##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-52705
 Abington Bancorp, Inc.
  Pennsylvania
    
    20-8613037(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 180 Old York Road 
Jenkintown, Pennsylvania
    
    19046(Address of Principal Executive Offices)
    
    (Zip Code)
  (Registrants Telephone Number, Including Area Code)
  (Former name, former address or former fiscal year if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



ABINGTON BANCORP, INC.
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSUnaudited Consolidated Statements of Financial Condition as of June 30, 2009 and December 31, 2008
    
    
    1Unaudited Consolidated Statements of Income for the Three and Six Months Ended June 30, 2009 and 2008
    
    
    2Unaudited Consolidated Statements of Stockholders Equity for the Six Months Ended June 30, 2009 and 2008
    
    
    3Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    34ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    49ITEM 4. CONTROLS AND PROCEDURES
    
    
    52PART II  OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    52ITEM 1A. Risk Factors
    
    
    52ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52ITEM 3. Defaults upon Senior Securities
    
    
    53ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    53ITEM 5. Other Information
    
    
    53ITEM 6. Exhibits
    
    
    54SIGNATURES
    
    
    55Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 June 30, 2009
    
    
    December 31, 2008ASSETSCash and due from banks
    
    $
    21,344,716
    
    
    $
    23,074,990Interest-bearing deposits in other banks
    
    
    4,232,583
    
    
    
    8,788,354Total cash and cash equivalents
    
    
    25,577,299
    
    
    
    31,863,344Investment securities held to maturity (estimated fair
value2009, $20,500,480; 2008, $20,590,495)
    
    
    20,388,025
    
    
    
    20,389,106Investment securities available for sale (amortized cost
2009, $68,627,026; 2008, $67,782,158)
    
    
    69,617,683
    
    
    
    69,323,505Mortgage-backed securities held to maturity (estimated fair
value2009, $70,637,881; 2008, $81,702,915)
    
    
    70,506,519
    
    
    
    83,093,064Mortgage-backed securities available for sale (amortized cost
2009, $133,574,762; 2008, $148,601,190)
    
    
    137,747,671
    
    
    
    151,628,507Loans receivable, net of allowance for loan losses
(2009, $10,748,651; 2008, $11,596,784)
    
    
    765,106,939
    
    
    
    756,552,352Accrued interest receivable
    
    
    4,558,818
    
    
    
    4,856,707Federal Home Loan Bank stockat cost
    
    
    14,607,700
    
    
    
    14,607,700Cash surrender value  bank owned life insurance
    
    
    40,086,655
    
    
    
    39,184,889Property and equipment, net
    
    
    10,824,519
    
    
    
    11,070,542Real estate owned
    
    
    18,083,366
    
    
    
    1,739,599Deferred tax asset
    
    
    3,841,139
    
    
    
    4,456,103Prepaid expenses and other assets
    
    
    2,557,944
    
    
    
    988,060TOTAL ASSETS
    
    $
    1,183,504,277
    
    
    $
    1,189,753,478LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-bearing
    
    $
    43,099,567
    
    
    $
    37,194,591Interest-bearing
    
    
    713,962,856
    
    
    
    627,755,843Total deposits
    
    
    757,062,423
    
    
    
    664,950,434Advances from Federal Home Loan Bank
    
    
    154,250,743
    
    
    
    257,051,203Other borrowed money
    
    
    28,636,328
    
    
    
    17,609,637Accrued interest payable
    
    
    4,280,385
    
    
    
    2,617,721Advances from borrowers for taxes and insurance
    
    
    5,284,148
    
    
    
    3,275,285Accounts payable and accrued expenses
    
    
    6,056,882
    
    
    
    6,148,613Total liabilities
    
    
    955,570,909
    
    
    
    951,652,893COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred stock, $0.01 par value, 20,000,000 shares authorized
none issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 80,000,000 shares authorized;
24,460,240 shares issued; outstanding: 21,747,135 shares in 2009,
23,369,916 shares in 2008
    
    
    244,602
    
    
    
    244,602Additional paid-in capital
    
    
    201,627,353
    
    
    
    201,378,465Treasury stockat cost, 2,713,105 shares in 2009,
1,090,324 shares in 2008
    
    
    (22,579,669
    )
    
    
    (10,525,100
    )Unallocated common stock held by:Employee Stock Ownership Plan (ESOP)
    
    
    (14,718,898
    )
    
    
    (15,138,418
    )Recognition & Retention Plan Trust (RRP)
    
    
    (4,742,943
    )
    
    
    (5,593,821
    )Deferred compensation plans trust
    
    
    (974,765
    )
    
    
    (1,190,857
    )Retained earnings
    
    
    65,748,816
    
    
    
    66,007,138Accumulated other comprehensive income
    
    
    3,328,872
    
    
    
    2,918,576Total stockholders equity
    
    
    227,933,368
    
    
    
    238,100,585TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,183,504,277
    
    
    $
    1,189,753,478
   1




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##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008INTEREST INCOME:Interest on loans
    
    $
    10,149,228
    
    
    $
    10,604,448
    
    
    $
    20,177,861
    
    
    $
    21,315,854Interest and dividends on investment and
mortgage-backed securities:Taxable
    
    
    3,002,420
    
    
    
    2,783,160
    
    
    
    6,285,351
    
    
    
    5,441,466Tax-exempt
    
    
    402,809
    
    
    
    338,623
    
    
    
    803,584
    
    
    
    635,398Interest and dividends on other interest-earning assets
    
    
    14,000
    
    
    
    293,523
    
    
    
    26,930
    
    
    
    824,406Total interest income
    
    
    13,568,457
    
    
    
    14,019,754
    
    
    
    27,293,726
    
    
    
    28,217,124INTEREST EXPENSE:Interest on deposits
    
    
    4,046,805
    
    
    
    4,250,930
    
    
    
    8,088,202
    
    
    
    9,173,039Interest on Federal Home Loan Bank advances
    
    
    1,903,687
    
    
    
    2,165,580
    
    
    
    3,988,271
    
    
    
    4,413,018Interest on other borrowed money
    
    
    21,757
    
    
    
    94,271
    
    
    
    36,335
    
    
    
    229,573Total interest expense
    
    
    5,972,249
    
    
    
    6,510,781
    
    
    
    12,112,808
    
    
    
    13,815,630NET INTEREST INCOME
    
    
    7,596,208
    
    
    
    7,508,973
    
    
    
    15,180,918
    
    
    
    14,401,494PROVISION FOR LOAN LOSSES
    
    
    3,404,721
    
    
    
    676,848
    
    
    
    3,521,412
    
    
    
    725,988NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    4,191,487
    
    
    
    6,832,125
    
    
    
    11,659,506
    
    
    
    13,675,506NON-INTEREST INCOMEService charges
    
    
    397,419
    
    
    
    424,541
    
    
    
    786,665
    
    
    
    806,450Income on bank owned life insurance
    
    
    453,212
    
    
    
    483,923
    
    
    
    901,766
    
    
    
    959,975Net gain on real estate owned
    
    
    153,248
    
    
    
    
    
    
    
    169,082
    
    
    
    Gain on sale of securities
    
    
    
    
    
    
    158,133
    
    
    
    
    
    
    
    146,375Impairment charge on investment securities
    
    
    
    
    
    
    (330,527
    )
    
    
    
    
    
    
    (330,527
    )Other income
    
    
    127,932
    
    
    
    109,743
    
    
    
    290,838
    
    
    
    216,824Total non-interest income
    
    
    1,131,811
    
    
    
    845,813
    
    
    
    2,148,351
    
    
    
    1,799,097NON-INTEREST EXPENSESSalaries and employee benefits
    
    
    2,809,910
    
    
    
    2,953,724
    
    
    
    5,767,269
    
    
    
    5,818,910Occupancy
    
    
    524,702
    
    
    
    507,897
    
    
    
    1,103,996
    
    
    
    1,041,838Depreciation
    
    
    225,889
    
    
    
    201,348
    
    
    
    448,074
    
    
    
    398,341Professional services
    
    
    360,740
    
    
    
    310,200
    
    
    
    698,400
    
    
    
    586,148Data processing
    
    
    412,967
    
    
    
    379,032
    
    
    
    792,779
    
    
    
    761,622Deposit insurance premium
    
    
    960,357
    
    
    
    56,732
    
    
    
    1,154,504
    
    
    
    81,042Advertising and promotions
    
    
    106,521
    
    
    
    116,019
    
    
    
    181,056
    
    
    
    218,471Director compensation
    
    
    225,109
    
    
    
    220,817
    
    
    
    448,855
    
    
    
    409,229Other
    
    
    627,874
    
    
    
    615,352
    
    
    
    1,249,541
    
    
    
