##### 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, 2010
 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
June 30, 2010
 INDEX
 CONTENTS
    
    Page No.Part I. Financial Information:Item 1. Financial Statements (unaudited).Consolidated Statements of Income and Comprehensive Income
for the Three Months and Six Months Ended June 30,
2010 and 2009
    
    
    3Consolidated Balance Sheets  June 30, 2010 and
December 31, 2009
    
    
    4Consolidated Statements of Changes in Stockholders Equity
for the Six Months Ended June 30, 2010 and 2009
    
    
    5Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures About Market
Risk
    
    
    *Item 4. Controls and Procedures
    
    
    56Item 4T. Controls and Procedures
    
    
    *Part II. Other Information:Item 1. Legal Proceedings
    
    
    57Item 1A. Risk Factors
    
    
    *Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
    
    
    57Item 3. Defaults Upon Senior Securities
    
    
    57Item 4. Removed and Reserved
    
    
    57Item 5. Other Information
    
    
    57Item 6. Exhibits
    
    
    57Signatures
    
    
    58Exhibit Index
    
    
    59Exhibit 31(i)Exhibit 32
  *
    
    Not Applicable  2




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##### 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 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    (Unaudited)Interest income:Interest and fees on loans:Taxable
    
    $
    5,942
    
    
    $
    6,436
    
    
    $
    11,883
    
    
    $
    12,884Tax-exempt
    
    
    318
    
    
    
    619
    
    
    
    640
    
    
    
    1,285Interest and dividends on investment securities available-for-sale:Taxable
    
    
    523
    
    
    
    315
    
    
    
    1,252
    
    
    
    664Tax-exempt
    
    
    238
    
    
    
    473
    
    
    
    540
    
    
    
    1,010Dividends
    
    
    2
    
    
    
    9
    
    
    
    4
    
    
    
    20Interest on federal funds sold
    
    
    9
    
    
    
    
    
    
    
    17
    
    
    
    1Total interest income
    
    
    7,032
    
    
    
    7,852
    
    
    
    14,336
    
    
    
    15,864Interest expense:Interest on deposits
    
    
    2,315
    
    
    
    2,426
    
    
    
    4,748
    
    
    
    5,059Interest on short-term borrowings
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    92Interest on long-term debt
    
    
    160
    
    
    
    
    
    
    
    320Total interest expense
    
    
    2,475
    
    
    
    2,462
    
    
    
    5,068
    
    
    
    5,151Net interest income
    
    
    4,557
    
    
    
    5,390
    
    
    
    9,268
    
    
    
    10,713Provision for loan losses
    
    
    300
    
    
    
    520
    
    
    
    1,300
    
    
    
    1,090Net interest income after provision for loan losses
    
    
    4,257
    
    
    
    4,870
    
    
    
    7,968
    
    
    
    9,623Noninterest income:Service charges, fees and commissions
    
    
    730
    
    
    
    832
    
    
    
    1,471
    
    
    
    1,596Mortgage banking income
    
    
    214
    
    
    
    490
    
    
    
    495
    
    
    
    892Net gain on sale of premises and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Net gain on sale of investment securities available-for-sale
    
    
    
    
    
    
    
    
    
    
    361
    
    
    
    114Total noninterest income
    
    
    944
    
    
    
    1,322
    
    
    
    2,327
    
    
    
    2,896Noninterest expense:Salaries and employee benefits expense
    
    
    2,183
    
    
    
    2,164
    
    
    
    4,370
    
    
    
    4,304Net occupancy and equipment expense
    
    
    547
    
    
    
    583
    
    
    
    1,150
    
    
    
    1,258Other expenses
    
    
    1,636
    
    
    
    2,260
    
    
    
    3,200
    
    
    
    3,793Total noninterest expense
    
    
    4,366
    
    
    
    5,007
    
    
    
    8,720
    
    
    
    9,355Income before income taxes
    
    
    835
    
    
    
    1,185
    
    
    
    1,575
    
    
    
    3,164Provision for income tax expense (benefit)
    
    
    (355
    )
    
    
    (30
    )
    
    
    (765
    )
    
    
    174Net income
    
    
    1,190
    
    
    
    1,215
    
    
    
    2,340
    
    
    
    2,990Other comprehensive income:Unrealized gains on investment securities available-for-sale
    
    
    2,030
    
    
    
    13
    
    
    
    1,755
    
    
    
    355Reclassification adjustment for gains included in net income
    
    
    
    
    
    
    
    
    
    
    (361
    )
    
    
    (114
    )Income tax expense related to other comprehensive income
    
    
    690
    
    
    
    4
    
    
    
    474
    
    
    
    82Other comprehensive income, net of income taxes
    
    
    1,340
    
    
    
    9
    
    
    
    920
    
    
    
    159Comprehensive income
    
    $
    2,530
    
    
    $
    1,224
    
    
    $
    3,260
    
    
    $
    3,149Per share data:Net income
    
    $
    0.69
    
    
    $
    0.70
    
    
    $
    1.36
    
    
    $
    1.73Cash dividends declared
    
    
    
    
    
    $
    0.28
    
    
    
    
    
    
    $
    0.56Average common shares outstanding
    
    
    1,722,923
    
    
    
    1,722,282
    
    
    
    1,722,923
    
    
    
    1,725,310
   3




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Comm Bancorp, Inc.
 
 CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except per share data)
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)
    
    
    (Unaudited)Assets:Cash and due from banks
    
    $
    10,050
    
    
    $
    23,978Federal funds sold
    
    
    31,700
    
    
    
    25,300Investment securities available-for-sale
    
    
    112,851
    
    
    
    108,005Loans held for sale, net
    
    
    110
    
    
    
    2,016Loans, net of unearned income
    
    
    465,143
    
    
    
    476,944Less: allowance for loan losses
    
    
    14,928
    
    
    
    17,462Net loans
    
    
    450,215
    
    
    
    459,482Premises and equipment, net
    
    
    11,425
    
    
    
    11,616Accrued interest receivable
    
    
    1,962
    
    
    
    2,122Other assets
    
    
    23,452
    
    
    
    19,634Total assets
    
    $
    641,765
    
    
    $
    652,153Liabilities:Deposits:Noninterest-bearing
    
    $
    87,348
    
    
    $
    88,335Interest-bearing
    
    
    489,370
    
    
    
