##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 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 0-17455
 Comm Bancorp, Inc.
  Pennsylvania
    
    23-2242292(State or other jurisdiction of incorporation
    
    (I.R.S. Employer Identification Number)or organization)
 125 North State Street, Clarks Summit, PA
    
    18411(Address of principal executive offices)
    
    (Zip Code)
 (570) 586-0377
 
  
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




---



##### 



COMM BANCORP, INC.
FORM 10-Q
June 30, 2009
 INDEX
 CONTENTS
    
    Page No.Part I. FINANCIAL INFORMATION:Item 1. Financial Statements.Consolidated Statements of Income and Comprehensive Income for the Three Months and Six Months Ended June 30, 2009 and 2008
    
    
    3Consolidated Balance Sheets  June 30, 2009 and December 31, 2008
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the Six Months Ended June 30, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    *Item 4. Controls and Procedures
    
    
    54Item 4T. Controls and Procedures
    
    
    *PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    55Item 1A. Risk Factors
    
    
    *Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    55Item 3. Defaults Upon Senior Securities
    
    
    55Item 4. Submission of Matters to a Vote of Security Holders
    
    
    56Item 5. Other Information
    
    
    56Item 6. Exhibits
    
    
    56Signatures
    
    
    57Exhibit Index
    
    
    58Exhibit 31(i)Exhibit 32
  *
    
    Not Applicable  2




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (Dollars in thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Interest and fees on loans:Taxable
    
    $
    6,436
    
    
    $
    7,274
    
    
    $
    12,884
    
    
    $
    14,842Tax-exempt
    
    
    619
    
    
    
    564
    
    
    
    1,285
    
    
    
    1,135Interest and dividends on investment securities available-for-sale:Taxable
    
    
    315
    
    
    
    38
    
    
    
    664
    
    
    
    81Tax-exempt
    
    
    473
    
    
    
    357
    
    
    
    1,010
    
    
    
    721Dividends
    
    
    9
    
    
    
    15
    
    
    
    20
    
    
    
    27Interest on federal funds sold
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    12Total interest income
    
    
    7,852
    
    
    
    8,258
    
    
    
    15,864
    
    
    
    16,818Interest expense:Interest on deposits
    
    
    2,426
    
    
    
    2,982
    
    
    
    5,059
    
    
    
    6,252Interest on short-term borrowings
    
    
    36
    
    
    
    50
    
    
    
    92
    
    
    
    178Total interest expense
    
    
    2,462
    
    
    
    3,032
    
    
    
    5,151
    
    
    
    6,430Net interest income
    
    
    5,390
    
    
    
    5,226
    
    
    
    10,713
    
    
    
    10,388Provision for loan losses
    
    
    520
    
    
    
    283
    
    
    
    1,090
    
    
    
    613Net interest income after provision for loan losses
    
    
    4,870
    
    
    
    4,943
    
    
    
    9,623
    
    
    
    9,775Noninterest income:Service charges, fees and commissions
    
    
    832
    
    
    
    881
    
    
    
    1,596
    
    
    
    1,679Mortgage banking income
    
    
    490
    
    
    
    154
    
    
    
    892
    
    
    
    324Net gains on sale of premises and equipment
    
    
    
    
    
    
    
    
    
    
    294Net gains on sale of investment securities available-for-sale
    
    
    
    
    
    
    
    
    
    
    114Total noninterest income
    
    
    1,322
    
    
    
    1,035
    
    
    
    2,896
    
    
    
    2,003Noninterest expense:Salaries and employee benefits expense
    
    
    2,164
    
    
    
    2,115
    
    
    
    4,304
    
    
    
    4,245Net occupancy and equipment expense
    
    
    583
    
    
    
    645
    
    
    
    1,258
    
    
    
    1,283Other expenses
    
    
    2,260
    
    
    
    1,272
    
    
    
    3,793
    
    
    
    2,503Total noninterest expense
    
    
    5,007
    
    
    
    4,032
    
    
    
    9,355
    
    
    
    8,031Income before income taxes
    
    
    1,185
    
    
    
    1,946
    
    
    
    3,164
    
    
    
    3,747Provision for income tax expense (benefit)
    
    
    (30
    )
    
    
    286
    
    
    
    174
    
    
    
    522Net income
    
    
    1,215
    
    
    
    1,660
    
    
    
    2,990
    
    
    
    3,225Other comprehensive income (loss):Unrealized gains (losses) on investment securities available-for-sale
    
    
    13
    
    
    
    (582
    )
    
    
    355
    
    
    
    (338
    )Reclassification adjustment for gains included in net income
    
    
    
    
    
    
    
    
    
    
    (114
    )Income tax expense (benefit) related to other comprehensive income (loss)
    
    
    4
    
    
    
    (198
    )
    
    
    82
    
    
    
    (115
    )Other comprehensive income (loss), net of income taxes
    
    
    9
    
    
    
    (384
    )
    
    
    159
    
    
    
    (223
    )Comprehensive income
    
    $
    1,224
    
    
    $
    1,276
    
    
    $
    3,149
    
    
    $
    3,002Per share data:Net income
    
    $
    0.70
    
    
    $
    0.95
    
    
    $
    1.73
    
    
    $
    1.84Cash dividends declared
    
    $
    0.28
    
    
    $
    0.27
    
    
    $
    0.56
    
    
    $
    0.54Average common shares outstanding
    
    
    1,722,282
    
    
    
    1,751,841
    
    
    
    1,725,310
    
    
    
    1,752,609
   3




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share data)
 June 30,
    
    
    December 31,2009
    
    
    2008Assets:Cash and due from banks
    
    $
    8,315
    
    
    $
    8,017Federal funds sold
    
    
    
    
    
    
    12,700Investment securities available-for-sale
    
    
    73,169
    
    
    
    80,574Loans held for sale, net
    
    
    787
    
    
    
    1,390Loans, net of unearned income
    
    
    510,870
    
    
    
    485,882Less: allowance for loan losses
    
    
    6,019
    
    
    
    5,255Net loans
    
    
    504,851
    
    
    
    480,627Premises and equipment, net
    
    
    11,709
    
    
    
    11,753Accrued interest receivable
    
    
    2,526
    
    
    
    2,143Other assets
    
    
    9,456
    
    
    
    6,837Total assets
    
    $
    610,813
    
    
    $
    604,041Liabilities:Deposits:Noninterest-bearing
    
    $
    82,002
    
    
    $
    79,674Interest-bearing
    
    
    456,795
    
    
    
    462,617Total deposits
    
    
    538,797
    
    
    
    542,291Short-term borrowings
    
    
    
    
    
