##### 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 September 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 
or organization)
    
    (I.R.S. Employer Identification Number)125 North State Street, Clarks Summit, PA
    
    18411(Address of principal executive offices)
    
    (Zip Code)
 (570) 586-0377
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



COMM BANCORP, INC.
FORM 10-Q
September 30, 2009
 INDEX
 CONTENTS
    
    Page No.Part I. FINANCIAL INFORMATION:Item 1. Financial Statements.Consolidated Statements of Income and Comprehensive Income (Loss) for the Three Months and Nine Months Ended September 30, 2009 and 2008
    
    
    3Consolidated Balance Sheets  September 30, 2009 and December 31, 2008
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the Nine Months Ended September 30, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    *Item 4. Controls and Procedures
    
    
    60Item 4T. Controls and Procedures
    
    
    *PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    61Item 1A. Risk Factors
    
    
    *Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    61Item 3. Defaults Upon Senior Securities
    
    
    61Item 4. Submission of Matters to a Vote of Security Holders
    
    
    61Item 5. Other Information
    
    
    61Item 6. Exhibits
    
    
    61Signatures
    
    
    62Exhibit Index
    
    
    63EX-31(i)EX-32
  *
    
    Not Applicable  2




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##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
 (Dollars in thousands, except per share data)
 Three Months Ended Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Interest and fees on loans:Taxable
    
    $
    6,194
    
    
    $
    7,137
    
    
    $
    19,078
    
    
    $
    21,979Tax-exempt
    
    
    598
    
    
    
    559
    
    
    
    1,883
    
    
    
    1,694Interest and dividends on investment securities available-for-sale:Taxable
    
    
    205
    
    
    
    52
    
    
    
    869
    
    
    
    133Tax-exempt
    
    
    407
    
    
    
    351
    
    
    
    1,417
    
    
    
    1,072Dividends
    
    
    9
    
    
    
    12
    
    
    
    29
    
    
    
    39Interest on federal funds sold
    
    
    4
    
    
    
    133
    
    
    
    5
    
    
    
    145Total interest income
    
    
    7,417
    
    
    
    8,244
    
    
    
    23,281
    
    
    
    25,062Interest expense:Interest on deposits
    
    
    2,433
    
    
    
    3,017
    
    
    
    7,492
    
    
    
    9,269Interest on short-term borrowings
    
    
    5
    
    
    
    
    
    
    
    97
    
    
    
    178Total interest expense
    
    
    2,438
    
    
    
    3,017
    
    
    
    7,589
    
    
    
    9,447Net interest income
    
    
    4,979
    
    
    
    5,227
    
    
    
    15,692
    
    
    
    15,615Provision for loan losses
    
    
    8,670
    
    
    
    400
    
    
    
    9,760
    
    
    
    1,013Net interest income (loss) after provision for loan losses
    
    
    (3,691
    )
    
    
    4,827
    
    
    
    5,932
    
    
    
    14,602Noninterest income:Service charges, fees and commissions
    
    
    848
    
    
    
    810
    
    
    
    2,444
    
    
    
    2,489Mortgage banking income
    
    
    287
    
    
    
    120
    
    
    
    1,179
    
    
    
    444Net gains on sale of premises and equipment
    
    
    
    
    
    
    
    
    
    
    294Net gains on sale of investment securities available-for-sale
    
    
    1,385
    
    
    
    
    
    
    
    1,499Total noninterest income
    
    
    2,520
    
    
    
    930
    
    
    
    5,416
    
    
    
    2,933Noninterest expense:Salaries and employee benefits expense
    
    
    2,025
    
    
    
    2,169
    
    
    
    6,329
    
    
    
    6,414Net occupancy and equipment expense
    
    
    591
    
    
    
    583
    
    
    
    1,849
    
    
    
    1,866Other expenses
    
    
    1,942
    
    
    
    1,331
    
    
    
    5,735
    
    
    
    3,834Total noninterest expense
    
    
    4,558
    
    
    
    4,083
    
    
    
    13,913
    
    
    
    12,114Income (loss) before income taxes
    
    
    (5,729
    )
    
    
    1,674
    
    
    
    (2,565
    )
    
    
    5,421Provision for income tax expense (benefit)
    
    
    (2,354
    )
    
    
    199
    
    
    
    (2,180
    )
    
    
    721Net income (loss)
    
    
    (3,375
    )
    
    
    1,475
    
    
    
    (385
    )
    
    
    4,700Other comprehensive (loss):Unrealized gains (losses) on investment securities available-for-sale
    
    
    1,118
    
    
    
    (686
    )
    
    
    1,473
    
    
    
    (1,024
    )Reclassification adjustment for gains included in net income
    
    
    (1,385
    )
    
    
    
    
    
    
    (1,499
    )Income tax benefit related to other comprehensive loss
    
    
    (91
    )
    
    
    (233
    )
    
    
    (9
    )
    
    
    (348
    )Other comprehensive loss, net of income taxes
    
    
    (176
    )
    
    
    (453
    )
    
    
    (17
    )
    
    
    (676
    )Comprehensive income (loss)
    
    $
    (3,551
    )
    
    $
    1,022
    
    
    $
    (402
    )
    
    $
    4,024Per share data:Net income (loss)
    
    $
    (1.95
    )
    
    $
    0.84
    
    
    $
    (0.22
    )
    
    $
    2.68Cash dividends declared
    
    $
    0.28
    
    
    $
    0.27
    
    
    $
    0.84
    
    
    $
    0.81Average common shares outstanding
    
    
    1,718,439
    
    
    
    1,747,438
    
    
    
    1,722,994
    
    
    
    1,750,872
   3




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##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share data)
 September 30,
    
    
    December 31,2009
    
    
    2008Assets:Cash and due from banks
    
    $
    8,728
    
    
    $
    8,017Federal funds sold
    
    
    46,100
    
    
    
    12,700Investment securities available-for-sale
    
    
    38,302
    
    
    