    502,448Total deposits
    
    
    576,718
    
    
    
    590,783Long-term debt
    
    
    8,000
    
    
    
    8,000Accrued interest payable
    
    
    1,284
    
    
    
    1,296Other liabilities
    
    
    2,124
    
    
    
    1,740Total liabilities
    
    
    588,126
    
    
    
    601,819Stockholders equity:Common
stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding: June 30, 2010, 1,722,923 shares; December 31, 2009, 1,721,007 shares
    
    
    569
    
    
    
    568Capital surplus
    
    
    8,010
    
    
    
    7,966Retained earnings
    
    
    43,321
    
    
    
    40,981Accumulated other comprehensive income
    
    
    1,739
    
    
    
    819Total stockholders equity
    
    
    53,639
    
    
    
    50,334Total liabilities and stockholders equity
    
    $
    641,765
    
    
    $
    652,153
   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(Unaudited)
    
    Stock
    
    
    Surplus
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2009
    
    $
    568
    
    
    $
    7,966
    
    
    $
    40,981
    
    
    $
    819
    
    
    $
    50,334Net income
    
    
    
    
    
    
    
    
    
    
    2,340
    
    
    
    
    
    
    
    2,340Dividend reinvestment plan: 1,916 shares issued
    
    
    1
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    45Other comprehensive income, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920
    
    
    
    920Balance, June 30, 2010
    
    $
    569
    
    
    $
    8,010
    
    
    $
    43,321
    
    
    $
    1,739
    
    
    $
    53,639Balance, 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
    
    
    $
    59,458
   5




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##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (Dollars in thousands, except per share data)
 Six Months Ended June 30,
    
    2010
    
    
    2009(Unaudited)Cash flows from operating activities:Net income
    
    $
    2,340
    
    
    $
    2,990Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    1,300
    
    
    
    1,090Depreciation and amortization of premises and equipment
    
    
    379
    
    
    
    459Net amortization of investment securities
    
    
    1,048
    
    
    
    181Amortization of net loan costs
    
    
    168
    
    
    
    191Amortization of mortgage servicing rights
    
    
    131
    
    
    
    231Deferred income tax expense (benefit)
    
    
    1,195
    
    
    
    (214
    )Net gain on sale of investment securities available-for-sale
    
    
    (361
    )
    
    
    (114
    )Net gain on sale of loans
    
    
    (424
    )
    
    
    (942
    )Net gain on sale of premises and equipment
    
    
    
    
    
    
    (294
    )Net loss (gain) on sale of foreclosed assets
    
    
    8
    
    
    
    (17
    )Changes in:Loans held for sale, net
    
    
    2,330
    
    
    
    1,545Accrued interest receivable
    
    
    160
    
    
    
    (383
    )Other assets
    
    
    (2,031
    )
    
    
    (1,246
    )Accrued interest payable
    
    
    (12
    )
    
    
    (119
    )Other liabilities
    
    
    151
    
    
    
    681Net cash provided by operating activities
    
    
    6,382
    
    
    
    4,039Cash flows from investing activities:Proceeds from repayments of investment securities available-for-sale
    
    
    9,546
    
    
    
    4,661Proceeds from sales of investment securities available-for-sale
    
    
    6,154
    
    
    
    4,341Purchases of investment securities available-for-sale
    
    
    (19,839
    )
    
    
    (1,423
    )Proceeds from sale of foreclosed assets
    
    
    336
    
    
    
    145Net decrease (increase) in lending activities
    
    
    4,342
    
    
    
    (27,023
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    509Purchases of premises and equipment
    
    
    (188
    )
    
    
    (630
    )Net cash provided by (used in) investing activities
    
    
    351
    
    
    
    (19,420
    )Cash flows from financing activities:Net changes in:Money market, NOW, savings and noninterest-bearing accounts
    
    
    (678
    )
    
    
    (358
    )Time deposits
    
    
    (13,387
    )
    
    
    (3,136
    )Short-term borrowings
    
    
    
    
    
    
    7,950Proceeds from issuance of common shares
    
    
    45
    
    
    
    160Repurchase and retirement of common shares
    
    
    
    
    
    
    (684
    )Cash dividends paid
    
    
    (241
    )
    
    
    (953
    )Net cash provided by (used in) financing activities
    
    
    (14,261
    )
    
    
    2,979Net decrease in cash and cash equivalents
    
    
    (7,528
    )
    
    
    (12,402
    )Cash and cash equivalents at beginning of year
    
    
    49,278
    
    
    
    20,717Cash and cash equivalents at end of period
    
    $
    41,750
    
    
    $
    8,315Supplemental disclosures:Cash paid during the period for:Interest
    
    $
    5,080
    
    
    $
    5,270Income taxes
    
    
    
    
    
    
    691Noncash items:Transfers of loans to foreclosed assets
    
    
    3,457
    
    
    
    1,518Unrealized gains on investment securities available-for-sale, net
    
    $
    (920
    )
    
    $
    (159
    )
   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 per common share:
  3. Subsequent events:
   7




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Comm Bancorp, Inc.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)  (Dollars in thousands, except per share data)
 3. Subsequent events (continued):
  4. Investment securities:
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairJune 30, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipals
    
    $
    18,170
    
    
    $
    1,166
    
    
    
    
    
    
    $
    19,336Mortgage-backed securities:U.S. Government agencies
    
    
    89,199
    
    
    
    1,625
    
    
    $
    267
    
    
    
    90,557U.S. Government-sponsored enterprises
    
    
    171
    
    
    
    11
    
    
    
    
    
    
    
    182Equity securities:Restricted
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    2,537Other
    
    
    139
    
    
    
    101
    
    
    
    1
    
    
    
    239Total
    
    $
    110,216
    
    
    $
    2,903
    
    
    $
    268
    
    
    $
    112,851
 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipals
    
    $
    25,343
    
    
    $
    1,520
    
    
    $
    1
    
    
    $
    26,862Mortgage-backed securities:U.S. Government agencies
    
    
    78,537
    
    
    
    17
    
    
    
    399
    
    
    
    78,155U.S. Government-sponsored enterprises
    
    
    208
    
    
    
    12
    
    
    
    
    
    
    
    220Equity securities:Restricted
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    2,537Other
    