    1,231,740Total non-interest expenses
    
    
    6,254,069
    
    
    
    5,361,121
    
    
    
    11,844,474
    
    
    
    10,547,341(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (930,771
    )
    
    
    2,316,817
    
    
    
    1,963,383
    
    
    
    4,927,262(BENEFIT) PROVISION FOR INCOME TAXES
    
    
    (553,002
    )
    
    
    569,942
    
    
    
    188,783
    
    
    
    1,262,218NET (LOSS) INCOME
    
    $
    (377,769
    )
    
    $
    1,746,875
    
    
    $
    1,774,600
    
    
    $
    3,665,044BASIC (LOSS) EARNINGS PER COMMON SHARE
    
    $
    (0.02
    )
    
    $
    0.08
    
    
    $
    0.09
    
    
    $
    0.16DILUTED (LOSS) EARNINGS PER COMMON SHARE
    
    $
    (0.02
    )
    
    $
    0.08
    
    
    $
    0.09
    
    
    $
    0.16BASIC AVERAGE COMMON SHARES OUTSTANDING:
    
    
    19,713,494
    
    
    
    22,131,813
    
    
    
    20,129,506
    
    
    
    22,241,837DILUTED AVERAGE COMMON SHARES OUTSTANDING:
    
    
    20,298,237
    
    
    
    22,942,871
    
    
    
    20,680,751
    
    
    
    22,908,601
   2




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##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF  STOCKHOLDERS EQUITY
 CommonStock
    
    
    
    
    
    
    AccumulatedCommon
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Acquired by
    
    
    
    
    
    
    Other
    
    
    TotalStock
    
    
    Common
    
    
    Paid-in
    
    
    Treasury
    
    
    Benefit
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Plans
    
    
    Earnings
    
    
    Income
    
    
    EquityBALANCEJANUARY 1, 2009
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    201,378,465
    
    
    $
    (10,525,100
    )
    
    $
    (21,923,096
    )
    
    $
    66,007,138
    
    
    $
    2,918,576
    
    
    $
    238,100,585Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,774,600
    
    
    
    
    
    
    
    1,774,600Net unrealized holding gain on
available for sale securities
arising during the period, net
of tax expense of $202,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392,635
    
    
    
    392,635Amortization of unrecognized
deferred costs on SERP, net
of tax benefit of $9,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,661
    
    
    
    17,661Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,184,896Treasury stock purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,097,258
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,097,258
    )Cash dividends declared,
($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,032,922
    )
    
    
    
    
    
    
    (2,032,922
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (11,298
    )
    
    
    42,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,391Excess tax liability on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (68,037
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,037
    )Stock options expense
    
    
    
    
    
    
    
    
    
    
    444,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    444,901Common stock released from
benefit plans
    
    
    
    
    
    
    
    
    
    
    (116,678
    )
    
    
    
    
    
    
    1,512,469
    
    
    
    
    
    
    
    
    
    
    
    1,395,791Common stock acquired by
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,979
    )
    
    
    
    
    
    
    
    
    
    
    (25,979
    )BALANCEJUNE 30, 2009
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    201,627,353
    
    
    $
    (22,579,669
    )
    
    $
    (20,436,606
    )
    
    $
    65,748,816
    
    
    $
    3,328,872
    
    
    $
    227,933,368
 Common
    
    
    
    
    
    
    AccumulatedStock
    
    
    
    
    
    
    OtherCommon
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Acquired by
    
    
    
    
    
    
    Comprehensive
    
    
    TotalStock
    
    
    Common
    
    
    Paid-in
    
    
    Treasury
    
    
    Benefit
    
    
    Retained
    
    
    Income
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Plans
    
    
    Earnings
    
    
    (Loss)
    
    
    EquityBALANCEJANUARY 1, 2008
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    200,634,467
    
    
    $
    (104,997
    )
    
    $
    (18,994,133
    )
    
    $
    68,360,520
    
    
    $
    (225,399
    )
    
    $
    249,915,060Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,665,044
    
    
    
    
    
    
    
    3,665,044Net unrealized holding loss on
available for sale securities
arising during the period, net
of tax benefit of $4,244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,236
    )
    
    
    (8,236
    )Amortization of unrecognized
deferred costs on SERP, net
of tax expense of $20,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,235
    
    
    
    40,235Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,697,043Cash dividends declared,
($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,271,023
    )
    
    
    
    
    
    
    (2,271,023
    )Stock options expense
    
    
    
    
    
    
    
    
    
    
    417,669
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417,669Common stock released from
benefit plans
    
    
    
    
    
    
    
    
    
    
    (17,881
    )
    
    
    
    
    
    
    1,213,302
    
    
    
    
    
    
    
    
    
    
    
    1,195,421Common stock acquired by
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,383,207
    )
    
    
    
    
    
    
    
    
    
    
    (5,383,207
    )BALANCEJUNE 30, 2008
    
    
    24,460,240
    
    
    $
    244,602
    
    
    $
    201,034,255
    
    
    $
    (104,997
    )
    
    $
    (23,164,038
    )
    
    $
    69,754,541
    
    
    $
    (193,400
    )
    
    $
    247,570,963
   3




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##### Table of Contents



ABINGTON BANCORP, INC.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2009
    
    
    2008OPERATING ACTIVITIES:Net income
    
    $
    1,774,600
    
    
    $
    3,665,044Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    3,521,412
    
    
    
    725,988Depreciation
    
    
    448,074
    
    
    
    398,341Stock-based compensation expense
    
    
    1,598,621
    
    
    
    1,607,890Net gain on real estate owned
    
    
    (169,082
    )
    
    
    Net gain on sale of mortgage-backed securities
    
    
    
    
    
    
    (146,375
    )Impairment charge on investment securities
    
    
    
    
    
    
    330,527Deferred income tax expense (benefit)
    
    
    403,599
    
    
    
    (730,840
    )Amortization of:Deferred loan fees
    
    
    (634,765
    )
    
    
    (431,386
    )Premiums and discounts, net
    
    
    (121,333
    )
    
    
    (3,509
    )Income from bank owned life insurance
    
    
    (901,766
    )
    
    
    (959,975
    )Changes in assets and liabilities which (used) provided cash:Accrued interest receivable
    
    
    297,889
    
    
    
    336,460Prepaid expenses and other assets
    
    
    (1,569,884
    )
    
    
    1,318,829Accrued interest payable
    
    
    1,662,664
    
    
    
    880,595Accounts payable and accrued expenses
    
    
    151,120
    
    
    
    (563,981
    )Net cash provided by operating activities
    
    
    6,461,149
    
    
    
    6,427,608INVESTING ACTIVITIES:Principal collected on loans
    
    
    67,713,411
    
    
    
    115,724,530Disbursements for loans
    
    
    (96,104,840
    )
    
    
    (129,170,505
    )Purchases of:Mortgage-backed securities held to maturity
    
    
    
    
    
    
    (24,779,806
    )Mortgage-backed securities available for sale
    
    
    (7,894,182
    )
    
    
    (44,782,543
    )Investments available for sale
    
    
    (19,036,181
    )
    
    
    (23,183,691
    )Federal Home Loan Bank stock
    
    
    
    
    
    
    (1,492,900
    )Property and equipment
    
    
    (202,051
    )
    
    
    (752,691
    )Proceeds from:Sales and maturities of mortgage-backed securities available for sale
    
    
    1,652,051
    
    
    
    7,354,286Sales and maturities of investments available for sale
    
    
    18,194,000
    
    
    
    41,697,000Principal repayments of mortgage-backed securities held to maturity
    
    
    12,536,588
    
    
    
    4,181,878Principal repayments of mortgage-backed securities available for sale
    
    
    21,438,243
    
    
    
    12,036,658Redemption of Federal Home Loan Bank stock
    
    
    
    
    
    
    899,400Sales of real estate owned
    
    
    1,165,109
    
    
    
    Additions to real estate owned, net
    
    
    (389,599
    )
    
    
    (352,884
    )Net cashused in investing activities
    
    
    (927,451
    )
    
    
    (42,621,268
    )FINANCING ACTIVITIES:Net increase in demand deposits and savings accounts
    
    
    56,974,397
    
    
    
    35,829,752Net increase in certificate accounts
    
    
    35,137,592
    
    
    
    (4,249,444
    )Net increase in other borrowed money
    
    
    11,026,691
    
    
    
    3,672,812Advances from Federal Home Loan Bank
    
    
    5,935,000
    
    
    
    50,610,000Repayments of advances from Federal Home Loan Bank
    
    
    (108,735,460
    )
    
    
    (58,414,842
    )Net increase in advances from borrowers for taxes and insurance
    
    
    2,008,863
    
    
    
    2,277,464Proceeds from exercise of stock options
    
    
    31,391
    
    
    