    80,574Loans held for sale, net
    
    
    
    
    
    
    1,390Loans, net of unearned income
    
    
    507,094
    
    
    
    485,882Less: allowance for loan losses
    
    
    11,566
    
    
    
    5,255Net loans
    
    
    495,528
    
    
    
    480,627Premises and equipment, net
    
    
    11,631
    
    
    
    11,753Accrued interest receivable
    
    
    2,597
    
    
    
    2,143Other assets
    
    
    11,386
    
    
    
    6,837Total assets
    
    $
    614,272
    
    
    $
    604,041Liabilities:Deposits:Noninterest-bearing
    
    $
    79,591
    
    
    $
    79,674Interest-bearing
    
    
    475,509
    
    
    
    462,617Total deposits
    
    
    555,100
    
    
    
    542,291Accrued interest payable
    
    
    1,185
    
    
    
    1,815Other liabilities
    
    
    2,478
    
    
    
    2,137Total liabilities
    
    
    558,763
    
    
    
    546,243Stockholders equity:Common stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding:September 30, 2009, 1,718,439 shares; December 31, 2008, 1,730,062 shares
    
    
    567
    
    
    
    571Capital surplus
    
    
    7,881
    
    
    
    7,694Retained earnings
    
    
    45,407
    
    
    
    47,862Accumulated other comprehensive income
    
    
    1,654
    
    
    
    1,671Total stockholders equity
    
    
    55,509
    
    
    
    57,798Total liabilities and stockholders equity
    
    $
    614,272
    
    
    $
    604,041
   4




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##### 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 loss
    
    
    
    
    
    
    
    
    
    
    (385
    )
    
    
    
    
    
    
    (385
    )Dividends declared: $0.84 per share
    
    
    
    
    
    
    
    
    
    
    (1,446
    )
    
    
    
    
    
    
    (1,446
    )Dividend reinvestment plan: 6,494 shares issued
    
    
    2
    
    
    
    241
    
    
    
    
    
    
    
    
    
    
    
    243Repurchase and retirement: 18,117 shares
    
    
    (6
    )
    
    
    (54
    )
    
    
    (624
    )
    
    
    
    
    
    
    (684
    )Other comprehensive loss, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Balance, September 30, 2009
    
    $
    567
    
    
    $
    7,881
    
    
    $
    45,407
    
    
    $
    1,654
    
    
    $
    55,509Balance, December 31, 2007
    
    $
    579
    
    
    $
    7,326
    
    
    $
    45,353
    
    
    $
    1,115
    
    
    $
    54,373Net income
    
    
    
    
    
    
    
    
    
    
    4,700
    
    
    
    
    
    
    
    4,700Dividends declared: $0.81 per share
    
    
    
    
    
    
    
    
    
    
    (1,416
    )
    
    
    
    
    
    
    (1,416
    )Dividend reinvestment plan: 8,644 shares issued
    
    
    3
    
    
    
    386
    
    
    
    
    
    
    
    
    
    
    
    389Repurchase and retirement: 17,046 shares
    
    
    (6
    )
    
    
    (51
    )
    
    
    (688
    )
    
    
    
    
    
    
    (745
    )Other comprehensive loss, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (676
    )
    
    
    (676
    )Balance, September 30, 2008
    
    $
    576
    
    
    $
    7,661
    
    
    $
    47,949
    
    
    $
    439
    
    
    $
    56,625
   5




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##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands, except per share data)
 Nine Months Ended September 30,
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    (385
    )
    
    $
    4,700Adjustments to reconcile net income (loss) to net cash provided by operating activities:Provision for loan losses
    
    
    9,760
    
    
    
    1,013Depreciation and amortization of premises and equipment
    
    
    678
    
    
    
    696Net amortization of investment securities
    
    
    236
    
    
    
    76Amortization of net loan costs
    
    
    286
    
    
    
    270Amortization of mortgage servicing rights
    
    
    310
    
    
    
    165Deferred income tax benefit
    
    
    (2,044
    )
    
    
    (335
    )Net gains on sale of investment securities available-for-sale
    
    
    (1,499
    )Net gains on sale of loans
    
    
    (1,210
    )
    
    
    (345
    )Net gains on sale of premises and equipment
    
    
    (294
    )Net losses (gains) on foreclosed assets
    
    
    159
    
    
    
    (12
    )Changes in:Loans held for sale, net
    
    
    2,600
    
    
    
    350Accrued interest receivable
    
    
    (454
    )
    
    
    (438
    )Other assets
    
    
    (1,219
    )
    
    
    (390
    )Accrued interest payable
    
    
    (630
    )
    
    
    138Other liabilities
    
    
    339
    
    
    
    163Net cash provided by operating activities
    
    
    6,633
    
    
    
    6,051Cash flows from investing activities:Proceeds from repayments of investment securities available-for-sale
    
    
    7,700
    
    
    
    9,446Proceeds from sales of investment securities available-for-sale
    
    
    40,460Purchases of investment securities available-for-sale
    
    
    (4,651
    )
    
    
    (47,845
    )Proceeds from sale of foreclosed assets
    
    
    268
    
    
    
    137Net increase in lending activities
    
    
    (26,970
    )
    
    
    (23,820
    )Proceeds from sale of premises and equipment
    
    
    509Purchases of premises and equipment
    
    
    (771
    )
    
    
    (1,150
    )Net cash provided by (used in) investing activities
    
    
    16,545
    
    
    
    (63,232
    )Cash flows from financing activities:Net changes in:Money market, NOW, savings and noninterest-bearing accounts
    
    
    7,436
    
    
    
    8,102Time deposits
    
    
    5,373
    
    
    
    48,134Proceeds from issuance of common shares
    
    
    243
    
    
    
    389Repurchase and retirement of common shares
    
    
    (684
    )
    
    
    (745
    )Cash dividends paid
    
    
    (1,435
    )
    