    
    139
    
    
    
    94
    
    
    
    2
    
    
    
    231Total
    
    $
    106,764
    
    
    $
    1,643
    
    
    $
    402
    
    
    $
    108,005
   8




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 4. Investment securities (continued):
  Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedJune 30, 2010
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesState and municipalsMortgage-backed securities:U.S. Government agencies
    
    $
    8,287
    
    
    $
    267
    
    
    
    
    
    
    
    
    
    
    $
    8,287
    
    
    $
    267U.S. Government-sponsored enterprisesEquity securities:RestrictedOther
    
    
    
    
    
    
    
    
    
    $
    8
    
    
    $
    1
    
    
    
    8
    
    
    
    1Total
    
    $
    8,287
    
    
    $
    267
    
    
    $
    8
    
    
    $
    1
    
    
    $
    8,295
    
    
    $
    268
 Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2009
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesState and municipals
    
    $
    686
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    $
    686
    
    
    $
    1Mortgage-backed securities:U.S. Government agencies
    
    
    30,651
    
    
    
    399
    
    
    
    
    
    
    
    
    
    
    
    30,651
    
    
    
    399U.S. Government-sponsored enterprisesEquity securities:RestrictedOther
    
    
    
    
    
    
    
    
    
    $
    7
    
    
    $
    2
    
    
    
    7
    
    
    
    2Total
    
    $
    31,337
    
    
    $
    400
    
    
    $
    7
    
    
    $
    2
    
    
    $
    31,344
    
    
    $
    402
    9




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 4. Investment securities (continued):
     10




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 4. Investment securities (continued):
  After one
    
    
    After fiveWithin
    
    
    but within
    
    
    but within
    
    
    AfterJune 30, 2010
    
    one year
    
    
    five years
    
    
    ten years
    
    
    ten years
    
    
    TotalState and municipals
    
    $
    1,176
    
    
    $
    2,817
    
    
    $
    10,414
    
    
    $
    4,929
    
    
    $
    19,336Mortgage-backed securities:U.S. Government
    
    
    14,590
    
    
    
    40,320
    
    
    
    32,687
    
    
    
    2,960
    
    
    
    90,557U.S. Government-sponsored
    
    
    43
    
    
    
    128
    
    
    
    11
    
    
    
    
    
    
    
    182Total
    
    $
    15,809
    
    
    $
    43,265
    
    
    $
    43,112
    
    
    $
    7,889
    
    
    $
    110,075
 5. Fair values of financial instruments:
  
    
    Level 1: Unadjusted quoted prices or 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.
  11




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 5. Fair values of financial instruments (continued):
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsJune 30, 2010
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Investment securities available-for-sale:State and municipals
    
    $
    19,336
    
    
    
    
    
    
    $
    19,336Mortgage-backed securities:U.S. Government agencies
    
    
    90,557
    
    
    
    
    
    
    
    90,557U.S. Government-sponsored enterprises
    
    
    182
    
    
    
    
    
    
    
    182Equity securities:Other
    
    
    239
    
    
    $
    239Total
    
    $
    110,314
    
    
    $
    239
    
    
    $
    110,075
 Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDecember 31, 2009
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Investment securities available-for-sale:State and municipals
    
    $
    26,862
    
    
    
    
    
    
    $
    26,862Mortgage-backed securities:U.S. Government agencies
    
    
    78,155
    
    
    
    
    
    
    
    78,155U.S. Government-sponsored enterprises
    
    
    220
    
    
    
    
    
    
    
    220Equity securities:Other
    
    
    231
    
    
    $
    231Total
    
    $
    105,468
    
    
    $
    231
    
    
    $
    105,237
   12




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Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 5. Fair values of financial instruments (continued):
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsJune 30, 2010
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    4,428
    
    
    
    
    
    
    
    
    
    
    $
    4,428Foreclosed assets
    
    $
    3,064
    
    
    
    
    
    
    
    
    
    
    $
    3,064
 Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDecember 31, 2009
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    7,719
    
    
    
    
    
    
    
    
    
    
    $
    7,719
     13




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 5. Fair values of financial instruments (continued):
    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:
  14




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 5. Fair values of financial instruments (continued):
 Deposits with stated maturities:
 Long-term debt:
 Accrued interest payable:
 Off-balance sheet financial instruments:
  June 30, 2010
    
    
    December 31,2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    41,750
    
    
    $
    41,750
    
    
    $
    49,278
    
    
    $
    49,278Investment securities available-for-sale
    
    
    112,851
    
    
    
    112,851
    
    
    
    108,005
    
    
    
    108,005Loans held for sale, net
    
    
    110
    
    
    
    110
    
    
    
    2,016
    
    
    
    2,016Net loans
    
    
    450,215
    
    
    
    454,154
    
    
    
    459,482
    
    
    
    467,018Mortgage servicing rights
    
    
    935
    
    
    
    935
    
    
    
    893
    
    
    
    893Accrued interest receivable
    
    
    1,962
    
    
    
    1,962
    
    
    
    2,122
    
    
    
    2,122Total
    
    $
    607,823
    
    
    $
    611,762
    
    
    $
    621,796
    
    
    $
    629,332Financial liabilities:Deposits without stated maturities
    
    $
    338,254
    
    
    $
    338,254
    
    
    $
    338,932
    
    
    $
    338,932Deposits with stated maturities
    
    
    238,464
    
    
    
    245,998
    
    
    
    251,851
    
    
    
    256,749Long-term debt
    
    
    8,000
    
    
    
    8,000
    
    
    
    8,000
    
    
    
    8,066Accrued interest payable
    
    
    1,284
    
    
    
    1,284
    
    
    
    1,296
    
    
    
    1,296Total
    
    $
    586,002
    
    
    $
    593,536
    
    
    $
    600,079
    
    
    $
    605,043
  15




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##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 6. Recent accounting pronouncements:
    16




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##### Table of Contents



Comm Bancorp, Inc.
 
