SOURCE: Abington Community Bancorp, Inc.

October 31, 2006 14:35 ET

Abington Community Bancorp, Inc. Announces Increase in Net Income for the Third Quarter of 2006

JENKINTOWN, PA -- (MARKET WIRE) -- October 31, 2006 -- Abington Community Bancorp, Inc. (the "Company") (NASDAQ: ABBC), the "mid-tier" holding company for Abington Bank (the "Bank"), reported net income of $1.7 million for the quarter ended September 30, 2006, representing an increase of 7.0% over the comparable 2005 period. Diluted earnings per share increased to $0.12 for the quarter compared to $0.10 for the third quarter of 2005. Additionally, the Company reported net income of $5.2 million for the first nine months of 2006, representing an increase of 10.2% over the comparable 2005 period. Diluted earnings per share increased to $0.35 for the first nine months of 2006 from $0.31 for the first nine months of 2005.

Mr. Robert W. White, Chairman, President and CEO of the Company, stated, "Although we continue to face stiff competition within the industry, we have continued to be successful in growing our loan and deposit portfolios. Our growth has enabled us to increase our net interest income despite the ongoing flat yield curve. We have continued to expand our branch network with the October opening of our new Concordville, Pennsylvania branch. We look forward to the opening of our new Lansdale, Pennsylvania branch by the end of 2006 as well as the opening of two additional branches in Chalfont and Springhouse, Pennsylvania by mid-2007. With these new branches we hope to attract new core customers and enhance our reputation as the #1 Community Bank."

Net interest income was $5.6 million and $17.0 million for the three months and nine months ended September 30, 2006, respectively, representing increases of 5.5% and 9.1%, respectively, over the comparable 2005 periods. Interest income for the three months ended September 30, 2006 increased $2.7 million or 25.7% over the comparable 2005 period. Interest income for the nine months ended September 30, 2006 increased $7.6 million or 26.2% over the comparable 2005 period. For both the three-month and nine-month periods, the increase in interest income was primarily a result of growth in the average balance of our loan portfolio combined with an increase in the average yield on those assets. The average balance of our loan portfolio increased $97.3 million or 19.8% to $588.4 million for the quarter ended September 30, 2006 from $491.1 million for the quarter ended September 30, 2005. The average yield on our loan portfolio increased 64 basis points to 6.90% from 6.26% over the same period. Similarly, the average balance of our loan portfolio increased $109.5 million or 24.2% to $561.6 million for the nine months ended September 30, 2006 from $452.2 million for the nine months ended September 30, 2005. The average yield on our loan portfolio increased 57 basis points to 6.72% from 6.15% over the same nine-month period.

Our increase in interest income for both the three-month and nine-month periods was partially offset by an increase in our interest expense. Interest expense for the three months ended September 30, 2006 increased $2.4 million or 47.2% over the comparable 2005 period. Interest expense for the nine months ended September 30, 2006 increased $6.2 million or 45.9% over the comparable 2005 period. For both the three- and nine-month periods, the increase in interest expense was primarily the result of increases in the average balances of and average rate paid on deposits. During the three months ended September 30, 2006 compared to the three months ended September 30, 2005, our average deposit balance grew by $80.7 million or 18.7%, primarily due to growth in higher-rate certificates of deposit. During the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005, our average deposit balance grew by $81.9 million or 20.3%, again, primarily due to growth in higher-rate certificates of deposit. As a result of this growth, as well as the rising interest rate environment, the average rate we paid on our deposits increased 114 basis points to 3.62% for the third quarter of 2006 from 2.48% for the third quarter of 2005. Similarly, the average rate we paid on our deposits increased 98 basis points to 3.23% for the first nine months of 2006 from 2.25% for the first nine months of 2005. Our average interest rate spread and net interest margin for the third quarter of 2006 decreased to 2.05% and 2.62%, respectively, from 2.26% and 2.76%, respectively, for the third quarter of 2005. Our average interest rate spread and net interest margin for the first nine months of 2006 decreased to 2.17% and 2.71%, respectively, from 2.29% and 2.79%, respectively, for the first nine months of 2005.