    
    7,950Accrued interest payable
    
    
    1,696
    
    
    
    1,815Other liabilities
    
    
    2,912
    
    
    
    2,137Total liabilities
    
    
    551,355
    
    
    
    546,243Stockholders equity:Common stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding:
June 30, 2009, 1,716,263 shares; December 31, 2008, 1,730,062 shares
    
    
    566
    
    
    
    571Capital surplus
    
    
    7,799
    
    
    
    7,694Retained earnings
    
    
    49,263
    
    
    
    47,862Accumulated other comprehensive income
    
    
    1,830
    
    
    
    1,671Total stockholders equity
    
    
    59,458
    
    
    
    57,798Total liabilities and stockholders equity
    
    $
    610,813
    
    
    $
    604,041
   4




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Dollars in thousands, except per share data)
 AccumulatedOther
    
    
    TotalCommon
    
    
    Capital
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Surplus
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2008
    
    $
    571
    
    
    $
    7,694
    
    
    $
    47,862
    
    
    $
    1,671
    
    
    $
    57,798Net income
    
    
    
    
    
    
    
    
    
    
    2,990
    
    
    
    
    
    
    
    2,990Dividends declared: $0.56 per share
    
    
    
    
    
    
    
    
    
    
    (965
    )
    
    
    
    
    
    
    (965
    )Dividend reinvestment plan: 4,318 shares issued
    
    
    1
    
    
    
    159
    
    
    
    
    
    
    
    
    
    
    
    160Repurchase and retirement: 18,117 shares
    
    
    (6
    )
    
    
    (54
    )
    
    
    (624
    )
    
    
    
    
    
    
    (684
    )Other comprehensive income, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    159Balance, June 30, 2009
    
    $
    566
    
    
    $
    7,799
    
    
    $
    49,263
    
    
    $
    1,830
    
    
    $
    59,458Balance, December 31, 2007
    
    $
    579
    
    
    $
    7,326
    
    
    $
    45,353
    
    
    $
    1,115
    
    
    $
    54,373Net income
    
    
    
    
    
    
    
    
    
    
    3,225
    
    
    
    
    
    
    
    3,225Dividends declared: $0.54 per share
    
    
    
    
    
    
    
    
    
    
    (945
    )
    
    
    
    
    
    
    (945
    )Dividend reinvestment plan: 5,738 shares issued
    
    
    2
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    259Repurchase and retirement: 11,586 shares
    
    
    (4
    )
    
    
    (35
    )
    
    
    (473
    )
    
    
    
    
    
    
    (512
    )Other comprehensive loss, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (223
    )
    
    
    (223
    )Balance, June 30, 2008
    
    $
    577
    
    
    $
    7,548
    
    
    $
    47,160
    
    
    $
    892
    
    
    $
    56,177
   5




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands, except per share data)
 Six Months Ended June 30,
    
    2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    2,990
    
    
    $
    3,225Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    1,090
    
    
    
    613Depreciation and amortization of premises and equipment
    
    
    459
    
    
    
    476Net amortization of investment securities
    
    
    181
    
    
    
    47Amortization of net loan costs
    
    
    191
    
    
    
    166Amortization of mortgage servicing rights
    
    
    231
    
    
    
    110Deferred income tax benefit
    
    
    (214
    )
    
    
    (358
    )Net gains on sale of investment securities available-for-sale
    
    
    (114
    )Net gains on sale of loans
    
    
    (942
    )
    
    
    (259
    )Net gains on sale of premises and equipment
    
    
    (294
    )Net gains on sale of foreclosed assets
    
    
    (17
    )
    
    
    (12
    )Changes in:Loans held for sale, net
    
    
    1,545
    
    
    
    582Accrued interest receivable
    
    
    (383
    )
    
    
    121Other assets
    
    
    (1,246
    )
    
    
    (341
    )Accrued interest payable
    
    
    (119
    )
    
    
    (37
    )Other liabilities
    
    
    681
    
    
    
    109Net cash provided by operating activities
    
    
    4,039
    
    
    
    4,442Cash flows from investing activities:Proceeds from repayments of investment securities available-for-sale
    
    
    4,661
    
    
    
    9,248Proceeds from sales of investment securities available-for-sale
    
    
    4,341Purchases of investment securities available-for-sale
    
    
    (1,423
    )
    
    
    (1,714
    )Proceeds from sale of foreclosed assets
    
    
    145
    
    
    
    137Net increase in lending activities
    
    
    (27,023
    )
    
    
    (20,042
    )Proceeds from sale of premises and equipment
    
    
    509Purchases of premises and equipment
    
    
    (630
    )
    
    
    (295
    )Net cash used in investing activities
    
    
    (19,420
    )
    
    
    (12,666
    )Cash flows from financing activities:Net changes in:Money market, NOW, savings and noninterest-bearing accounts
    
    
    (358
    )
    
    
    (258
    )Time deposits
    
    
    (3,136
    )
    
    
    11,433Short-term borrowings
    
    
    7,950Proceeds from issuance of common shares
    
    
    160
    
    
    
    259Repurchase and retirement of common shares
    
    
    (684
    )
    
    
    (512
    )Cash dividends paid
    
    
    (953
    )
    
    
    (930
    )Net cash provided by financing activities
    
    
    2,979
    
    
    
    9,992Net increase (decrease) in cash and cash equivalents
    
    
    (12,402
    )
    
    
    1,768Cash and cash equivalents at beginning of year
    
    
    20,717
    
    
    
    21,876Cash and cash equivalents at end of period
    
    $
    8,315
    
    
    $
    23,644Supplemental disclosures:Cash paid during the period for:Interest
    
    $
    5,270
    
    
    $
    6,467Income taxes
    
    
    691
    
    
    
    830Noncash items:Transfers of loans to foreclosed assets
    
    
    1,518Unrealized losses (gains) on investment securities available-for-sale, net
    
    $
    (159
    )
    
    $
    223
   6




---



##### Table of Contents



Comm Bancorp, Inc.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands, except per share data)
 1. Basis of presentation:
   2. Earnings per common share:
   7




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 3. Subsequent events:
  
    
    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 or disclosure in financial statements;
 
    
    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 an entity should make about events or transactions that
occurred after the balance sheet date.
  4. Transfers of financial assets:
  5. Variable Interest Entities:
   8




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 6. Hierarchy of GAAP:
  7. Investment securities:
   Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairJune 30, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipals
    
    $
    38,023
    
    
    $
    1,830
    
    
    $
    76
    
    
    $
    39,777Mortgage-backed securities
    
    
    29,697
    
    
    
    939
    
    
    
    
    
    
    