 MANAGEMENTS DISCUSSION AND ANALYSIS  (Dollars in thousands, except per share data)
 Forward-Looking Discussion:
       17




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Critical Accounting Policies:
       18




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##### Table of Contents



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




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##### Table of Contents



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




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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:
    21




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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
 June 30,
    
    
    December 31,2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %State and municipals
    
    $
    19,336
    
    
    
    17.13
    %
    
    $
    26,862
    
    
    
    24.87
    %Mortgage-backed securities:U.S. Government agencies
    
    
    90,557
    
    
    
    80.25
    
    
    
    78,155
    
    
    
    72.36U.S. Government-sponsored enterprises
    
    
    182
    
    
    
    0.16
    
    
    
    220
    
    
    
    0.21Equity securities:Restricted
    
    
    2,537
    
    
    
    2.25
    
    
    
    2,537
    
    
    
    2.35Other
    
    
    239
    
    
    
    0.21
    
    
    
    231
    
    
    
    0.21Total
    
    $
    112,851
    
    
    
    100.00
    %
    
    $
    108,005
    
    
    
    100.00
    %
     22




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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 available-for-sale portfolio
 After one
    
    
    After fiveWithin
    
    
    but within
    
    
    but within
    
    
    Afterone year
    
    
    five years
    
    
    ten years
    
    
    ten years
    
    
    TotalJune 30, 2010
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldAmortized
cost:State and municipals
    
    $
    1,156
    
    
    
    7.44
    %
    
    $
    2,691
    
    
    
    7.78
    %
    
    $
    9,567
    
    
    
    7.38
    %
    
    $
    4,756
    
    
    
    7.04
    %
    
    $
    18,170
    
    
    
    7.35
    %Mortgage-backed securities:U.S. Government
    
    
    14,493
    
    
    
    3.10
    
    
    
    39,883
    
    
    
    3.02
    
    
    
    31,935
    
    
    
    3.17
    
    
    
    2,888
    
    
    
    3.52
    
    
    
    89,199
    
    
    
    3.10U.S. Government-sponsored
    
    
    41
    
    
    
    6.80
    
    
    
    119
    
    
    
    6.73
    
    
    
    11
    
    
    
    6.66
    
    
    
    
    
    
    
    
    
    
    
    171
    
    
    
    6.74Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    0.26
    
    
    
    2,537
    
    
    
    0.26Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    0.98
    
    
    
    139
    
    
    
    0.98Total
    
    $
    15,690
    
    
    
    3.43
    %
    
    $
    42,693
    
    
    
    3.33
    %
    
    $
    41,513
    
    
    
    4.14
    %
    
    $
    10,320
    
    
    
    4.30
    %
    
    $
    110,216
    
    
    
    3.74
    %Fair value:State and municipals
    
    $
    1,176
    
    
    
    
    
    
    $
    2,817
    
    
    
    
    
    
    $
    10,414
    
    
    
    
    
    
    $
    4,929
    
    
    
    
    
    
    $
    19,336Mortgage-backed securities:U.S. Government
    
    
    14,590
    
    
    
    
    
    
    
    40,320
    
    
    
    
    
    
    
    32,687
    
    
    
    
    
    
    
    2,960
    
    
    
    
    
    
    
    90,557U.S. Government-sponsored
    
    
    43
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    
    
    
    
    2,537Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    239Total
    
    $
    15,809
    
    
    
    
    
    
    $
    43,265
    
    
    
    
    
    
    $
    43,112
    
    
    
    
    
    
    $
    10,665
    
    
    
    
    
    
    $
    112,851
  23




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##### Table of Contents



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




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##### 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 31,2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %Commercial, financial and others
    
    $
    152,944
    
    
    
    32.88
    %
    
    $
    160,945
    
    
    
    33.75
    %Real estate:Construction
    
    
    19,853
    
    
    
    4.27
    
    
    
    23,195
    
    
    
    4.86Residential
    
    
    102,305
    
    
    
    21.99
    
    
    
    104,925
    
    
    
    22.00Commercial
    
    
    158,960
    
    
    
    34.17
    
    
    
    155,269
    
    
    
    32.55Consumer, net
    
    
    28,025
    
    
    
    6.03
    
    
    
    29,447
    
    
    
    6.18Lease financing, net
    
    
    3,056
    
    
    
    0.66
    
    
    
    3,163
    
    
    
    0.66Loans, net of unearned income
    
    
    465,143
    
    
    
    100.00
    %
    
    
    476,944
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    14,928
    
    
    
    
    
    
    
    17,462Net loans
    
    $
    450,215
    
    
    
    
    
    
    $
    459,482
   25




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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 and interest sensitivity of loan portfolio
 After oneWithin
    
    
    but within
    
    
    AfterJune 30, 2010
    
    one year
    
    
    five years
    
    
    five years
    
    
    TotalMaturity schedule:Commercial, financial and others
    
    $
    61,896
    
    
    $
    26,619
    
    
    $
    64,429
    
    
    $
    152,944Real estate:Construction
    
    
    10,401
    
    
    
    3,742
    
    
    
    5,710
    
    
    
    19,853Residential
    
    
    8,057
    
    
    
    28,236
    
    
    
    66,012
    
    
    
    102,305Commercial
    
    
    7,910
    
    
    
    8,270
    
    
    
    142,780
    
    
    
    158,960Consumer, net
    
    
    1,841
    
    
    
    19,405
    
    
    
    6,779
    
    
    
    28,025Lease financing, net
    
    
    612
    
    
    
    2,444
    
    
    
    
    
    
    
    3,056Total
    
    $
    90,717
    
    
    $
    88,716
    
    
    $
    285,710
    
    
    $
    465,143Predetermined interest rates
    
    $
    30,485
    
    
    $
    72,116
    
    
    $
    89,677
    
    
    $
    192,278Floating- or adjustable-interest rates
    
    
    60,232
    
    
    
    16,600
    
    
    
    196,033
    
    
    
    272,865Total
    
    $
    90,717
    
    
    $
    88,716
    
    
    $
    285,710
    
    
    $
    465,143
     26




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##### 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 31,2010
    
    
    2009Commitments to extend credit
    
    $
    85,426
    
    
    $
    81,945Unused portions of lines of credit
    
    
    25,314
    
    
    
    24,723Commercial letters of credit
    
    
    19,076
    
    
    
    20,982Total
    
    $
    129,816
    
    
    $
    127,650
   27




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Asset Quality:
  June 30,
    
    2010
    
    
    2009United States
    
    
    9.5
    %
    
    
    9.5
    %Pennsylvania
    
    
    9.2
    
    
    