We made a $120,000 provision to the allowance for loan losses during the third quarter of 2006, and our provision for loan losses amounted to $128,000 for the first nine months of 2006. During the third quarter of 2005, we made a provision of $20,000 to the allowance for loan losses with no provision taken earlier in 2005. The provision for loan losses is charged to expense as necessary to bring our allowance for loan losses to a sufficient level to cover known and inherent losses in the loan portfolio. The provision taken during the third quarter of 2006 was largely the result of growth in the loan portfolio while the overall credit quality of the loan portfolio remains strong. A portion of the provision, however, related to an aggregate of $2.9 million of loans to one borrower, consisting of four construction loans and one commercial real estate loan that we classified as substandard during the quarter. Although the borrower has made payments on all of these loans on a timely basis, we determined that on two of the construction loans, the Bank had disbursed a greater amount of the loan proceeds than was warranted given the progress of construction at the time of disbursement. The Company subsequently made a physical inspection of every project securing the construction loans in its portfolio and determined that this was an isolated incident. All other construction properties were sufficiently complete for the funds advanced.

For the specific construction loans, we have confessed judgment against the borrower, which provides us with additional collateral securing the loans. We also obtained current appraisals of the underlying collateral properties, which support the full value of the loans. Based on the value of the construction properties, as well as the additional collateral available, we do not expect to incur any additional losses on the loans to this borrower. Since the loans have continued to perform they remain on accrual status. At September 30, 2006, non-performing loans amounted to 0.04% of loans receivable and our allowance for loan losses amounted to 645.23% of non-performing loans.

Our total non-interest income amounted to $716,000 for the third quarter of 2006 compared to $770,000 for the third quarter of 2005. The decrease was due primarily to a $37,000 decrease in gain on derivative instruments, net, as our final swap agreement expired in December 2005, combined with a $22,000 decrease in other non-interest income, primarily due to a decrease in appraisal income. For the nine months ended September 30, 2006, our total non-interest income amounted to $2.2 million, compared to $2.1 million for the nine months ended September 30, 2005. The increase of $50,000 was due primarily to a $174,000 increase in income on bank owned life insurance ("BOLI") that was partially offset by decreases in service charge income and in gain on derivative instruments, net, of $38,000 and $80,000, respectively.

Our total non-interest expense for the third quarter of 2006 amounted to $3.9 million, representing a decrease of $36,000 from the third quarter of 2005. Decreases in occupancy expense and professional services expense were partially offset by increases in salaries and employee benefits expense, depreciation expense and advertising and promotions expense. The decrease in professional services expense of $92,000 for the third quarter of 2006 compared to the third quarter of 2005 was primarily the result of our change in independent auditors. The $43,000 increase in salaries and employee benefits expense was due primarily to growth in the total number of employees, normal merit increases in salaries, and higher health and insurance benefit costs. Also contributing to the increase in salaries and employee benefits expense was an increase in the expense for our Employee Stock Ownership Plan ("ESOP"), which is based on the average price of our common stock for the period. The increase in depreciation expense of $40,000 was a result of our additional facilities, primarily the Bank's new branch in Warrington, Pennsylvania, which opened in April 2006. The increase in advertising expense of $26,000 was a result of increased advertising to promote our deposit products. For the nine months ended September 30, 2006, our total non-interest expense amounted to $11.7 million, representing an increase of $726,000 or 6.6% from the nine months ended September 30, 2005. As was the case for the quarter ended September 30, 2006, decreases in occupancy expense and professional services expense were offset by increases in other expense categories. The largest increases in expense for the first nine months of 2006 compared to the first nine months of 2005 were in salaries and employee benefits expense, depreciation expense and other non-interest expense. The decrease in professional services expense of $155,000 for the first nine months of 2006 compared to the first nine months of 2005 was primarily the result of our change in independent auditors, as was the case for the third quarter of 2006. Salaries and employee benefits expense increased $609,000 or 10.5% for the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005. This increase was primarily due to additional expenses of $378,000 in the aggregate relating to the Company's 2005 Stock Option Plan ("SOP") and 2005 Recognition and Retention Plan ("RRP"), both of which began in the third quarter of 2005. The remainder of the increase again was due to growth in the total number of employees, normal merit increases in salaries, and higher health and insurance benefit costs. Depreciation expense for the first nine months of 2006 compared to the first nine months of 2005 increased $113,000 or 29.8%. As was the case for the three-month period, the increase was primarily due to our new facilities. Additional expenses of approximately $154,000 were recognized in other non-interest expense for SOP and RRP awards to directors, but were somewhat offset by decreases in various other categories of other non-interest expense.