    
    (1,401
    )Net cash provided by financing activities
    
    
    10,933
    
    
    
    54,479Net increase (decrease) in cash and cash equivalents
    
    
    34,111
    
    
    
    (2,702
    )Cash and cash equivalents at beginning of year
    
    
    20,717
    
    
    
    21,876Cash and cash equivalents at end of period
    
    $
    54,828
    
    
    $
    19,174Supplemental disclosures:Cash paid during the period for:Interest
    
    $
    8,219
    
    
    $
    9,309Income taxes
    
    
    691
    
    
    
    1,320Noncash items:Transfers of loans to foreclosed assets
    
    
    2,023Unrealized losses on investment securities available-for-sale, net
    
    $
    17
    
    
    $
    676
   6




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##### Table of Contents



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




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 4. Hierarchy of GAAP:
   5. Transfers of financial assets:
   8




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 6. Variable interest entities:
  7. Fair value measurements:
    9




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 8. Own-share lending arrangements:
  9. Change in accounting estimate:
   10




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 10. Investment securities:
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairSeptember 30, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipals
    
    $
    27,751
    
    
    $
    2,385
    
    
    
    
    
    
    $
    30,136Mortgage-backed securities
    
    
    5,369
    
    
    
    51
    
    
    $
    16
    
    
    
    5,404Equity securities:Restricted
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    2,537Other
    
    
    139
    
    
    
    88
    
    
    
    2
    
    
    
    225Total
    
    $
    35,796
    
    
    $
    2,524
    
    
    $
    18
    
    
    $
    38,302
 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
   11




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##### 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
    
    
    UnrealizedSeptember 30, 2009
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesState and municipalsMortgage-backed securities
    
    $
    3,212
    
    
    $
    16
    
    
    
    
    
    
    
    
    
    
    $
    3,212
    
    
    $
    16Equity securities:RestrictedOther
    
    
    
    
    
    
    
    
    
    $
    7
    
    
    $
    2
    
    
    
    7
    
    
    
    2Total
    
    $
    3,212
    
    
    $
    16
    
    
    $
    7
    
    
    $
    2
    
    
    $
    3,219
    
    
    $
    18
 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
    12




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
      13




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##### 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.
   After one
    
    
    After fiveWithin
    
    
    but within
    
    
    but within
    
    
    AfterSeptember 30, 2009
    
    one year
    
    
    five years
    
    
    ten years
    
    
    ten years
    
    
    TotalState and municipals
    
    $
    1,944
    
    
    $
    3,429
    
    
    $
    14,641
    
    
    $
    10,122
    
    
    $
    30,136Mortgage-backed securities
    
    
    1,943
    
    
    
    3,461
    
    
    
    
    
    
    
    
    
    
    
    5,404Total
    
    $
    3,887
    
    
    $
    6,890
    
    
    $
    14,641
    
    
    $
    10,122
    
    
    $
    35,540
  14




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 11. 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.
   Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsSeptember 30, 2009
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Investment securities available-for-sale
    
    $
    35,765
    
    
    $
    225
    
    
    $
    35,540
 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
   15




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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 InputsSeptember 30, 2009
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    10,828
    
    
    
    
    
    
    
    
    
    
    $
    10,828Foreclosed assets
    
    $
    1,932
    
    
    
    
    
    
    
    
    
    
    $
    1,932
 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
     16




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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:
 Accrued interest receivable:
 Deposits without stated maturities:
  17




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Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 Deposits with stated maturities:
 Accrued interest payable:
 Off-balance sheet financial instruments:
  September 30, 2009
    
    
    December 31,2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    54,828
    
    
    $
    54,828
    
    
    $
    20,717
    
    
    $
    20,717Investment securities available-for-sale
    
    
    38,302
    
    
    
    38,302
    
    
    
    80,574
    
    
    
    80,574Loans held for sale, net
    
    
    
    
    
    
    
    
    
    
    1,390
    
    
    
    1,390Net loans
    
    
    495,528
    
    
    
    498,797
    
    
    
    480,627
    
    
    
    487,917Mortgage servicing rights
    
    
    901
    
    
    
    901
    
    
    
    578
    
    
    
    578Accrued interest receivable
    
    
    2,597
    
    
    
    2,597
    
    
    
    2,143
    
    
    
    2,143Total
    
    $
    592,156
    
    
    $
    595,425
    
    
    $
    586,029
    
    
    $
    593,319Financial liabilities:Deposits without stated maturities
    
    $
    297,977
    
    
    $
    297,977
    
    
    $
    290,541
    
    
    $
    290,541Deposits with stated maturities
    
    
    257,123
    
    
    
    262,441
    
    
    
    251,750
    
    
    
    260,019Accrued interest payable
    
    
    1,185
    
    
    
    1,185
    
    
    
    1,815
    
    
    
    1,815Total
    
    $
    556,285
    
    
    $
    561,603
    
    
    $
    544,106
    
    
    $
    552,375
  18




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Comm Bancorp, Inc.
 
 MANAGEMENTS DISCUSSION AND ANALYSIS
 (Dollars in thousands, except per share data)
 Forward-Looking Discussion:
       19




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




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
       21




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Operating Environment:
     22




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Review of Financial Position:
    
    
    The cancellation of all Board of Directors and Management bonuses;
 
    
    The elimination of paid expenses for Board of Director seminars and
conventions;
 
    
    The suspension of annual employee salary increases; and
 
    
    Curtailment of marketing-related expenses.
    23




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##### 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
 September 30,
    
    
    December 31,2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %State and municipals
    
    $
    30,136
    
    
    
    78.68
    %
    
    $
    47,007
    
    
    
    58.34
    %Mortgage-backed securities
    
    
    5,404
    
    
    
    14.11
    
    
    
    32,226
    
    
    
    40.00Equity securities:Restricted
    
    
    2,537
    
    
    
    6.62
    
    
    
    1,116
    
    
    
