Filed by Abington Bancorp, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933, as amended,
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act
of 1934, as amended.
Subject Company: Abington Bancorp, Inc.
Commission File No.: 0-16018
This filing contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, with respect to the financial condition,
results of operations and business of Abington Bancorp, Inc. prior to the merger
and Seacoast Financial Services Corporation following the consummation of the
merger that are subject to various factors which could cause actual results to
differ materially from such projections or estimates. Such factors include, but
are not limited to, the following: (1) the businesses of Seacoast Financial
Services Corporation and Abington Bancorp, Inc. may not be combined
successfully, or such combination may take longer to accomplish than expected;
(2) expected cost savings from the merger cannot be fully realized or realized
within the expected timeframes; (3) operating costs, customer loss and business
disruption following the merger, including adverse effects on relationships with
employees, may be greater than expected; (4) governmental approvals of the
merger may not be obtained, or adverse regulatory conditions may be imposed in
connection with government approvals of the merger; (5) the stockholders of
Abington may fail to approve the merger; (6) adverse governmental or regulatory
policies may be enacted; (7) the interest rate environment may further compress
margins and adversely affect net interest income; (8) the risks associated with
continued diversification of assets and adverse changes to credit quality; (9)
competitive pressures from other financial service companies in Seacoast
Financial's and Abington's markets may increase significantly; and (10) the risk
of an economic slowdown that would adversely affect credit quality and loan
originations. Other factors that may cause actual results to differ from
forward-looking statements are described in Seacoast Financial's filings with
the Securities and Exchange Commission. Seacoast Financial does not undertake or
intend to update any forward-looking statements.
Seacoast Financial Services Corporation and Abington Bancorp, Inc. will be
filing relevant documents concerning the transaction with the Securities and
Exchange Commission, including a registration statement on Form S-4. Investors
are urged to read the registration statement on Form S-4 containing a
prospectus/proxy statement regarding the proposed transaction and any other
documents filed with the SEC, as well as any amendments or supplements to those
documents, because they contain (or will contain) important information.
Investors are able to obtain those documents free of charge at the SEC's
website, (http://www.sec.gov). In addition, documents filed with the SEC by
Seacoast Financial can be obtained, without charge, by directing a request to
Seacoast Financial Services Corporation, One Compass Place, New Bedford,
Massachusetts 02740, Attn: James R. Rice, Senior Vice President, Marketing,
telephone (508) 984-6102. In addition, documents filed with the SEC by Abington
can be obtained, without charge, by directing a request to Abington Bancorp,
Inc., 97 Libbey Parkway, Weymouth, MA 02189, Attn: Corporate Secretary,
telephone (781) 682-6400. WE URGE SHAREHOLDERS TO READ THESE DOCUMENTS, AS WELL
AS ANY AMENDMENTS AND SUPPLEMENTS TO THOSE DOCUMENTS BECAUSE THEY CONTAIN (OR
WILL CONTAIN) IMPORTANT INFORMATION. Abington and its directors and executive
officers may be deemed to be participants in the solicitation of proxies in
connection with the merger.
Information about the directors and executive officers of Abington and their
ownership of Abington common stock is set forth in the proxy statement for
Abington's 2003 annual meeting of stockholders as filed on Schedule 14A with the
SEC on June 27, 2003. Additional information about the interests of those
participants may be obtained from reading the definitive prospectus/proxy
statement regarding the proposed transaction when it becomes available.
THE FOLLOWING IS A SCRIPT USED FOR A CONFERENCE CALL HELD BY ABINGTON BANCORP,
INC. AT 2:00 P.M. EASTERN TIME ON OCTOBER 23, 2003.
ABINGTON BANCORP.
SCRIPT FOR THIRD QUARTER 2003 CONFERENCE CALL
OCTOBER 23, 2003
JIM MCDONOUGH
Good afternoon, everyone, and welcome to Abington Bancorp's third quarter
conference call. With me here today is Jim Hunt, our Chief Financial Officer.
Jim and I will discuss third quarter results and those details of our pending
merger with Seacoast Financial Services Corp. that are in the public domain. Jim
will then provide some additional financial details regarding our third quarter
results while I cover the overall business environment and, of course, we'll
take your questions at the end. Before we get started, Jim will read our safe
harbor provision. Jim?