    8.2Lackawanna county
    
    
    9.6
    
    
    
    8.2Luzerne county
    
    
    10.7
    
    
    
    9.0Monroe county
    
    
    9.9
    
    
    
    9.4Susquehanna county
    
    
    8.9
    
    
    
    8.8Wayne county
    
    
    7.8
    
    
    
    7.6Wyoming county
    
    
    9.7
    %
    
    
    8.8
    %
   
    
    Hiring an independent loan review company to assist and advise us with our credit
risk management practices;
 
    
    Enhancing the oversight and workout of classified assets by hiring an in-house
attorney to expedite the process of loan foreclosures and redeploying existing staff to
the workout and loan review functions;
 
    
    Initiating the formation of a problem loan committee for the purpose of
monitoring the status of problem assets and devising action plans for the timely workout
or liquidation of assets;
  28




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 
    
    Overhauling the appraisal process by requiring new appraisals on all impaired
loans subject to evaluation under FASB ASC 310, Receivables, and any loan that is
delinquent over 60 days; and
 
    
    Tightening underwriting standards to ensure a more rigorous review of potential
loans and more conservative lending standards.
    29




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##### 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 31,2010
    
    
    2009Nonaccrual loans:Commercial, financial and others
    
    $
    2,752
    
    
    $
    7,438Real estate:Construction
    
    
    5,886
    
    
    
    4,532Residential
    
    
    1,457
    
    
    
    1,797Commercial
    
    
    6,423
    
    
    
    5,196Consumer, net
    
    
    160
    
    
    
    52Lease financing, netTotal nonaccrual loans
    
    
    16,678
    
    
    
    19,015Restructured loans:Commercial, financial and others
    
    
    1,346
    
    
    
    1,777Real estate:ConstructionResidential
    
    
    277Commercial
    
    
    352
    
    
    
    2,525Consumer, netLease financing, netTotal restructured loans
    
    
    1,975
    
    
    
    4,302Accruing loans past due 90 days or more:Commercial, financial and others
    
    
    
    
    
    
    263Real estate:ConstructionResidential
    
    
    196
    
    
    
    603Commercial
    
    
    162
    
    
    
    469Consumer, net
    
    
    19
    
    
    
    134Lease financing, net
    
    
    176
    
    
    
    165Total accruing loans past due 90 days or more
    
    
    553
    
    
    
    1,634Total nonperforming loans
    
    
    19,206
    
    
    
    24,951Foreclosed assets
    
    
    6,322
    
    
    
    3,209Total nonperforming assets
    
    $
    25,528
    
    
    $
    28,160Ratios:Nonperforming loans as a percentage of loans, net
    
    
    4.13
    %
    
    
    5.23
    %Nonperforming assets as a percentage of loans, net and
foreclosed assets
    
    
    5.41
    %
    
    
    5.86
    %
  30




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    31




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##### 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 31,2010
    
    
    2009Nonaccrual loans:Commercial, financial and others
    
    $
    2,752
    
    
    $
    7,438Real estate:Construction
    
    
    5,886
    
    
    
    4,532Residential
    
    
    1,457
    
    
    
    1,797Commercial
    
    
    6,423
    
    
    
    5,196Consumer, net
    
    
    160
    
    
    
    52Lease financing, netTotal nonaccrual loans
    
    
    16,678
    
    
    
    19,015Accruing loans:Commercial, financial and others
    
    
    1,346
    
    
    
    3,400Real estate:ConstructionResidential
    
    
    277
    
    
    
    55Commercial
    
    
    352
    
    
    
    5,198Consumer, netLease financing, netTotal accruing loans
    
    
    1,975
    
    
    
    8,653Total impaired loans
    
    $
    18,653
    
    
    $
    27,668Ratio:Impaired loans as a percentage of loans, net
    
    
    4.01
    %
    
    
    5.80
    %
   32




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  June 30, 2010
    
    
    December 31, 2009Recorded
    
    
    Related
    
    
    Recorded
    
    
    RelatedInvestment
    
    
    Allowance
    
    
    Investment
    
    
    AllowanceImpaired loans:With a related allowance
    
    $
    7,038
    
    
    $
    2,610
    
    
    $
    13,481
    
    
    $
    5,762With no related allowance
    
    
    11,615
    
    
    
    
    
    
    
    14,187Total
    
    $
    18,653
    
    
    $
    2,610
    
    
    $
    27,668
    
    
    $
    5,762
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross interest due under terms
    
    $
    283
    
    
    $
    385
    
    
    $
    708
    
    
    $
    922Interest income recognized
    
    
    104
    
    
    
    225
    
    
    
    287
    
    
    
    485Interest income not recognized
    
    $
    179
    
    
    $
    160
    
    
    $
    421
    
    
    $
    437Interest income recognized (cash-basis)
    
    $
    137
    
    
    $
    155
    
    
    $
    396
    
    
    $
    347Average recorded investment in impaired loans
    
    $
    21,089
    
    
    $
    30,249
    
    
    $
    24,918
    
    
    $
    31,449
   33




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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
 June 30,
    
    
    December 31,2010
    
    
    2009Category
    
    
    
    
    
    
    Categoryas a
    
    
    
    
    
    
    as a% of
    
    
    
    
    
    
    % ofAmount
    
    
    loans
    
    
    Amount
    
    
    loansAllocated allowance:Specific:Commercial, financial and others
    
    $
    921
    
    
    
    0.88
    %
    
    $
    3,679
    
    
    
    2.27
    %Real estate:Construction
    
    
    913
    
    
    
    1.27
    
    
    
    1,002
    
    
    
    0.95Residential
    
    
    163
    
    
    
    0.37
    
    
    
    265
    
    
    
    0.39Commercial
    
    
    545
    
    
    
    1.46
    
    
    
    812
    
    
    
    2.18Consumer, net
    
    
    68
    
    
    
    0.03
    
    
    
    4
    
    
    
    0.01Lease financing, netTotal
specific
    
    
    2,610
    
    
    
    4.01
    
    
    
    5,762
    
    
    
    5.80Formula:Commercial, financial and others
    
    
    4,023
    
    
    
    32.00
    
    
    
    1,024
    
    
    
    31.48Real estate:Construction
    
    
    1,732
    
    
    
    3.00
    
    
    