    1.38Other
    
    
    225
    
    
    
    0.59
    
    
    
    225
    
    
    
    0.28Total
    
    $
    38,302
    
    
    
    100.00
    %
    
    $
    80,574
    
    
    
    100.00
    %
    24




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    25




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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
    
    
    TotalSeptember 30, 2009
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldAmortized cost:State and municipals
    
    $
    1,908
    
    
    
    7.87
    %
    
    $
    3,277
    
    
    
    7.70
    %
    
    $
    13,365
    
    
    
    7.43
    %
    
    $
    9,201
    
    
    
    7.08
    %
    
    $
    27,751
    
    
    
    7.38
    %Mortgage-backed securities
    
    
    1,908
    
    
    
    4.51
    
    
    
    3,461
    
    
    
    3.72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,369
    
    
    
    4.00Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    1.44
    
    
    
    2,537
    
    
    
    1.44Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    1.77
    
    
    
    139
    
    
    
    1.77Total
    
    $
    3,816
    
    
    
    6.19
    %
    
    $
    6,738
    
    
    
    5.66
    %
    
    $
    13,365
    
    
    
    7.43
    %
    
    $
    11,877
    
    
    
    5.81
    %
    
    $
    35,796
    
    
    
    6.43
    %Fair value:State and municipals
    
    $
    1,944
    
    
    
    
    
    
    $
    3,429
    
    
    
    
    
    
    $
    14,641
    
    
    
    
    
    
    $
    10,122
    
    
    
    
    
    
    $
    30,136Mortgage-backed securities
    
    
    1,943
    
    
    

    
    
    

    
    3,461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,404Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    
    
    
    
    2,537Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    225Total
    
    $
    3,887
    
    
    
    
    
    
    $
    6,890
    
    
    
    
    
    
    $
    14,641
    
    
    
    
    
    
    $
    12,884
    
    
    
    
    
    
    $
    38,302
 Loan Portfolio:
    26




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
     27




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of loan portfolio
 September 30,
    
    
    December 31,2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %Commercial, financial and others
    
    $
    189,370
    
    
    
    37.34
    %
    
    $
    170,305
    
    
    
    35.05
    %Real estate:Construction
    
    
    22,139
    
    
    
    4.37
    
    
    
    25,332
    
    
    
    5.21Residential
    
    
    105,694
    
    
    
    20.84
    
    
    
    112,053
    
    
    
    23.06Commercial
    
    
    156,252
    
    
    
    30.81
    
    
    
    142,641
    
    
    
    29.36Consumer, net
    
    
    30,713
    
    
    
    6.06
    
    
    
    32,812
    
    
    
    6.76Lease financing, net
    
    
    2,926
    
    
    
    0.58
    
    
    
    2,739
    
    
    
    0.56Loans, net of unearned income
    
    
    507,094
    
    
    
    100.00
    %
    
    
    485,882
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    11,566
    
    
    
    
    
    
    
    5,255Net loans
    
    $
    495,528
    
    
    
    
    
    
    $
    480,627
    28




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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
    
    
    AfterSeptember 30, 2009
    
    one year
    
    
    five years
    
    
    five years
    
    
    TotalMaturity schedule:Commercial, financial and others
    
    $
    95,043
    
    
    $
    43,620
    
    
    $
    50,707
    
    
    $
    189,370Real estate:Construction
    
    
    16,926
    
    
    
    1,448
    
    
    
    3,765
    
    
    
    22,139Residential
    
    
    16,345
    
    
    
    48,360
    
    
    
    40,989
    
    
    
    105,694Commercial
    
    
    21,610
    
    
    
    59,071
    
    
    
    75,571
    
    
    
    156,252Consumer, net
    
    
    4,176
    
    
    
    21,754
    
    
    
    4,783
    
    
    
    30,713Lease financing, net
    
    
    586
    
    
    
    2,340
    
    
    
    
    
    
    
    2,926Total
    
    $
    154,686
    
    
    $
    176,593
    
    
    $
    175,815
    
    
    $
    507,094Predetermined interest rates
    
    $
    75,297
    
    
    $
    98,388
    
    
    $
    66,217
    
    
    $
    239,902Floating- or adjustable-interest rates
    
    
    79,389
    
    
    
    78,205
    
    
    
    109,598
    
    
    
    267,192Total
    
    $
    154,686
    
    
    $
    176,593
    
    
    $
    175,815
    
    
    $
    507,094
  29




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




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of off-balance sheet commitments
 September 30,
    
    
    December 31,2009
    
    
    2008Commitments to extend credit
    
    $
    82,693
    
    
    $
    69,235Unused portions of lines of credit
    
    
    24,538
    
    
    
    19,855Commercial letters of credit
    
    
    20,395
    
    
    
    15,447Total
    
    $
    127,626
    
    
    $
    104,537
  Asset Quality:
  September 30,
    
    2009
    
    
    2008United States
    
    
    9.8
    %
    
    
    6.2
    %Pennsylvania
    
    
    8.8
    
    
    
    5.6Lackawanna county
    
    
    9.0
    
    
    
    6.2Luzerne county
    
    
    9.9
    
    
    
    6.6Monroe county
    
    
    9.4
    
    
    
    6.7Susquehanna county
    
    
    8.7
    
    
    
    5.6Wayne county
    
    
    7.5
    
    
    
    5.5Wyoming county
    
    
    7.7
    %
    
    
    6.1
    %
   31




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
     32




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Distribution of nonperforming assets
 September 30,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans:Commercial, financial and others
    
    $
    8,532
    
    
    $
    7,608Real estate:Construction
    
    
    6,680
    
    
    
    8,775Residential
    
    
    1,587
    
    
    
    1,070Commercial
    
    
    3,742
    
    
    
    5,498Consumer, net
    
    
    26
    
    
    
    117Lease financing, netTotal nonaccrual loans
    
    
    20,567
    
    
    
