Comm Bancorp, Inc. Reports Second Quarter 2010 Earnings

July 21, 2010

Clarks Summit, PA, July 21/PR Newswire/-Comm Bancorp, Inc. (Nasdaq:CCBP) today reported second quarter 2010 earnings of $1,190 thousand or $0.69 per share compared to $1,215 thousand or $0.70 per share for the second quarter of 2009. Year-to-date earnings totaled $2,340 thousand or $1.36 per share in 2010 compared to $2,990 thousand or $1.73 per share in 2009. Return on average assets was 0.74% for the second quarter and 0.73% for the six months ended June 30, 2010, compared to 0.79% and 0.97% for the same periods of 2009. Return on average stockholders' equity equaled 9.22% for the second quarter and 9.19% year-to-date 2010, compared to 8.18% and 10.21% for the respective periods of the prior year.

INCOME STATEMENT REVIEW

Tax-equivalent net interest income for the first half of 2010 totaled $9,876 thousand, a decrease of $2,020 thousand or 17.0% from $11,896 thousand for the same period of 2009. Despite an increase of $24.0 million in average earning assets, tax-equivalent interest income for the six months ended June 30, decreased $2,103 thousand to $14,944 thousand in 2010, from $17,047 thousand in 2009. The decline in tax-equivalent interest income was due, for the most part, to a $43.7 million or 8.5% reduction in average loans. Average tax-exempt loans decreased $36.3 million, while taxable loans declined $7.4 million. With regard to tax-exempt loans, several large tax anticipation notes of local municipalities, which were outstanding during the first half of 2009, matured by year end. As part of our tax planning strategy for 2010, we chose not to actively compete for these types of loans. The maturities and repayments received from the loan portfolio were reinvested in lower-yielding assets, which contributed to a 92 basis point decrease in the tax-equivalent yield on earning assets to 4.91% in 2010 from 5.83% in 2009. Slightly mitigating the reduction in interest income was an $83 thousand decrease in interest expense. Our cost of funds decreased 15 basis points to 2.04% for the six months ended June 30, 2010, from 2.19% for the same period last year. The cost of funds was influenced primarily by a 53 basis point decrease in the average rate paid for time deposits. Partially offsetting the positive effect from the reduction in funding costs was growth in the average balance of interest-bearing liabilities of $27.5 million or 5.8% to $502.1 million for the six months ended June 30, 2010, from $474.6 million for the same six months of 2009. For the first half of the year, our tax-equivalent net interest margin contracted 82 basis points to 3.25% in 2010 compared to 4.07% in 2009.

For the three and six months ended June 30, 2010, the provision for loan losses amounted to $300 thousand and $1,300 thousand, compared to $520 thousand and $1,090 thousand for the respective periods of 2009.

Noninterest income totaled $2,327 thousand for the six months ended June 30, 2010, a decrease of $569 thousand or 19.6% from 2,896 thousand for the same six months of 2009. Included in noninterest revenue in 2009 was a net gain of $294 thousand from the disposition of our former Tunhannock and Eaton Township, Pennsylvania branch offices. For the six months ended June 30, we recorded gains on the sale of available-for-sale investment securities of $361 thousand in 2010 and $114 thousand in 2009. Activity in our secondary mortgage banking division subsided, which caused a $397 thousand decrease in mortgage banking income comparing the first half of 2010 and 2009. Service charges, fees and commissions decreased $125 thousand to $1,471 thousand in 2010 from $1,596 thousand in 2009. For the second quarter, noninterest income decreased $378 thousand when comparing 2010 and 2009, which reflected reductions in service charges, fees and commissions and mortgage banking income.

For the six months ended June 30, 2010, noninterest expense amounted to $8,720 thousand, a decrease of $635 thousand or 6.8% from $9,355 thousand for the same period last year. Decreases of $108 thousand in net occupancy and equipment expense and $593 thousand in other expenses were partially offset by a $66 thousand increase in salaries and employee benefits expense. Reductions in equipment and software depreciation and rental expense contributed to the 8.5% decrease in net occupancy and equipment expense. With regard to the 15.6% decline in other expenses, reductions in marketing-related expenses, directors' fees and deposit insurance were the primary factors influencing the overall decline. Comparing the second quarter of 2010 and 2009, noninterest expense decreased $641 thousand for primarily the same reasons as discussed for the year-to-date changes.

BALANCE SHEET REVIEW

Total assets equaled $641.8 million at June 30, 2010, an increase of $31.0 million from $610.8 million at June 30, 2009. Subdued loan demand, coupled with tax-planning strategies, resulted in a decrease of $45.8 million in loans, net of unearned income, to $465.1 million at the close of the second quarter of 2010 from $510.9 million one year earlier. Total deposits grew to $576.7 million at the end of the second quarter of 2010, from $538.8 million at June 30, 2009. Noninterest-bearing deposits increased $5.3 million, while interest-bearing deposits rose $32.6 million. Due to the decline in loan volumes, the investment portfolio played a more prominent role in our balance sheet composition. Available-for-sale investment securities increased $39.7 million or 54.2%. In addition, we had federal funds sold outstanding of $31.7 million at June 30, 2010. Comparatively, we had short-term borrowings outstanding of $8.0 million at June 30, 2009.

Stockholders' equity grew to $53.6 million or $31.13 per share at June 30, 2010. In comparison, stockholders' equity was $51.1 million or $29.66 per share at March 31, 2010, and $50.3 million or $34.64 per share at December 31, 2009. Net income of $1,190 thousand for the second quarter of 2010 and $2,340 thousand year-to-date was the primary factor leading to the capital improvement. At June 30, 2010, we reported a Tier I capital, Total capital and Leverage ratios of 10.4%, 13.3% and 8.0%. In addition, our subsidiary, Community Bank and Trust Company reported Tier I capital, Total capital and Leverage ratios of 9.4%, 12.3% and 7.2%. Community Bank and Trust Company continued to exceed the requirements to be categorized as well capitalized under the regulatory framework for prompt corrective action at the close of the second quarter of 2010.

Nonperforming assets decreased $2.7 million or 9.6% to $25.5 million or 5.41% of loans, net of unearned income and foreclosed assets at June 30, 2010, compared to $28.2 million or 5.86% at December 31, 2009. Specifically, the improvement from year end resulted from decreases of $2.4 million in nonaccrual loans, $2.3 million in restructured loans and $1.1 million in loans past due 90 days or more and still accruing. Partially offsetting these decreases was an increase in foreclosed assets of $3.1 million. Loans charged-off, net of recoveries, for the six months ended June 30, equaled 1.64% of average loans outstanding in 2010 and 0.13% in 2009. The allowance for loan losses equaled $14.9 million or 3.21% of loans, net of unearned income, at June 30, 2010, compared to $17.5 million or 3.65% at December 31, 2009, and $6.0 million or 1.18% at June 30, 2009.

Comm Bancorp, Inc. serves six Pennsylvania counties through Community Bank and Trust Company's 15 community-banking offices and one loan production office. Each office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations and government entities. In addition, customers can take advantage of Klick^sm Banking, on-line banking services, by accessing the Company's website at http://www.combk.com. The Company's business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision-making, flexible and reasonable operating procedures and consistently-applied credit policies.

SOURCE Comm Bancorp, Inc.
/Contact: MEDIA/INVESTORS, Scott A. Seasock, 570-586-0377 or fax, 570-587-3761, of Comm Bancorp, Inc.

Co: Comm Bancorp, Inc.
St: Pennsylvania
In: Fin