    30,636Equity securities:Restricted
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    2,537Other
    
    
    139
    
    
    
    83
    
    
    
    3
    
    
    
    219Total
    
    $
    70,396
    
    
    $
    2,852
    
    
    $
    79
    
    
    $
    73,169
 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipals
    
    $
    44,873
    
    
    $
    2,288
    
    
    $
    154
    
    
    $
    47,007Mortgage-backed securities
    
    
    31,916
    
    
    
    366
    
    
    
    56
    
    
    
    32,226Equity securities:Restricted
    
    
    1,116
    
    
    
    
    
    
    
    
    
    
    
    1,116Other
    
    
    137
    
    
    
    90
    
    
    
    2
    
    
    
    225Total
    
    $
    78,042
    
    
    $
    2,744
    
    
    $
    212
    
    
    $
    80,574
  9




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
   Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedJune 30, 2009
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesState and municipals
    
    $
    2,742
    
    
    $
    76
    
    
    
    
    
    
    
    
    
    
    $
    2,742
    
    
    $
    76Mortgage-backed securitiesEquity securities:RestrictedOther
    
    
    6
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    3Total
    
    $
    2,748
    
    
    $
    79
    
    
    
    
    
    
    
    
    
    
    $
    2,748
    
    
    $
    79
 Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2008
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesState and municipals
    
    $
    4,102
    
    
    $
    154
    
    
    
    
    
    
    
    
    
    
    $
    4,102
    
    
    $
    154Mortgage-backed securities
    
    
    6,071
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    6,071
    
    
    
    56Equity securities:RestrictedOther
    
    
    7
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    2Total
    
    $
    10,180
    
    
    $
    212
    
    
    
    
    
    
    
    
    
    
    $
    10,180
    
    
    $
    212
   10




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
     11




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
   
    
    its operating performance;
 
    
    the severity and duration of declines in the fair value of its net assets related
to its capital stock amount;
 
    
    its commitment to make payments required by law or regulation and the level of such
payments in relation to its operating performance;
 
    
    the impact of legislative and regulatory changes on the FHLB-Pgh, and accordingly,
on the members of the FHLB-Pgh; and
 
    
    its liquidity and funding position.
   12




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
  After one
    
    
    After fiveWithin
    
    
    but within
    
    
    but within
    
    
    AfterJune 30, 2009
    
    one year
    
    
    five years
    
    
    ten years
    
    
    ten years
    
    
    TotalState and municipals
    
    $
    1,881
    
    
    $
    4,030
    
    
    $
    20,465
    
    
    $
    13,401
    
    
    $
    39,777Mortgage-backed securities
    
    
    10,886
    
    
    
    18,189
    
    
    
    1,356
    
    
    
    205
    
    
    
    30,636Total
    
    $
    12,767
    
    
    $
    22,219
    
    
    $
    21,821
    
    
    $
    13,606
    
    
    $
    70,413
 8. Fair values of financial instruments:
  
    
    Level 1: Unadjusted quoted prices of identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.
 
    
    Level 2: Significant other observable inputs other than Level 1 prices such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market
data.
 
    
    Level 3: Significant unobservable inputs that reflect a reporting entitys own
assumptions about the assumptions that market participants would use in pricing an asset
or liability.
  13




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsJune 30, 2009
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Investment securities available-for-sale
    
    $
    70,632
    
    
    $
    219
    
    
    $
    70,413
 Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDecember 31, 2008
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Investment securities available-for-sale
    
    $
    79,458
    
    
    $
    225
    
    
    $
    79,233
   Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsJune 30, 2009
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    14,445
    
    
    
    
    
    
    
    
    
    
    $
    14,445Foreclosed assets
    
    $
    1,726
    
    
    
    
    
    
    
    
    
    
    $
    1,726
 Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDecember 31, 2008
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    16,135
    
    
    
    
    
    
    
    
    
    
    $
    16,135Foreclosed assets
    
    $
    336
    
    
    
    
    
    
    
    
    
    
    $
    336
   14




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
      15




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
  Cash and cash equivalents:
 Investment securities available for sale:
 Loans held for sale, net:
 Net loans:
 Mortgage servicing rights:
 Short-term borrowings:
 Accrued interest receivable:
 Deposits without stated maturities:
 Deposits with stated maturities:
  16




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 Accrued interest payable:
 Off-balance sheet financial instruments:
  June 30, 2009
    
    
    December 31,2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    8,315
    
    
    $
    8,315
    
    
    $
    20,717
    
    
    $
    20,717Investment securities available-for-sale
    
    
    73,169
    
    
    
    73,169
    
    
    
    80,574
    
    
    
    80,574Loans held for sale, net
    
    
    787
    
    
    
    787
    
    
    
    1,390
    
    
    
    1,390Net loans
    
    
    504,851
    
    
    
    508,254
    
    
    
    480,627
    
    
    
    487,917Mortgage servicing rights
    
    
    833
    
    
    
    833
    
    
    
    578
    
    
    
    578Accrued interest receivable
    
    
    2,526
    
    
    
    2,526
    
    
    
    2,143
    
    
    
    2,143Total
    
    $
    590,481
    
    
    $
    593,884
    
    
    $
    586,029
    
    
    $
    593,319Financial liabilities:Deposits without stated maturities
    
    $
    290,183
    
    
    $
    290,183
    
    
    $
    290,541
    
    
    $
    290,541Deposits with stated maturities
    
    
    248,614
    
    
    
    253,929
    
    
    
    251,750
    
    
    
    260,019Short-term borrowings
    
    
    7,950
    
    
    
    7,950Accrued interest payable
    
    
    1,696
    
    
    
    1,696
    
    
    
    1,815
    
    
    
    1,815Total
    
    $
    548,443
    
    
    $
    553,758
    
    
    $
    544,106
    
    
    $
    552,375
  17




---



##### Table of Contents



Comm Bancorp, Inc.
 
