. The decrease in our
interest expense occurred as a decrease in the average rate paid on our total
interest-bearing liabilities offset an increase in the average balance of those
liabilities. The average rate we paid on our total interest-bearing liabilities
decreased 37 basis points to 3.70% for the first quarter of 2008 from 4.07% for
the first quarter of 2007. The average rate we paid on our total deposits
decreased 39 basis points quarter-over-quarter, driven by a 60 basis point
decrease in the average rate paid on our certificates of deposit and a 150
basis point decrease in the average rate paid on our other borrowings. The
average balance of our total interest-bearing liabilities increased $30.8
million to $789.3 million for the quarter ended March 31, 2008 from $758.5
million for the quarter ended March 31, 2007. Our average deposit balance grew
by $32.8 million over this same period as a result of increases in all
categories of interest-bearing deposits. The average balance of our advances
from the Federal Home Loan Bank (FHLB) decreased $4.4 million to $188.7
million for the first quarter of 2008 from $193.1 million for the first quarter
of 2007. The average balance of our other borrowings increased $2.5 million or
14.0% quarter-over-quarter.

38

---



Average
Balances, Net Interest Income, and Yields Earned and Rates Paid. The following
table shows for the periods indicated the total dollar amount of interest from
average interest-earning assets and the resulting yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates, and the net interest margin. Tax-exempt income and yields have not been
adjusted to a tax-equivalent basis. All average balances are based on monthly
balances. Management does not believe that the monthly averages differ
significantly from what the daily averages would be.