    Excess tax liability from stock-based compensation
    
    
    (68,037
    )
    
    
    Acquisition of stock for benefit plans
    
    
    
    
    
    
    (5,356,588
    )Purchase of treasury stock
    
    
    (12,097,258
    )
    
    
    Payment of cash dividend
    
    
    (2,032,922
    )
    
    
    (2,271,023
    )Net cash (used in) provided by financing activities
    
    
    (11,819,743
    )
    
    
    22,098,131NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (6,286,045
    )
    
    
    (14,095,529
    )CASH AND CASH EQUIVALENTSBeginning of period
    
    
    31,863,344
    
    
    
    68,055,461CASH AND CASH EQUIVALENTSEnd of period
    
    $
    25,577,299
    
    
    $
    53,959,932
  4




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##### Table of Contents



ABINGTON BANCORP, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
 Six Months Ended June 30,2009
    
    
    2008SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest on deposits and other borrowings
    
    $
    10,450,144
    
    
    $
    12,935,035Income taxes
    
    $
    750,000
    
    
    $
    1,705,000Non-cash transfer of loans to real estate owned
    
    $
    16,950,195
    
    
    $
    977,386Acquisition of stock for deferred compensation plans trust
    
    $
    25,719
    
    
    $
    21,419Release of stock from deferred compensation plans trust
    
    $
    242,071
    
    
    $
    
   5




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##### Table of Contents



ABINGTON BANCORP, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of Financial Statement PresentationAbington Bancorp, Inc. (the Company) is a
Pennsylvania corporation which was organized to be the stock holding company for Abington
Savings Bank in connection with our second-step conversion and reorganization completed in 2007,
which is discussed further below. Abington Savings Bank is a Pennsylvania-chartered,
FDIC-insured savings bank, which conducts business under the name Abington Bank (the Bank or
Abington Bank). As a result of the Banks election pursuant to Section 10(l) of the Home
Owners Loan Act, the Company is a savings and loan holding company regulated by the Office of
Thrift Supervision (the OTS). The Bank is a wholly owned subsidiary of the Company. The
Companys results of operations are primarily dependent on the results of the Bank and the
Banks wholly owned subsidiaries, ASB Investment Co and American Street Lofts LLC. 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 12 other branches and seven
limited service facilities located in Montgomery, Bucks and Delaware Counties, Pennsylvania. The
Bank is principally engaged in the business of accepting customer deposits and investing these
funds in loans that include residential mortgage, commercial, consumer and construction loans.
The principal business of ASB Investment Co. is to hold certain investment securities for the
Bank. The principal business of American Street Lofts LLC is to own and manage a 40-unit high
rise residential condominium in Center City, Philadelphia that was acquired through foreclosure
during the second quarter of 2009. Keswick Services II, and its wholly owned subsidiaries, and
Abington Corp. are currently inactive subsidiaries.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, 2008, which are included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008. The results for the
three and six months ended June 30, 2009 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 2009, or any other period.Effective April 1, 2009, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 165, Subsequent Events. SFAS No. 165 establishes general standards for accounting
for and disclosure of events that occur after the balance sheet date but before financial
statements are issued. SFAS No. 165 sets forth the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions that may occur for
potential recognition in the financial statements, identifies the circumstances under which an
entity should recognize events or
transactions occurring after the balance sheet date in its financial statements, and the
disclosures that should be made about events or transactions that occur after the balance sheet
date. In preparing these financial statements, the Company evaluated the events and transactions
that occurred from June 30, 2009 through August 10, 2009, the date these financial statements
were issued.
  6




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##### Table of Contents



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 or six months ended June 30, 2009. An impairment charge of approximately $331,000 was
recognized during the three and six months ended June 30, 2008. The impairment charge was taken
to write-down the book value of our investment in a mortgage-backed security based mutual fund
to its fair value of $3.0 million at June 30, 2008, based on our determination that the
investment was other-than-temporarily impaired.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.
  7




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##### Table of Contents



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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net unrealized gain (loss) on securities
arising during the period, net of tax
    
    $
    (292,960
    )
    
    $
    (1,704,435
    )
    
    $
    392,635
    
    
    $
    (129,776
    )Plus: reclassification adjustment for net
losses included in net income, net of tax
    
    
    
    
    
    
    113,780
    
    
    
    
    
    
    
    121,540Net unrealized gain (loss) on securities,
net of tax
    
    $
    (292,960
    )
    
    $
    (1,590,655
    )
    
    $
    392,635
    
    
    $
    (8,236
    )Amortization of deferred costs on
supplemental retirement plan, net of tax
    
    
    8,831
    
    
    
    20,118
    
    
    
    17,661
    
    
    
    40,235Total other comprehensive income (loss),
net of tax
    
    $
    (284,129
    )
    
    $
    (1,570,537
    )
    
    $
    410,296
    
    
    $
    31,999
  June 30,
    
    
    December 31,2009
    
    
    2008Net unrealized gain on securities
    
    $
    3,407,952
    
    
    $
    3,015,317Unrecognized deferred costs of supplemental
retirement plan
    
    
    (79,080
    )
    
    
    (96,741
    )Total accumulated other comprehensive income
    
    $
    3,328,872
    
    
    $
    2,918,576
 Share-Based Compensation Share-Based Payment
   8




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##### Table of Contents



Employers Accounting for Employee Stock Ownership Plans
 Earnings per share
 Three Months Ended June 30,2009
    
    
    2008Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedNet (loss) income
    
    $
    (377,769
    )
    
    $
    (377,769
    )
    
    $
    1,746,875
    
    
    $
    1,746,875Weighted average shares outstanding
    
    
    19,713,494
    
    
    
    19,713,494
    
    
    
    22,131,813
    
    
    
    22,131,813Effect of common stock equivalents
    
    
    
    
    
    
    584,743
    
    
    
    
    
    
    
    811,058Adjusted weighted average shares used in earnings per share computation
    
    
    19,713,494
    
    
    
    20,298,237
    
    
    
    22,131,813
    
    
    
    22,942,871(Loss) earnings per share
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    0.08
    
    
    $
    0.08
 Six Months Ended June 30,2009
    
    
    2008Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedNet income
    
    $
    1,774,600
    
    
    $
    1,774,600
    
    
    $
    3,665,044
    
    
    $
    3,665,044Weighted average shares outstanding
    
    
    20,129,506
    
    
    
    20,129,506
    
    
    
    22,241,837
    
    
    
    22,241,837Effect of common stock equivalents
    
    
    
    
    
    
    551,245
    
    
    
    
    
    
    
    666,764Adjusted weighted average shares used in earnings per share computation
    
    
    20,129,506
    
    
    
    20,680,751
    
    
    
    22,241,837
    
    
    
    22,908,601Earnings per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.16
 Recent Accounting Pronouncements Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly Fair
Value Measurements
  9




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##### Table of Contents



Recognition and Presentation of
Other-Than-Temporary Impairments
 Recognition and Presentation of
Other-Than-Temporary Impairments
    10




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##### Table of Contents



Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting
  Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140 . Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Amendments to FASB Interpretation No. 46(R) . Consolidation of Variable Interest
Entities (revised December 2003)  an interpretation of ARB No. 51
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 . , The Hierarchy of Generally Accepted Accounting
Principles, FASB Accounting Standards Codification
  11




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##### Table of Contents



Reclassifications 
 2.
    
    INVESTMENT SECURITIES
  Held to MaturityJune 30, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Municipal bonds
    
    $
    20,388,025
    
    
    $
    172,741
    
    
    $
    (60,286
    )
    
    $
    20,500,480Total debt securities
    
    $
    20,388,025
    
    
    $
    172,741
    
    
    $
    (60,286
    )
    
    $
    20,500,480
 Available for SaleJune 30, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Agency bonds
    
    $
    42,448,765
    
    
    $
    635,496
    
    
    $
    (8,840
    )
    
    $
    43,075,421Corporate bonds and
commercial paper
    
    
    1,990,435
    
    
    
    162
    
    
    
    (7,327
    )
    
    
    1,983,270Municipal bonds
    
    
    21,557,770
    
    
    
    488,499
    
    
    
    (35,502
    )
    
    
    22,010,767Certificates of deposit
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    99,000Total debt securities
    
    
    66,095,970
    
    
    
    1,124,157
    
    
    
    (51,669
    )
    
    
    67,168,458Equity securities:Common stock
    
    
    10
    
    
    
    
    
    
    
    (5
    )
    
    
    5Mutual funds
    
    
    2,531,046
    
    
    
    
    
    
    
    (81,826
    )
    
    
    2,449,220Total equity securities
    
    
    2,531,056
    
    
    
    
    
    
    
    (81,831
    )
    