 MANAGEMENTS DISCUSSION AND ANALYSIS
 (Dollars in thousands, except per share data)
 Forward-Looking Discussion:
       18




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Critical Accounting Policies:
       19




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
       20




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Operating Environment:
  Review of Financial Position:
    21




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Investment Portfolio:
   Distribution of investment securities available-for-sale
 June 30,
    
    
    December 31,2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %State and municipals
    
    $
    30,636
    
    
    
    41.87
    %
    
    $
    47,007
    
    
    
    58.34
    %Mortgage-backed securities
    
    
    39,777
    
    
    
    54.36
    
    
    
    32,226
    
    
    
    40.00Equity securities:Restricted
    
    
    2,537
    
    
    
    3.47
    
    
    
    1,116
    
    
    
    1.38Other
    
    
    219
    
    
    
    0.30
    
    
    
    225
    
    
    
    0.28Total
    
    $
    73,169
    
    
    
    100.00
    %
    
    $
    80,574
    
    
    
    100.00
    %
     22




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Maturity distribution of available-for-sale portfolio
 After one
    
    
    After fiveWithin
    
    
    but within
    
    
    but within
    
    
    Afterone year
    
    
    five years
    
    
    ten years
    
    
    ten years
    
    
    TotalJune 30, 2009
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldAmortized cost:State and municipals
    
    $
    1,828
    
    
    
    7.86
    %
    
    $
    3,867
    
    
    
    7.73
    %
    
    $
    19,243
    
    
    
    7.40
    %
    
    $
    13,085
    
    
    
    7.35
    %
    
    $
    38,023
    
    
    
    7.44
    %Mortgage-backed securities
    
    
    10,551
    
    
    
    4.35
    
    
    
    17,640
    
    
    
    4.37
    
    
    
    1,307
    
    
    
    3.41
    
    
    
    199
    
    
    
    4.52
    
    
    
    29,697
    
    
    
    4.32Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    1.45
    
    
    
    2,537
    
    
    
    1.45Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    2.33
    
    
    
    139
    
    
    
    2.33Total
    
    $
    12,379
    
    
    
    4.87
    %
    
    $
    21,507
    
    
    
    4.97
    %
    
    $
    20,550
    
    
    
    7.15
    %
    
    $
    15,960
    
    
    
    6.33
    %
    
    $
    70,396
    
    
    
    5.90
    %Fair value:State and municipals
    
    $
    1,881
    
    
    
    
    
    
    $
    4,030
    
    
    
    
    
    
    $
    20,465
    
    
    
    
    
    
    $
    13,401
    
    
    
    
    
    
    $
    39,777Mortgage-backed securities
    
    
    10,886
    
    
    
    
    
    
    
    18,189
    
    
    
    
    
    
    
    1,356
    
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    30,636Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    
    
    
    
    2,537Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    219Total
    
    $
    12,767
    
    
    
    
    
    
    $
    22,219
    
    
    
    
    
    
    $
    21,821
    
    
    
    
    
    
    $
    16,362
    
    
    
    
    
    
    $
    73,169
 Loan Portfolio:
   23




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      24




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of loan portfolio
 June 30,
    
    
    December 31,2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %Commercial, financial and others
    
    $
    191,415
    
    
    
    37.47
    %
    
    $
    170,305
    
    
    
    35.05
    %Real estate:Construction
    
    
    21,536
    
    
    
    4.21
    
    
    
    25,332
    
    
    
    5.21Residential
    
    
    106,611
    
    
    
    20.87
    
    
    
    112,053
    
    
    
    23.06Commercial
    
    
    157,485
    
    
    
    30.83
    
    
    
    142,641
    
    
    
    29.36Consumer, net
    
    
    31,135
    
    
    
    6.09
    
    
    
    32,812
    
    
    
    6.76Lease financing, net
    
    
    2,688
    
    
    
    0.53
    
    
    
    2,739
    
    
    
    0.56Loans, net of unearned income
    
    
    510,870
    
    
    
    100.00
    %
    
    
    485,882
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    6,019
    
    
    
    
    
    
    
    5,255Net loans
    
    $
    504,851
    
    
    
    
    
    
    $
    480,627
   25




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Maturity distribution and interest sensitivity of loan portfolio
 After oneWithin
    
    
    but within
    
    
    AfterJune 30, 2009
    
    one year
    
    
    five years
    
    
    five years
    
    
    TotalMaturity schedule:Commercial, financial and others
    
    $
    95,275
    
    
    $
    44,371
    
    
    $
    51,769
    
    
    $
    191,415Real estate:Construction
    
    
    14,534
    
    
    
    4,357
    
    
    
    2,645
    
    
    
    21,536Residential
    
    
    16,773
    
    
    
    48,429
    
    
    
    41,409
    
    
    
    106,611Commercial
    
    
    23,663
    
    
    
    58,304
    
    
    
    75,518
    
    
    
    157,485Consumer, net
    
    
    4,226
    
    
    
    22,124
    
    
    
    4,785
    
    
    
    31,135Lease financing, net
    
    
    539
    
    
    
    2,149
    
    
    
    
    
    
    
    2,688Total
    
    $
    155,010
    
    
    $
    179,734
    
    
    $
    176,126
    
    
    $
    510,870Predetermined interest rates
    
    $
    76,108
    
    
    $
    99,559
    
    
    $
    67,159
    
    
    $
    242,826Floating- or adjustable-interest rates
    
    
    78,902
    
    
    
    80,175
    
    
    
    108,967
    
    
    
    268,044Total
    
    $
    155,010
    
    
    $
    179,734
    
    
    $
    176,126
    
    
    $
    510,870
     26




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    Distribution of off-balance sheet commitments
 June 30,
    
    
    December 31,2009
    
    
    2008Commitments to extend credit
    
    $
    74,394
    
    
    $
    69,235Unused portions of lines of credit
    
    
    22,106
    
    
    
    19,855Commercial letters of credit
    
    
    20,839
    
    
    
    15,447Total
    
    $
    117,339
    
    
    $
    104,537
   27




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Asset Quality:
  June 30,
    
    2009
    
    
    2008United States
    
    
    9.5
    %
    
    
    5.6
    %Pennsylvania
    
    
    8.3
    
    
    
    5.3Lackawanna county
    
    
    8.4
    
    
    
    5.6Luzerne county
    
    
    9.3
    
    
    
    6.1Monroe county
    
    
    9.0
    
    
    
    6.1Susquehanna county
    
    
    7.5
    
    
    
    5.5Wayne county
    
    
    7.2
    
    
    
    5.1Wyoming county
    
    
    9.0
    %
    
    
    5.9
    %
     28




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of nonperforming assets
 June 30,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans:Commercial, financial and others
    
    $
    7,533
    
    
    $
    7,608Real estate:Construction
    
    
    7,255
    
    
    
    8,775Residential
    
    
    933
    
    
    
    1,070Commercial
    
    
    4,351
    
    
    
    5,498Consumer, net
    
    
    94
    
    
    
    117Lease financing, netTotal nonaccrual loans
    
    
    20,166
    
    
    
    23,068Accruing loans past due 90 days or more:Commercial, financial and others
    
    
    133
    
    
    
    170Real estate:Construction
    
    
    
    
    
    
    475Residential
    
    
    340
    
    
    
    75Commercial
    
    
    
    
    
    
    417Consumer, net
    
    
    99
    
    
    