Income tax expense for the third quarter of 2006 amounted to $666,000 compared to $604,000 for the third quarter of 2005. Income tax expense for the nine months ended September 30, 2006 amounted to $2.1 million compared to $1.9 million for the nine months ended September 30, 2005. Our effective tax rate increased to 28.1% for the quarter ended September 30, 2006, from 27.5% for quarter ended September 30, 2005, however, our effective tax rate improved to 28.7% for the nine months ended September 30, 2006 from 29.1% for the nine months ended September 30, 2005.

The Company's total assets increased $61.6 million, or 7.3%, to $905.7 million at September 30, 2006 compared to $844.1 million at December 31, 2005. The primary reason for the increase in total assets during the first nine months of 2006 was a $65.3 million or 12.3% increase in net loans receivable. The largest loan growth occurred in one- to four-family residential loans, which increased $45.6 million or 14.1% and construction loans, which increased $13.3 million or 10.0%. Additionally, multi-family residential and commercial loans increased $10.9 million or 14.3%. Also contributing to the overall increase in assets during the first nine months of 2006 was an increase in property and equipment, net, of $1.8 million or 28.3%, primarily as a result of increased investment in our new branches. The first of these branches opened in April 2006 in Warrington, Pennsylvania, and was followed by the opening of another branch in Concordville, Pennsylvania in October 2006. Additional branches are also expected to open later this year (Lansdale, Pennsylvania) and early next year (Springhouse and Chalfont, Pennsylvania). These increases were somewhat offset by a decrease in investment and mortgage-backed securities of $8.4 million in the aggregate, which occurred as a portion of our maturities and repayments were reinvested into new loans.

Our total deposits increased $53.8 million or 10.7% to $555.0 million at September 30, 2006 compared to $501.2 million at December 31, 2005. The increase was due primarily to an increase in certificate accounts of $88.2 million that was partially offset by a decrease in savings and money market accounts of $23.4 million and a decrease in checking accounts of $11.0 million. The shift towards higher-rate certificates of deposit was a result of the increased rates available on those products relative to other deposit products or other investments in the current interest rate environment. The Company continues to remain focused on maintaining and growing its base of core deposits over the long term.

Our stockholders' equity decreased $4.1 million to $113.2 million at September 30, 2006 compared to $117.2 million at December 31, 2005. The decrease was primarily due to the purchase of approximately 582,000 shares of the Company's common stock for an aggregate of $8.3 million as part of the Company's stock repurchase program announced in January 2006. The payment of the Company's quarterly cash dividends of $0.05 per share in March and $0.06 per share in June and September reduced retained earnings by $2.6 million, but this was offset by our $5.2 million of net income for the first nine months of 2006, resulting in a net increase to retained earnings of $2.7 million.

