##### 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 March 31, 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




---



##### 



COMM
BANCORP, INC.
FORM 10-Q
 March 31, 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 Ended March 31, 2010 and 2009
    
    
    3Consolidated Balance Sheets  March 31, 2010, and December
31, 2009
    
    
    4Consolidated Statements of Changes in Stockholders Equity
for the Three Months Ended March 31, 2010 and 2009
    
    
    5Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    *Item 4. Controls and Procedures
    
    
    55Item 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
    
    
    59Exhbiit 31(i)Exhibit 32
  *
    
    Not Applicable  2




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (Dollars in thousands, except per share data)
 For the Three Months Ended March 31
    
    2010
    
    
    2009(Unaudited)Interest income:Interest and fees on loans:Taxable
    
    $
    5,941
    
    
    $
    6,448Tax-exempt
    
    
    322
    
    
    
    666Interest and dividends on investment securities available-for-sale:Taxable
    
    
    729
    
    
    
    349Tax-exempt
    
    
    302
    
    
    
    537Dividends
    
    
    2
    
    
    
    11Interest on federal funds sold
    
    
    8
    
    
    
    1Total interest income
    
    
    7,304
    
    
    
    8,012Interest expense:Interest on deposits
    
    
    2,433
    
    
    
    2,633Interest on short-term borrowings
    
    
    
    
    
    
    56Interest on long-term debt
    
    
    160Total interest expense
    
    
    2,593
    
    
    
    2,689Net interest income
    
    
    4,711
    
    
    
    5,323Provision for loan losses
    
    
    1,000
    
    
    
    570Net interest income after provision for loan losses
    
    
    3,711
    
    
    
    4,753Noninterest income:Service charges, fees and commissions
    
    
    741
    
    
    
    764Mortgage banking income
    
    
    281
    
    
    
    402Net gain on sale of premises and equipment
    
    
    
    
    
    
    294Net gain on sale of investment securities available-for-sale
    
    
    361
    
    
    
    114Total noninterest income
    
    
    1,383
    
    
    
    1,574Noninterest expense:Salaries and employee benefits expense
    
    
    2,187
    
    
    
    2,140Net occupancy and equipment expense
    
    
    603
    
    
    
    675Other expenses
    
    
    1,564
    
    
    
    1,533Total noninterest expense
    
    
    4,354
    
    
    
    4,348Income before income taxes
    
    
    740
    
    
    
    1,979Provision for income tax expense (benefit)
    
    
    (410
    )
    
    
    204Net income
    
    
    1,150
    
    
    
    1,775Other comprehensive income (loss):Unrealized holding gains (losses) on investment securities available-for-sale
    
    
    (275
    )
    
    
    342Reclassification adjustment for gains included in net income
    
    
    (361
    )
    
    
    (114
    )Income tax expense (benefit) related to other comprehensive income (loss)
    
    
    (216
    )
    
    
    78Other comprehensive income (loss), net of income taxes
    
    
    (420
    )
    
    
    150Comprehensive income
    
    $
    730
    
    
    $
    1,925Per share data:Net income
    
    $
    0.67
    
    
    $
    1.03Cash dividends declared
    
    
    
    
    
    $
    0.28Average common shares outstanding
    
    
    1,722,923
    
    
    
    1,728,371
   3




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share data)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Assets:Cash and due from banks
    
    $
    8,798
    
    
    $
    23,978Federal funds sold
    
    
    33,800
    
    
    
    25,300Investment securities available-for-sale
    
    
    116,593
    
    
    
    108,005Loans held-for-sale, net
    
    
    811
    
    
    
    2,016Loans, net of unearned income
    
    
    466,296
    
    
    
    476,944Less: allowance for loan losses
    
    
    14,891
    
    
    
    17,462Net loans
    
    
    451,405
    
    
    
    459,482Premises and equipment, net
    
    
    11,480
    
    
    
    11,616Accrued interest receivable
    
    
    2,213
    
    
    
    2,122Other assets
    
    
    23,512
    
    
    
    19,634Total assets
    
    $
    648,612
    
    
    $
    652,153Liabilities:Deposits:Noninterest-bearing
    
    $
    90,999
    
    
    $
    88,335Interest-bearing
    
    
    495,361
    
    
    
    502,448Total deposits
    
    
    586,360
    
    
    
    590,783Long-term debt
    
    
    8,000
    
    
    
    8,000Accrued interest payable
    
    
    1,623
    
    
    
    1,296Other liabilities
    
    
    1,520
    
    
    
    1,740Total liabilities
    
    
    597,503
    
    
    
    601,819Stockholders equity:Common
stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding: March 31, 2010, 1,722,923 shares; December 31, 2009, 1,721,007 shares
    
    
    569
    
    
    
    568Capital surplus
    
    
    8,010
    
    
    
    7,966Retained earnings
    
    
    42,131
    
    
    
    40,981Accumulated other comprehensive income
    
    
    399
    
    
    
    819Total stockholders equity
    
    
    51,109
    
    
    
    50,334Total liabilities and stockholders equity
    
    $
    648,612
    
    
    $
    652,153
   4




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Dollars in thousands, except per share data)
 AccumulatedOther
    
    
    TotalCommon
    
    
    Capital
    
    
    Retained
    
    
    Comprehensive
    
    
    Stockholders(Unaudited)
    
