Comm Bancorp, Inc. Reports Third Quarter 2010 Earnings

Oct 21, 2010, 12:20 ET from Comm Bancorp, Inc.

CLARKS SUMMIT, Pa., Oct. 21 /PRNewswire-FirstCall/ -- Comm Bancorp, Inc. (Nasdaq: CCBP) today reported third quarter 2010 earnings of $1,000 thousand or $0.58 per share compared to a net loss of $3,375 thousand or $1.95 per share for the third quarter of 2009. Year-to-date earnings totaled $3,340 thousand or $1.94 per share in 2010 compared to a net loss of $385 thousand or $0.22 per share in 2009. The earnings improvement resulted primarily from reductions in the provision for loan losses and noninterest expense, which were partially offset by lower net interest income and noninterest income.

Return on average assets was 0.62% for the quarter and 0.69% for the nine months ended September 30, 2010, compared to (2.19)% and (0.08)% for the respective 2009 periods. Return on average stockholders' equity was 7.32% and 8.54%, respectively, for the third quarter and year-to-date 2010, compared to (22.63)% and (0.87)% for the same periods of 2009.

INCOME STATEMENT REVIEW

Tax-equivalent net interest income for the nine months ended September 30, 2010, totaled $14,841 thousand, a decrease of $2,551 thousand or 14.7% from $17,392 thousand for the same period of 2009. Despite an increase of $20.6 million in average earning assets, tax-equivalent interest income for the nine months ended September 30, decreased $2,812 thousand to $22,169 thousand in 2010, from $24,981 thousand in 2009. The decline in tax-equivalent interest income was due, for the most part, to a $46.5 million or 9.1% reduction in average loans.  Average tax-exempt loans decreased $34.0 million, while taxable loans declined $12.5 million. With regard to tax-exempt loans, several large tax anticipation notes of local municipalities, which were outstanding last year, matured at the end of 2009. As part of our tax planning strategy for 2010, we chose not to actively compete for these types of loans. The maturities and repayments received from the loan portfolio were reinvested in lower-yielding assets, which contributed to an 81 basis point decrease in the tax-equivalent yield on earning assets to 4.86% in 2010 from 5.67% in 2009. Slightly mitigating the reduction in interest income was a $261 thousand decrease in interest expense. Our cost of funds decreased 19 basis points to 1.96% for the nine months ended September 30, 2010, from 2.15% for the same period last year. The cost of funds was affected primarily by a 46 basis point decrease in the average rate paid for total time deposits. Partially offsetting the positive effect from the reduction in funding costs was growth in average interest-bearing liabilities of $27.5 million or 5.8% to $499.7 million for the nine months ended September 30, 2010, from $472.2 million for the same nine months of 2009. Year-to-date, the tax-equivalent net interest margin contracted 70 basis points to 3.25% in 2010 compared to 3.95% in 2009.

For the three and nine months ended September 30, 2010, the provision for loan losses amounted to $300 thousand and $1,600 thousand, compared to $8,670 thousand and $9,760 thousand for the respective periods of 2009. The provision for loan losses in 2009 reflected the effect of collateral valuation revisions to certain large commercial real estate loans, coupled with a change in the methodology for estimating the allowance for loan losses. With regard to collateral valuation revisions, independent appraisals for these commercial real estate loans indicated significant market devaluations brought on by the deterioration in the local economy at that time. In addition, in the third quarter of 2009, management revised its methodology for estimating losses in the remainder of the loan portfolio by shortening the number of periods considered for estimating loss factors in order to reflect rapidly changing market conditions.

Noninterest income totaled $3,443 thousand for the nine months ended September 30, 2010, a decrease of $1,973 thousand from $5,416 thousand for the same nine months of 2009. Included in noninterest revenue in 2009 was a net gain of $294 thousand from the disposition of our former Tunhannock and Eaton Township, Pennsylvania branch offices. For the nine months ended September 30, 2010, we recorded gains on the sale of available-for-sale investment securities of $361 thousand, a decrease of $1,138 thousand from gains of $1,499 thousand recorded in 2009. Activity in our secondary mortgage banking division provided income of $900 thousand in 2010 and $1,179 thousand in 2009. Service charges, fees and commissions decreased $262 thousand to $2,182 thousand in 2010 from $2,444 thousand in 2009. For the third quarter, noninterest income decreased $1,404 thousand, which reflected reductions in service charges, fees and commissions and net gains on the sale of available-for-sale investment securities, partially offset by an increase in mortgage banking income.