    23,068Restructured loans:Commercial, financial and others
    
    
    2,197Real estate:ConstructionResidentialCommercial
    
    
    2,576Consumer, netLease financing, netTotal restructured loans
    
    
    4,773Accruing loans past due 90 days or more:Commercial, financial and others
    
    
    360
    
    
    
    170Real estate:ConstructionResidential
    
    
    498
    
    
    
    75Commercial
    
    
    
    
    
    
    417Consumer, net
    
    
    174
    
    
    
    104Lease financing, net
    
    
    145
    
    
    
    69Total accruing loans past due 90 days or more
    
    
    1,177
    
    
    
    835Total nonperforming loans
    
    
    26,517
    
    
    
    23,903Foreclosed assets
    
    
    1,932
    
    
    
    336Total nonperforming assets
    
    $
    28,449
    
    
    $
    24,239Ratios:Nonperforming loans as a percentage of loans, net
    
    
    5.23
    %
    
    
    4.92
    %Nonperforming assets as a percentage of loans, net and
and foreclosed assets
    
    
    5.59
    %
    
    
    4.99
    %
   33




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
     34




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Distribution of impaired loans
 September 30,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans:Commercial, financial and others
    
    $
    8,532
    
    
    $
    7,608Real estate:Construction
    
    
    6,680
    
    
    
    8,775Residential
    
    
    1,587
    
    
    
    1,070Commercial
    
    
    3,742
    
    
    
    5,498Consumer, net
    
    
    26
    
    
    
    117Lease financing, netTotal nonaccrual loans
    
    
    20,567
    
    
    
    23,068Accruing loans:Commercial, financial and others
    
    
    3,945
    
    
    
    1,920Real estate:Construction
    
    
    
    
    
    
    1,512Residential
    
    
    
    
    
    
    486Commercial
    
    
    5,282
    
    
    
    6,904Consumer, net
    
    
    6
    
    
    
    9Lease financing, netTotal accruing loans
    
    
    9,233
    
    
    
    10,831Total impaired loans
    
    $
    29,800
    
    
    $
    33,899Ratio:Impaired loans as a percentage of loans, net
    
    
    5.88
    %
    
    
    6.98
    %
    35




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
   September 30, 2009
    
    
    December 31, 2008Recorded
    
    
    Related
    
    
    Recorded
    
    
    RelatedInvestment
    
    
    Allowance
    
    
    Investment
    
    
    AllowanceImpaired loans:With a related allowance
    
    $
    16,087
    
    
    $
    5,259
    
    
    $
    19,707
    
    
    $
    3,572With no related allowance
    
    
    13,713
    
    
    
    
    
    
    
    14,192Total
    
    $
    29,800
    
    
    $
    5,259
    
    
    $
    33,899
    
    
    $
    3,572
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross interest due under terms
    
    $
    440
    
    
    $
    654
    
    
    $
    1,362
    
    
    $
    1,729Interest income recognized
    
    
    211
    
    
    
    428
    
    
    
    696
    
    
    
    1,210Interest income not recognized
    
    $
    229
    
    
    $
    226
    
    
    $
    666
    
    
    $
    519Interest income recognized (cash-basis)
    
    $
    181
    
    
    $
    227
    
    
    $
    528
    
    
    $
    1,009Average recorded investment in impaired loans
    
    $
    32,125
    
    
    $
    33,603
    
    
    $
    31,677
    
    
    $
    31,610
   36




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##### 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
 September 30,
    
    
    December 31,2009
    
    
    2008Category
    
    
    
    
    
    
    Categoryas a
    
    
    
    
    
    
    as a% of
    
    
    
    
    
    
    % ofAmount
    
    
    loans
    
    
    Amount
    
    
    loansAllocated allowance:Specific:Commercial, financial and others
    
    $
    3,649
    
    
    
    2.46
    %
    
    $
    1,533
    
    
    
    1.96
    %Real estate:Construction
    
    
    520
    
    
    
    1.32
    
    
    
    1,516
    
    
    
    2.12Residential
    
    
    267
    
    
    
    0.31
    
    
    
    169
    
    
    
    0.32Commercial
    
    
    817
    
    
    
    1.78
    
    
    
    253
    
    
    
    2.55Consumer, net
    
    
    6
    
    
    
    0.01
    
    
    
    101
    
    
    
    0.03Lease financing, netTotal specific
    
    
    5,259
    
    
    
    5.88
    
    
    
    3,572
    
    
    
    6.98Formula:Commercial, financial and others
    
    
    1,003
    
    
    
    34.88
    
    
    
    253
    
    
    
    33.09Real estate:Construction
    
    
    2,224
    
    
    
    3.05
    
    
    
    37
    
    
    
    3.09Residential
    
    
    130
    
    
    
    20.53
    
    
    
    246
    
    
    
    22.74Commercial
    
    
    2,370
    
    
    
    29.03
    
    
    
    522
    
    
    
    26.81Consumer, net
    
    
    212
    
    
    
    6.05
    
    
    
    511
    
    
    
    6.73Lease financing, net
    
    
    11
    
    
    
    0.58
    
    
    
    7
    
    
    
    0.56Total formula
    
    
    5,950
    
    
    
    94.12
    
    
    
    1,576
    
    
    
    93.02Total allocated allowance
    
    
    11,209
    
    
    
    100.00
    %
    
    
    5,148
    
    
    
    100.00
    %Unallocated allowance
    
    
    357
    
    
    
    
    
    
    
    107Total allowance for loan losses
    
    $
    11,566
    
    
    
    
    
    
    $
    5,255
   37




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
   
    
    A review of the methodology for compliance with Bank policies and accounting and
regulatory guidance;
 
    
    An evaluation to determine that qualitative and environmental factors were
supported in accordance with FASB ASC 450;
 
    
    An assessment that loans analyzed in accordance with FASB ASC 310 were
appropriately documented and were within the intentions of the accounting guidance; and
 