    104Lease financing, net
    
    
    92
    
    
    
    69Total accruing loans past due 90 days or more
    
    
    1,139
    
    
    
    835Total nonperforming loans
    
    
    21,305
    
    
    
    23,903Foreclosed assets
    
    
    1,726
    
    
    
    336Total nonperforming assets
    
    $
    23,031
    
    
    $
    24,239Ratios:Nonperforming loans as a percentage of loans, net
    
    
    4.17
    %
    
    
    4.92
    %Nonperforming assets as a percentage of loans, net and
and foreclosed assets
    
    
    4.49
    %
    
    
    4.99
    %
  29




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    30




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of impaired loans
 June 30,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans:Commercial, financial and others
    
    $
    7,533
    
    
    $
    7,608Real estate:Construction
    
    
    7,255
    
    
    
    8,775Residential
    
    
    933
    
    
    
    1,070Commercial
    
    
    4,351
    
    
    
    5,498Consumer, net
    
    
    94
    
    
    
    117Lease financing, netTotal nonaccrual loans
    
    
    20,166
    
    
    
    23,068Accruing loans:Commercial, financial and others
    
    
    1,039
    
    
    
    1,920Real estate:Construction
    
    
    1,508
    
    
    
    1,512Residential
    
    
    480
    
    
    
    486Commercial
    
    
    2,656
    
    
    
    6,904Consumer, net
    
    
    
    
    
    
    9Lease financing, netTotal accruing loans
    
    
    5,683
    
    
    
    10,831Total impaired loans
    
    $
    25,849
    
    
    $
    33,899Ratio:Impaired loans as a percentage of loans, net
    
    
    5.06
    %
    
    
    6.98
    %
   31




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  June 30, 2009
    
    
    December 31, 2008Recorded
    
    
    Related
    
    
    Recorded
    
    
    RelatedInvestment
    
    
    Allowance
    
    
    Investment
    
    
    AllowanceImpaired loans:With a related allowance
    
    $
    18,734
    
    
    $
    4,289
    
    
    $
    19,707
    
    
    $
    3,572With no related allowance
    
    
    7,115
    
    
    
    
    
    
    
    14,192Total
    
    $
    25,849
    
    
    $
    4,289
    
    
    $
    33,899
    
    
    $
    3,572
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross interest due under terms
    
    $
    385
    
    
    $
    512
    
    
    $
    922
    
    
    $
    1,075Interest income recognized
    
    
    225
    
    
    
    304
    
    
    
    485
    
    
    
    782Interest income not recognized
    
    $
    160
    
    
    $
    208
    
    
    $
    437
    
    
    $
    293Interest income recognized (cash-basis)
    
    $
    155
    
    
    $
    304
    
    
    $
    347
    
    
    $
    782Average recorded investment in impaired loans
    
    $
    30,249
    
    
    $
    30,935
    
    
    $
    31,449
    
    
    $
    30,570
   32




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Allocation of the allowance for loan losses
 June 30,
    
    
    December 31,2009
    
    
    2008Category
    
    
    
    
    
    
    Categoryas a
    
    
    
    
    
    
    as a% of
    
    
    
    
    
    
    % ofAmount
    
    
    loans
    
    
    Amount
    
    
    loansAllocated allowance:Specific:Commercial, financial and others
    
    $
    1,734
    
    
    
    1.68
    %
    
    $
    1,533
    
    
    
    1.96
    %Real estate:Construction
    
    
    1,699
    
    
    
    1.72
    
    
    
    1,516
    
    
    
    2.12Residential
    
    
    164
    
    
    
    0.28
    
    
    
    169
    
    
    
    0.32Commercial
    
    
    624
    
    
    
    1.37
    
    
    
    253
    
    
    
    2.55Consumer, net
    
    
    68
    
    
    
    0.02
    
    
    
    101
    
    
    
    0.03Lease financing, netTotal specific
    
    
    4,289
    
    
    
    5.07
    
    
    
    3,572
    
    
    
    6.98Formula:Commercial, financial and others
    
    
    358
    
    
    
    35.79
    
    
    
    253
    
    
    
    33.09Real estate:Construction
    
    
    35
    
    
    
    2.49
    
    
    
    37
    
    
    
    3.09Residential
    
    
    253
    
    
    
    20.59
    
    
    
    246
    
    
    
    22.74Commercial
    
    
    659
    
    
    
    29.46
    
    
    
    522
    
    
    
    26.81Consumer, net
    
    
    416
    
    
    
    6.07
    
    
    
    511
    
    
    
    6.73Lease financing, net
    
    
    7
    
    
    
    0.53
    
    
    
    7
    
    
    
    0.56Total formula
    
    
    1,728
    
    
    
    94.93
    
    
    
    1,576
    
    
    
    93.02Total allocated allowance
    
    
    6,017
    
    
    
    100.00
    %
    
    
    5,148
    
    
    
    100.00
    %Unallocated allowance
    
    
    2
    
    
    
    
    
    
    
    107Total allowance for loan losses
    
    $
    6,019
    
    
    
    
    
    
    $
    5,255
   33




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
   Reconciliation of allowance for loan losses
 June 30,2009Allowance for loan losses at beginning of period
    
    $
    5,255Loans charged-off:Commercial, financial and others
    
    
    265Real estate:ConstructionResidential
    
    
    35Commercial
    
    
    83Consumer, net
    
    
    88Lease financing, netTotal
    
    
    471Loans recovered:Commercial, financial and others
    
    
    102Real estate:ConstructionResidential
    
    
    2CommercialConsumer, net
    
    
    41Lease financing, netTotal
    
    
    145Net loans charged-off
    
    
    326Provision charged to operating expense
    
    
    1,090Allowance for loan losses at end of period
    
    $
    6,019Ratios:Net loans charged-off as a percentage of average loans outstanding
    
    
    0.13
    %Allowance for loan losses as a percentage of period end loans
    
    
    1.18
    %
   34




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Deposits:
    35




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Deposit distribution
 June 30,
    
    
    June 30,2009
    
    
    2008Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateInterest-bearing:Money market accounts
    
    $
    27,229
    
    
    
    0.84
    %
    
    $
    26,866
    
    
    
    2.06
    %NOW accounts
    
    
    75,689
    
    
    
    1.49
    
    
    
    70,740
    
    
    
    2.63Savings accounts
    
    
    104,034
    
    
    
    0.53
    
    
    
    100,324
    
    
    
    1.13Time deposits less than $100
    
    
    165,475
    
    
    
    3.38
    
    
    
    168,440
    
    
    