    
    2,449,225Total
    
    $
    68,627,026
    
    
    $
    1,124,157
    
    
    $
    (133,500
    )
    
    $
    69,617,683
  12




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##### Table of Contents



Held to MaturityDecember 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Municipal bonds
    
    $
    20,389,106
    
    
    $
    300,162
    
    
    $
    (98,773
    )
    
    $
    20,590,495Total debt securities
    
    $
    20,389,106
    
    
    $
    300,162
    
    
    $
    (98,773
    )
    
    $
    20,590,495
 Available for SaleDecember 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Agency bonds
    
    $
    41,962,148
    
    
    $
    1,159,700
    
    
    $
    
    
    
    $
    43,121,848Corporate bonds and
commercial paper
    
    
    1,979,499
    
    
    
    
    
    
    
    (97,319
    )
    
    
    1,882,180Municipal bonds
    
    
    21,073,983
    
    
    
    479,220
    
    
    
    (250
    )
    
    
    21,552,953Certificates of deposit
    
    
    288,000
    
    
    
    
    
    
    
    
    
    
    
    288,000Total debt securities
    
    
    65,303,630
    
    
    
    1,638,920
    
    
    
    (97,569
    )
    
    
    66,844,981Equity securities:Common stock
    
    
    10
    
    
    
    
    
    
    
    (4
    )
    
    
    6Mutual funds
    
    
    2,478,518
    
    
    
    
    
    
    
    
    
    
    
    2,478,518Total equity securities
    
    
    2,478,528
    
    
    
    
    
    
    
    (4
    )
    
    
    2,478,524Total
    
    $
    67,782,158
    
    
    $
    1,638,920
    
    
    $
    (97,573
    )
    
    $
    69,323,505
     13




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##### Table of Contents



June 30, 2009Available for Sale
    
    
    Held to MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    3,024,933
    
    
    $
    3,031,597
    
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    47,539,979
    
    
    
    48,461,736
    
    
    
    
    
    
    
    Due after five years through ten years
    
    
    15,531,058
    
    
    
    15,675,125
    
    
    
    5,922,740
    
    
    
    5,969,907Due after ten years
    
    
    
    
    
    
    
    
    
    
    14,465,285
    
    
    
    14,530,573Total
    
    $
    66,095,970
    
    
    $
    67,168,458
    
    
    $
    20,388,025
    
    
    $
    20,500,480
  Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities held to maturity:Municipal bonds
    
    $
    (17,652
    )
    
    $
    2,637,342
    
    
    $
    (42,634
    )
    
    $
    2,818,766Total securities held to maturity
    
    
    (17,652
    )
    
    
    2,637,342
    
    
    
    (42,634
    )
    
    
    2,818,766Securities available for sale:Agency bonds
    
    $
    (8,840
    )
    
    $
    6,991,160
    
    
    $
    
    
    
    $
    Corporate bonds and
commercial paper
    
    
    
    
    
    
    
    
    
    
    (7,327
    )
    
    
    991,090Municipal bonds
    
    
    (35,502
    )
    
    
    2,935,958
    
    
    
    
    
    
    
    Equity securities
    
    
    (81,831
    )
    
    
    2,448,225
    
    
    
    
    
    
    
    Total securities available for sale
    
    
    (126,173
    )
    
    
    12,375,343
    
    
    
    (7,327
    )
    
    
    991,090Total
    
    $
    (143,825
    )
    
    $
    15,012,685
    
    
    $
    (49,961
    )
    
    $
    3,809,856
  14




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##### Table of Contents



Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities held to maturity:Municipal bonds
    
    $
    (76,549
    )
    
    $
    2,406,781
    
    
    $
    (22,224
    )
    
    $
    355,946Total securities held to maturity
    
    
    (76,549
    )
    
    
    2,406,781
    
    
    
    (22,224
    )
    
    
    355,946Securities available for sale:Corporate bonds and
commercial paper
    
    $
    (31,898
    )
    
    $
    950,540
    
    
    $
    (65,421
    )
    
    $
    931,640Municipal bonds
    
    
    (250
    )
    
    
    506,658
    
    
    
    
    
    
    
    Equity securities
    
    
    (4
    )
    
    
    6
    
    
    
    
    
    
    
    Total securities available for sale
    
    
    (32,152
    )
    
    
    1,457,204
    
    
    
    (65,421
    )
    
    
    931,640Total
    
    $
    (108,701
    )
    
    $
    3,863,985
    
    
    $
    (87,645
    )
    
    $
    1,287,586
   15




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##### Table of Contents



3.
    
    MORTGAGE-BACKED SECURITIES
  Held to MaturityJune 30, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    13,678,062
    
    
    $
    485,147
    
    
    $
    
    
    
    $
    14,163,209FNMA pass-through
certificates
    
    
    32,219,817
    
    
    
    959,570
    
    
    
    (27,064
    )
    
    
    33,152,323FHLMC pass-through
certificates
    
    
    15,070,988
    
    
    
    195,642
    
    
    
    
    
    
    
    15,266,630Collateralized mortgage
obligations
    
    
    9,537,652
    
    
    
    
    
    
    
    (1,481,933
    )
    
    
    8,055,719Total
    
    $
    70,506,519
    
    
    $
    1,640,359
    
    
    $
    (1,508,997
    )
    
    $
    70,637,881
 Available for saleJune 30, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    2,712
    
    
    $
    322
    
    
    $
    
    
    
    $
    3,034FNMA pass-through
certificates
    
    
    52,522,763
    
    
    
    1,769,407
    
    
    
    
    
    
    
    54,292,170FHLMC pass-through
certificates
    
    
    61,241,409
    
    
    
    2,232,611
    
    
    
    (22,988
    )
    
    
    63,451,032Collateralized mortgage
obligations
    
    
    19,807,878
    
    
    
    348,721
    
    
    
    (155,164
    )
    
    
    20,001,435Total
    
    $
    133,574,762
    
    
    $
    4,351,061
    
    
    $
    (178,152
    )
    
    $
    137,747,671
  16




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Held to MaturityDecember 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    19,780,669
    
    
    $
    
    
    
    $
    
    
    
    $
    19,780,669FNMA pass-through
certificates
    
    
    35,800,959
    
    
    
    917,098
    
    
    
    (58,079
    )
    
    
    36,659,978FHLMC pass-through
certificates
    
    
    16,613,987
    
    
    
    299,956
    
    
    
    
    
    
    
    16,913,943Collateralized mortgage
obligations
    
    
    10,897,449
    
    
    
    
    
    
    
    (2,549,124
    )
    
    
    8,348,325Total
    
    $
    83,093,064
    
    
    $
    1,217,054
    
    
    $
    (2,607,203
    )
    
    $
    81,702,915
 Available for saleDecember 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGNMA pass-through
certificates
    
    $
    2,948
    
    
    $
    308
    
    
    $
    
    
    
    $
    3,256FNMA pass-through
certificates
    
    
    60,266,060
    
    
    
    1,217,941
    
    
    
    (2,037
    )
    
    
    61,481,964FHLMC pass-through
certificates
    
    
    73,505,894
    
    
    
    1,733,749
    
    
    
    (75,063
    )
    
    
    75,164,580Collateralized mortgage
obligations
    
    
    14,826,288
    
    
    
    185,637
    
    
    
    (33,218
    )
    
    
    14,978,707Total
    
    $
    148,601,190
    
    
    $
    3,137,635
    
    
    $
    (110,318
    )
    
    $
    151,628,507
     17




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Less than 12 months
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSecurities held to maturity:FNMA pass-through
certificates
    
    $
    (27,064
    )
    
    $
    4,043,380
    
    
    $
    
    
    
    $
    Collateralized mortgage
obligations
    
    
    
    
    
    
    
    
    
    
    (1,481,933
    )
    
    
    8,055,719Total securities held
to maturity
    
    
    (27,064
    )
    
    
    4,043,380
    
    
    
    (1,481,933
    )
    
    
    8,055,719Securities available for sale:FHLMC pass-through
certificates
    
    
    (19,285
    )
    
    
    2,293,048
    
    
    
    (3,703
    )
    
    
    1,721,136Collateralized mortgage
obligations
    
    
    (155,164
    )
    
    
    6,297,019
    
    
    
    
    
    
    
    Total securities
available for sale
    
    
    (174,449
    )
    
    
    8,590,067
    
    
    
    (3,703
    )
    
    
    1,721,136Total
    
    $
    (201,513
    )
    
    $
    12,633,447
    
    
    $
    (1,485,636
    )
    
    $
    9,776,855
  18




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Less than 12 months
    
    
    
    
    
    
    More than 12 monthsGross
    
    
    Estimated
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    EstimatedUnrealized
    
    
    Fair
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    FairLosses
    
    
    Value
    
    
    
    
    