    Stock
    
    
    Surplus
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2009
    
    $
    568
    
    
    $
    7,966
    
    
    $
    40,981
    
    
    $
    819
    
    
    $
    50,334Net income
    
    
    
    
    
    
    
    
    
    
    1,150
    
    
    
    
    
    
    
    1,150Dividend reinvestment plan: 1,916 shares issued
    
    
    1
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    45Other comprehensive loss, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )
    
    
    (420
    )Balance, March 31, 2010
    
    $
    569
    
    
    $
    8,010
    
    
    $
    42,131
    
    
    $
    399
    
    
    $
    51,109Balance, December 31, 2008
    
    $
    571
    
    
    $
    7,694
    
    
    $
    47,862
    
    
    $
    1,671
    
    
    $
    57,798Net income
    
    
    
    
    
    
    
    
    
    
    1,775
    
    
    
    
    
    
    
    1,775Dividends declared: $0.28 per share
    
    
    
    
    
    
    
    
    
    
    (483
    )
    
    
    
    
    
    
    (483
    )Dividend reinvestment plan: 2,135 shares issued
    
    
    1
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    79Repurchase and retirement: 10,352 shares
    
    
    (4
    )
    
    
    (31
    )
    
    
    (361
    )
    
    
    
    
    
    
    (396
    )Other comprehensive income, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    150Balance, March 31, 2009
    
    $
    568
    
    
    $
    7,741
    
    
    $
    48,793
    
    
    $
    1,821
    
    
    $
    58,923
   5




---



##### Table of Contents



Comm Bancorp, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands, except per share data)
 For the Three Months Ended March 31
    
    2010

    
    
    2009(Unaudited)Cash flows from operating activities:Net income
    
    $
    1,150
    
    
    $
    1,775Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    1,000
    
    
    
    570Depreciation and amortization of premises and equipment
    
    
    189
    
    
    
    232Net amortization of investment securities
    
    
    394
    
    
    
    81Amortization of net loan costs
    
    
    84
    
    
    
    86Amortization of mortgage servicing rights
    
    
    65
    
    
    
    111Deferred income tax expense (benefit)
    
    
    1,156
    
    
    
    (79
    )Net gain on sale of investment securities available-for-sale
    
    
    (361
    )
    
    
    (114
    )Net gain on sale of loans
    
    
    (250
    )
    
    
    (424
    )Net gain on sale of premises and equipment
    
    
    
    
    
    
    (294
    )Net loss on sale of foreclosed assets
    
    
    8Changes in:Loans held for sale, net
    
    
    1,455
    
    
    
    (429
    )Accrued interest receivable
    
    
    (91
    )
    
    
    (313
    )Other assets
    
    
    (2,329
    )
    
    
    (628
    )Accrued interest payable
    
    
    327
    
    
    
    309Other liabilities
    
    
    237
    
    
    
    169Net cash provided by operating activities
    
    
    3,034
    
    
    
    1,052Cash flows from investing activities:Proceeds from repayments of investment securities available-for-sale
    
    
    4,428
    
    
    
    2,666Proceeds from sales of investment securities available-for-sale
    
    
    6,154
    
    
    
    4,341Purchases of investment securities available-for-sale
    
    
    (19,839
    )
    
    
    (1,421
    )Proceeds from sale of foreclosed assets
    
    
    242Net decrease (increase) in lending activities
    
    
    3,973
    
    
    
    (23,182
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    509Purchases of premises and equipment
    
    
    (53
    )
    
    
    (479
    )Net cash used in investing activities
    
    
    (5,095
    )
    
    
    (17,566
    )Cash flows from financing activities:Net changes in:Money market, NOW, savings and noninterest-bearing accounts
    
    
    (4,181
    )
    
    
    (9,513
    )Time deposits
    
    
    (242
    )
    
    
    (11,912
    )Short-term borrowings
    
    
    
    
    
    
    27,450Proceeds from the issuance of common shares
    
    
    45
    
    
    
    79Repurchase and retirement of common shares
    
    
    
    
    
    
    (396
    )Cash dividends paid
    
    
    (241
    )
    
    
    (470
    )Net cash provided by (used in) financing activities
    
    
    (4,619
    )
    
    
    5,238Net decrease in cash and cash equivalents
    
    
    (6,680
    )
    
    
    (11,276
    )Cash and cash equivalents at beginning of year
    
    
    49,278
    
    
    
    20,717Cash and cash equivalents at end of period
    
    $
    42,598
    
    
    $
    9,441Supplemental disclosures:Cash paid during the period for:Interest
    
    $
    2,266
    
    
    $
    2,380Income taxes
    
    
    
    
    
    
    11Noncash items:Transfers of loans to foreclosed assets
    
    
    3,020
    
    
    
    1,518Unrealized losses (gains) on investment securities available-for-sale, net
    
    $
    420
    
    
    $
    (150
    )
   6




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 4. Investment securities:
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairMarch 31, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipals
    
    $
    19,542
    
    
    $
    1,054
    
    
    $
    4
    
    
    $
    20,592Mortgage-backed securities:U.S. Government agencies
    
    
    93,569
    
    
    
    75
    
    
    
    629
    
    
    
    93,015U.S. Government-sponsored enterprises
    
    
    201
    
    
    
    12
    
    
    
    
    
    
    
    213Equity securities:Restricted
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    2,537Other
    
    
    139
    
    
    
    98
    
    
    
    1
    
    
    