    4.15Time deposits $100 or more
    
    
    75,684
    
    
    
    3.56
    
    
    
    46,428
    
    
    
    4.39Total interest-bearing
    
    
    448,111
    
    
    
    2.28
    %
    
    
    412,798
    
    
    
    3.05
    %Noninterest-bearing
    
    
    81,115
    
    
    
    
    
    
    
    74,709Total deposits
    
    $
    529,226
    
    
    
    
    
    
    $
    487,507
    36




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Maturity distribution of time deposits of $100 or more
 June 30,
    
    
    December 31,2009
    
    
    2008Within three months
    
    $
    28,393
    
    
    $
    19,271After three months but within six months
    
    
    17,401
    
    
    
    20,470After six months but within twelve months
    
    
    21,902
    
    
    
    25,522After twelve months
    
    
    17,945
    
    
    
    16,272Total
    
    $
    85,641
    
    
    $
    81,535
 Market Risk Sensitivity:
   37




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    38




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Interest rate sensitivity
 Due after
    
    
    Due afterthree months
    
    
    one yearDue within
    
    
    but within
    
    
    but within
    
    
    Due afterJune 30, 2009
    
    three months
    
    
    twelve months
    
    
    five years
    
    
    five years
    
    
    TotalRate-sensitive assets:Investment securities
    
    $
    2,037
    
    
    $
    10,730
    
    
    $
    22,219
    
    
    $
    38,183
    
    
    $
    73,169Loans held for sale, net
    
    
    787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787Loans, net of unearned income
    
    
    126,942
    
    
    
    97,167
    
    
    
    217,642
    
    
    
    69,119
    
    
    
    510,870Total
    
    $
    129,766
    
    
    $
    107,897
    
    
    $
    239,861
    
    
    $
    107,302
    
    
    $
    584,826Rate-sensitive liabilities:Money market accounts
    
    $
    15,680
    
    
    $
    7,541
    
    
    
    
    
    
    
    
    
    
    $
    23,221NOW accounts
    
    
    56,552
    
    
    
    17,385
    
    
    
    
    
    
    
    
    
    
    
    73,937Savings accounts
    
    
    13,200
    
    
    
    
    
    
    $
    97,823
    
    
    
    
    
    
    
    111,023Time deposits less than $100
    
    
    30,976
    
    
    
    43,483
    
    
    
    78,493
    
    
    $
    10,021
    
    
    
    162,973Time deposits $100 or more
    
    
    28,393
    
    
    
    39,303
    
    
    
    17,475
    
    
    
    470
    
    
    
    85,641Short-term borrowings
    
    
    7,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,950Total
    
    $
    152,751
    
    
    $
    107,712
    
    
    $
    193,791
    
    
    $
    10,491
    
    
    $
    464,745Rate sensitivity gap:Period
    
    $
    (22,985
    )
    
    $
    185
    
    
    $
    46,070
    
    
    $
    96,811Cumulative
    
    $
    (22,985
    )
    
    $
    (22,800
    )
    
    $
    23,270
    
    
    $
    120,081
    
    
    $
    120,081RSA/RSL ratio:Period
    
    
    0.85
    
    
    
    1.00
    
    
    
    1.24
    
    
    
    10.23Cumulative
    
    
    0.85
    
    
    
    0.91
    
    
    
    1.05
    
    
    
    1.26
    
    
    
    1.26
   39




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      40




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Liquidity:
  
    
    Funding new and existing loan commitments;
 
    
    Payment of deposits on demand or at their contractual maturity;
 
    
    Repayment of borrowings as they mature;
 
    
    Payment of lease obligations; and
 
    
    Payment of operating expenses.
    41




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    Capital Adequacy:
   42




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
     43




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Regulatory capital
 Minimum to be WellCapitalized underMinimum for Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsJune 30,
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Basis for ratios:Tier I capital to risk-weighted assets:Consolidated
    
    $
    57,197
    
    
    $
    54,879
    
    
    $
    21,127
    
    
    $
    19,532Community Bank.
    
    
    51,877
    
    
    
    49,814
    
    
    
    20,970
    
    
    
    19,391
    
    
    $
    31,455
    
    
    $
    29,086Total capital to risk-weighted assets:Consolidated
    
    
    63,216
    
    
    
    59,980
    
    
    
    42,254
    
    
    
    39,064Community Bank
    
    
    57,896
    
    
    
    54,915
    
    
    
    41,940
    
    
    
    38,781
    
    
    
    52,424
    
    
    
    48,477Tier I capital to total average assets
less goodwill:Consolidated
    
    
    57,197
    
    
    
    54,879
    
    
    
    24,727
    
    
    
    22,338Community Bank
    
    
    51,877
    
    
    
    49,814
    
    
    $
    24,577
    
    
    $
    22,184
    
    
    $
    30,722
    
    
    $
    27,730Risk-weighted assets:Consolidated
    
    
    511,779
    
    
    
    475,705Community Bank
    
    
    507,851
    
    
    
    472,172Risk-weighted off-balance sheet items:Consolidated
    
    
    16,394
    
    
    
    12,593Community Bank
    
    
    16,394
    
    
    
    12,593Average assets for Leverage ratio:Consolidated
    
    
    618,174
    
    
    
    558,457Community Bank
    
    $
    614,435
    
    
    $
    554,596Ratios:Tier I capital as a percentage of risk-
weighted assets and off-balance sheet
items:Consolidated
    
    
    10.8
    %
    
    
    11.2
    %
    
    
    4.0
    %
    
    
    4.0
    %Community Bank
    
    
    9.9
    
    
    
    10.3
    
    
    
    4.0
    
    
    
    4.0
    
    
    
    6.0
    %
    
    
    6.0
    %Total of Tier I and Tier II capital as a
percentage of risk-weighted assets and
off-balance sheet items:Consolidated
    
    
    12.0
    
    
    
    12.3
    
    
    
    8.0
    
    
    
    8.0Community Bank
    
    
    11.0
    
    
    
    11.3
    
    
    
    8.0
    
    
    
    8.0
    
    
    
    10.0
    
    
    
    10.0Tier I capital as a percentage of total
average assets less intangible assets:Consolidated
    
    
    9.3
    
    
    
    9.8
    
    
    
    4.0
    
    
    
    4.0Community Bank
    
    
    8.4
    %
    
    
    9.0
    %
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    5.0
    %
    
    
    5.0
    %
  44




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  
    
    A Tier I risk-based ratio of at least 6.0 percent;
 
    
    A total risk-based ratio of at least 10.0 percent; and
 
    
    A Leverage ratio of at least 5.0 percent.
  Review of Financial Performance:
  Net Interest Income:
  