Abington Community Bancorp, Inc. is the "mid-tier" holding company for Abington Bank. Abington Bank is a Pennsylvania-chartered, FDIC-insured savings bank which was originally organized in 1867. Abington Bank conducts business from its headquarters and main office in Jenkintown, Pennsylvania as well as eight additional full service branch offices and five limited service banking offices located in Montgomery and Bucks Counties, Pennsylvania. As of September 30, 2006, Abington Community Bancorp had $905.7 million in total assets, $555.0 million in deposits and $113.2 million in stockholders' equity.

This news release contains certain forward-looking statements, including statements about the financial condition, results of operations and earnings outlook for Abington Community Bancorp, Inc. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate" and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Forward-looking statements, by their nature, are subject to risks and uncertainties. A number of factors -- many of which are beyond the Company's control -- could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The Company's reports filed from time-to-time with the Securities and Exchange Commission, describe some of these factors, including general economic conditions, changes in interest rates, deposit flows, the cost of funds, changes in credit quality and interest rate risks associated with the Company's business and operations. Other factors described include changes in our loan portfolio, changes in competition, fiscal and monetary policies and legislation and regulatory changes. Investors are encouraged to access the Company's periodic reports filed with the Securities and Exchange Commission for financial and business information regarding the Company at www.abingtonbank.com under the Investor Relations menu. We undertake no obligation to update any forward-looking statements.

ABINGTON COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

                                              September 30,  December 31,
                                                  2006           2005
                                              -------------  -------------
ASSETS

Cash and due from banks                       $  12,757,692  $  19,460,237
Interest-bearing bank balances                   15,500,133      8,254,004
                                              -------------  -------------
      Total cash and cash equivalents            28,257,825     27,714,241
Investment securities held to maturity
 (estimated fair value--2006, $20,624,239;
 2005, $20,316,775)                              20,393,971     20,395,593
Investment securities available for sale
 (amortized cost--2006, $80,995,631; 2005,
 $80,775,605)                                    79,536,089     78,828,696
Mortgage-backed securities held to maturity
 (estimated fair value--2006, $56,673,006;
 2005, $65,505,255)                              58,905,688     67,410,735
Mortgage-backed securities available for sale
 (amortized cost--2006, $81,579,068; 2005,
 $82,212,270)                                    79,372,301     79,943,379
Loans receivable, net of allowance for loan
 losses (2006, $1,555,278; 2005, $1,454,510)    594,759,328    529,487,209
Accrued interest receivable                       4,618,869      3,475,350
Federal Home Loan Bank stock--at cost            11,888,500     11,061,200
Cash surrender value - bank owned life
 insurance                                       16,003,814     15,498,958
Property and equipment, net                       8,352,523      6,510,144
Deferred tax asset                                2,620,173      2,648,200
Prepaid expenses and other assets                   969,316      1,098,106
                                              -------------  -------------
TOTAL ASSETS                                  $ 905,678,397  $ 844,071,811
                                              =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Deposits:
    Noninterest-bearing                       $  37,653,586  $  43,333,286
    Interest-bearing                            517,362,004    457,849,738
                                              -------------  -------------
      Total deposits                            555,015,590    501,183,024
  Advances from Federal Home Loan Bank          204,396,450    201,444,952
  Other borrowed money                           21,995,785     16,113,949
  Accrued interest payable                        6,325,273      1,909,234
  Advances from borrowers for taxes and
   insurance                                        547,000      2,384,314
  Accounts payable and accrued expenses           4,238,533      3,805,571
                                              -------------  -------------
           Total liabilities                    792,518,631    726,841,044
                                              -------------  -------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, $0.01 par value,
   10,000,000 shares authorized, none issued              -              -
  Common stock, $0.01 par value, 40,000,000
   shares authorized, issued: 15,870,000 in
   2006 and 2005, oustanding:
   15,293,464 in 2006 and 15,870,000 in 2005        158,700        158,700
  Additional paid-in capital                     69,540,776     69,234,964
  Treasury stock--at cost, 576,536 shares        (8,316,768)             -
  Unallocated common stock held by:
    Employee Stock Ownership Plan (ESOP)         (6,511,650)    (6,880,236)
    Recognition & Retention Plan Trust (RRP)     (2,791,047)    (3,339,413)
    Deferred compensation plans trust            (1,059,876)    (1,050,000)
  Retained earnings                              64,559,396     61,889,180
  Accumulated other comprehensive loss           (2,419,765)    (2,782,428)
                                              -------------  -------------
           Total stockholders' equity           113,159,766    117,230,767
                                              -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 905,678,397  $ 844,071,811
                                              =============  =============