    
    A determination to provide reasonable assurance that our internal loan review had
identified those loans which should have been considered for evaluation and measurement
under FASB ASC 310 and the resulting impairment measurement was generally complete and
reasonable in the current environment.
   38




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##### 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
 September 30,2009Allowance for loan losses at beginning of period
    
    $
    5,255Loans charged-off:Commercial, financial and others
    
    
    618Real estate:Construction
    
    
    2,083Residential
    
    
    42Commercial
    
    
    745Consumer, net
    
    
    116Lease financing, netTotal
    
    
    3,604Loans recovered:Commercial, financial and others
    
    
    104Real estate:ConstructionResidential
    
    
    4CommercialConsumer, net
    
    
    47Lease financing, netTotal
    
    
    155Net loans charged-off
    
    
    3,449Provision charged to operating expense
    
    
    9,760Allowance for loan losses at end of period
    
    $
    11,566Ratios:Net loans charged-off as a percentage of average loans outstanding
    
    
    0.90
    %Allowance for loan losses as a percentage of period end loans
    
    
    2.28
    %
    39




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Deposits:
    Deposit distribution
 September 30,
    
    
    September 30,2009
    
    
    2008Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateInterest-bearing:Money market accounts
    
    $
    26,059
    
    
    
    0.88
    %
    
    $
    24,593
    
    
    
    1.97
    %NOW accounts
    
    
    74,865
    
    
    
    1.41
    
    
    
    69,844
    
    
    
    2.32Savings accounts
    
    
    106,680
    
    
    
    0.53
    
    
    
    102,604
    
    
    
    1.09Time deposits less than $100
    
    
    164,390
    
    
    
    3.33
    
    
    
    170,728
    
    
    
    4.04Time deposits $100 or more
    
    
    81,610
    
    
    
    3.30
    
    
    
    53,355
    
    
    
    4.24Total interest-bearing
    
    
    453,604
    
    
    
    2.21
    %
    
    
    421,124
    
    
    
    2.94
    %Noninterest-bearing
    
    
    81,092
    
    
    
    
    
    
    
    80,207Total deposits
    
    $
    534,696
    
    
    
    
    
    
    $
    501,331
  40




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##### 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
 September 30,
    
    
    December 31,2009
    
    
    2008Within three months
    
    $
    30,441
    
    
    $
    19,271After three months but within six months
    
    
    14,898
    
    
    
    20,470After six months but within twelve months
    
    
    28,626
    
    
    
    25,522After twelve months
    
    
    21,877
    
    
    
    16,272Total
    
    $
    95,842
    
    
    $
    81,535
  41




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##### Table of Contents



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




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##### 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 afterSeptember 30, 2009
    
    three months
    
    
    twelve months
    
    
    five years
    
    
    five years
    
    
    TotalRate-sensitive assets:Investment securities
    
    $
    858
    
    
    $
    3,029
    
    
    $
    6,890
    
    
    $
    27,525
    
    
    $
    38,302Loans, net of unearned income
    
    
    157,309
    
    
    
    60,647
    
    
    
    219,951
    
    
    
    69,187
    
    
    
    507,094Federal funds sold
    
    
    46,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,100Total
    
    $
    204,267
    
    
    $
    63,676
    
    
    $
    226,841
    
    
    $
    96,712    $
    
    
    
    591,496Rate-sensitive liabilities:Money market accounts
    
    $
    26,192
    
    
    $
    8,037
    
    
    
    
    
    
    
    
    
    
    $
    34,229NOW accounts
    
    
    58,057
    
    
    
    16,320
    
    
    
    
    
    
    
    
    
    
    
    74,377Savings accounts
    
    
    12,129
    
    
    
    
    
    
    $
    97,651
    
    
    
    
    
    
    
    109,780Time deposits less than $100
    
    
    27,676
    
    
    
    48,736
    
    
    
    75,290
    
    
    $
    9,579
    
    
    
    161,281Time deposits $100 or more
    
    
    30,441
    
    
    
    43,524
    
    
    
    21,142
    
    
    
    735
    
    
    
    95,842Total
    
    $
    154,495
    
    
    $
    116,617
    
    
    $
    194,083
    
    
    $
    10,314    $
    
    
    
    475,509Rate sensitivity gap:Period
    
    $
    49,772
    
    
    $
    (52,941
    )
    
    $
    32,758
    
    
    $
    86,398Cumulative
    
    $
    49,772
    
    
    $
    (3,169
    )
    
    $
    29,589
    
    
    $
    115,987    $
    
    
    
    115,987RSA/RSL ratio:Period
    
    
    1.32
    
    
    
    0.55
    
    
    
    1.17
    
    
    
    9.38Cumulative
    
    
    1.32
    
    
    
    0.99
    
    
    
    1.06
    
    
    
    1.24
    
    
    
    1.24
  43




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      44




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##### 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.
   45




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      46




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##### Table of Contents



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




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##### 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 ProvisionsSeptember 30,
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Basis for ratios:Tier I capital to risk-weighted assets:Consolidated
    
    $
    53,417
    
    
    $
    55,781
    
    
    $
    21,040
    
    
    $
    20,166Community Bank
    
    
    48,080
    
    
    
    50,648
    
    
    
    20,892
    
    
    
    20,017
    
    
    $
    31,338
    
    
    $
    30,025Total capital to risk-weighted assets:Consolidated
    
    
    60,055
    
    
    
    60,472
    
    
    
    42,079
    
    
    
    40,333Community Bank
    
    
    54,672
    
    
    
    55,339
    
    
    
    41,784
    
    
    
    40,033
    
    
    
    52,230
    
    
    
    50,042Tier I capital to total average assets
less goodwill:Consolidated
    
    
    53,417
    
    
    
    55,781
    
    
    
    24,628
    
    
    
    22,738Community Bank
    
    
    48,080
    
    
    
    50,648
    
    
    $
    24,481
    
    
    $
    22,586
    
    
    $
    30,601
    
    
    $
    28,233Risk-weighted assets:Consolidated
    
    
    508,430
    
    
    
