SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934

 

For Quarter Ended September 30, 2003

 

 

Commission File Number 0-16018

 

ABINGTON BANCORP, INC.

(Exact name of Registrant as specified in its charter)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý  No  o

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  ý

 

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: 3,923,071 shares as of November 12, 2003.

 

 

Cautionary Statement Regarding Forward-Looking Information

 

Certain statements in this Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Further, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements.  Without limiting the foregoing, the words “expect,” “anticipate,” “plan,” “believe,” “seek,” “estimate,” “internal” and similar words are intended to identify expressions that may be forward-looking statements. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those contemplated by such statements. For example, actual results may be adversely affected by the following possibilities: (1) competitive pressure among depository institutions may increase; (2) changes in interest rates may reduce banking interest margins; (3) general economic conditions and real estate values may be less favorable than contemplated; and (4) adverse legislation or regulatory requirements may be adopted.  Many of such factors are beyond the Company’s ability to control or predict. Readers of this Form 10-Q are accordingly cautioned not to place undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly any of the forward-looking statements herein, whether in response to new information, future events or otherwise.

 

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ABINGTON BANCORP, INC.

FORM 10-Q

 

INDEX

 

Explanatory Note
Part I	Financial Information
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2003 and 2002
	Unaudited Consolidated Statements of Comprehensive Income for the Nine Months Ended September 30, 2003 and 2002
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002
	Notes to Unaudited Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4	Controls and Procedures
Part II	Other Information
Item 1.	Legal Proceedings
Item 2.	Change in Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K
Signature Page
Certifications

 

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ABINGTON BANCORP, INC.

FORM 10-Q

For the Quarter Ended September 30, 2003

 

EXPLANATORY NOTE

 

Based on the findings of an internal accounting review initiated by the Company during the first quarter of 2003, the Company reported that it would revise its previously announced 2002 financial results and would restate its previously issued 2001 financial statements.  The revisions and restatement were necessary to correct accounting errors related to the acceleration of prepayments on mortgage-backed investment securities, errors in recording payments received on various investment securities and certain adjustments related to accruals for income and expense.

 

During its internal accounting review, the Company identified a number of accounting errors recorded by the Company’s former controller, including underlying prepayment assumptions used in the calculation of interest income in 2002 that did not adequately reflect the actual prepayment rates received on a portion of its mortgage-backed securities (MBS) portfolio and that certain payments received on a portion of its MBS portfolio were not properly applied.  It was further determined, based upon the results of the preliminary review, that it would be necessary to revise the Company’s previously announced financial results for 2002 and restate the Company’s financial statements for 2001.  The Company engaged its independent accountant, PricewaterhouseCoopers LLP, which replaced Arthur Andersen LLP in mid-2002, to undertake a re-audit of the year 2001.  Restated financial statements for the year 2001 are included in the Company's Form 10-K for the year ended December 31, 2002 and the 2002 financial information contained in this Form 10-Q for the quarter and nine months ended September 30, 2002 has been revised.

 

Following the discovery of these accounting errors, the Company initiated a number of improvements in its disclosure controls and procedures as well as its internal controls.  Most of these improvements were designed to reduce the opportunity for human error, which was the primary cause of each of the identified errors.  Management implemented several changes in the process of recording transactions and related recordkeeping in those areas where errors occurred, including (a) automation of investment portfolio accounting (previously processed on a manual basis), (b) improved reconcilement procedures and yield analyses, (c) the utilization of third party resources and advisory services and, (d) additional training and oversight of personnel within the accounting division along with the addition of three senior accounting officers with significant experience in bank accounting matters and internal controls.

 

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Following is a summary of the effect of restatement on the Company’s unaudited consolidated financial statements at or for the periods presented:

 

				Selected Balance Sheet Data
				At September  30, 2002
				As Previously			As
(Dollars in thousands)				Reported			Restated
Securities available for sale at market value				$	404,687		$	403,560
Other assets				11,554			10,621
Total assets				937,838			935,778
Accrued taxes and expenses				8,284			7,652
Other liabilities				16,393			15,981
Total liabilities				868,017			866,973
Retained earnings				35,774			34,389
Other accumulated comprehensive income, net of tax				4,867			5,236
Total stockholders’ equity				57,602			56,586

 

		Summary Income Data
		Three Months Ended						Nine Months Ended
		September 30, 2002						September 30, 2002
(Dollars in thousands,		As Previously			As			As Previously
except per share data)		Reported			Restated			Reported			Restated
Interest and fees on loans		$	6,053		$	6,218		$	18,742		$	18,670
Interest on mortgage-backed securities		5,059			4,513			14,304			13,761
Salaries and employee benefits		3,451			3,406			10,036			10,025
Other non-interest expense		2,071			2,045			5,616			5,538
Provision for income taxes		1,050			940			3,210			3,023
Net income		1,693			1,493			5,385			5,046
Net income per share:
Basic		$	0.51		$	0.44		$	1.67		$	1.55
Diluted		$	0.49		$	0.42		$	1.60		$	1.50

 

		Selected Cash Flow Data (a)(b)
		Nine Months Ended September 30, 2002
		As Previously			As
(Dollars in thousands)		Reported			Restated
Net income		$	5,385		$	5,046
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization, accretion and depreciation, net		1,607			2,122
Other, net		(3,292		)	(3,638		)
Net cash provided by operating activities		7,172			7,002
Cash flows from investing activities:
Proceeds from principal payments on and maturities of available for sale securities		79,146			79,316
Net cash provided (used) by Investing activities		(29,546		)	(29,376		)
Net increase in cash and cash equivalents		$	8,044		$	8,044

 

(a)   The previously reported amounts for net cash provided by (used in) operating activities and investing activities have been adjusted for the effect of the restatement.

(b)   As indicated, there has been no change in the net increase in cash and cash equivalents as a result of the restatement.

 

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Part I                 Financial Information

Item 1.           Financial Statements

 

ABINGTON BANCORP, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

(Dollar amounts in thousands)		September 30, 2003			December 31, 2002