|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|------------------------------------------------- |  | ---------------------------- | --------- | -------- | - | ------------------ |  | --------------- | ---- | -------- | - | ------------------ |  | - | ------ |  |  | ---- | -
|                                                  |  | Three
Months Ended March 31, |          
|                                                  |  |                              |          
|                                                  |  | 2008                         |           | 2007     |  
|                                                  |  |                              |           |          |  
|                                                  |  | Average
Balance              |           | Interest |   | Average
Yield/Rate |  | Average
Balance |      | Interest |   | Average
Yield/Rate | 
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    | 
|                                                  |  | (Dollars
in Thousands)       |          
|Interest-earning assets:                          |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Investment securities(1)                          |  | $                            | 115,881   |          | $ | 1,334              |  |                 | 4.60 | %        | $ | 99,497             |  | $ | 1,113  |  |  | 4.47 | %
|Mortgage-backed securities                        |  |                              | 149,002   |          |   | 1,621              |  |                 | 4.35 |          |   | 133,274            |  |   | 1,409  |  |  | 4.23 |  
|Loans receivable(2)                               |  |                              | 688,958   |          |   | 10,711             |  |                 | 6.22 |          |   | 615,897            |  |   | 10,368 |  |  | 6.73 |  
|Other interest-earning assets                     |  |                              | 60,135    |          |   | 531                |  |                 | 3.53 |          |   | 33,291             |  |   | 330    |  |  | 3.97 |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Total interest-earning assets                     |  |                              | 1,013,976 |          |   | 14,197             |  |                 | 5.60 |          |   | 881,959            |  |   | 13,220 |  |  | 6.00 |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Cash and non-interest bearing balances            |  |                              | 22,523    |          |   |                    |  |                 |      |          |   | 17,319             |  |   |        |  |  |      |  
|Other non-interest-earning assets                 |  |                              | 57,275    |          |   |                    |  |                 |      |          |   | 29,668             |  |   |        |  |  |      |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Total assets                                      |  | $                            | 1,093,774 |          |   |                    |  |                 |      |          | $ | 928,946            |  |   |        |  |  |      |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Interest-bearing liabilities:                     |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|                                                 
|Deposits:                                         |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Savings and money market accounts                 |  | $                            | 97,723    |          |   | 345                |  |                 | 1.41 |          | $ | 93,463             |  |   | 281    |  |  | 1.20 |  
|Checking accounts                                 |  |                              | 60,127    |          |   | 5                  |  |                 | 0.03 |          |   | 57,116             |  |   | 4      |  |  | 0.03 |  
|Certificate accounts                              |  |                              | 422,706   |          |   | 4,572              |  |                 | 4.33 |          |   | 397,210            |  |   | 4,894  |  |  | 4.93 |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Total deposits                                    |  |                              | 580,556   |          |   | 4,922              |  |                 | 3.39 |          |   | 547,789            |  |   | 5,179  |  |  | 3.78 |  
|FHLB advances                                     |  |                              | 188,734   |          |   | 2,248              |  |                 | 4.76 |          |   | 193,138            |  |   | 2,355  |  |  | 4.88 |  
|Other borrowings                                  |  |                              | 19,989    |          |   | 135                |  |                 | 2.70 |          |   | 17,532             |  |   | 184    |  |  | 4.20 |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Total interest-bearing liabilities                |  |                              | 789,279   |          |   | 7,305              |  |                 | 3.70 |          |   | 758,459            |  |   | 7,718  |  |  | 4.07 |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Non-interest-bearing liabilities:                 |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Non-interest-bearing demand accounts              |  |                              | 39,987    |          |   |                    |  |                 |      |          |   | 43,482             |  |   |        |  |  |      |  
|Real estate tax escrow accounts                   |  |                              | 3,572     |          |   |                    |  |                 |      |          |   | 3,170              |  |   |        |  |  |      |  
|Other liabilities                                 |  |                              | 10,791    |          |   |                    |  |                 |      |          |   | 8,846              |  |   |        |  |  |      |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Total liabilities                                 |  |                              | 843,629   |          |   |                    |  |                 |      |          |   | 813,957            |  |   |        |  |  |      |  
|Stockholders equity                              |  |                              | 250,145   |          |   |                    |  |                 |      |          |   | 114,989            |  |   |        |  |  |      |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Total liabilities and stockholders equity        |  | $                            | 1,093,774 |          |   |                    |  |                 |      |          | $ | 928,946            |  |   |        |  |  |      |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Net interest-earning assets                       |  | $                            | 224,697   |          |   |                    |  |                 |      |          |   | 123,500            |  |   |        |  |  |      |  
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Net interest income; average Interest rate spread |  |                              |           |          | $ | 6,892              |  |                 | 1.90 | %        |   |                    |  | $ | 5,502  |  |  | 1.93 | %
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  
|Net interest margin(3)                            |  |                              |           |          |   |                    |  |                 | 2.72 | %        |   |                    |  |   |        |  |  | 2.50 | %
|                                                  |  |                              |           |          |   |                    |  |                 |      |          |   |                    |  |   |        |  |  |      |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Investment securities for
 the 2008 period include 95 tax-exempt municipal bonds with an aggregate
 average balance of $29.3 million and an average yield of 4.1%. Investment
 securities for the 2007 period include 46 tax-exempt municipal bonds with an
 aggregate average balance of $20.4 million and an average yield of 4.2%. 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.                                                                                                                                                                                                                                                                                                                                                             

39

---



Provision for Loan Losses.
We made a $49,000 provision for loan losses during the first quarter of 2008
compared to a provision of $4,000 during the first quarter of 2007. The
provision for loan losses is charged to expense as necessary to bring our
allowance for loan losses to a sufficient level to cover known and inherent
losses in the loan portfolio. Our loan portfolio at March 31, 2008 included an
aggregate of $561,000 of non-performing loans compared to $1.6 million of
non-performing loans at December 31, 2007. Our non-performing loans at March
31, 2008 consist primarily of one construction and one commercial real estate
loan to one borrower with an aggregate balance of $468,000. During the first
quarter of 2008, we foreclosed on the collateral properties underlying three
other commercial real estate loans to this borrower. The aggregate balance of
these loans, which had been previously placed on non-accrual status, was
approximately $977,000 at the time of foreclosure. No loan balances were
charged-off in conjunction with the acquisitions of these properties. At March
31, 2008, our non-performing loans amounted to 0.08% of loans receivable and
our allowance for loan losses amounted to 329.8% of non-performing loans.