ABINGTON COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)


                        Three Months Ended          Nine Months Ended
                          September 30,               September 30,
                    --------------------------- --------------------------
                        2006          2005          2006          2005
                    ------------- ------------- ------------  -------------
INTEREST INCOME:
  Interest on loans $  10,146,533 $   7,683,975 $ 28,321,461  $  20,860,816
  Interest and
   dividends on
   investment and
    mortgage-backed
     securities:
      Taxable           2,715,257     2,500,970    7,599,627      7,639,385
      Tax-exempt          212,727       214,482      639,935        471,876
                    ------------- ------------- ------------  -------------
        Total
         interest
         income
                       13,074,517    10,399,427   36,561,023     28,972,077
INTEREST EXPENSE:
  Interest on
   deposits             4,629,897     2,668,445   11,776,374      6,826,392
  Interest on
   Federal Home
   Loan Bank
   advances             2,535,445     2,259,801    7,207,782      6,290,844
  Interest on other
   borrowed money         268,440       122,642      620,257        318,307
                    ------------- ------------- ------------  -------------
    Total non-interest
     expense            7,433,782     5,050,888   19,604,413     13,435,543
                    ------------- ------------- ------------  -------------
NET INTEREST INCOME     5,640,735     5,348,539   16,956,610     15,536,534
PROVISION FOR LOAN
 LOSSES                   120,000        20,000      128,000         20,000
                    ------------- ------------- ------------  -------------
NET INTEREST INCOME
 AFTER
  PROVISION FOR
   LOAN LOSSES          5,520,735     5,328,539   16,828,610     15,516,534
                    ------------- ------------- ------------  -------------
NON-INTEREST INCOME
  Service charges         435,978       436,938    1,282,401      1,320,289
  Rental income            10,348        10,048       25,520         33,998
  Gain on
   derivative
   instruments, net             -        37,380            -         80,050
  Income on bank
   owned life
   insurance              171,605       166,113      504,856        330,453
  Loss on sale of
   investment
   securities                   -             -         (601)             -
  Other income             97,910       119,890      349,289        347,120
                    ------------- ------------- ------------  -------------
    Total non-interest
     income               715,841       770,369    2,161,465      2,111,910
                    ------------- ------------- ------------  -------------
NON-INTEREST
 EXPENSES
  Salaries and
   employee
   benefits             2,158,377     2,115,019    6,402,075      5,793,082
  Occupancy               365,762       429,222    1,140,453      1,219,505
  Depreciation            173,723       133,302      490,874        378,222
  Professional
   services               128,871       221,192      514,731        669,903
  Data processing         322,957       309,527      957,032        908,914
  ATM expense              82,734        82,174      246,772        250,204
  Deposit insurance
   premium                 35,345        31,620      104,623         91,265
  Advertising and
   promotions             158,786       132,524      390,191        334,510
  Other                   437,795       446,121    1,419,965      1,295,198
                    ------------- ------------- ------------  -------------