For the nine months ended September 30, 2010, noninterest expense amounted to $13,669 thousand, a decrease of $244 thousand from $13,913 thousand for the same period last year. Decreases of $141 thousand in net occupancy and equipment expense and $332 thousand in other expenses were partially offset by a $229 thousand increase in salaries and employee benefits expense. Reductions in equipment and software depreciation and rental expense contributed to the 7.6% decrease in net occupancy and equipment expense. With regard to the 5.8% decline in other expenses, reductions in marketing-related expenses, directors' fees and deposit insurance were the primary factors influencing the overall reduction. For the third quarter of 2010, noninterest expense increased $391 thousand, which resulted  primarily from increases in legal expenses and expenditures related to other real estate and loan collection.

BALANCE SHEET REVIEW

Total assets equaled $652.8 million at September 30, 2010, an increase of $38.5 million from $614.3 million at September 30, 2009. Subdued loan demand, coupled with stricter underwriting and tax-planning strategies, resulted in a decrease of $59.8 million in loans, net of unearned income, to $447.3 million at the close of the third quarter of 2010 from $507.1 million one year earlier. Total deposits grew to $585.9 million at the end of the third quarter of 2010, from $555.1 million at September 30, 2009.  Noninterest-bearing deposits increased $2.8 million, while interest-bearing deposits rose $28.0 million. Due to the decline in loan volumes, the investment portfolio played a more prominent role in our balance sheet composition. Available-for-sale investment securities increased $70.3 million or 183.4%. Federal funds outstanding at the end of the third quarter amounted to $19.5 million in 2010 and $46.1 million in 2009.

Stockholders' equity grew to $55.2 million or $32.01 per share at September 30, 2010. In comparison, stockholders' equity was $53.6 million or $31.13 per share at June 30, 2010, and $50.3 million or $29.25 per share at December 31, 2009. Net income of $1,000 thousand for the third quarter of 2010 and $3,340 thousand year-to-date was the primary factor leading to the capital improvement. At September 30, 2010, we reported Tier I capital, Total capital and Leverage ratios of 11.0%, 13.9% and 8.2%. In addition, our wholly owned subsidiary, Community Bank and Trust Company reported Tier I capital, Total capital and Leverage ratios of 9.9%, 12.9% and 7.4%. Community Bank and Trust Company continued to exceed the requirements to be categorized as well capitalized under the regulatory framework for prompt corrective action at the close of the third quarter of 2010.

Nonperforming assets decreased $3.6 million or 12.8% to $24.6 million or 5.42% of loans, net of unearned income and foreclosed assets at September 30, 2010, compared to $28.2 million or 5.86% at December 31, 2009. Specifically, the improvement from year end resulted from decreases of $4.2 million in nonaccrual loans, $2.3 million in restructured loans and $0.7 million in loans past due 90 days or more and still accruing. Partially offsetting these decreases was an increase in foreclosed assets of $3.6 million. Loans charged-off, net of recoveries, for the nine months ended September 30, equaled 1.54% of average loans outstanding in 2010 and 0.90% in 2009. The allowance for loan losses equaled $13.7 million or 3.06% of loans, net of unearned income, at September 30, 2010, compared to $17.5 million or 3.65% at December 31, 2009, and $11.6 million or 2.28% at September 30, 2009.

On August 9, 2010, F.N.B. Corporation and Comm Bancorp, Inc. issued a joint press release announcing the signing of a definitive merger agreement pursuant to which F.N.B. Corporation will acquire Comm Bancorp, Inc. A copy of the definitive merger agreement and joint press release have been filed as Exhibits 10.1 and 99.1 to our Current Report on Form 8-K with the Securities and Exchange Commission on August 10, 2010, Commission File Number: 0-17455.

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

Summary Data

Comm Bancorp, Inc.