    236Total
    
    $
    115,988
    
    
    $
    1,239
    
    
    $
    634
    
    
    $
    116,593
 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




---



##### 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
    
    
    UnrealizedMarch 31, 2010
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesState and municipals
    
    $
    682
    
    
    $
    4
    
    
    
    
    
    
    
    
    
    
    $
    682
    
    
    $
    4Mortgage-backed securities:U.S. Government agencies
    
    
    70,806
    
    
    
    629
    
    
    
    
    
    
    
    
    
    
    
    70,806
    
    
    
    629U.S. Government-sponsored enterprisesEquity securities:RestrictedOther
    
    
    
    
    
    
    
    
    
    $
    8
    
    
    $
    1
    
    
    
    8
    
    
    
    1Total
    
    $
    71,488
    
    
    $
    633
    
    
    $
    8
    
    
    $
    1
    
    
    $
    71,496
    
    
    $
    634
 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




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
  After one
    
    
    After fiveWithin
    
    
    but within
    
    
    but within
    
    
    AfterMarch 31, 2010
    
    one year
    
    
    five years
    
    
    ten years
    
    
    ten years
    
    
    TotalState and municipals
    
    $
    2,295
    
    
    $
    2,676
    
    
    $
    10,733
    
    
    $
    4,888
    
    
    $
    20,592Mortgage-backed securities:U.S. Government agencies
    
    
    18,831
    
    
    
    46,665
    
    
    
    27,237
    
    
    
    282
    
    
    
    93,015U.S. Government-sponsored enterprises
    
    
    85
    
    
    
    121
    
    
    
    7
    
    
    
    
    
    
    
    213Total
    
    $
    21,211
    
    
    $
    49,462
    
    
    $
    37,977
    
    
    $
    5,170
    
    
    $
    113,820
 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




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsMarch 31, 2010
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Investment securities available-for-sale:State and municipals
    
    $
    20,592
    
    
    
    
    
    
    $
    20,592Mortgage-backed securities:U.S. Government agencies
    
    
    93,015
    
    
    
    
    
    
    
    93,015U.S. Government-sponsored enterprises
    
    
    213
    
    
    
    
    
    
    
    213Equity securities:RestrictedOther
    
    
    236
    
    
    $
    236Total
    
    $
    114,056
    
    
    $
    236
    
    
    $
    113,820
 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:RestrictedOther
    
    
    231
    
    
    $
    231Total
    
    $
    105,468
    
    
    $
    231
    
    
    $
    105,237
   12




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsMarch 31, 2010
    
    Amount
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    5,733
    
    
    
    
    
    
    
    
    
    
    $
    5,733
 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




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
    Cash and cash equivalents:
 Investment securities available-for-sale:
 Loans held for sale, net:
 Net loans:
 Mortgage servicing rights:
 Accrued interest receivable:
 Deposits without stated maturities:
  14




---



##### Table of Contents



Comm Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, except per share data)
 Deposits with stated maturities:
 Long-term debt:
 Accrued interest payable:
 Off-balance sheet financial instruments:
  March 31, 2010
    
    
    December 31,2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    42,598
    
    
    $
    42,598
    
    
    $
    49,278
    
    
    $
    49,278Investment securities available-for-sale
    
    
    116,593
    
    
    
    116,593
    
    
    
    108,005
    
    
    
    108,005Loans held for sale, net
    
    
    811
    
    
    
    811
    
    
    
    2,016
    
    
    
    2,016Net loans
    
    
    451,405
    
    
    
    456,400
    
    
    
    459,482
    
    
    
    467,018Mortgage servicing rights
    
    
    929
    
    
    
    929
    
    
    
    893
    
    
    
    893Accrued interest receivable
    
    
    2,213
    
    
    
    2,213
    
    
    
    2,122
    
    
    
    2,122Total
    
    $
    614,549
    
    
    $
    619,544
    
    
    $
    621,796
    
    
    $
    629,332Financial liabilities:Deposits without stated maturities
    
    $
    334,751
    
    
    $
    334,751
    
    
    $
    338,932
    
    
    $
    338,932Deposits with stated maturities
    
    
    251,609
    
    
    
    259,631
    
    
    
    251,851
    
    
    
    256,749Long-term debt
    
    
    8,000
    
    
    
    8,066
    
    
    
    8,000
    
    
    
    8,066Accrued interest payable
    
    
    1,623
    
    
    
    1,623
    
    
    
    1,296
    
    
    
    1,296Total
    
    $
    595,983
    
    
    $
    604,071
    
    
    $
    600,079
    
    
    $
    605,043
  15




---



##### Table of Contents



Comm Bancorp, Inc.
 
 MANAGEMENTS DISCUSSION AND ANALYSIS
 (Dollars in thousands, except per share data)
 Forward-Looking Discussion:
       16




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Critical Accounting Policies:
      17




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
 Review of Financial Position:
  Investment Portfolio:
   Distribution of investment securities available-for-sale
 March 31,
    
    
    December 31,2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %State and municipals
    
    $
    20,592
    
    
    
    17.66
    %
    
    $
    26,862
    
    
    
    24.87
    %Mortgage-backed securities:U.S. Government
    
    
    93,015
    
    
    
    79.78
    
    
    
    78,155
    
    
    
    72.36U.S. Government-sponsored
    
    
    213
    
    
    
    0.18
    
    
    
    220
    
    
    
    0.21Equity securities:Restricted
    
    
    2,537
    
    
    
    2.18
    
    
    