   Total non-interest
    expenses            3,864,350     3,900,701   11,666,716     10,940,803
                    ------------- ------------- ------------  -------------
INCOME BEFORE
 INCOME TAXES           2,372,226     2,198,207    7,323,359      6,687,641
PROVISION FOR
 INCOME TAXES             665,667       603,819    2,099,227      1,946,193
                    ------------- ------------- ------------  -------------
NET INCOME          $   1,706,559 $   1,594,388 $  5,224,132  $   4,741,448
                    ============= ============= ============  =============
BASIC EARNINGS PER
 COMMON SHARE       $        0.12 $        0.10 $       0.35  $        0.31
DILUTED EARNINGS
 PER COMMON SHARE   $        0.12 $        0.10 $       0.35  $        0.31
BASIC AVERAGE
 COMMON SHARES
 OUTSTANDING:          14,554,073    15,244,232   14,802,227     15,366,869
DILUTED AVERAGE
 COMMON SHARES
 OUTSTANDING:          14,799,709    15,485,363   15,040,647     15,448,129



ABINGTON COMMUNITY BANCORP, INC.

SELECTED FINANCIAL DATA (unaudited)


                                             Three Months     Nine Months
                                                Ended           Ended
                                            September 30,   September 30,
                                            --------------  --------------
                                             2006    2005    2006    2005
                                            ------  ------  ------  ------

Selected Operating Ratios(1):
Average yield on interest-earning assets      6.08%   5.36%   5.85%   5.21%
Average rate on interest-bearing
 liabilities                                  4.03%   3.10%   3.68%   2.92%
Average interest rate spread(2)               2.05%   2.26%   2.17%   2.29%
Net interest margin(2)                        2.62%   2.76%   2.71%   2.79%
Average interest-earning assets to average
  interest-bearing liabilities              116.61% 119.02% 117.45% 120.91%
Net interest income after provision
  for loan losses to non-interest expense   142.88% 136.61% 144.24% 141.82%
Total non-interest expense to average
 assets                                       1.71%   1.90%   1.77%   1.86%
Efficiency ratio(3)                          60.78%  63.75%  61.03%  61.99%
Return on average assets                      0.77%   0.78%   0.80%   0.81%
Return on average equity                      6.25%   5.36%   6.12%   5.25%
Average equity to average assets             12.35%  14.49%  13.06%  15.36%

Asset Quality Ratios(4):
Non-performing loans as a percent of
  total loans receivable(5)                   0.04%   0.06%   0.04%   0.06%

Non-performing assets as a percent of
  total assets(5)                             0.03%   0.04%   0.04%   0.04%

Allowance for loan losses as a percent of
  non-performing loans                      645.23% 435.00% 645.23% 435.00%

Net charge-offs to average loans receivable   0.00%   0.00%   0.00%   0.01%

Capital Ratios(6):
Tier 1 leverage ratio                        10.40%  10.47%  10.40%  10.47%
Tier 1 risk-based capital ratio              16.37%  17.05%  16.37%  17.05%
Total risk-based capital ratio               16.64%  17.33%  16.64%  17.33%

(1) With the exception of end of period ratios, all ratios are based on
average monthly balances during the indicated periods and, for the
three-month and nine-month periods ended September 30, 2006 and 2005, are
annualized where appropriate.
(2) Average interest rate spread represents the difference between the
average yield on interest-earning assets and the average rate paid on
interest-bearing liabilities, and net interest margin represents net
interest income as a percentage of average interest-earning assets.
(3) The efficiency ratio represents the ratio of non-interest expense
divided by the sum of net interest income and non-interest income.
(4) Asset quality ratios are end of period ratios, except for net
charge-offs to average loans receivable.
(5) Non-performing assets consist of non-performing loans and real estate
owned.  Non-performing loans consist of all accruing loans 90 days or more
past due and all non-accruing loans.  It is our policy to cease accruing
interest on all loans 90 days or more past due.  Real estate owned consists
of real estate acquired through foreclosure and real estate acquired by
acceptance of a deed-in-lieu of foreclosure.
(6) Capital ratios are end of period ratios and are calculated for Abington
Bank per regulatory requirements.

Contact Information

  • Contact:
    Robert W. White
    Chairman, President and CEO

    Jack Sandoski
    Senior Vice President and CFO
    (215) 886-8280