JIM HUNT
Thanks Jim and good afternoon everyone. Certain statements we will make this
afternoon constitute "forward-looking statements," within the meaning of the
Private Securities Litigation Reform Act of 1995, that involve a number of risks
and uncertainties that could cause actual results to differ materially from
those indicated, including changing regional and national economic conditions,
changes in the real estate market, changes in market interest rates, credit
risks on lending activities, and competitive and regulatory factors. All
forward-looking statements are necessarily speculative and undue reliance should
not be placed on any such statements, which are accurate only as of today,
October 23, 2003. We undertake no responsibility to update those forward-looking
statements in the future.
Now I'll turn the call back to Jim McDonough.
JIM MCDONOUGH
Thanks, Jim.
It has obviously been a very busy few weeks here, and as you can imagine, a time
filled with mixed emotions. But at the end of the day, we truly believe that our
affiliation with Seacoast will be in the best long-term interests of all of our
constituencies: our customers - our shareholders - our community - and our
employees. Seacoast is a great institution, one whose management team we have
known and respected for years. The combined strength of our franchises will
surely make for a stronger combined entity - one that will enhance Abington's
capacity to better serve its customers. Yet, we will be small enough to maintain
community ties and provide the strong, customer-focused service for which we
have always been known.
As stated in the release announcing the transaction, we currently expect the
merger will be completed during the second quarter of 2004 - or earlier -
depending on regulatory approval and the approval of Abington's shareholders.
Upon completion of the merger, the combined bank will be the largest independent
savings bank in Massachusetts with a pro-forma market capitalization of more
than $700 million and total assets of approximately $5.4 billion. We will serve
a vibrant and growing region of the state, the Southeast Corridor, with 64
branches that cover territory from Boston to Cape Cod, the Islands and the Rhode
Island border. And importantly, because there is no overlap between our two
franchises, we have pledged not close any Abington Savings branches.
Let me review some of the significant terms of the transaction with you. Based
upon the closing price of Seacoast's stock on October 17th, our shareholders
will receive $34.00 per share in cash, 1.4468 shares of Seacoast common stock,
or a combination thereof, equaling an aggregate value of almost $140 million.
Payment will be made to Abington shareholders through an election process and
allocation procedures intended to ensure that 75% of Abington's shares will be
exchanged for Seacoast common stock and 25% for cash.
For now, that's about all we can tell you about our planned combination. It is
my understanding that a complete copy of the definitive agreement will soon be
filed with the Securities and Exchange Commission under the cover of a Form 8-K.
As our teams work together over the coming weeks and months, we will be able to
share more details. You know both of our organizations have considerable recent
experience with mergers, so we expect that this process will be fairly smooth
and efficient.
Before asking Jim Hunt to comment on our financial results for the quarter, let
me spend a just a few minutes reviewing some of our other third quarter
activities.
Our mortgage banking subsidiary, Old Colony Mortgage, continues to generate
relatively strong loan originations, although slowing somewhat from the record
activity levels of the past few quarters, reflecting changes in the mortgage
rate environment. For the third quarter, Old Colony processed over $90 million
in loan applications, versus $192 million in the second quarter this year and
$66 million in the year ago quarter. On a nine month basis, mortgage
applications were $477 million, more than doubling the $205 million of volume
processed in 2002. While production is coming down from the record highs, we are
still seeing significant activity in this area. As I have said in the past, we
have anticipated this trend and while we will remain competitive in the
residential mortgage market, we continue to place greater emphasis going forward
on the origination of home equity and commercial loans - markets that we believe
can contribute to earnings in a more meaningful way in the future.
On the community banking side, our results are also strong. Total deposits grew
$10.1 million, or 1.6% from the end of 2002. Transaction accounts, which exclude
the more rate-sensitive time deposits and are an important measure for our
business, grew even faster, 30.6 million, or 6.7%, for the first nine months of
2003. Higher cost term certificates were allowed to decrease by $20.5 million,
or 10.8%, due to pricing strategies.
I'll now turn the conference over to Jim Hunt, who will review financial
highlights of the past quarter, including the steps we announced in September to
rebalance our balance sheet.