Five Quarter Trend

(In thousands, except per share data)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

Key performance data:

Per share data:

Net income (loss)

$  0.58

$  0.69

$  0.67

$(2.65)

$(1.95)

Cash dividends declared

$  0.14

$  0.28

Book value

$32.01

$31.13

$29.66

$29.25

$32.30

Tangible book value

$31.81

$30.93

$29.46

$29.05

$32.10

Market value:

High

$39.11

$23.56

$23.53

$34.50

$40.00

Low

$15.36

$17.50

$18.00

$21.80

$31.00

Closing

$39.11

$17.50

$18.50

$21.84

$34.50

Market capitalization

$67,384

$30,151

$31,874

$37,587

$59,286

Common shares outstanding

1,722,923

1,722,923

1,722,923

1,721,007

1,718,439

Selected ratios:

Return on average stockholders' equity

7.32%

9.22%

9.16%

(29.70)%

(22.63)%

Return on average assets

0.62%

0.74%

0.72%

(2.60)%

(2.19)%

Leverage

8.16%

7.99%

7.77%

7.90%

8.68%

Total risk-based capital

13.91%

13.29%

12.94%

12.61%

11.42%

Efficiency

85.27%

79.37%

71.45%

87.17%

60.78%

Nonperforming assets to loans, net, and foreclosed assets

5.42%

5.41%

5.43%

5.86%

5.59%

Net charge-offs to average loans, net

1.34%

0.23%

3.05%

1.38%

2.42%

Allowance for loan losses to loans, net

3.06%

3.21%

3.19%

3.65%

2.28%

Earning assets yield (FTE)

4.76%

4.82%

5.01%

5.01%

5.35%

Cost of funds

1.81%

1.99%

2.08%

2.01%

2.07%

Net interest spread (FTE)

2.95%

2.83%

2.93%

3.00%

3.28%

Net interest margin (FTE)

3.27%

3.19%

3.30%

3.37%

3.70%

Comm Bancorp, Inc.

Consolidated Statements of Income (Loss)

(In thousands, except per share data)

Nine Months Ended

Sept. 30,

Sept. 30,

2010

2009

Interest income:

Interest and fees on loans:

Taxable

$17,689

$19,078

Tax-exempt

959

1,883

Interest and dividends on investment securities available-for-sale:

Taxable

1,842

869

Tax-exempt

759

1,417

Dividends

6

29

Interest on federal funds sold

29

5

Total interest income

21,284

23,281

Interest expense:

Interest on deposits

6,848

7,492

Interest on short-term borrowings

97

Interest on long-term debt

480

Total interest expense

7,328

7,589

Net interest income

13,956

15,692

Provision for loan losses

1,600

9,760

Net interest income after provision for loan losses

12,356

5,932

Noninterest income:

Service charges, fees and commissions

2,182

2,444

Mortgage banking income

900

1,179

Net gain on sale of premises and equipment

294

Net gain on sale of investment securities available-for-sale

361

1,499

Total noninterest income

3,443

5,416

Noninterest expense:

Salaries and employee benefits expense

6,558

6,329

Net occupancy and equipment expense

1,708

1,849

Other expenses

5,403

5,735

Total noninterest expense

13,669

13,913

Income (loss) before income taxes

2,130

(2,565)

Income tax benefit

(1,210)

(2,180)

Net income (loss)

$ 3,340

$   (385)

Other comprehensive income (loss):

Unrealized holding gains on investment securities available-for-sale

$ 2,532

$ 1,473

Reclassification adjustment for gains included in net income

(361)

(1,499)

Income tax expense (benefit) related to other comprehensive income (loss)

738

(9)

Other comprehensive income (loss), net of income taxes

1,433

(17)

Comprehensive income (loss)

$ 4,773

$   (402)

Per share data:

Net income (loss)

$   1.94

$  (0.22)

Cash dividends declared

$    0.84

Average common shares outstanding

1,722,923

1,722,994

Comm Bancorp, Inc.

Consolidated Statements of Income (Loss)

(In thousands, except per share data)

Three months ended

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

Interest income:

Interest and fees on loans:

Taxable

$5,806

$5,942

$5,941

$ 6,169

$ 6,194

Tax-exempt

319

318

322

602

598

Interest and dividends on investment securities available-for-sale:

Taxable

590

523

729

118

205

Tax-exempt

219

238

302

326

407

Dividends

2

2

2

(20)

9

Interest on federal funds sold

12

9

8

14

4

Total interest income

6,948

7,032

7,304

7,209

7,417

Interest expense:

Interest on deposits

2,100

2,315

2,433

2,511

2,433

Interest on short-term borrowings

5

Interest on long-term debt

160

160

160

Total interest expense

2,260

2,475

2,593

2,511

2,438

Net interest income

4,688

4,557

4,711

4,698

4,979

Provision for loan losses

300

300

1,000

7,670

8,670

Net interest income (loss) after provision for loan losses

4,388

4,257

3,711

(2,972)

(3,691)

Noninterest income:

Service charges, fees and commissions

711

730

741

825

848

Mortgage banking income

405

214

281

185

287

Net gain on sale of investment securities available-for-sale

361

91

1,385

Total noninterest income

1,116

944

1,383

1,101

2,520

Noninterest expense:

Salaries and employee benefits expense

2,188

2,183

2,187

2,184

2,025

Net occupancy and equipment expense

558

547

603

589

591

Other expenses

2,203

1,636

1,564

2,282

1,942

Total noninterest expense

4,949

4,366

4,354

5,055

4,558

Income (loss) before income taxes

555

835

740

(6,926)

(5,729)

Provision for income tax benefit

(445)

(355)

(410)

(2,741)

(2,354)

Net income (loss)

$1,000

$1,190

$1,150

$(4,185)

$(3,375)

Other comprehensive income (loss):

Unrealized holding gains (losses) on investment securities available-for-sale

$     777

$2,030

$  (275)

$(1,174)

$ 1,118

Reclassification adjustment for gains included in net income

(361)

(91)

(1,385)

Income tax expense (benefit) related to other comprehensive income (loss)

264

690

(216)

(430)

(91)

Other comprehensive income (loss), net of income taxes

513

1,340

(420)

(835)

(176)

Comprehensive income (loss)

$1,513

$2,530

$   730

$(5,020)

$(3,551)

Per share data:

Net income (loss)

$  0.58

$  0.69

$  0.67

$  (2.43)

$ (1.95)

Cash dividends declared

$   0.14

$   0.28

Average common shares outstanding

1,722,923

1,722,923

1,722,923

1,721,007

1,718,439

Comm Bancorp, Inc.

Details of Net Interest and Net Interest Margin

(In thousands, fully taxable equivalent basis)

Three months ended

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

Net interest income:

Interest income

Loans, net:

Taxable

$5,806

$5,942

$5,941

$6,169

$6,194

Tax-exempt

483

482

488

912

906

Total loans, net

6,289

6,424

6,429

7,081

7,100

Investments:

Taxable

592

525

731

98

214

Tax-exempt

332

360

458

494

616

Total investments

924

885

1,189

592

830

Federal funds sold

12

9

8

14

4

Total interest income

7,225

7,318

7,626

7,687

7,934

Interest expense:

Deposits

2,100

2,315

2,433

2,511

2,433

Borrowed funds

160

160

160

5

Total interest expense

2,260

2,475

2,593

2,511

2,438

Net interest income

$4,965

$4,843

$5,033

$5,176

$5,496

Loans, net:

Taxable

5.38%

5.48%

5.44%

5.46%

5.45%

Tax-exempt

6.07%

6.23%

6.29%

5.96%

5.89%

Total loans, net

5.43%

5.53%

5.50%

5.52%

5.50%

Investments:

Taxable

2.62%

2.23%

3.31%

1.80%

3.10%

Tax-exempt

7.28%

7.49%

7.46%

7.33%

7.07%

Total investments

3.40%

3.13%

4.21%

4.86%

5.32%

Federal funds sold

0.14%

0.12%

0.11%

0.11%

0.11%

Total earning assets

4.76%

4.82%

5.01%

5.01%

5.35%

Interest expense:

Deposits

1.71%

1.89%

1.98%

2.01%

2.08%

Borrowed funds

8.00%

8.00%

8.00%

0.67%

Total interest-bearing liabilities

1.81%

1.99%

2.08%

2.01%

2.07%

Net interest spread

2.95%

2.83%

2.93%

3.00%

3.28%

Net interest margin

3.27%

3.19%

3.30%

3.37%

3.70%

Comm Bancorp, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

At period end

2010

2010

2010

2009

2009

Assets:

Cash and due from banks

$   52,658

$   10,050

$   8,798

$   23,978

$   8,728

Federal funds sold

19,501

31,700

33,800

25,300

46,100

Investment securities available-for-sale

108,555

112,851

116,593

108,005

38,302

Loans held for sale, net

625

110

811

2,016

Loans, net of unearned income

447,282

465,143

466,296

476,944

507,094

Less: allowance for loan losses

13,669

14,928

14,891

17,462

11,566

Net loans

433,613

450,215

451,405

459,482

495,528

Premises and equipment, net

11,300

11,425

11,480

11,616

11,631

Accrued interest receivable

2,023

1,962

2,213

2,122

2,597

Other assets

24,502

23,452

23,512

19,634

11,386

Total assets

$652,777

$641,765

$648,612

$652,153

$614,272

Liabilities:

Deposits:

Noninterest-bearing

$  82,407

$  87,348

$  90,999

$  88,335

$  79,591

Interest-bearing

503,536

489,370

495,361

502,448

475,509

Total deposits

585,943

576,718

586,360

590,783

555,100

Short-term borrowings

Long-term debt

8,000

8,000

8,000

8,000

Accrued interest payable

1,110

1,284

1,623

1,296

1,185

Other liabilities

2,572

2,124

1,520

1,740

2,478

Total liabilities

597,625

588,126

597,503

601,819

558,763

Stockholders' equity:

Common stock, par value $0.33 authorized

12,000,000, shares issued and outstanding 1,722,923;

1,722,923; 1,722,923; 1,721,007; 1,718,439

569

569

569

568

567

Capital surplus

8,010

8,010

8,010

7,966

7,881

Retained earnings

44,321

43,321

42,131

40,981

45,407

Accumulated other comprehensive income

2,252

1,739

399

819

1,654

Total stockholders' equity

55,152

53,639

51,109

50,334

55,509

     Total liabilities and stockholders' equity

$652,777

$641,765

$648,612

$652,153

$614,272

Comm Bancorp, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

Average quarterly balances

2010

2010

2010

2009

2009

Assets:

Loans, net:

Taxable

$428,327

$435,316

$442,821

$448,359

$451,025

Tax-exempt

31,547

30,960

31,479

60,710

61,000

Total loans, net

459,874

466,276

474,300

509,069

512,025

Investments:

Taxable

89,740

94,305

89,635

21,598

27,354

Tax-exempt

18,084

19,269

24,889

26,740

34,562

Total investments

107,824

113,574

114,524

48,338

61,916

Federal funds sold

34,910

28,930

29,093

51,706

14,709

Total earning assets

602,608

608,780

617,917

609,113

588,650

Other assets

37,023

33,439

29,344

29,950

22,649

Total assets

$639,631

$642,219

$647,261

$639,063

$611,299

Liabilities and stockholders' equity:

Deposits:

Interest-bearing

$487,033

$490,502

$497,712

$495,714

$464,411

Noninterest-bearing

87,204

89,285

86,711

84,139

81,047

Total deposits

574,237

579,787

584,423

579,853

545,458

Short-term borrowings

1

33

2,970

Long-term debt

8,000

8,000

8,000

87

Other liabilities

3,191

2,646

3,881

3,223

3,710

Total liabilities

585,428

590,434

596,337

583,163

552,138

Stockholders' equity

54,203

51,785

50,924

55,900

59,161

Total liabilities and stockholders' equity

$639,631

$642,219

$647,261

$639,063

$611,299

Comm Bancorp, Inc.

Asset Quality Data

(In thousands)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

At quarter end

2010

2010

2010

2009

2009

Nonperforming assets:

Nonaccrual loans

$14,875

$16,678

$17,302

$19,015

$20,567

Restructured loans

1,969

1,975

1,980

4,302

4,773

Accruing loans past due 90 days or more

897

553

392

1,634

1,177

Foreclosed assets

6,853

6,322

5,979

3,209

1,932

Total nonperforming assets

$24,594

$25,528

$25,653

$28,160

$28,449

Three months ended

Allowance for loan losses:

Beginning balance

$14,928

$14,891

$17,462

$11,566

$ 6,019

Charge-offs

1,693

437

3,591

1,814

3,133

Recoveries

134

174

20

40

10

Provision for loan losses

300

300

1,000

7,670

8,670

Ending balance

$13,669

$14,928

$14,891

$17,462

$11,566

Except for the historical information contained, herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties in the banking industry and overall economy. Such risks and uncertainties are detailed in the Company's Securities and Exchange Commission reports, including the Annual Report on Form 10-K and quarterly reports on Form 10-Q.

SOURCE Comm Bancorp, Inc.



RELATED LINKS

http://www.combk.com