    2,537
    
    
    
    2.35Other
    
    
    236
    
    
    
    0.20
    
    
    
    231
    
    
    
    0.21Total
    
    $
    116,593
    
    
    
    100.00
    %
    
    $
    108,005
    
    
    
    100.00
    %
   20




---



##### Table of Contents



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




---



##### 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
    
    
    TotalMarch 31, 2010
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldAmortized cost:State and municipals
    
    $
    2,253
    
    
    
    7.66
    %
    
    $
    2,592
    
    
    
    7.90
    %
    
    $
    9,941
    
    
    
    7.37
    %
    
    $
    4,756
    
    
    
    7.04
    %
    
    $
    19,542
    
    
    
    7.39
    %Mortgage-backed securities:U.S. Government
    
    
    18,957
    
    
    
    3.30
    
    
    
    46,900
    
    
    
    3.14
    
    
    
    27,430
    
    
    
    3.49
    
    
    
    282
    
    
    
    4.11
    
    
    
    93,569
    
    
    
    3.28U.S. Government-sponsored
    
    
    80
    
    
    
    6.83
    
    
    
    114
    
    
    
    6.71
    
    
    
    7
    
    
    
    6.62
    
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    6.75Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    0.26
    
    
    
    2,537
    
    
    
    0.26Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    1.27
    
    
    
    139
    
    
    
    1.27Total
    
    $
    21,290
    
    
    
    3.77
    %
    
    $
    49,606
    
    
    
    3.40
    %
    
    $
    37,378
    
    
    
    4.52
    %
    
    $
    7,714
    
    
    
    4.60
    %
    
    $
    115,988
    
    
    
    3.91
    %Fair value:State and municipals
    
    $
    2,295
    
    
    
    
    
    
    $
    2,676
    
    
    
    
    
    
    $
    10,733
    
    
    
    
    
    
    $
    4,888
    
    
    
    
    
    
    $
    20,592Mortgage-backed securities:U.S. Government
    
    
    18,831
    
    
    
    
    
    
    
    46,665
    
    
    
    
    
    
    
    27,237
    
    
    
    
    
    
    
    282
    
    
    
    
    
    
    
    93,015U.S. Government-sponsored
    
    
    85
    
    
    
    
    
    
    
    121
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213Equity securities:Restricted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,537
    
    
    
    
    
    
    
    2,537Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236
    
    
    
    
    
    
    
    236Total
    
    $
    21,211
    
    
    
    
    
    
    $
    49,462
    
    
    
    
    
    
    $
    37,977
    
    
    
    
    
    
    $
    7,943
    
    
    
    
    
    
    $
    116,593
 Loan Portfolio:
   22




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
     23




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
   Distribution of loan portfolio
 March 31,
    
    
    December 31,2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %Commercial, financial and others
    
    $
    152,515
    
    
    
    32.71
    %
    
    $
    160,945
    
    
    
    33.75
    %Real estate:Construction
    
    
    18,624
    
    
    
    3.99
    
    
    
    23,195
    
    
    
    4.86Residential
    
    
    103,904
    
    
    
    22.28
    
    
    
    104,925
    
    
    
    22.00Commercial
    
    
    159,702
    
    
    
    34.25
    
    
    
    155,269
    
    
    
    32.55Consumer, net
    
    
    28,475
    
    
    
    6.11
    
    
    
    29,447
    
    
    
    6.18Lease financing, net
    
    
    3,076
    
    
    
    0.66
    
    
    
    3,163
    
    
    
    0.66Loans, net of unearned income
    
    
    466,296
    
    
    
    100.00
    %
    
    
    476,944
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    14,891
    
    
    
    
    
    
    
    17,462Net loans
    
    $
    451,405
    
    
    
    
    
    
    $
    459,482
   24




---



##### 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
    
    
    AfterMarch 31, 2010
    
    one year
    
    
    five years
    
    
    five years
    
    
    TotalMaturity schedule:Commercial, financial and others
    
    $
    67,343
    
    
    $
    45,846
    
    
    $
    39,326
    
    
    $
    152,515Real estate:Construction
    
    
    13,895
    
    
    
    1,635
    
    
    
    3,094
    
    
    
    18,624Residential
    
    
    15,038
    
    
    
    47,811
    
    
    
    41,055
    
    
    
    103,904Commercial
    
    
    22,088
    
    
    
    61,445
    
    
    
    76,169
    
    
    
    159,702Consumer, net
    
    
    3,861
    
    
    
    20,057
    
    
    
    4,557
    
    
    
    28,475Lease financing, net
    
    
    616
    
    
    
    2,460
    
    
    
    
    
    
    
    3,076Total
    
    $
    122,841
    
    
    $
    179,254
    
    
    $
    164,201
    
    
    $
    466,296Sensitivity schedule:Predetermined interest rates
    
    $
    43,569
    
    
    $
    98,401
    
    
    $
    54,885
    
    
    $
    196,855Floating or adjustable interest rates
    
    
    79,272
    
    
    
    80,853
    
    
    
    109,316
    
    
    
    269,441Total
    
    $
    122,841
    
    
    $
    179,254
    
    
    $
    164,201
    
    
    $
    466,296
     25




---



##### 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
 March 31,
    
    
    December 31,2010
    
    
    2009Commitments to extend credit
    
    $
    76,278
    
    
    $
    81,945Unused portions of lines of credit
    
    
    24,846
    
    
    