    
    Variations in the volume, rate and composition of earning assets and
interest-bearing liabilities;
 
    
    Changes in general market rates; and
 
    
    The level of nonperforming assets.
   45




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Net interest income changes due to rate and volume
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009 vs. 2008
    
    
    2009 vs. 2008Increase (decrease)
    
    
    Increase (decrease)attributable to
    
    
    attributable toTotal
    
    
    
    
    
    
    
    
    
    
    TotalChange
    
    
    Rate
    
    
    Volume
    
    
    Change
    
    
    Rate
    
    
    VolumeInterest income:Loans:Taxable
    
    $
    (838
    )
    
    $
    (890
    )
    
    $
    52
    
    
    $
    (1,958
    )
    
    $
    (2,105
    )
    
    $
    147Tax-exempt
    
    
    83
    
    
    
    (103
    )
    
    
    186
    
    
    
    227
    
    
    
    (218
    )
    
    
    445Investments:Taxable
    
    
    271
    
    
    
    1
    
    
    
    270
    
    
    
    576
    
    
    
    33
    
    
    
    543Tax-exempt
    
    
    175
    
    
    
    (4
    )
    
    
    179
    
    
    
    438
    
    
    
    (14
    )
    
    
    452Federal funds sold
    
    
    (10
    )
    
    
    (3
    )
    
    
    (7
    )
    
    
    (11
    )
    
    
    (6
    )
    
    
    (5
    )Total interest income
    
    
    (319
    )
    
    
    (999
    )
    
    
    680
    
    
    
    (728
    )
    
    
    (2,310
    )
    
    
    1,582Interest expense:Money market accounts
    
    
    (60
    )
    
    
    (66
    )
    
    
    6
    
    
    
    (161
    )
    
    
    (165
    )
    
    
    4NOW accounts
    
    
    (154
    )
    
    
    (181
    )
    
    
    27
    
    
    
    (363
    )
    
    
    (424
    )
    
    
    61Savings accounts
    
    
    (107
    )
    
    
    (121
    )
    
    
    14
    
    
    
    (289
    )
    
    
    (309
    )
    
    
    20Time deposits less than $100
    
    
    (363
    )
    
    
    (294
    )
    
    
    (69
    )
    
    
    (704
    )
    
    
    (644
    )
    
    
    (60
    )Time deposits $100 or more
    
    
    128
    
    
    
    (118
    )
    
    
    246
    
    
    
    324
    
    
    
    (221
    )
    
    
    545Short-term borrowings
    
    
    (14
    )
    
    
    (54
    )
    
    
    40
    
    
    
    (86
    )
    
    
    (197
    )
    
    
    111Total interest expense
    
    
    (570
    )
    
    
    (834
    )
    
    
    264
    
    
    
    (1,279
    )
    
    
    (1,960
    )
    
    
    681Net interest income
    
    $
    251
    
    
    $
    (165
    )
    
    $
    416
    
    
    $
    551
    
    
    $
    (350
    )
    
    $
    901
  46




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      47




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
     48




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Summary of net interest income
 June 30, 2009
    
    
    June 30, 2008Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Interest
    
    
    Average
    
    
    Income/
    
    
    InterestBalance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateASSETS:Earning assets:Loans:Taxable
    
    $
    446,405
    
    
    $
    12,884
    
    
    
    5.82
    %
    
    $
    441,991
    
    
    $
    14,842
    
    
    
    6.75
    %Tax-exempt
    
    
    67,528
    
    
    
    1,947
    
    
    
    5.81
    
    
    
    52,683
    
    
    
    1,720
    
    
    
    6.57Investments:Taxable
    
    
    33,589
    
    
    
    684
    
    
    
    4.11
    
    
    
    6,643
    
    
    
    108
    
    
    
    3.27Tax-exempt
    
    
    41,375
    
    
    
    1,531
    
    
    
    7.46
    
    
    
    29,161
    
    
    
    1,093
    
    
    
    7.54Federal funds sold
    
    
    433
    
    
    
    1
    
    
    
    0.47
    
    
    
    1,165
    
    
    
    12
    
    
    
    2.07Total earning assets
    
    
    589,330
    
    
    
    17,047
    
    
    
    5.83
    %
    
    
    531,643
    
    
    
    17,775
    
    
    
    6.72
    %Less: allowance for loan losses
    
    
    5,602
    
    
    
    
    
    
    
    
    
    
    
    4,930Other assets
    
    
    34,877
    
    
    
    
    
    
    
    
    
    
    
    32,150Total assets
    
    $
    618,605
    
    
    
    
    
    
    
    
    
    
    $
    558,863LIABILITIES AND STOCKHOLDERS EQUITY:Interest-bearing liabilities:Money market accounts
    
    $
    27,229
    
    
    
    114
    
    
    
    0.84
    %
    
    $
    26,866
    
    
    
    275
    
    
    
    2.06
    %NOW accounts
    
    
    75,689
    
    
    
    561
    
    
    
    1.49
    
    
    
    70,740
    
    
    
    924
    
    
    
    2.63Savings accounts
    
    
    104,034
    
    
    
    275
    
    
    
    0.53
    
    
    
    100,324
    
    
    
    564
    
    
    
    1.13Time deposits less than $100
    
    
    165,475
    
    
    
    2,772
    
    
    
    3.38
    
    
    
    168,440
    
    
    
    3,476
    
    
    
    4.15Time deposits $100 or more
    
    
    75,684
    
    
    
    1,337
    
    
    
    3.56
    
    
    
    46,428
    
    
    
    1,013
    
    
    
    4.39Short-term borrowings
    
    
    26,537
    
    
    
    92
    
    
    
    0.70
    
    
    
    12,330
    
    
    
    178
    
    
    
    2.90Total interest-bearing liabilities
    
    
    474,648
    
    
    
    5,151
    
    
    
    2.19
    %
    
    
    425,128
    
    
    
    6,430
    
    
    
    3.04
    %Noninterest-bearing deposits
    
    
    81,115
    
    
    
    
    
    
    
    
    
    
    
    74,709Other liabilities
    
    
    3,782
    
    
    
    
    
    
    
    
    
    
    
    3,209Stockholders equity
    
    
    59,060
    
    
    
    
    
    
    
    
    
    
    
    55,817Total liabilities and stockholders equity
    
    $
    618,605
    
    
    
    
    
    
    
    
    
    
    $
    558,863Net interest income/spread
    
    
    
    
    
    $
    11,896
    
    
    
    3.64
    %
    
    
    
    
    
    $
    11,345
    
    
    
    3.68
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.07
    %
    
    
    
    
    
    
    