    
    Losses
    
    
    
    
    
    
    ValueSecurities held to maturity:FNMA pass-through
certificates
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    (58,079
    )
    
    
    
    
    
    $
    7,746,498Collateralized mortgage
obligations
    
    
    (415,128
    )
    
    
    522,693
    
    
    
    
    
    
    
    (2,133,996
    )
    
    
    
    
    
    
    7,825,632Total securities held to maturity
    
    
    (415,128
    )
    
    
    522,693
    
    
    
    
    
    
    
    (2,192,075
    )
    
    
    
    
    
    
    15,572,130Securities available for sale:FNMA pass-through
certificates
    
    
    (2,037
    )
    
    
    1,859,605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FHLMC pass-through
certificates
    
    
    (15,846
    )
    
    
    5,655,458
    
    
    
    
    
    
    
    (59,217
    )
    
    
    
    
    
    
    3,292,856Collateralized mortgage
obligations
    
    
    (25,031
    )
    
    
    2,855,731
    
    
    
    
    
    
    
    (8,187
    )
    
    
    
    
    
    
    137,235Total securities available for sale
    
    
    (42,914
    )
    
    
    10,370,794
    
    
    
    
    
    
    
    (67,404
    )
    
    
    
    
    
    
    3,430,091Total
    
    $
    (458,042
    )
    
    $
    10,893,487
    
    
    
    
    
    
    $
    (2,259,479
    )
    
    
    
    
    
    $
    19,002,221
   19




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4.
    
    LOANS RECEIVABLE  NET
  June 30, 2009
    
    
    December 31, 2008One-to four-family residential
    
    $
    445,645,996
    
    
    $
    452,922,968Multi-family residential and commercial
    
    
    116,657,598
    
    
    
    102,088,507Construction
    
    
    213,817,664
    
    
    
    219,542,552Home equity lines of credit
    
    
    33,001,271
    
    
    
    27,119,068Commercial business loans
    
    
    18,044,958
    
    
    
    18,966,744Consumer non-real estate loans
    
    
    3,245,394
    
    
    
    2,811,075Total loans
    
    
    830,412,881
    
    
    
    823,450,914Less:Construction loans in process
    
    
    (54,099,819
    )
    
    
    (54,797,754
    )Deferred loan fees, net
    
    
    (457,472
    )
    
    
    (504,024
    )Allowance for loan losses
    
    
    (10,748,651
    )
    
    
    (11,596,784
    )Loans receivablenet
    
    $
    765,106,939
    
    
    $
    756,552,352
  Six Months Ended
    
    
    Year EndedJune 30, 2009
    
    
    December 31, 2008Balancebeginning of year
    
    $
    11,596,784
    
    
    $
    1,811,121Provision for loan losses
    
    
    3,521,412
    
    
    
    9,759,936Charge-offs
    
    
    (4,512,361
    )
    
    
    (63,788
    )Recoveries
    
    
    142,816
    
    
    
    89,515(Charge-offs)/recoveriesnet
    
    
    (4,369,545
    )
    
    
    25,727Balanceend of period
    
    $
    10,748,651
    
    
    $
    11,596,784
   20




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June 30,
    
    
    December 31,2009
    
    
    2008Impaired collateral-dependent loans with a
valuation allowance
    
    $
    24,037,355
    
    
    $
    22,439,654Impaired collateral-dependent loans with no
valuation allowance
    
    
    
    
    
    
    751,727Total Impaired collateral-dependent loans
    
    $
    24,037,355
    
    
    $
    23,191,381Average impaired loan balance
    
    $
    28,369,386
    
    
    $
    11,948,700Valuation allowance on impaired loans
    
    $
    8,434,194
    
    
    $
    7,455,469Interest income recognized on impaired loans
    
    $
    80,280
    
    
    $
    278,550
    21




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22




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##### Table of Contents



June 30, 2009
    
    
    December 31, 2008(Dollars in Thousands)Non-accruing loans:One- to four-family residential
    
    $
    240
    
    
    $
    240Multi-family residential and
commercial real estate
    
    
    561
    
    
    
    2,597Construction
    
    
    19,647
    
    
    
    20,594Commercial business
    
    
    
    
    
    
    Home equity lines of credit
    
    
    
    
    
    
    Consumer non-real estate
    
    
    
    
    
    
    Total non-accruing loans
    
    
    20,448
    
    
    
    23,191Accruing loans 90 days or more past due:One- to four-family residential
    
    
    748
    
    
    
    311Multi-family residential and
commercial real estate
    
    
    
    
    
    
    Construction
    
    
    17,853
    
    
    
    Commercial business
    
    
    
    
    
    
    Home equity lines of credit
    
    
    18
    
    
    
    Consumer non-real estate
    
    
    
    
    
    
    Total accruing loans 90 days or
more past due
    
    
    18,619
    
    
    
    311Total non-performing loans(1)
    
    
    39,067
    
    
    
    23,502Real estate owned, net
    
    
    18,083
    
    
    
    1,740Total non-performing assets
    
    $
    57,150
    
    
    $
    25,242Total non-performing loans as a
percentage of loans
    
    
    5.04
    %
    
    
    3.06
    %Total non-performing loans as a
percentage of total assets
    
    
    3.30
    %
    
    
    1.98
    %Total non-performing assets as a
percentage of total assets
    
    
    4.83
    %
    
    
    2.12
    %
 
 (1)
    
    Non-performing loans consist of non-accruing loans plus accruing loans 90 days or more past
due.  23




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##### Table of Contents



AccruingType
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans 90Total
    
    
    
    
    
    
    One- to
    
    
    
    
    
    
    
    
    
    
    Loan Classification
    
    
    
    
    
    
    Days or
    
    
    AllowanceNo. of
    
    
    Balance
    
    
    Land
    
    
    Four-
    
    
    Multi-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    
    
    
    
    More Past
    
    
    for LoanLoans
    
    
    Outstanding
    
    
    Only
    
    
    Family
    
    
    Family
    
    
    Commercial
    
    
    Doubtful
    
    
    Substandard
    
    
    Mention
    
    
    Non-Accrual
    
    
    Due
    
    
    LossesRange
    
    (Dollars in Thousands)Loans over $10.0 million
    
    
    1
    
    
    $
    17,473
    
    
    $
    
    
    
    $
    
    
    
    $
    17,473
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    88Loans $5.0 million to $10.0 million
    
    
    9
    
    
    
    55,350
    
    
    
    7,125
    
    
    
    19,355
    
    
    
    5,000
    
    
    
    23,869
    
    
    
    7,125
    
    
    
    7,077
    
    
    
    16,216
    
    
    
    7,125
    
    
    
    7,077
    
    
    
    3,012Loans $2.5 million to $5.0 million
    
    
    11
    
    
    
    39,373
    
    
    
    7,505
    
    
    
    20,809
    
    
    
    
    
    
    
    11,059
    
    
    
    7,442
    
    
    
    3,590
    
    
    
    
    
    
    
    7,442
    
    
    
    3,590
    
    
    
    5,100Loans $1.0 million to $2.5 million
    
    
    24
    
    
    
    40,912
    
    
    
    12,973
    
    
    
    17,878
    
    
    
    3,843
    
    
    
    6,219
    
    
    
    1,134
    
    
    
    7,251
    
    
    
    11,323
    
    
    
    4,525
    
    
    
    6,308
    
    
    
    922Loans under $1.0 million
    
    
    23
    
    
    
    6,610
    
    
    
    555
    
    
    
    4,246
    
    
    
    1,460
    
    
    
    349
    
    
    
    
    
    
    
    555
    
    
    
    955
    
    
    
    555
    
    
    
    878
    
    
    
    65Total construction loans
    
    
    68
    
    
    $
    159,718
    
    
    $
    28,158
    
    
    $
    62,288
    
    
    $
    27,776
    
    
    $
    41,496
    
    
    $
    15,701
    
    
    $
    18,473
    
    
    $
    28,494
    
    
    $
    19,647
    
    
    $
    17,853
    
    
    $
    9,187
  24




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##### Table of Contents



5.
    
    DEFERRED INCOME TAXES
  June 30,
    
    
    December 31,2009
    
    
    2008Deferred tax assets:Allowance for loan losses
    
    $
    3,654,542
    
    
    $
    3,942,907Deferred compensation
    
    
    1,763,381
    
    
    
    1,803,336Write-down of impaired investments
    
    
    295,526
    
    
    
    295,526Property and equipment
    
    
    123,303
    
    
    
    112,131Other assets
    
    
    118,629
    
    
    
    190,855Total deferred tax assets
    
    
    5,955,381
    
    
    
    6,344,755Deferred tax liabilities:Unrealized gain on securities available-for-sale
    
    
    (1,755,612
    )
    
    
    (1,553,346
    )Deferred loan fees
    
    
    (346,102
    )
    
    
    (320,621
    )Other liabilities
    
    
    (12,528
    )
    
    
    (14,685
    )Total deferred tax liabilities
    
    
    (2,114,242
    )
    
    
    (1,888,652
    )Net deferred tax asset
    
    $
    3,841,139
    
    
    $
    4,456,103
 6.
    