At March 31,
2008, the Banks largest construction loan was a $13.0 million loan for the
construction of a 40 unit high rise residential condominium project in Center
City, Philadelphia. This loan has performed in accordance with its terms since
its origination in 2005, and no specific reserve is currently maintained on
this loan. However, construction is behind schedule and the Bank recently
approved a $1.5 million increase in the authorized loan amount to cover certain
cost overruns and permit completion of the project. Management is closely
monitoring this loan.

Non-interest Income.
Our total non-interest income for the first quarter of 2008 amounted to
$953,000, representing an increase of $266,000 or 38.7% from the first quarter
of 2007. The increase was due primarily to an increase in income on bank owned
life insurance (BOLI) of $298,000 that resulted mainly from the purchase of $20.0
million of additional BOLI during the third quarter of 2007. Partially
offsetting this increase were decreases in service charge income and other
non-interest income for the first quarter of 2008 compared to the first quarter
of 2007, as well as a $12,000 aggregate loss on the sales of certain
mortgage-backed securities during the first quarter of 2008.

Non-interest Expenses.
Our total non-interest expenses for the first quarter of 2008 amounted to $5.2
million, representing an increase of $989,000 or 23.6% from the first quarter
of 2007. The largest increases were in salaries and employee benefits,
occupancy, professional services and other non-interest expense. Salaries and
employee benefits expense increased $538,000 quarter-over-quarter, due largely
to growth in the total number of employees, normal merit increases in salaries,
and higher health and insurance benefit costs. Salaries and employee benefits
expense also increased due to an additional expense of $176,000 recognized
during the first quarter of 2008 as the result of the granting of awards to
officers and employees under the 2007 Option Plan and the 2007 RRP, which were
approved by shareholders in January 2008. Occupancy expense increased by
$97,000, quarter-over-quarter, primarily as a result of our additional branches
opened in Chalfont and Spring House, Pennsylvania during 2007 as well as
additional equipment and computer costs for all of our facilities. The increase
in professional services expense was due to increases in both legal and
accounting fees. The increase in legal fees was due in part to expenses related
to the special meeting of shareholders held in January 2008 as well as expenses
incurred in connection with the resolution of certain non-performing loans. The
increase in other non-interest expense was due largely to an additional expense
of $71,000 for the issuance of awards to directors under the 2007 Option Plan
and 2007 RRP. Also contributing to the increase in other non-interest expense
were increases in expenses for appraisal fees, office supplies, copying,
postage, and deposit premiums as well as a $17,000 expense for real estate
owned.

Income Tax Expense.
Income tax expense for the first quarter of 2008 amounted to $692,000 compared
to $526,000 for the first quarter of 2007. Our effective tax rate held steady
at 26.5% for both quarters. This occurred in part due to purchases of
additional tax-exempt investments, including municipal bonds
and BOLI, that
allowed our tax-exempt income to increase as other sources of income were
increasing. The increase in our provision for income taxes was a result of the
increase in our pre-tax income.

40

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FORWARD LOOKING STATEMENTS

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

These
forward-looking statements are subject to significant risks, assumptions and
uncertainties, including, among other things, the following: (1) general
economic conditions, (2) competitive pressure among financial services
companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand,
(6) changes in legislation or regulation, (7) changes in accounting principles,
policies and guidelines, (8) costs related to the expansion of our branch
network, (9) changes in the amount or character of our non-performing assets, and
(10) other economic, competitive, governmental, regulatory and technological
factors affecting our operations, pricing, products and services.

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

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

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

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

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

41

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| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have
  attempted to match fund a portion of our securities portfolio with borrowings
  having similar expected lives;                              
| |   |                                                                                                                                                       
| |  | we have
  attempted, where possible, to extend the maturities of our deposits and
  borrowings; and                                                   
| |   |                                                                                                                                                       
| |  | we have
  invested in securities with relatively short anticipated lives, generally three
  to five years, and increased our holding of liquid assets.