    24,723Commercial letters of credit
    
    
    20,371
    
    
    
    20,982Total
    
    $
    121,495
    
    
    $
    127,650
   26




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of nonperforming assets
 March 31,
    
    
    December 31,2010
    
    
    2009Nonaccrual loans:Commercial, financial and others
    
    $
    3,333
    
    
    $
    7,438Real estate:Construction
    
    
    5,893
    
    
    
    4,532Residential
    
    
    1,666
    
    
    
    1,797Commercial
    
    
    6,293
    
    
    
    5,196Consumer, net
    
    
    117
    
    
    
    52Lease financing, netTotal nonaccrual loans
    
    
    17,302
    
    
    
    19,015Restructured loans:Commercial, financial and others
    
    
    1,346
    
    
    
    1,777Real estate:ConstructionResidential
    
    
    278Commercial
    
    
    356
    
    
    
    2,525Consumer, netLease financing, netTotal restructured loans
    
    
    1,980
    
    
    
    4,302Accruing loans past due 90 days or more:Commercial, financial and others
    
    
    105
    
    
    
    263Real estate:ConstructionResidential
    
    
    41
    
    
    
    603Commercial
    
    
    
    
    
    
    469Consumer, net
    
    
    39
    
    
    
    134Lease financing, net
    
    
    207
    
    
    
    165Total accruing loans past due 90 days or more
    
    
    392
    
    
    
    1,634Total nonperforming loans
    
    
    19,674
    
    
    
    24,951Foreclosed assets
    
    
    5,979
    
    
    
    3,209Total nonperforming assets
    
    $
    25,653
    
    
    $
    28,160Ratios:Nonperforming loans as a percentage of loans, net
    
    
    4.22
    %
    
    
    5.23
    %Nonperforming assets as a percentage of loans, net, and
foreclosed assets
    
    
    5.43
    %
    
    
    5.86
    %
  28




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    29




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Distribution of impaired loans
 March 31,
    
    
    December 31,2010
    
    
    2009Nonaccrual loans:Commercial, financial and others
    
    $
    3,333
    
    
    $
    7,438Real estate:Construction
    
    
    5,893
    
    
    
    4,532Residential
    
    
    1,666
    
    
    
    1,797Commercial
    
    
    6,293
    
    
    
    5,196Consumer, net
    
    
    117
    
    
    
    52Lease financing, netTotal nonaccrual loans
    
    
    17,302
    
    
    
    19,015Accruing loans:Commercial, financial and others
    
    
    2,088
    
    
    
    3,400Real estate:ConstructionResidential
    
    
    278
    
    
    
    55Commercial
    
    
    1,890
    
    
    
    5,198Consumer, netLease financing, netTotal accruing loans
    
    
    4,256
    
    
    
    8,653Total impaired loans
    
    $
    21,558
    
    
    $
    27,668Ratio:Impaired loans as a percentage of loans, net
    
    
    4.62
    %
    
    
    5.80
    %
   30




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  March 31, 2010
    
    
    December 31, 2009Recorded
    
    
    Related
    
    
    Recorded
    
    
    RelatedInvestment
    
    
    Allowance
    
    
    Investment
    
    
    AllowanceImpaired loans:With a related allowance
    
    $
    7,794
    
    
    $
    2,061
    
    
    $
    13,481
    
    
    $
    5,762With no related allowance
    
    
    13,764
    
    
    
    
    
    
    
    14,187Total
    
    $
    21,558
    
    
    $
    2,061
    
    
    $
    27,668
    
    
    $
    5,762
  Three Months Ended March 31
    
    2010
    
    
    2009Gross interest due under terms
    
    $
    425
    
    
    $
    537Interest income recognized
    
    
    183
    
    
    
    260Interest income not recognized
    
    $
    242
    
    
    $
    277Interest income recognized (cash-basis)
    
    $
    259
    
    
    $
    192Average recorded investment in impaired loans
    
    $
    28,790
    
    
    $
    32,662
   31




---



##### 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
 March 31, 2010
    
    
    December 31, 2009Category
    
    
    
    
    
    
    Categoryas a
    
    
    
    
    
    
    as a% of
    
    
    
    
    
    
    % ofAmount
    
    
    loans
    
    
    Amount
    
    
    loansAllocated allowance:Specific:Commercial, financial and others
    
    $
    697
    
    
    
    1.16
    %
    
    $
    3,679
    
    
    
    2.27
    %Real estate:Construction
    
    
    685
    
    
    
    1.26
    
    
    
    1,002
    
    
    
    0.95Residential
    
    
    168
    
    
    
    0.42
    
    
    
    265
    
    
    
    0.39Commercial
    
    
    442
    
    
    
    1.76
    
    
    
    812
    
    
    
    2.18Consumer, net
    
    
    69
    
    
    
    0.03
    
    
    
    4
    
    
    
    0.01Lease financing, netTotal specific
    
    
    2,061
    
    
    
    4.63
    
    
    
    5,762
    
    
    
    5.80Formula:Commercial, financial and others
    
    
    4,128
    
    
    
    31.55
    
    
    
    1,024
    
    
    
    31.48Real estate:Construction
    
    
    1,586
    
    
    
    2.73
    
    
    
    1,645
    
    
    
    3.91Residential
    
    
    97
    
    
    
    21.86
    
    
    
    103
    
    
    
    21.61Commercial
    
    
    3,048
    
    
    
    32.49
    
    
    