    PENSION, PROFIT SHARING AND STOCK COMPENSATION PLANS
  Employee Stock Ownership Plan
   25




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##### Table of Contents



Recognition and Retention Plans
    Six Months Ended June 30,2009
    
    
    2008Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average grant
    
    
    Number of
    
    
    average grantshares
    
    
    date fair value
    
    
    shares
    
    
    date fair valueNonvested at the beginning of the year
    
    
    661,763
    
    
    $
    8.72
    
    
    
    274,874
    
    
    $
    7.54Granted
    
    
    
    
    
    
    
    
    
    
    517,200
    
    
    
    9.11Vested
    
    
    (97,140
    )
    
    
    9.11
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonvested at the end of the period
    
    
    564,623
    
    
    $
    8.65
    
    
    
    792,074
    
    
    $
    8.57
  26




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##### Table of Contents



Stock Options
    Six Months Ended June 30,2009
    
    
    2008Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average
    
    
    Number of
    
    
    averageshares
    
    
    exercise price
    
    
    shares
    
    
    exercise priceOutstanding at the beginning of the year
    
    
    2,206,296
    
    
    $
    8.48
    
    
    
    1,135,180
    
    
    $
    7.74Granted
    
    
    
    
    
    
    
    
    
    
    1,247,500
    
    
    
    9.11Exercised
    
    
    (4,176
    )
    
    
    7.51
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at the end of the period
    
    
    2,202,120
    
    
    $
    8.48
    
    
    
    2,382,680
    
    
    $
    8.46Exercisable at the end of the period
    
    
    813,424
    
    
    $
    8.05
    
    
    
    418,224
    
    
    $
    7.57
  27




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted Average
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Remaining
    
    
    Number of
    
    
    AverageExercise Price
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Shares
    
    
    Exercise Price(in years)$7.51
    
    
    917,680
    
    
    $
    7.51
    
    
    
    6.0
    
    
    
    550,608
    
    
    $
    7.518.35
    
    
    7,200
    
    
    
    8.35
    
    
    
    6.4
    
    
    
    4,320
    
    
    
    8.359.11
    
    
    1,142,500
    
    
    
    9.11
    
    
    
    8.6
    
    
    
    228,500
    
    
    
    9.119.63
    
    
    94,500
    
    
    
    9.63
    
    
    
    8.4
    
    
    
    13,900
    
    
    
    9.6310.18
    
    
    40,240
    
    
    
    10.18
    
    
    
    7.4
    
    
    
    16,096
    
    
    
    10.18Total
    
    
    2,202,120
    
    
    $
    8.48
    
    
    
    7.5
    
    
    
    813,424
    
    
    $
    8.05Intrinsic value
    
    $
    412,956
    
    
    
    
    
    
    
    
    
    
    $
    247,774
  Dividend yield
    
    
    1.88
    %Expected volatility
    
    
    23.25
    %Risk-free interest rate
    
    
    3.13  3.49
    %Expected life of options
    
    4  7 years
  7.
    
    COMMITMENTS AND CONTINGENCIES
   28




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##### Table of Contents



8.
    
    FAIR VALUE MEASUREMENTS
  Fair Value Measurements
 
    
    Level 1  Valuation is based upon quoted prices for identical instruments traded in
active markets.
 
    
    Level 2  Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market.
 
    
    Level 3  Valuation is generated from model-based techniques that use significant
assumptions not observable in the market. These unobservable assumptions reflect the
Companys own estimates of assumptions that market participants would use in pricing
the asset.
  29




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##### Table of Contents



Cash and Cash Equivalents
 Investment and Mortgage-backed Securities Available for Sale
 Loans Receivable
  30




---



##### Table of Contents



Impaired Loans
 Accrued Interest Receivable
 FHLB Stock
 Real Estate Owned
 Deposits
 Advances from Federal Home Loan Bank
  31




---



##### Table of Contents



Other Borrowed Money
 Accrued Interest Payable
 Commitments to Extend Credit and Letters of Credit
  June 30, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available for sale
    
    $
    69,617,683
    
    
    $
    2,449,225
    
    
    $
    67,168,458
    
    
    $
    Mortgage-backed securities
available for sale
    
    
    137,747,671
    
    
    
    
    
    
    
    137,747,671
    
    
    
    Total
    
    $
    207,365,354
    
    
    $
    2,449,225
    
    
    $
    204,916,129
    
    
    $
    
 December 31, 2008Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available for sale
    
    $
    69,323,505
    
    
    $
    2,478,524
    
    
    $
    66,844,981
    
    
    $
    Mortgage-backed securities
available for sale
    
    
    151,628,507
    
    
    
    
    
    
    
    151,628,507
    
    
    
    Total
    
    $
    220,952,012
    
    
    $
    2,478,524
    
    
    $
    218,473,488
    
    
    $
    
  32




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##### Table of Contents



June 30, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans
    
    $
    15,603,161
    
    
    $
    
    
    
    $
    
    
    
    $
    15,603,161Real estate owned
    
    
    18,083,366
    
    
    
    
    
    
    
    
    
    
    
    18,083,366Total
    
    $
    33,686,527
    
    
    $
    
    
    
    $
    
    
    
    $
    33,686,527
 December 31, 2008Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans
    
    $
    14,984,185
    
    
    $
    
    
    
    $
    
    
    
    $
    14,984,185Real estate owned
    
    
    1,739,599
    
    
    
    
    
    
    
    
    
    
    
    1,739,599Total
    
    $
    16,723,784
    
    
    $
    
    
    
    $
    
    
    
    $
    16,723,784
  June 30, 2009
    
    
    December 31, 2008Estimated
    
    
    
    
    
    
    EstimatedCarrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(In Thousands)Assets:Cash and cash equivalents
    
    $
    25,577
    
    
    $
    25,577
    
    
    $
    31,863
    
    
    $
    31,863Investment securities
    
    
    90,006
    
    
    
    90,118
    
    
    
    89,713
    
    
    
    89,914Mortgage-backed securities
    
    
    208,254
    
    
    
    208,386
    
    
    
    234,722
    
    
    
    233,331Loans receivablenet
    
    
    765,107
    
    
    
    763,724
    
    
    
    756,552
    
    
    
    784,239FHLB stock
    
    
    14,608
    
    
    
    14,608
    
    
    
    14,608
    
    
    
    14,608Accrued interest receivable
    
    
    4,559
    
    
    
    4,559
    
    
    
    4,857
    
    
    
    4,857Liabilities:Deposits
    
    $
    757,062
    
    
    $
    741,135
    
    
    $
    664,950
    
    
    $
    651,922Advances from FederalHome Loan Bank
    
    
    154,251
    
    
    
    160,591
    
    
    
    257,051
    
    
    
    264,048Other borrowed money
    
    
    28,636
    
    
    
    28,636
    
    
    
    17,610
    
    
    
    17,610Accrued interest payable
    
    
    4,280
    
    
    
    4,280
    
    
    
    2,618
    
    
    
    2,618Off balance sheet financial
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   33




---



##### Table of Contents



ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 FORWARD LOOKING STATEMENTS
    Overview
   34




---



##### Table of Contents



Critical Accounting Policies, Judgments and Estimates
  35




---



##### Table of Contents



Allowance for Loan Losses
       36




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2009 AND DECEMBER 31, 2008
     39




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
      Actual Ratios AtJune 30,
    
    
    December 31,
    
    
    Regulatory
    
    
    To Be Well2009
    
    
    2008
    
    
    Minimum
    
    
    CapitalizedCapital Ratios:Tier 1 leverage ratio
    
    
    14.25
    %
    
    
    14.20
    %
    
    
    4.00
    %
    
    
    5.00
    %Tier 1 risk-based capital ratio
    
    
    21.86
    
    
    
    22.06
    
    
    
    4.00
    
    
    
    6.00Total risk-based capital ratio
    
    
    23.11
    
    
    
    23.32
    
    
    
    8.00
    
    
    
    10.00
  40




---



##### Table of Contents



SHARE-BASED COMPENSATION
 Share-Based Payment
  Employers Accounting for Employee Stock Ownership Plans
 COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS
     41




---



##### Table of Contents



Amount of Commitment Expiration - Per PeriodAfter One to
    
    
    After ThreeTotal Amounts
    
    
    To
    
    
    Three
    
    
    to Five
    
    
    After FiveCommitted
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Years(In Thousands)Letters of credit
    