    
    
    
    4.29
    %Tax equivalent adjustments:Loans
    
    
    
    
    
    $
    662
    
    
    
    

    
    
    
    
    
    
    $
    585Investments
    
    
    
    
    
    
    521
    
    
    
    

    
    
    
    
    
    
    
    372Total adjustments
    
    
    
    
    
    $
    1,183
    
    
    
    

    
    
    
    
    
    
    $
    957
 Note:
    
    Average balances were calculated using average daily balances. Interest income on loans
include fees of $532 in 2009 and $237 in 2008. Available-for-sale securities, included in
investment securities, are stated at amortized cost with the related average unrealized
holding gains of $2,647 and $1,960 for the six months ended June 30, 2009 and 2008 included in
other assets. Tax-equivalent adjustments were calculated using the prevailing statutory tax
rate of 34.0 percent.  49




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Provision for Loan Losses:
   Noninterest Income:
  Noninterest Expense:
   50




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Noninterest expenses
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Salaries and employee benefits expense:Salaries and payroll taxes
    
    $
    1,681
    
    
    $
    1,677
    
    
    $
    3,375
    
    
    $
    3,348Employee benefits
    
    
    483
    
    
    
    438
    
    
    
    929
    
    
    
    897Salaries and employee benefits expense
    
    
    2,164
    
    
    
    2,115
    
    
    
    4,304
    
    
    
    4,245Net occupancy and equipment expense:Net occupancy expense
    
    
    273
    
    
    
    312
    
    
    
    627
    
    
    
    642Equipment expense
    
    
    310
    
    
    
    333
    
    
    
    631
    
    
    
    641Net occupancy and equipment expense
    
    
    583
    
    
    
    645
    
    
    
    1,258
    
    
    
    1,283Other expenses:Marketing expense
    
    
    175
    
    
    
    162
    
    
    
    361
    
    
    
    336Other taxes
    
    
    160
    
    
    
    125
    
    
    
    346
    
    
    
    249Stationery and supplies
    
    
    60
    
    
    
    74
    
    
    
    129
    
    
    
    146Contractual services
    
    
    599
    
    
    
    427
    
    
    
    1,136
    
    
    
    858Insurance, including FDIC assessment
    
    
    807
    
    
    
    56
    
    
    
    977
    
    
    
    136Other
    
    
    459
    
    
    
    428
    
    
    
    844
    
    
    
    778Other expenses
    
    
    2,260
    
    
    
    1,272
    
    
    
    3,793
    
    
    
    2,503Total noninterest expense
    
    $
    5,007
    
    
    $
    4,032
    
    
    $
    9,355
    
    
    $
    8,031
   51




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      52




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Income Taxes:
    53




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures:
  Internal Control Over Financial Reporting:
   54




---



##### Table of Contents



Comm Bancorp, Inc.
OTHER INFORMATION
 
 Part II. Other Information
 
 Item 1.
    
    Legal Proceedings
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    
    Maximum NumberShares Purchased
    
    
    of Shares that mayTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    yet be Purchasedof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the PlansMonth Ending
    
    Purchased
    
    
    Per Share
    
    
    or Programs
    
    
    or ProgramsApril 30, 2009
    
    
    650
    
    
    $
    35.24
    
    
    
    650
    
    
    
    32,283May 31, 2009
    
    
    1,210
    
    
    
    36.56
    
    
    
    1,210
    
    
    
    31,073June 30, 2009
    
    
    5,905
    
    
    
    37.32
    
    
    
    5,905
    
    
    
    25,168Total
    
    
    7,765
    
    
    $
    37.03
    
    
    
    7,765
 
 Item 3.
    
    Defaults Upon Senior Securities
   55




---



##### Table of Contents



Comm Bancorp, Inc.
OTHER INFORMATION (CONTINUED)
 
 Item 4.
    
    Results of Votes of Security Holders at the Companys annual meeting of stockholders held
on June 5, 2009, for which proxies were solicited pursuant to Section 14 under the Securities
Exchange Act of 1934, the following matters were voted upon by the stockholders.
 1.
    
    To fix the number of directors at 8.
 For
    
    Against1,464,532.292
    
    15,216.297
 2.
    
    To elect 8 directors to serve for a one-year term and until their successors are
duly elected and qualified.All nominees of the Board of Directors were elected. The number of votes cast for or
opposed to each of the nominees for election to the Board of Directors were as follows:
 Nominee
    
    For
    
    
    AgainstDavid L. Baker
    
    
    1,425,079.764
    
    
    
    54,668.825William F. Farber, Sr.
    
    
    1,425,951.613
    
    
    
    53,796.976Judd B. Fitze
    
    
    1,424,856.613
    
    
    
    54,891.976Dean L. Hesser
    
    
    1,433,806.613
    
    
    
    45,941.976John P. Kameen
    
    
    1,432,706.613
    
    
    
    47,041.976Erwin T. Kost
    
    
    1,433,806.613
    
    
    
    45,941.976Susan F. Mancuso
    
    
    1,433,806.613
    
    
    
    45,941.976Joseph P. Moore, III
    
    
    1,433,806.613
    
    
    
    45,941.976
 3.
    
    To ratify the selection of Beard Miller Company LLP, of Allentown, Pennsylvania,
Certified Public Accountants, as the independent auditor for the year ending December
31, 2009. The votes cast on this matter were as follows:
 For
    
    Against1,474,119.589
    
    5,629.000
 
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
 31(i)
    
    CEO and CFO certifications pursuant to Rule 13a-14(a)/15d-14(a).
 32
    
    CEO and CFO certifications pursuant to Section 1350.
  56




---



##### Table of Contents



COMM BANCORP, INC.
FORM 10-Q
 
 SIGNATURE PAGE
  Registrant, Comm Bancorp, Inc.Date:  August 12, 2009
    /s/ William F. Farber, Sr.William F. Farber, Sr.President and Chief Executive Officer
Chairman of the Board/Director
(Principal Executive Officer)Date:  August 12, 2009
    /s/ Scott A. SeasockScott A. SeasockExecutive Vice President and
Chief Financial Officer
(Principal Financial Officer)Date:  August 12, 2009
    /s/ Stephanie A. Westington, CPAStephanie A. Westington, CPAVice President of Finance
(Principal Accounting Officer)  57




---



##### Table of Contents



EXHIBIT INDEX
 Item Number
    
    Description
    
    Page31
    (i)
    
    CEO and CFO Certifications Pursuant to
Rule 13a-14(a)/15d-14(a).
    
    
    5932
    
    
    CEO and CFO Certifications Pursuant to
Section 1350.
    
    
    61
  58