Gap Analysis. The
matching of assets and liabilities may be analyzed by examining the extent to
which such assets and liabilities are interest rate sensitive and by
monitoring the interest rate sensitivity gap. An asset and liability is said
to be interest rate sensitive within a specific time period if it will mature
or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that same time
period. A gap is considered positive when the amount of interest rate sensitive
assets exceeds the amount of interest rate sensitive liabilities. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds the amount of interest rate sensitive assets. During a period of rising
interest rates, a negative gap would tend to affect adversely net interest
income while a positive gap would tend to result in an increase in net interest
income. Conversely, during a period of falling interest rates, a negative gap
would tend to result in an increase in net interest income while a positive gap
would tend to affect adversely net interest income. Our current asset/liability
policy provides that our one-year interest rate gap as a percentage of total
assets should not exceed positive or negative 20%. This policy was adopted by our
management and Board based upon their judgment that it established an
appropriate benchmark for the level of interest-rate risk, expressed in terms
of the one-year gap, for the Bank. In the event our one-year gap position were
to approach or exceed the 20% policy limit, we would review the composition of
our assets and liabilities in order to determine what steps might appropriately
be taken, such as selling certain securities or loans or repaying certain
borrowings, in order to maintain our one-year gap in accordance with the
policy. Alternatively, depending on the then-current economic scenario, we
could determine to make an exception to our policy or we could determine to
revise our policy. In recent periods, our one-year gap position was well within
our policy. Our one-year cumulative gap was a negative 9.24% at March 31, 2008,
compared to a negative 9.04% at December 31, 2007. We have increased our
originations of commercial real estate and multi-family residential real estate
loans, construction loans, home equity lines and commercial business loans in
recent periods. This has been done, in part, because such loans generally have
shorter terms to maturity than single-family residential mortgage loans and are
more likely to have floating or adjustable rates of interest, thereby
increasing the amount of our interest rate sensitive assets in the one- to
three-year time horizon. By increasing the amount of our interest rate
sensitive assets in the one-to three-year time horizon, we felt that we better
positioned ourselves to benefit from a rising interest rate environment because
the average interest rates on our loans would increase as general market rates
of interest were increasing.



42

---



The following
table sets forth the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at March 31, 2008, which we expect,
based upon certain assumptions, to reprice or mature in each of the future time
periods shown (the GAP Table). Except as stated below, the amount of assets
and liabilities shown which reprice or mature during a particular period were
determined in accordance with the earlier of term to repricing or the
contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at March 31,
2008, on the basis of contractual maturities, anticipated prepayments, and
scheduled rate adjustments within a three-month period and subsequent selected
time intervals. The loan amounts in the table reflect principal balances
expected to be redeployed and/or repriced as a result of contractual
amortization and anticipated
prepayments of
adjustable-rate loans and fixed-rate loans, and as a result of contractual rate
adjustments on adjustable-rate loans. Annual prepayment rates for
adjustable-rate and fixed-rate single-family and multi-family mortgage loans
are assumed to range from 10% to 26%. The annual prepayment rate for
mortgage-backed securities is assumed to range from 9% to 63%. Money market
deposit accounts, savings accounts and interest-bearing checking accounts are
assumed to have annual rates of withdrawal, or decay rates, of 16%, 12.5% and
0%, respectively.