    1,645
    
    
    
    3.91Residential
    
    
    104
    
    
    
    21.62
    
    
    
    103
    
    
    
    21.61Commercial
    
    
    3,156
    
    
    
    32.71
    
    
    
    1,413
    
    
    
    30.37Consumer, net
    
    
    216
    
    
    
    6.00
    
    
    
    184
    
    
    
    6.17Lease financing, net
    
    
    128
    
    
    
    0.66
    
    
    
    12
    
    
    
    0.66Total formula
    
    
    9,359
    
    
    
    95.99
    
    
    
    4,381
    
    
    
    94.20Total allocated allowance
    
    
    11,969
    
    
    
    100.00
    %
    
    
    10,143
    
    
    
    100.00
    %Unallocated allowance
    
    
    2,959
    
    
    
    
    
    
    
    7,319Total allowance for loan losses
    
    $
    14,928
    
    
    
    
    
    
    $
    17,462
   34




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    Reconciliation of allowance for loan losses
 June 30,2010Allowance for loan losses at beginning of period
    
    $
    17,462Loans charged-off:Commercial, financial and others
    
    
    3,002Real estate:Construction
    
    
    525Residential
    
    
    9Commercial
    
    
    432Consumer, net
    
    
    60Lease financing, netTotal
    
    
    4,028Loans recovered:Commercial, financial and others
    
    
    179Real estate:ConstructionResidential
    
    
    1CommercialConsumer, net
    
    
    14Lease financing, netTotal
    
    
    194Net loans charged-off
    
    
    3,834Provision charged to operating expense
    
    
    1,300Allowance for loan losses at end of period
    
    $
    14,928Ratios:Net loans charged-off as a percentage of average loans outstanding
    
    
    1.64
    %Allowance for loan losses as a percentage of period end loans
    
    
    3.21
    %
  35




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
   Deposits:
    36




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Deposit distribution
 June 30,
    
    
    June 30,2010
    
    
    2009Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateInterest-bearing:Money market accounts
    
    $
    34,895
    
    
    
    0.98
    %
    
    $
    27,229
    
    
    
    0.84
    %NOW accounts
    
    
    100,946
    
    
    
    1.51
    
    
    
    75,689
    
    
    
    1.49Savings accounts
    
    
    110,124
    
    
    
    0.44
    
    
    
    104,034
    
    
    
    0.53Time deposits less than $100
    
    
    157,696
    
    
    
    3.07
    
    
    
    165,475
    
    
    
    3.38Time deposits $100 or more
    
    
    90,426
    
    
    
    2.62
    
    
    
    75,684
    
    
    
    3.56Total interest-bearing
    
    
    494,087
    
    
    
    1.94
    %
    
    
    448,111
    
    
    
    2.28
    %Noninterest-bearing
    
    
    88,005
    
    
    
    
    
    
    
    81,115Total deposits
    
    $
    582,092
    
    
    
    
    
    
    $
    529,226
     37




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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 31,2010
    
    
    2009Within three months
    
    $
    27,693
    
    
    $
    13,860After three months but within six months
    
    
    19,746
    
    
    
    31,501After six months but within twelve months
    
    
    17,800
    
    
    
    22,289After twelve months
    
    
    20,275
    
    
    
    21,287Total
    
    $
    85,514
    
    
    $
    88,937
 Market Risk Sensitivity:
   38




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    39




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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, 2010
    
    three months
    
    
    twelve months
    
    
    five years
    
    
    five years
    
    
    TotalRate-sensitive assets:Investment securities
    
    $
    4,007
    
    
    $
    11,802
    
    
    $
    43,265
    
    
    $
    53,777
    
    
    $
    112,851Loans held for sale, net
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110Loans, net of unearned income
    
    
    165,891
    
    
    
    115,382
    
    
    
    165,327
    
    
    
    18,543
    
    
    
    465,143Federal funds sold
    
    
    31,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,700Total
    
    $
    201,708
    
    
    $
    127,184
    
    
    $
    208,592
    
    
    $
    72,320
    
    
    $
    609,804Rate-sensitive liabilities:Money market accounts
    
    $
    23,548
    
    
    $
    8,259
    
    
    
    
    
    
    
    
    
    
    $
    31,807NOW accounts
    
    
    87,232
    
    
    
    19,325
    
    
    
    
    
    
    
    
    
    
    
    106,557Savings accounts
    
    
    2,741
    
    
    
    
    
    
    $
    109,801
    
    
    
    
    
    
    
    112,542Time deposits less than $100
    
    
    27,268
    
    
    
    43,766
    
    
    
    69,793
    
    
    $
    12,123
    
    
    
    152,950Time deposits $100 or more
    
    
    27,693
    
    
    
    37,546
    
    
    
    19,022
    
    
    
    1,253
    
    
    
    85,514Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    8,000Total
    
    $
    168,482
    
    
    $
    108,896
    
    
    $
    198,616
    
    
    $
    21,376
    
    
    $
    497,370Rate sensitivity gap:Period
    
    $
    33,226
    
    
    $
    18,288
    
    
    $
    9,976
    
    
    $
    50,944Cumulative
    
    $
    33,226
    
    
    $
    51,514
    
    
    $
    61,490
    
    
    $
    112,434
    
    
    $
    112,434RSA/RSL ratio:Period
    
    
    1.20
    
    
    
    1.17
    
    
    
    1.05
    
    
    
    3.38Cumulative
    
    
    1.20
    
    
    
    1.19
    
    
    
    1.13
    
    
    
    1.23
    
    
    
    1.23
   40




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Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
      41




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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.
   