    $
    46,797
    
    
    $
    21,135
    
    
    $
    334
    
    
    $
    25,328
    
    
    $
    Recourse obligations on loans
sold
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Commitments to originate loans
    
    
    6,692
    
    
    
    6,692
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity
lines of credit
    
    
    26,299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,299Unused portion of commercial
lines of credit
    
    
    55,832
    
    
    
    55,832
    
    
    
    
    
    
    
    
    
    
    
    Undisbursed portion of
construction loans in process
    
    
    54,100
    
    
    
    32,329
    
    
    
    21,771
    
    
    
    
    
    
    
    Total commitments
    
    $
    189,905
    
    
    $
    115,988
    
    
    $
    22,105
    
    
    $
    25,328
    
    
    $
    26,484
  Payments Due By PeriodAfter One to
    
    
    After ThreeTo
    
    
    Three
    
    
    to Five
    
    
    After FiveTotal
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Years(In Thousands)Certificates of deposit
    
    $
    446,461
    
    
    $
    352,038
    
    
    $
    48,761
    
    
    $
    18,630
    
    
    $
    27,032FHLB advances
    
    
    154,251
    
    
    
    35,700
    
    
    
    54,850
    
    
    
    17,490
    
    
    
    46,211Repurchase agreements
    
    
    28,636
    
    
    
    28,636
    
    
    
    
    
    
    
    
    
    
    
    Total debt
    
    
    182,887
    
    
    
    64,336
    
    
    
    54,850
    
    
    
    17,490
    
    
    
    46,211Operating lease obligations
    
    
    6,730
    
    
    
    865
    
    
    
    1,690
    
    
    
    1,306
    
    
    
    2,869Total contractual obligations
    
    $
    636,078
    
    
    $
    417,239
    
    
    $
    105,301
    
    
    $
    37,426
    
    
    $
    76,112
  42




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##### Table of Contents



COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
 General.
 Interest Income.
 Interest Expense.
  43




---



##### Table of Contents



Average Balances, Net Interest Income, and Yields Earned and Rates Paid.
 Three Months Ended June 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(Dollars in Thousands)Interest-earning assets:Investment securities(1)
    
    $
    84,346
    
    
    $
    800
    
    
    
    3.79
    %
    
    $
    106,036
    
    
    $
    1,198
    
    
    
    4.52
    %Mortgage-backed securities
    
    
    213,407
    
    
    
    2,605
    
    
    
    4.88
    
    
    
    172,529
    
    
    
    1,924
    
    
    
    4.46Loans receivable(2)
    
    
    756,738
    
    
    
    10,149
    
    
    
    5.36
    
    
    
    698,678
    
    
    
    10,604
    
    
    
    6.07Other interest-earning assets
    
    
    33,243
    
    
    
    14
    
    
    
    0.17
    
    
    
    50,791
    
    
    
    294
    
    
    
    2.32Total interest-earning assets
    
    
    1,087,734
    
    
    
    13,568
    
    
    
    4.99
    
    
    
    1,028,034
    
    
    
    14,020
    
    
    
    5.46Cash and non-interest bearing
balances
    
    
    22,180
    
    
    
    
    
    
    
    
    
    
    
    23,168Other non-interest-earning assets
    
    
    83,454
    
    
    
    
    
    
    
    
    
    
    
    59,664Total assets
    
    $
    1,193,368
    
    
    
    
    
    
    
    
    
    
    $
    1,110,866Interest-bearing liabilities:Deposits:Savings and money market accounts
    
    $
    180,272
    
    
    
    604
    
    
    
    1.34
    
    
    $
    109,582
    
    
    
    415
    
    
    
    1.51Checking accounts
    
    
    71,749
    
    
    
    8
    
    
    
    0.04
    
    
    
    63,011
    
    
    
    4
    
    
    
    0.03Certificate accounts
    
    
    451,963
    
    
    
    3,435
    
    
    
    3.04
    
    
    
    424,466
    
    
    
    3,832
    
    
    
    3.61Total deposits
    
    
    703,984
    
    
    
    4,047
    
    
    
    2.30
    
    
    
    597,059
    
    
    
    4,251
    
    
    
    2.85FHLB advances
    
    
    178,128
    
    
    
    1,903
    
    
    
    4.27
    
    
    
    186,067
    
    
    
    2,166
    
    
    
    4.66Other borrowings
    
    
    26,090
    
    
    
    22
    
    
    
    0.34
    
    
    
    20,833
    
    
    
    94
    
    
    
    1.80Total interest-bearing liabilities
    
    
    908,202
    
    
    
    5,972
    
    
    
    2.63
    
    
    
    803,959
    
    
    
    6,511
    
    
    
    3.24Non-interest-bearing liabilities:Non-interest-bearing demand
accounts
    
    
    40,931
    
    
    
    
    
    
    
    
    
    
    
    41,872Real estate tax escrow accounts
    
    
    4,471
    
    
    
    
    
    
    
    
    
    
    
    4,205Other liabilities
    
    
    9,634
    
    
    
    
    
    
    
    
    
    
    
    11,256Total liabilities
    
    
    963,238
    
    
    
    
    
    
    
    
    
    
    
    861,292Stockholders equity
    
    
    230,130
    
    
    
    
    
    
    
    
    
    
    
    249,574Total liabilities and stockholders
equity
    
    $
    1,193,368
    
    
    
    
    
    
    
    
    
    
    $
    1,110,866Net interest-earning assets
    
    $
    179,532
    
    
    
    
    
    
    
    
    
    
    $
    224,075Net interest income; average
Interest rate spread
    
    
    
    
    
    $
    7,596
    
    
    
    2.36
    %
    
    
    
    
    
    $
    7,509
    
    
    
    2.22
    %Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    2.79
    %
    
    
    
    
    
    
    
    
    
    
    2.92
    %
 
 (1)
    
    Investment securities for the 2009 period include 134 tax-exempt municipal bonds with an
aggregate average balance of $41.8 million and an average yield of 3.9%. Investment securities
for the 2008 period include 116 tax-exempt municipal bonds with an aggregate average balance
of $34.5 million and an average yield of 3.9%. The tax-exempt income from such securities has
not been presented on a tax equivalent basis.(2)
    
    Includes non-accrual loans during the respective periods. Calculated net of deferred fees
and discounts and loans in process.(3)
    
    Equals net interest income divided by average interest-earning assets.  44




---



##### Table of Contents



Provision for Loan Losses.
      45




---



##### Table of Contents



Non-interest Income.
 Non-interest Expenses.
 Income Tax Expense.
  46




---



##### Table of Contents



COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 General.
 Interest Income.
 Interest Expense.
  47




---



##### Table of Contents



Average Balances, Net Interest Income, and Yields Earned and Rates Paid.
 Six Months Ended June 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(Dollars in Thousands)Interest-earning assets:Investment securities(1)
    
    $
    84,347
    
    
    $
    1,677
    
    
    
    3.98
    %
    
    $
    110,862
    
    
    $
    2,532
    
    
    
    4.57
    %Mortgage-backed securities
    
    
    220,701
    
    
    
    5,412
    
    
    
    4.90
    
    
    
    160,716
    
    
    
    3,545
    
    
    
    4.41Loans receivable(2)
    
    
    753,453
    
    
    
    20,178
    
    
    
    5.36
    
    
    
    693,449
    
    
    
    21,316
    
    
    
    6.15Other interest-earning assets
    
    
    31,941
    
    
    
    27
    
    
    
    0.17
    
    
    
    55,325
    
    
    
    824
    
    
    
    2.98Total interest-earning assets
    
    
    1,090,442
    
    
    
    27,294
    
    
    
    5.01
    
    
    
    1,020,352
    
    
    
    28,217
    
    
    
    5.53Cash and non-interest bearing
balances
    
    
    22,783
    
    
    
    
    
    
    
    
    
    
    
    22,777Other non-interest-earning assets
    
    
    81,380
    
    
    
    
    
    
    
    
    
    
    
    58,377Total assets
    
    $
    1,194,605
    
    
    
    
    
    
    
    
    
    
    $
    1,101,506Interest-bearing liabilities:Deposits:Savings and money market accounts
    
    $
    167,979
    
    
    
    1,172
    
    
    
    1.40
    
    
    $
    103,949
    
    
    
    760
    
    
    
    1.46Checking accounts
    
    
    69,978
    
    
    
    13
    
    
    
    0.04
    
    
    
    61,482
    
    
    
    9
    
    
    
    0.03Certificate accounts
    
    
    440,805
    
    
    
    6,904
    
    
    
    3.13
    
    
    
    422,840
    
    
    
    8,404
    
    
    