43

---



|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|----------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---------------------------- | - | --------------------------- | -- | ---------------------------- | ------- | ----------------- | - | ------------ | - | - | ------- | - | - | --------- | 
|                                                                                                                  |  | 6 Months
or Less       |         | More than
6 Months
to 1 Year |   | More than
1 Year
to 3 Years |    | More than
3 Years
to 5 Years |         | More than
5 Years |   | Total
Amount |  
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |  
|                                                                                                                  |  | (Dollars in Thousands) |        
|Interest-earning assets(1):                                                                                       |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Loans receivable                                                                                                  |  | $                      | 277,362 |                              | $ | 55,220                      |    | $                            | 157,058 |                   | $ | 87,360       |   | $ | 118,466 |   | $ | 695,466   | 
|Mortgage-backed securities                                                                                        |  |                        | 31,772  |                              |   | 19,702                      |    |                              | 44,909  |                   |   | 22,431       |   |   | 42,297  |   |   | 161,111   | 
|Investment securities                                                                                             |  |                        | 10,548  |                              |   | 189                         |    |                              | 17,000  |                   |   | 41,945       |   |   | 41,952  |   |   | 111,634   | 
|Other interest-earning assets                                                                                     |  |                        | 56,423  |                              |   |                            |    |                              |        |                   |   |             |   |   |        |   |   | 56,423    | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Total interest-earning assets                                                                                     |  | $                      | 376,105 |                              | $ | 75,111                      |    | $                            | 218,967 |                   | $ | 151,736      |   | $ | 202,715 |   | $ | 1,024,634 | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Interest-bearing liabilities:                                                                                     |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Savings and money market accounts                                                                                 |  | $                      | 15,282  |                              | $ | 15,282                      |    | $                            | 38,139  |                   | $ | 17,546       |   | $ | 15,330  |   | $ | 101,579   | 
|Checking accounts                                                                                                 |  |                        |        |                              |   |                            |    |                              |        |                   |   |             |   |   | 62,178  |   |   | 62,178    | 
|Certificate accounts                                                                                              |  |                        | 312,028 |                              |   | 73,839                      |    |                              | 20,415  |                   |   | 9,382        |   |   | 13,140  |   |   | 428,804   | 
|FHLB advances                                                                                                     |  |                        | 89,727  |                              |   | 26,946                      |    |                              | 39,019  |                   |   | 8,346        |   |   | 23,815  |   |   | 187,853   | 
|Other borrowed money                                                                                              |  |                        | 20,481  |                              |   |                            |    |                              |        |                   |   |             |   |   |        |   |   | 20,481    | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Total interest-bearing liabilities                                                                                |  | $                      | 437,518 |                              | $ | 116,067                     |    | $                            | 97,573  |                   | $ | 35,274       |   | $ | 114,463 |   | $ | 800,895   | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Interest-earning assets less
  interest-bearing liabilities                                                       |  | $                      | (61,413 | )                            | $ | (40,956                     | )  | $                            | 121,394 |                   | $ | 116,462      |   | $ | 88,252  |   | $ | 223,739   | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Cumulative interest-rate sensitivity gap(2)                                                                       |  | $                      | (61,413 | )                            | $ | (102,369                    | )  | $                            | 19,025  |                   | $ | 135,487      |   | $ | 223,739 |   |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Cumulative interest-rate gap as a
  percentage of total assets at March 31, 2008                                  |  |                        | (5.54   | )%                           |   | (9.24                       | )% |                              | 1.72    | %                 |   | 12.23        | % |   | 20.19   | % |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 
|Cumulative interest-earning assets as a
  percentage of cumulative interest-bearing liabilities at March 31, 2008 |  |                        | 85.96   | %                            |   | 81.51                       | %  |                              | 102.92  | %                 |   | 119.74       | % |   | 127.94  | % |   |           | 
|                                                                                                                  |  |                        |         |                              |   |                             |    |                              |         |                   |   |              |   |   |         |   |   |           | 

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

44

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ITEM 4.  CONTROLS AND PROCEDURES

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

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

|        |                   | 
|------- | ----------------- | 
|PART II | OTHER INFORMATION | 

|        |                  
|------- | -----------------
|ITEM 1. | LEGAL PROCEEDINGS

Not
applicable.

|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

There
have been no material changes from the risk factors disclosed in the Companys
Annual Report on Form 10-K for the year ended December 31, 2007.

|        |                                                            
|------- | -----------------------------------------------------------
|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

|    |                                 
|--- | --------------------------------
|(a) | Not
  applicable.               
|    |                                 
|(b) | Not
  applicable.               
|    |                                 
|(c) | Purchases of
  Equity Securities

45

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The Companys
purchases of its common stock made during the quarter consisted solely of
purchases to fund the 2007 Recognition and Retention Plan and Trust, which is
an affiliate of the Company, and are set forth in the following table.