    490,518Community Bank
    
    
    504,735
    
    
    
    486,778Risk-weighted off-balance sheet items:Consolidated
    
    
    17,563
    
    
    
    13,639Community Bank
    
    
    17,563
    
    
    
    13,639Average assets for Leverage ratio:Consolidated
    
    
    615,705
    
    
    
    568,451Community Bank
    
    $
    612,015
    
    
    $
    564,651Ratios:Tier I capital as a percentage of risk-weighted assets and off-balance sheet
items:Consolidated
    
    
    10.2
    %
    
    
    11.1
    %
    
    
    4.0
    %
    
    
    4.0
    %Community Bank
    
    
    9.2
    
    
    
    10.1
    
    
    
    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
    
    
    11.4
    
    
    
    12.0
    
    
    
    8.0
    
    
    
    8.0Community Bank
    
    
    10.5
    
    
    
    11.1
    
    
    
    8.0
    
    
    
    8.0
    
    
    
    10.0
    
    
    
    10.0Tier I capital as a percentage of total
average assets less intangible assets:Consolidated
    
    
    8.7
    
    
    
    9.8
    
    
    
    4.0
    
    
    
    4.0Community Bank
    
    
    7.9
    %
    
    
    9.0
    %
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    5.0
    %
    
    
    5.0
    %
  
    
    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.
   48




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    Review of Financial Performance:
   49




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 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.
    50




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##### 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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009 vs. 2008
    
    
    2009 vs. 2008Increase (decrease)
    
    
    Increase (decrease)attributable to
    
    
    attributable toTotal
    
    
    
    
    
    
    
    
    
    
    TotalChange
    
    
    Rate
    
    
    Volume
    
    
    Change
    
    
    Rate
    
    
    VolumeInterest income:Loans:Taxable
    
    $
    (943
    )
    
    $
    (1,088
    )
    
    $
    145
    
    
    $
    (2,901
    )
    
    $
    (3,193
    )
    
    $
    292Tax-exempt
    
    
    59
    
    
    
    (96
    )
    
    
    155
    
    
    
    286
    
    
    
    (314
    )
    
    
    600Investments:Taxable
    
    
    150
    
    
    
    (36
    )
    
    
    186
    
    
    
    726
    
    
    
    (3
    )
    
    
    729Tax-exempt
    
    
    85
    
    
    
    (28
    )
    
    
    113
    
    
    
    523
    
    
    
    (42
    )
    
    
    565Federal funds sold
    
    
    (129
    )
    
    
    (82
    )
    
    
    (47
    )
    
    
    (140
    )
    
    
    (88
    )
    
    
    (52
    )Total interest income
    
    
    (778
    )
    
    
    (1,330
    )
    
    
    552
    
    
    
    (1,506
    )
    
    
    (3,640
    )
    
    
    2,134Interest expense:Money market accounts
    
    
    (29
    )
    
    
    (46
    )
    
    
    17
    
    
    
    (190
    )
    
    
    (211
    )
    
    
    21NOW accounts
    
    
    (61
    )
    
    
    (82
    )
    
    
    21
    
    
    
    (424
    )
    
    
    (506
    )
    
    
    82Savings accounts
    
    
    (127
    )
    
    
    (139
    )
    
    
    12
    
    
    
    (416
    )
    
    
    (448
    )
    
    
    32Time deposits less than $100
    
    
    (363
    )
    
    
    (237
    )
    
    
    (126
    )
    
    
    (1,067
    )
    
    
    (881
    )
    
    
    (186
    )Time deposits $100 or more
    
    
    (4
    )
    
    
    (215
    )
    
    
    211
    
    
    
    320
    
    
    
    (436
    )
    
    
    756Short-term borrowings
    
    
    5
    
    
    
    (2
    )
    
    
    7
    
    
    
    (81
    )
    
    
    (199
    )
    
    
    118Total interest expense
    
    
    (579
    )
    
    
    (721
    )
    
    
    142
    
    
    
    (1,858
    )
    
    
    (2,681
    )
    
    
    823Net interest income
    
    $
    (199
    )
    
    $
    (609
    )
    
    $
    410
    
    
    $
    352
    
    
    $
    (959
    )
    
    $
    1,311
    51




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




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




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Summary of net interest income
 September 30, 2009
    
    
    September 30, 2008Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Interest
    
    
    Average
    
    
    Income/
    
    
    InterestBalance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateASSETS:Earning assets:Loans:Taxable
    
    $
    447,962
    
    
    $
    19,078
    
    
    
    5.69
    %
    
    $
    442,007
    
    
    $
    21,979
    
    
    
    6.64
    %Tax-exempt
    
    
    65,328
    
    
    
    2,853
    
    
    
    5.84
    
    
    
    52,106
    
    
    
    2,567
    
    
    
    6.58Investments:Taxable
    
    
    31,488
    
    
    
    898
    
    
    
    3.81
    
    
    
    5,939
    
    
    
    172
    
    
    
    3.87Tax-exempt
    
    
    39,079
    
    
    
    2,147
    
    
    
    7.35
    
    
    
    28,812
    
    
    
    1,624
    
    
    
    7.53Federal funds sold
    
    
    5,244
    
    
    
    5
    
    
    
    0.13
    
    
    
    11,618
    
    
    
    145
    
    
    
    1.67Total earning assets
    
    
    589,101
    
    
    
    24,981
    
    
    
    5.67
    %
    
    
    540,482
    
    
    
    26,487
    
    
    
    6.55
    %Less: allowance for loan losses
    
    
    5,855
    
    
    
    
    
    
    
    
    
    
    
    5,020Other assets
    
    
    32,897
    
    
    
    
    
    
    
    
    
    
    
    33,394Total assets
    
    $
    616,143
    
    
    
    
    
    
    
    
    