    3.98Total deposits
    
    
    678,762
    
    
    
    8,089
    
    
    
    2.38
    
    
    
    588,271
    
    
    
    9,173
    
    
    
    3.12FHLB advances
    
    
    207,007
    
    
    
    3,988
    
    
    
    3.85
    
    
    
    187,336
    
    
    
    4,413
    
    
    
    4.71Other borrowings
    
    
    22,328
    
    
    
    36
    
    
    
    0.32
    
    
    
    20,401
    
    
    
    230
    
    
    
    2.25Total interest-bearing liabilities
    
    
    908,097
    
    
    
    12,113
    
    
    
    2.67
    
    
    
    796,008
    
    
    
    13,816
    
    
    
    3.47Non-interest-bearing liabilities:Non-interest-bearing demand
accounts
    
    
    39,907
    
    
    
    
    
    
    
    
    
    
    
    40,840Real estate tax escrow accounts
    
    
    4,225
    
    
    
    
    
    
    
    
    
    
    
    3,954Other liabilities
    
    
    9,362
    
    
    
    
    
    
    
    
    
    
    
    10,867Total liabilities
    
    
    961,591
    
    
    
    
    
    
    
    
    
    
    
    851,669Stockholders equity
    
    
    233,014
    
    
    
    
    
    
    
    
    
    
    
    249,837Total liabilities and stockholders
equity
    
    $
    1,194,605
    
    
    
    
    
    
    
    
    
    
    $
    1,101,506Net interest-earning assets
    
    $
    182,345
    
    
    
    
    
    
    
    
    
    
    $
    224,344Net interest income; average
Interest rate spread
    
    
    
    
    
    $
    15,181
    
    
    
    2.34
    %
    
    
    
    
    
    $
    14,401
    
    
    
    2.06
    %Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    2.78
    %
    
    
    
    
    
    
    
    
    
    
    2.82
    %
 
 (1)
    
    Investment securities for the 2009 period include 134 tax-exempt municipal bonds with an
aggregate average balance of $41.7 million and an average yield of 3.9%. Investment securities
for the 2008 period include 116 tax-exempt municipal bonds with an aggregate average balance
of $32.0 million and an average yield of 4.0%. 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.  48




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##### Table of Contents



Provision for Loan Losses.
 Non-interest Income.
 Non-interest Expenses.
 Income Tax Expense.
 
 ITEM 3.
    
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Asset/Liability Management and Market Risk.
   49




---



##### Table of Contents



Gap Analysis.
   50




---



##### Table of Contents



More than
    
    
    More than
    
    
    More than6 Months
    
    
    6 Months
    
    
    1 Year
    
    
    3 Years
    
    
    More than
    
    
    Totalor Less
    
    
    to 1 Year
    
    
    to 3 Years
    
    
    to 5 Years
    
    
    5 Years
    
    
    Amount(Dollars in Thousands)Interest-earning assets (1):Loans receivable (2)
    
    $
    302,199
    
    
    $
    60,680
    
    
    $
    166,800
    
    
    $
    94,280
    
    
    $
    138,575
    
    
    $
    762,534Mortgage-backed
securities
    
    
    40,105
    
    
    
    27,111
    
    
    
    64,517
    
    
    
    33,771
    
    
    
    38,577
    
    
    
    204,081Investment securities
    
    
    4,629
    
    
    
    1,030
    
    
    
    28,140
    
    
    
    19,220
    
    
    
    35,996
    
    
    
    89,015Other interest-earning
assets
    
    
    18,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,840Total interest-earning
assets
    
    
    365,773
    
    
    
    88,821
    
    
    
    259,457
    
    
    
    147,271
    
    
    
    213,148
    
    
    
    1,074,470Interest-bearing liabilities:Savings and money market
accounts
    
    $
    29,148
    
    
    $
    29,148
    
    
    $
    73,037
    
    
    $
    33,602
    
    
    $
    29,446
    
    
    $
    194,381Checking accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,121
    
    
    
    73,121Certificate accounts
    
    
    279,179
    
    
    
    75,969
    
    
    
    45,651
    
    
    
    18,630
    
    
    
    27,032
    
    
    
    446,461FHLB advances
    
    
    73,409
    
    
    
    7,889
    
    
    
    32,810
    
    
    
    10,380
    
    
    
    29,763
    
    
    
    154,251Other borrowed money
    
    
    28,636
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,636Total interest-bearing
liabilities
    
    
    410,372
    
    
    
    113,006
    
    
    
    151,498
    
    
    
    62,612
    
    
    
    159,362
    
    
    
    896,850Interest-earning assets less
interest-bearing liabilities
    
    $
    (44,599
    )
    
    $
    (24,185
    )
    
    $
    107,959
    
    
    $
    84,659
    
    
    $
    53,786
    
    
    $
    177,620Cumulative interest-rate
sensitivity gap (3)
    
    $
    (44,599
    )
    
    $
    (68,784
    )
    
    $
    39,175
    
    
    $
    123,834
    
    
    $
    177,620Cumulative interest-rate
gap
as a percentage of total
assets at June 30, 2009
    
    
    (3.77
    )%
    
    
    (5.81
    )%
    
    
    3.31
    %
    
    
    10.46
    %
    
    
    15.01
    %Cumulative interest-earning
assets as a percentage of
cumulative interest-bearing
liabilities at June 30, 2009
    
    
    89.13
    %
    
    
    86.86
    %
    
    
    105.80
    %
    
    
    116.79
    %
    
    
    119.80
    %
 
 (1)
    
    Interest-earning assets are included in the period in which the balances are
expected to be redeployed and/or repriced as a result of anticipated prepayments,
scheduled rate adjustments and contractual maturities.(2)
    
    For purposes of the gap analysis, loans receivable includes non-performing
loans net of the allowance for loan losses, undisbursed loan funds, unamortized
discounts and deferred loan fees.(3)
    
    Interest-rate sensitivity gap represents the difference between net interest-earning
assets and interest-bearing liabilities.  51




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##### Table of Contents



ITEM 4.
    
     CONTROLS AND PROCEDURES
   
 PART II OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a)
    
    Not applicable.
 (b)
    
    Not applicable.
 (c)
    
    Purchases of Equity Securities
  52




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##### Table of Contents



Total Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased
    
    
    of Shares that MayNumber of
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the Plan orPeriod
    
    Purchased(1)
    
    
    per Share
    
    
    or Programs
    
    
    Programs (2)April 1  April 30, 2009
    
    
    108,106
    
    
    $
    8.52
    
    
    
    108,106
    
    
    
    901,559May 1  May 31, 2009
    
    
    118,270
    
    
    
    8.34
    
    
    
    118,270
    
    
    
    783,289June 1  June 30, 2009
    
    
    19,526
    
    
    
    8.18
    
    
    
    19,526
    
    
    
    763,763Total
    
    
    245,902
    
    
    $
    8.41
    
    
    
    245,902
    
    
    
    763,763
 (1)
    
    Certain shares purchased during the quarter were acquired as part of the
Companys recognition and retention plan. In conjunction with the plan, participants may
elect to have a portion of their awarded shares withheld upon vesting solely to pay for
any related tax liabilities on these awards.(2)
    
    On March 16, 2009, the Company announced a stock repurchase program to repurchase
up to 5% of its outstanding shares, or 1,104,168 shares. This repurchase program is
scheduled to terminate as of March 16, 2010. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   For
    
    
    WithheldMichael F. Czerwonka, III, CPA
    
    
    19,506,362
    
    
    
    433,814Robert J. Pannepacker, Sr.
    
    
    17,287,317
    
    
    
    2,652,859
 For
    
    
    Against
    
    
    Abstain
    
    
    Broker Non-Votes2. To ratify the
appointment of
Beard Miller
Company LLP as
independent
registered public
accounting firm
for the year
ending December
31, 2009
    
    
    19,766,638
    
    
    
    152,473
    
    
    
    21,065
    
    
    
    n/a
 
 ITEM 5.
    
    OTHER INFORMATION
   53




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
 No.
    
    Description10.1*
    
    
    Employment Agreement between Abington Savings Bank
and Thomas J. Wasekanes31.1
    
    
    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.
 
 *
    
    Denotes a management contract.  54




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##### Table of Contents



SIGNATURES
  ABINGTON BANCORP, INC.Date: August 10, 2009
    By:
    /s/ Robert W. WhiteRobert W. WhiteChairman, President and
Chief Executive OfficerDate: August 10, 2009
    By:
    /s/ Jack J. SandoskiJack J. SandoskiSenior Vice President and
Chief Financial Officer  55




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description10.1*
    
    
    Employment Agreement between Abington Savings
Bank and Thomas J. Wasekanes31.1
    
    
    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.
 
 *
    
    Denotes a management contract.  56