|                                 |  |                                        |         |                            |   |                                                                                          |  |                                                                                           |         |  |  |         | 
|-------------------------------- |  | -------------------------------------- | ------- | -------------------------- | - | ---------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | ------- |  |  | ------- | 
|Period                           |  | Total
  Number of
  Shares
  Purchased |         | AveragePrice Paidper Share |   | Total Number of
  Shares Purchased
  as Part of Publicly
  Announced Plans
  or Programs |  | Maximum Number
  of Shares that May
  Yet be Purchased
  Under the Plan or
  Programs (1) |        
|                                 |  |                                        |         |                            |   |                                                                                          |  |                                                                                           |        
|                                 |  |                                        |         |                            |   |                                                                                          |  |                                                                                           |        
|January 1  January 31,
  2008   |  |                                        |        |                            |   |                                                                                         |  |                                                                                           |        |  |  | 520,916 | 
|February 1  February 29,
  2008 |  |                                        | 196,038 |                            |   | 9.88                                                                                     |  |                                                                                           | 196,038 |  |  | 324,878 | 
|March 1  March 31, 2008         |  |                                        | 108,363 |                            |   | 9.99                                                                                     |  |                                                                                           | 108,363 |  |  | 216,515 | 
|                                 |  |                                        |         |                            |   |                                                                                          |  |                                                                                           |         |  |  |         | 
|                                 |  |                                        |         |                            |   |                                                                                          |  |                                                                                           |         |  |  |         | 
|Total                            |  |                                        | 304,401 |                            | $ | 9.92                                                                                     |  |                                                                                           | 304,401 |  |  | 216,515 | 
|                                 |  |                                        |         |                            |   |                                                                                          |  |                                                                                           |         |  |  |         | 

(1) On January 30, 2008,
shareholders of the Company voted to approve the 2007 Recognition and Retention
Plan and Trust Agreement (2007 RRP) authorizing the purchase of up to 520,916
shares of the Companys common stock. Purchases to fund the 2007 RRP are
expected to continue until the plan is fully funded.

|        |                                
|------- | -------------------------------
|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES

Not
applicable.

|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On
January 30, 2008, the Company held a Special Meeting of Shareholders to obtain
approval for two proxy proposals submitted on behalf of the Companys Board of
Directors. Shareholders of record as of December 17, 2007, received proxy
materials and were considered eligible to vote on these proposals. The
following is a brief summary of each proposal and the result of the vote.

|                                                                          |  |     |            |         |  |           |  |                  |         |  |  |   | 
|------------------------------------------------------------------------- |  | --- | ---------- | ------- |  | --------- |  | ---------------- | ------- |  |  | - | 
|                                                                          |  | For |            | Against |  | Abstain   |  | Broker Non-Votes |        
|                                                                          |  |     |            |         |  |           |  |                  |        
|                                                                          |  |     |            |         |  |           |  |                  |        
|1. To adopt the 2007 Stock Option Plan                                    |  |     | 13,976,534 |         |  | 2,950,818 |  |                  | 121,144 |  |  |  | 
|                                                                          |  |     |            |         |  |           |  |                  |         |  |  |   | 
|2. To adopt
  the 2007 Recognition and Retention Plan and Trust Agreement |  |     | 14,047,147 |         |  | 2,875,333 |  |                  | 126,016 |  |  |  | 

|        |                  
|------- | -----------------
|ITEM 5. | OTHER INFORMATION

Not
applicable.

|        |         
|------- | --------
|ITEM 6. | EXHIBITS

| |      |  |                                                                             
| | ---- |  | ----------------------------------------------------------------------------
| | No.  |  | Description                                                                 
| |      |  |                                                                             
| | 31.1 |  | 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.                                               

46

---



SIGNATURES

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

|                  |                          |                          
|----------------- | ------------------------ | -------------------------
|                  | ABINGTON
  BANCORP, INC.
|                  |                          |                          
|Date: May 9, 2008 | By:                      | /s/ Robert W. White      
|                  |                          |                          
|                  |                          | Robert W. White          
|                  |                          | Chairman, President and  
|                  |                          | Chief Executive Officer  
|                  |                          |                          
|Date: May 9, 2008 | By:                      | /s/ Jack J. Sandoski     
|                  |                          |                          
|                  |                          | Jack J. Sandoski         
|                  |                          | Senior Vice President and
|                  |                          | Chief Financial Officer  

47

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