    
    FHLB-Pgh liquidity contingency line of credit;
 
    
    Federal Reserve Bank discount window;
 
    
    Internet certificates of deposit;
 
    
    Brokered deposits;
 
    
    Institutional Deposit Corporation deposits;
 
    
    Repurchase agreements; and
 
    
    Federal funds purchased.
   42




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




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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:
   
    
    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.
   44




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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 ProvisionsJune 30,
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Basis for ratios:Tier I capital to risk-weighted assets:Consolidated
    
    $
    51,459
    
    
    $
    57,197
    
    
    $
    19,799
    
    
    $
    21,127Community Bank
    
    
    45,814
    
    
    
    51,877
    
    
    
    19,578
    
    
    
    20,970
    
    
    $
    29,367
    
    
    $
    31,455Total capital to risk-weighted assets:Consolidated
    
    
    65,755
    
    
    
    63,216
    
    
    
    39,598
    
    
    
    42,254Community Bank
    
    
    60,042
    
    
    
    57,896
    
    
    
    39,156
    
    
    
    41,940
    
    
    
    48,945
    
    
    
    52,424Tier I capital to total average assets
less goodwill:Consolidated
    
    
    51,459
    
    
    
    57,197
    
    
    
    25,771
    
    
    
    24,727Community Bank
    
    
    45,814
    
    
    
    51,877
    
    
    $
    25,535
    
    
    $
    24,577
    
    
    $
    31,919
    
    
    $
    30,722Risk-weighted assets:Consolidated
    
    
    478,005
    
    
    
    511,779Community Bank
    
    
    472,483
    
    
    
    507,851Risk-weighted off-balance sheet items:Consolidated
    
    
    16,970
    
    
    
    16,394Community Bank
    
    
    16,970
    
    
    
    16,394Average assets for Leverage ratio:Consolidated
    
    
    644,285
    
    
    
    618,174Community Bank
    
    $
    638,387
    
    
    $
    614,435Ratios:Tier I capital as a percentage of risk-
weighted assets and off-balance sheet
items:Consolidated
    
    
    10.4
    %
    
    
    10.8
    %
    
    
    4.0
    %
    
    
    4.0
    %Community Bank
    
    
    9.4
    
    
    
    9.9
    
    
    
    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
    
    
    13.3
    
    
    
    12.0
    
    
    
    8.0
    
    
    
    8.0Community Bank
    
    
    12.3
    
    
    
    11.0
    
    
    
    8.0
    
    
    
    8.0
    
    
    
    10.0
    
    
    
    10.0Tier I capital as a percentage of total
average assets less intangible assets:Consolidated
    
    
    8.0
    
    
    
    9.3
    
    
    
    4.0
    
    
    
    4.0Community Bank
    
    
    7.2
    %
    
    
    8.4
    %
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    5.0
    %
    
    
    5.0
    %
   45




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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:
   46




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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.
   47




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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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010 vs. 2009
    
    
    2010 vs. 2009Increase (decrease)
    
    
    Increase (decrease)attributable to
    
    
    attributable toTotal
    
    
    
    
    
    
    
    
    
    
    TotalChange
    
    
    Rate
    
    
    Volume
    
    
    Change
    
    
    Rate
    
    
    VolumeInterest income:Loans:Taxable
    
    $
    (494
    )
    
    $
    (357
    )
    
    $
    (137
    )
    
    $
    (1,001
    )
    
    $
    (792
    )
    
    $
    (209
    )Tax-exempt
    
    
    (456
    )
    
    
    89
    
    
    
    (545
    )
    
    
    (977
    )
    
    
    140
    
    
    
    (1,117
    )Investments:Taxable
    
    
    201
    
    
    
    (189
    )
    
    
    390
    
    
    
    572
    
    
    
    (287
    )
    
    
    859Tax-exempt
    
    
    (357
    )
    
    
    6
    
    
    
    (363
    )
    
    
    (713
    )
    
    
    3
    
    
    
    (716
    )Federal funds sold
    
    
    9
    
    
    
    
    
    
    
    9
    
    
    
    16
    
    
    
    (2
    )
    
    
    18Total interest income
    
    
    (1,097
    )
    
    
    (451
    )
    
    
    (646
    )
    
    
    (2,103
    )
    
    
    (938
    )
    
    
    (1,165
    )Interest expense:Money market accounts
    
    
    23
    
    
    
    8
    
    
    
    15
    
    
    
    56
    
    
    
    21
    
    
    
    35NOW accounts
    
    
    121
    
    
    
    18
    
    
    
    103
    
    
    
    197
    
    
    
    7
    
    
    
    190Savings accounts
    
    
    (36
    )
    
    
    (42
    )
    
    
    6
    
    
    
    (34
    )
    
    
    (49
    )
    
    
    15Time deposits less than $100
    
    
    (155
    )
    
    
    (93
    )
    
    
    (62
    )
    
    
    (369
    )
    
    
    (243
    )
    
    
    (126
    )Time deposits $100 or more
    
    
    (64
    )
    
    
    (155
    )
    
    
    91
    
    
    
    (161
    )
    
    
    (392
    )
    
    
    231Short-term borrowings
    
    
    (36
    )
    
    
    (6
    )
    
    
    (30
    )
    
    
    (92
    )
    
    
    (11
    )
    
    
    (81
    )Long-term debt
    
    
    160
    
    
    
    
    
    
    
    160
    
    
    
    320
    
    
    
    
    
    
    
    320Total interest expense
    
    
    13
    
    
    
    (270
    )
    
    
    283
    
    
    
    (83
    )
    
    
    (667
    )
    
    
    584Net interest income
    
    $
    (1,110
    )
    
    $
    (181
    )
    
    $
    (929
    )
    
    $
    (2,020
    )
    
    $
    (271
    )
    
    $
    (1,749
    )
   48




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




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




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##### 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, 2010
    
    
    June 30, 2009Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Interest
    
    
    Average
    
    
    Income/
    
    
    InterestBalance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateASSETS:Earning assets:Loans:Taxable
    
    $
    439,048
    
    
    $
    11,883
    
    
    
    5.46
    %
    
    $
    446,405
    
    
    $
    12,884
    
    
    
    5.82
    %Tax-exempt
    
    
    31,218
    
    
    
    970
    
    
    
    6.27
    
    
    
    67,528
    
    
    
    1,947
    
    
    
    5.81Investments:Taxable
    
    
    91,983
    
    
    
    1,256
    
    
    
    2.75
    
    
    
    33,589
    
    
    
    684
    
    
    
    4.11Tax-exempt
    
    
    22,063
    
    
    
    818
    
    
    
    7.48
    
    
    
    41,375
    
    
    
    1,531
    
    
    
    7.46Federal funds sold
    
    
    29 011
    
    
    
    17
    
    
    
    0.12
    
    
    
    433
    
    
    
    1
    
    
    
    0.47Total earning assets
    
    
    613,323
    
    
    
    14,944
    
    
    