Jim, please go ahead
JIM HUNT
Thanks, Jim. To begin, I want to let you know that we expect to file our Form
10-Q for the third quarter of 2003 on or before October 14th, and that report
will contain additional financial details. Now, I'd like to take a few minutes
to provide you with some additional insight into our efforts to restructure our
balance sheet to better position the Bank in the face of rising interest rates.
In early September, we announced a program to effect sales of
higher-risk securities and reduce higher-cost term debt. This program was
designed to improve future earnings, strengthen our capital position and reduce
overall interest rate and price risk. The program was completed by quarter end
and included the sale of $75 million of higher risk and $22 million of small
denomination mortgage-backed securities. Proceeds from the sales were used to
reduce approximately $72 million of longer-term, higher-cost Federal Home Loan
Bank (FHLB) borrowings. In connection with this program, the Company recorded
approximately $1.72 million in charges related to the prepayment of the FHLB
debt during the third quarter of 2003. The Company repaid an additional $46
million of short-term FHLB debt during the quarter and sold an additional $12
million of higher risk mortgage-backed securities.
The execution of this program affected the bank's net income for the
three and nine month periods of 2003, in comparison with prior year periods. At
the time of the announcement, it was expected that earnings for the third
quarter of 2003 would approximate break-even. Actual net income for the quarter
was $385,000, or $0.09 per diluted share, somewhat better than the projected
break-even quarter we anticipated when we originally announced the restructuring
program. The better result was due to higher than anticipated securities gains,
lower penalties associated with debt prepayment and other miscellaneous income
received during the quarter. Our timing could not have been better as we were
able to effect this program in early September when rates were somewhat higher,
thereby reducing the amount of the prepayment penalty.
Our quarterly net income of $385 thousand, or $0.09 per share, compares with
restated net income of $1.49 million, or $0.42 per diluted share, for the same
quarter last year.
For the first nine months of 2003, net income was $2.31 million, or
$0.58 per diluted share, compared with the restated $5.05 million, or $1.50 per
diluted share, for the comparable 2002 period.
Net interest margin was 2.63% for the third quarter of 2003, compared to
the restated 3.42% in the third quarter last year - a result of the yield on
earnings assets declining to 4.93% from 5.94% and the cost of funds declining to
1.80% from 2.53%. Like many other financial companies, we complied with the
provisions for SFAS No. 150, which became effective July 1, 2003. Under the
provisions of SFAS No. 150, securities with characteristice of both debt and
equity, such as Abington's trust preferred securities, are treated as
liabilities and related payments are reported as interest expense. Historically,
these costs were reported as non-interest expense. As a result, the net interest
margin for the quarter was reduced by approximately $261 thousand, or 13 basis
points. SFAS No. 150 does not allow for prior period restatement. Hence, all
expenses related to the company's trust preferred securities are reported as
noninterest expense.
Looking below the net interest income line, we were pleased to report an 86.4%
increase in non-interest income in the third quarter this year over the prior
year through a combination of $1.10 million more in gains on the sales of
mortgage loans and customer service fees that were $663,000 higher than last
year. Realized gains from the sale of securities were $221,000 this quarter,
compared to realized losses of $328,000 last year.
Non-interest expenses increased at a greater rate than non-interest income. The
most significant component of non-interest expense in the current year is the
$1.7 million prepayment penalty recorded on FHLB borrowings. Other increases
reflect additional salary and occupancy expenses associated with the addition of
MAFN employees for the full quarter in 2003 compared with only 17 days in 2002,
plus incentive payments to loan origination officers in mortgage banking
operations and additional costs associated with the relocation of our corporate
headquarters in the third quarter of last year. .
With that, I'll to turn the call back to Jim McDonough for some Closing Comments
Jim?
JIM MCDONOUGH:
Thanks, Jim. I'm sure that there may be some questions out there so I will not
prolong matters any further. We will make every effort to answer those questions
to the extent that we can. I'd now like to turn the call over to the Operator so
that we can take any questions. Operator?
(at the close of call)
JIM MCDONOUGH
Thanks again for taking the time to join us today. Please call ether of us if we
can answer any additional questions for you.