    
    $
    568,856LIABILITIES AND STOCKHOLDERS EQUITY:Interest-bearing liabilities:Money market accounts
    
    $
    26,059
    
    
    
    172
    
    
    
    0.88
    %
    
    $
    24,593
    
    
    
    362
    
    
    
    1.97
    %NOW accounts
    
    
    74,865
    
    
    
    789
    
    
    
    1.41
    
    
    
    69,844
    
    
    
    1,213
    
    
    
    2.32Savings accounts
    
    
    106,680
    
    
    
    422
    
    
    
    0.53
    
    
    
    102,604
    
    
    
    838
    
    
    
    1.09Time deposits less than $100
    
    
    164,390
    
    
    
    4,095
    
    
    
    3.33
    
    
    
    170,728
    
    
    
    5,162
    
    
    
    4.04Time deposits $100 or more
    
    
    81,610
    
    
    
    2,014
    
    
    
    3.30
    
    
    
    53,355
    
    
    
    1,694
    
    
    
    4.24Short-term borrowings
    
    
    18,595
    
    
    
    97
    
    
    
    0.70
    
    
    
    8,190
    
    
    
    178
    
    
    
    2.90Total interest-bearing liabilities
    
    
    472,199
    
    
    
    7,589
    
    
    
    2.15
    %
    
    
    429,314
    
    
    
    9,447
    
    
    
    2.94
    %Noninterest-bearing deposits
    
    
    81,092
    
    
    
    
    
    
    
    
    
    
    
    80,207Other liabilities
    
    
    3,758
    
    
    
    
    
    
    
    
    
    
    
    3,143Stockholders equity
    
    
    59,094
    
    
    
    
    
    
    
    
    
    
    
    56,192Total liabilities and stockholders equity
    
    $
    616,143
    
    
    
    
    
    
    
    
    
    
    $
    568,856Net interest income/spread
    
    
    
    
    
    $
    17,392
    
    
    
    3.52
    %
    
    
    
    
    
    $
    17,040
    
    
    
    3.61
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.95
    %
    
    
    
    
    
    
    
    
    
    
    4.21
    %Tax equivalent adjustments:Loans
    
    
    
    
    
    $
    970
    
    
    
    
    
    
    
    
    
    
    $
    873Investments
    
    
    
    
    
    
    730
    
    
    
    
    
    
    
    
    
    
    
    552Total adjustments
    
    
    
    
    
    $
    1,700
    
    
    
    
    
    
    
    
    
    
    $
    1,425
 Note:
    
    Average balances were calculated using average daily balances. Interest income on loans
include fees of $652 in 2009 and $321 in 2008. Available-for-sale securities, included in
investment securities, are stated at amortized cost with the related average unrealized
holding gains of $2,573 and $1,753 for the nine months ended September 30, 2009 and 2008
included in other assets. Tax-equivalent adjustments were calculated using the prevailing
statutory tax rate of 34.0 percent.  54




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##### 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:
   55




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Noninterest Expense:
   Noninterest expenses
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Salaries and employee benefits expense:Salaries and payroll taxes
    
    $
    1,734
    
    
    $
    1,700
    
    
    $
    5,109
    
    
    $
    5,048Employee benefits
    
    
    291
    
    
    
    469
    
    
    
    1,220
    
    
    
    1,366Salaries and employee benefits expense
    
    
    2,025
    
    
    
    2,169
    
    
    
    6,329
    
    
    
    6,414Net occupancy and equipment expense:Net occupancy expense
    
    
    271
    
    
    
    276
    
    
    
    898
    
    
    
    918Equipment expense
    
    
    320
    
    
    
    307
    
    
    
    951
    
    
    
    948Net occupancy and equipment expense
    
    
    591
    
    
    
    583
    
    
    
    1,849
    
    
    
    1,866Other expenses:Marketing expense
    
    
    167
    
    
    
    261
    
    
    
    528
    
    
    
    597Other taxes
    
    
    151
    
    
    
    46
    
    
    
    497
    
    
    
    295Stationery and supplies
    
    
    49
    
    
    
    69
    
    
    
    178
    
    
    
    215Contractual services
    
    
    482
    
    
    
    446
    
    
    
    1,618
    
    
    
    1,304Insurance, including FDIC assessment
    
    
    336
    
    
    
    84
    
    
    
    1,313
    
    
    
    220Other
    
    
    757
    
    
    
    425
    
    
    
    1,601
    
    
    
    1,203Other expenses
    
    
    1,942
    
    
    
    1,331
    
    
    
    5,735
    
    
    
    3,834Total noninterest expense
    
    $
    4,558
    
    
    $
    4,083
    
    
    $
    13,913
    
    
    $
    12,114
  56




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      57




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    58




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Income Taxes:
    59




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##### Table of Contents



Comm Bancorp, Inc.
 
 CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures:
  Internal Control Over Financial Reporting:
   60




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##### 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
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Results of Votes of Security Holders
  
 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.
  61




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##### Table of Contents



COMM BANCORP, INC.
FORM 10-Q
 
 SIGNATURE PAGE
  Registrant, Comm Bancorp, Inc.Date: November 13, 2009
    /s/ William F. Farber, Sr.William F. Farber, Sr.President and Chief Executive Officer
Chairman of the Board/Director
(Principal Executive Officer)Date: November 13, 2009
    /s/ Scott A. SeasockScott A. SeasockExecutive Vice President and
Chief Financial Officer
(Principal Financial Officer)Date: November 13, 2009
    /s/ Stephanie A. Westington, CPAStephanie A. Westington, CPAVice President of Finance
(Principal Accounting Officer)  62




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##### Table of Contents



EXHIBIT INDEX
 Item Number
    
    Description
    
    Page31(i)
    
    CEO and CFO Certifications Pursuant to
Rule 13a-14(a)/15d-14(a).
    
    
    6432
    
    CEO and CFO Certifications Pursuant to
Section 1350.
    
    
    66
  63