    4.91
    %
    
    
    589,330
    
    
    
    17,047
    
    
    
    5.83
    %Less: allowance for loan losses
    
    
    15,900
    
    
    
    
    
    
    
    
    
    
    
    5,602Other assets
    
    
    47,303
    
    
    
    
    
    
    
    
    
    
    
    34,877Total assets
    
    $
    644,726
    
    
    
    
    
    
    
    
    
    
    $
    618,605LIABILITIES AND STOCKHOLDERS EQUITY:Interest-bearing liabilities:Money market accounts
    
    $
    34,895
    
    
    
    170
    
    
    
    0.98
    %
    
    $
    27,229
    
    
    
    114
    
    
    
    0.84
    %NOW accounts
    
    
    100,946
    
    
    
    758
    
    
    
    1.51
    
    
    
    75,689
    
    
    
    561
    
    
    
    1.49Savings accounts
    
    
    110,124
    
    
    
    241
    
    
    
    0.44
    
    
    
    104,034
    
    
    
    275
    
    
    
    0.53Time deposits less than $100
    
    
    157,696
    
    
    
    2,403
    
    
    
    3.07
    
    
    
    165,475
    
    
    
    2,772
    
    
    
    3.38Time deposits $100 or more
    
    
    90,426
    
    
    
    1,176
    
    
    
    2.62
    
    
    
    75,684
    
    
    
    1,337
    
    
    
    3.56Short-term borrowings
    
    
    17
    
    
    
    
    
    
    
    0.61
    
    
    
    26,537
    
    
    
    92
    
    
    
    0.70Long-term debt
    
    
    8,000
    
    
    
    320
    
    
    
    8.07Total interest-bearing liabilities
    
    
    502,104
    
    
    
    5,068
    
    
    
    2.04
    %
    
    
    474,648
    
    
    
    5,151
    
    
    
    2.19
    %Noninterest-bearing deposits
    
    
    88,005
    
    
    
    
    
    
    
    
    
    
    
    81,115Other liabilities
    
    
    3,260
    
    
    
    
    
    
    
    
    
    
    
    3,782Stockholders equity
    
    
    51,357
    
    
    
    
    
    
    
    
    
    
    
    59,060Total liabilities and stockholders equity
    
    $
    644,726
    
    
    
    
    
    
    
    
    
    
    $
    618,605Net interest income/spread
    
    
    
    
    
    $
    9,876
    
    
    
    2.87
    %
    
    
    
    
    
    $
    11,896
    
    
    
    3.64
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    4.07
    %Tax equivalent adjustments:Loans
    
    
    
    
    
    $
    330
    
    
    
    
    
    
    
    
    
    
    $
    662Investments
    
    
    
    
    
    
    278
    
    
    
    
    
    
    
    
    
    
    
    521Total adjustments
    
    
    
    
    
    $
    608
    
    
    
    
    
    
    
    
    
    
    $
    1,183
 Note:
    
    Average balances were calculated using average daily balances. Interest income on loans
include fees of $381 in 2010 and $532 in 2009. Available-for-sale securities, included in
investment securities, are stated at amortized cost with the related average unrealized
holding gains of $918 and $2,647 for the six months ended June 30, 2010 and 2009 included in
other assets. Tax-equivalent adjustments were calculated using the prevailing statutory tax
rate of 34.0 percent.  51




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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:
  Noninterest Expense:
   52




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##### 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 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Salaries and employee benefits expense:Salaries and payroll taxes
    
    $
    1,733
    
    
    $
    1,681
    
    
    $
    3,461
    
    
    $
    3,375Employee benefits
    
    
    450
    
    
    
    483
    
    
    
    909
    
    
    
    929Salaries and employee benefits expense
    
    
    2,183
    
    
    
    2,164
    
    
    
    4,370
    
    
    
    4,304Net occupancy and equipment expense:Net occupancy expense
    
    
    260
    
    
    
    273
    
    
    
    590
    
    
    
    627Equipment expense
    
    
    287
    
    
    
    310
    
    
    
    560
    
    
    
    631Net occupancy and equipment expense
    
    
    547
    
    
    
    583
    
    
    
    1,150
    
    
    
    1,258Other expenses:Marketing expense
    
    
    108
    
    
    
    175
    
    
    
    204
    
    
    
    361Other taxes
    
    
    154
    
    
    
    160
    
    
    
    315
    
    
    
    346Stationery and supplies
    
    
    53
    
    
    
    60
    
    
    
    96
    
    
    
    129Contractual services
    
    
    512
    
    
    
    599
    
    
    
    1,005
    
    
    
    1,136Insurance, including FDIC assessment
    
    
    402
    
    
    
    807
    
    
    
    762
    
    
    
    977Other
    
    
    407
    
    
    
    459
    
    
    
    818
    
    
    
    844Other expenses
    
    
    1,636
    
    
    
    2,260
    
    
    
    3,200
    
    
    
    3,793Total noninterest expense
    
    $
    4,366
    
    
    $
    5,007
    
    
    $
    8,720
    
    
    $
    9,355
   53




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##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
       54




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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:
    55




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##### Table of Contents



Comm Bancorp, Inc.
 
 CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures:
  Internal Control Over Financial Reporting:
  
    
    The measurement of changes in the levels and trends of adversely classified
loans and their potential effect on risked-based capital ratios; and
 
    
    The identification of and changes in concentrations of credit and their
potential effect on the allowance for loan losses.
   56




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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. Removed and reserved
  
 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.
  57




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##### Table of Contents



COMM BANCORP, INC.
FORM 10-Q
 
 SIGNATURE PAGE
  Registrant, Comm Bancorp, Inc.Date:    August 13, 2010
    /s/ William F. Farber, Sr.William F. Farber, Sr.President and Chief Executive Officer
Chairman of the Board/Director
(Principal Executive Officer)Date:    August 13, 2010
    /s/ Scott A. SeasockScott A. SeasockExecutive Vice President and
Chief Financial Officer
(Principal Financial Officer)Date:    August 13, 2010
    /s/ Stephanie A. Westington, CPAStephanie A. Westington, CPAVice President of Finance
(Principal Accounting Officer)  58




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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).
    
    
    6032
    
    
    CEO and CFO Certifications Pursuant to Section 1350.
    
    
    62
  59