    1,413
    
    
    
    30.37Consumer, net
    
    
    250
    
    
    
    6.08
    
    
    
    184
    
    
    
    6.17Lease financing, net
    
    
    12
    
    
    
    0.66
    
    
    
    12
    
    
    
    0.66Total formula
    
    
    9,121
    
    
    
    95.37
    
    
    
    4,381
    
    
    
    94.20Total allocated allowance
    
    
    11,182
    
    
    
    100.00
    %
    
    
    10,143
    
    
    
    100.00
    %Unallocated allowance
    
    
    3,709
    
    
    
    
    
    
    
    7,319Total allowance for loan losses
    
    $
    14,891
    
    
    
    
    
    
    $
    17,462
   32




---



##### 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
 March 31,2010Allowance for loan losses at beginning of period
    
    $
    17,462Loans charged-off:Commercial, financial and others
    
    
    2,691Real estate:Construction
    
    
    525ResidentialCommercial
    
    
    332Consumer, net
    
    
    43Lease financing, netTotal
    
    
    3,591Loans recovered:Commercial, financial and others
    
    
    12Real estate:ConstructionResidential
    
    
    1CommercialConsumer, net
    
    
    7Lease financing, netTotal
    
    
    20Net loans charged-off
    
    
    3,571Provision charged to operating expense
    
    
    1,000Allowance for loan losses at end of period
    
    $
    14,891Ratios:Net loans charged-off as a percentage of average loans outstanding
    
    
    3.05
    %Allowance for loan losses as a percentage of period end loans
    
    
    3.19
    %
  33




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Deposit distribution
 March 31,
    
    
    March 31,2010
    
    
    2009Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateInterest-bearing:Money market accounts
    
    $
    36,972
    
    
    
    1.00
    %
    
    $
    28,352
    
    
    
    0.83
    %NOW accounts
    
    
    99,544
    
    
    
    1.56
    
    
    
    76,743
    
    
    
    1.62Savings accounts
    
    
    108,154
    
    
    
    0.46
    
    
    
    100,659
    
    
    
    0.49Time deposits less than $100
    
    
    160,570
    
    
    
    3.11
    
    
    
    168,255
    
    
    
    3.48Time deposits $100 or more
    
    
    92,472
    
    
    
    2.65
    
    
    
    75,233
    
    
    
    3.78Total interest-bearing
    
    
    497,712
    
    
    
    1.98
    %
    
    
    449,242
    
    
    
    2.38
    %Noninterest-bearing
    
    
    86,711
    
    
    
    
    
    
    
    79,997Total deposits
    
    $
    584,423
    
    
    
    
    
    
    $
    529,239
  .
  35




---



##### 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
 March 31,
    
    
    December 31,2010
    
    
    2009Within three months
    
    $
    30,927
    
    
    $
    13,860After three months but within six months
    
    
    27,545
    
    
    
    31,501After six months but within twelve months
    
    
    15,287
    
    
    
    22,289After twelve months
    
    
    18,741
    
    
    
    21,287Total
    
    $
    92,500
    
    
    $
    88,937
 Market Risk Sensitivity:
   36




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    37




---



##### 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 afterMarch 31, 2010
    
    three months
    
    
    twelve months
    
    
    five years
    
    
    five years
    
    
    TotalRate-sensitive assets:Investment securities
    
    $
    7,111
    
    
    $
    14,100
    
    
    $
    49,462
    
    
    $
    45,920
    
    
    $
    116,593Loans held for sale, net
    
    
    811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    811Loans, net of unearned income
    
    
    126,317
    
    
    
    69,618
    
    
    
    213,180
    
    
    
    57,181
    
    
    
    466,296Federal funds sold
    
    
    33,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,800Total
    
    $
    168,039
    
    
    $
    83,718
    
    
    $
    262,642
    
    
    $
    103,101
    
    
    $
    617,500Rate-sensitive liabilities:Money market accounts
    
    $
    25,931
    
    
    $
    8,714
    
    
    
    
    
    
    
    
    
    
    $
    34,645NOW accounts
    
    
    80,248
    
    
    
    18,629
    
    
    
    
    
    
    
    
    
    
    
    98,877Savings accounts
    
    
    5,358
    
    
    
    
    
    
    $
    104,872
    
    
    
    
    
    
    
    110,230Time deposits less than $100
    
    
    29,356
    
    
    
    47,749
    
    
    
    70,170
    
    
    $
    11,834
    
    
    
    159,109Time deposits $100 or more
    
    
    30,927
    
    
    
    42,832
    
    
    
    17,592
    
    
    
    1,149
    
    
    
    92,500Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    8,000Total
    
    $
    171,820
    
    
    $
    117,924
    
    
    $
    192,634
    
    
    $
    20,983
    
    
    $
    503,361Rate-sensitivity gap:Period
    
    $
    (3,781
    )
    
    $
    (34,206
    )
    
    $
    70,008
    
    
    $
    82,118Cumulative
    
    $
    (3,781
    )
    
    $
    (37,987
    )
    
    $
    32,021
    
    
    $
    114,139
    
    
    $
    114,139RSA/RSL ratio:Period
    
    
    0.98
    
    
    
    0.71
    
    
    
    1.36
    
    
    
    4.91Cumulative
    
    
    0.98
    
    
    
    0.87
    
    
    
    1.07
    
    
    
    1.23
    
    
    
    1.23
   38




---



##### Table of Contents



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




---



##### 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.
   40




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### 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.
  43




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Regulatory capital
 Minimum to be WellCapitalized underMinimum for Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsMarch 31
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Basis for ratios:Tier I capital to risk-weighted assets:Consolidated
    
    $
    50,269
    
    
    $
    56,686
    
    
    $
    19,977
    
    
    $
    20,935Community Bank
    
    
    44,672
    
    
    
    51,379
    
    
    
    19,749
    
    
    
    20,798
    
    
    $
    29,624
    
    
    $
    31,197Total capital to risk-weighted assets:Consolidated
    
    
    64,620
    
    
    
    62,217
    
    
    
    39,953
    
    
    
    41,871Community Bank
    
    
    58,952
    
    
    
    56,910
    
    
    
    39,498
    
    
    
    41,596
    
    
    
    49,373
    
    
    
    51,995Tier I capital to total average assets
less intangibles assets:Consolidated
    
    
    50,269
    
    
    
    56,686
    
    
    
    25,983
    
    
    
    24,917Community Bank
    
    
    44,672
    
    
    
    51,379
    
    
    $
    25,616
    
    
    $
    24,771
    
    
    $
    32,020
    
    
    $
    30,963Risk-weighted assets:Consolidated
    
    
    482,374
    
    
    
    509,637Community Bank
    
    
    476,683
    
    
    
    506,201Risk-weighted off-balance sheet items:Consolidated
    
    
    17,044
    
    
    
    13,749Community Bank
    
    
    17,044
    
    
    
    13,749Average assets for Leverage ratio:Consolidated
    
    
    646,820
    
    
    
    622,935Community Bank
    
    $
    640,395
    
    
    $
    619,267Ratios:Tier I capital as a percentage of risk-weighted assets and off-balance sheet
items:Consolidated
    
    
    10.1
    %
    
    
    10.8
    %
    
    
    4.0
    %
    
    
    4.0
    %Community Bank
    
    
    9.0
    
    
    
    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
    
    
    12.9
    
    
    
    11.9
    
    
    
    8.0
    
    
    
    8.0Community Bank
    
    
    11.9
    
    
    
    10.9
    
    
    
    8.0
    
    
    
    8.0
    
    
    
    10.0
    
    
    
    10.0Tier I capital as a percentage of total
average assets less intangibles assets:Consolidated
    
    
    7.8
    
    
    
    9.1
    
    
    
    4.0
    
    
    
    4.0Community Bank
    
    
    7.0
    %
    
    
    8.3
    %
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    5.0
    %
    
    
    5.0
    %
   44




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
    Review of Financial Performance:
   45




---



##### 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.
   46




---



##### 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
 March 31,2010 vs. 2009Increase (decrease)attributable toTotalChange
    
    
    Rate
    
    
    VolumeInterest income:Loans:Taxable
    
    $
    (507
    )
    
    $
    (435
    )
    
    $
    (72
    )Tax-exempt
    
    
    (521
    )
    
    
    51
    
    
    
    (572
    )Investments:Taxable
    
    
    371
    
    
    
    (98
    )
    
    
    469Tax-exempt
    
    
    (356
    )
    
    
    (3
    )
    
    
    (353
    )Federal funds sold
    
    
    7
    
    
    
    (2
    )
    
    
    9Total interest income
    
    
    (1,006
    )
    
    
    (487
    )
    
    
    (519
    )Interest expense:Money market accounts
    
    
    33
    
    
    
    13
    
    
    
    20NOW accounts
    
    
    76
    
    
    
    (11
    )
    
    
    87Savings accounts
    
    
    2
    
    
    
    (7
    )
    
    
    9Time deposits less than $100
    
    
    (214
    )
    
    
    (150
    )
    
    
    (64
    )Time deposits $100 or more
    
    
    (97
    )
    
    
    (237
    )
    
    
    140Short-term borrowings
    
    
    (56
    )
    
    
    (5
    )
    
    
    (51
    )Long-term debt
    
    
    160
    
    
    
    
    
    
    
    160Total interest expense
    
    
    (96
    )
    
    
    (397
    )
    
    
    301Net interest income
    
    $
    (910
    )
    
    $
    (90
    )
    
    $
    (820
    )
   47




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
  Summary of net interest income
 March 31, 2010
    
    
    March 31, 2009Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Interest
    
    
    Average
    
    
    Income/
    
    
    InterestBalance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateASSETS:Earning assets:Loans:Taxable
    
    $
    442,821
    
    
    $
    5,941
    
    
    
    5.44
    %
    
    $
    447,922
    
    
    $
    6,448
    
    
    
    5.84
    %Tax-exempt
    
    
    31,479
    
    
    
    488
    
    
    
    6.29
    
    
    
    68,567
    
    
    
    1,009
    
    
    
    5.97Investments:Taxable
    
    
    89,635
    
    
    
    731
    
    
    
    3.31
    
    
    
    34,068
    
    
    
    360
    
    
    
    4.29Tax-exempt
    
    
    24,889
    
    
    
    458
    
    
    
    7.46
    
    
    
    44,051
    
    
    
    814
    
    
    
    7.49Federal funds sold
    
    
    29,093
    
    
    
    8
    
    
    
    0.11
    
    
    
    833
    
    
    
    1
    
    
    
    0.49Total earning assets
    
    
    617,917
    
    
    
    7,626
    
    
    
    5.01
    %
    
    
    595,441
    
    
    
    8,632
    
    
    
    5.88
    %Less: allowance for loan losses
    
    
    16,821
    
    
    
    
    
    
    
    
    
    
    
    5,503Other assets
    
    
    46,165
    
    
    
    
    
    
    
    
    
    
    
    33,413Total assets
    
    $
    647,261
    
    
    
    
    
    
    
    
    
    
    $
    623,351LIABILITIES AND STOCKHOLDERS EQUITY:Interest-bearing liabilities:Money market accounts
    
    $
    36,972
    
    
    
    91
    
    
    
    1.00
    %
    
    $
    28,352
    
    
    
    58
    
    
    
    0.83
    %NOW accounts
    
    
    99,544
    
    
    
    382
    
    
    
    1.56
    
    
    
    76,743
    
    
    
    306
    
    
    
    1.62Savings accounts
    
    
    108,154
    
    
    
    124
    
    
    
    0.46
    
    
    
    100,659
    
    
    
    122
    
    
    
    0.49Time deposits less than $100
    
    
    160,570
    
    
    
    1,231
    
    
    
    3.11
    
    
    
    168,255
    
    
    
    1,445
    
    
    
    3.48Time deposits $100 or more
    
    
    92,472
    
    
    
    605
    
    
    
    2.65
    
    
    
    75,233
    
    
    
    702
    
    
    
    3.78Short-term borrowings
    
    
    33
    
    
    
    
    
    
    
    0.63
    
    
    
    31,773
    
    
    
    56
    
    
    
    0.71Long-term debt
    
    
    8,000
    
    
    
    160
    
    
    
    8.11Total interest-bearing liabilities
    
    
    505,745
    
    
    
    2,593
    
    
    
    2.08
    %
    
    
    481,015
    
    
    
    2,689
    
    
    
    2.27
    %Noninterest-bearing deposits
    
    
    86,711
    
    
    
    
    
    
    
    
    
    
    
    79,997Other liabilities
    
    
    3,881
    
    
    
    
    
    
    
    
    
    
    
    3,821Stockholders equity
    
    
    50,924
    
    
    
    
    
    
    
    
    
    
    
    58,518Total liabilities and stockholders equity
    
    $
    647,261
    
    
    
    
    
    
    
    
    
    
    $
    623,351Net interest income/spread
    
    
    
    
    
    $
    5,033
    
    
    
    2.93
    %
    
    
    
    
    
    $
    5,943
    
    
    
    3.61
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.30
    %
    
    
    
    
    
    
    
    
    
    
    4.05
    %Tax equivalent adjustments:Loans
    
    
    
    
    
    $
    166
    
    
    
    
    
    
    
    
    
    
    $
    343Investments
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    277Total adjustments
    
    
    
    
    
    $
    322
    
    
    
    
    
    
    
    
    
    
    $
    620
 Note:
    
    Average balances were calculated using average daily balances. Interest income on loans
include fees of $167 in 2010 and $206 in 2009. Available-for-sale securities, included in
investment securities, are stated at amortized cost with the related average unrealized
holding gains of $1,210 and $2,531 for the first quarter of 2010 and 2009 included in other
assets. Tax-equivalent adjustments were calculated using the prevailing statutory tax rate of
34.0 percent.  50




---



##### 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:
   51




---



##### Table of Contents



Comm Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)
   Noninterest expenses
 Three Months EndedMarch 31,2010
    
    
    2009Salaries and employee benefits expense:Salaries and payroll taxes
    
    $
    1,728
    
    
    $
    1,694Employee benefits
    
    
    459
    
    
    
    446Salaries and employee benefits expense
    
    
    2,187
    
    
    
    2,140Net occupancy and equipment expense:Net occupancy expense
    
    
    330
    
    
    
    354Equipment expense
    
    
    273
    
    
    
    321Net occupancy and equipment expense
    
    
    603
    
    
    
    675Other expenses:Marketing expense
    
    
    96
    
    
    
    186Other taxes
    
    
    161
    
    
    
    186Stationery and supplies
    
    
    43
    
    
    
    69Contractual services
    
    
    493
    
    
    
    537Insurance including FDIC assessment
    
    
    360
    
    
    
    170Other
    
    
    411
    
    
    
    385Other expenses
    
    
    1,564
    
    
    
    1,533Total noninterest expense
    
    $
    4,354
    
    
    $
    4,348
  52




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Comm Bancorp, Inc.
CONTROLS AND PROCEDURES
 
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
     55




---



##### Table of Contents



Comm Bancorp, Inc.
CONTROLS AND PROCEDURES (CONTINUED)
 Form 10-K/A Form 10-Q
 Changes in Internal Control over Financial Reporting
  Remediation Steps to Address Material Weakness
   56




---



##### 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




---



##### Table of Contents



COMM BANCORP, INC.
FORM 10-Q
 
 SIGNATURE PAGE
  Registrant, Comm Bancorp, Inc.Date:  May 17, 2010
    /s/ William F. Farber, Sr.William F. Farber, Sr.President and Chief Executive Officer
Chairman of the Board/Director
(Principal Executive Officer)Date: May 17, 2010
    /s/ Scott A. SeasockScott A. SeasockExecutive Vice President and
Chief Financial Officer
(Principal Financial Officer)Date: May 17, 2010
    /s/ Stephanie A. WestingtonStephanie A. Westington, CPAVice President of Finance
(Principal Accounting Officer)  58




---



##### 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