CLARKS SUMMIT, Pa., Oct. 30 /PRNewswire-FirstCall/ -- Comm Bancorp, Inc. today reported a net loss of $385 thousand or $0.22 per share for the nine months ended September 30, 2009, compared to net income of $4,700 thousand or $2.68 per share for the same period of 2008. The net loss was $3,375 thousand or $1.95 per share in the third quarter of 2009 compared to net income of $1,475 thousand or $0.84 per share for the same quarter of 2008. The net losses reported for nine months and quarter ended September 30, 2009, were primarily a result of recognizing a provision for loan losses of $8.7 million in the third quarter of 2009.
Return on average assets was (2.19)% for the third quarter and (0.08)% for the nine months ended September 30, 2009, compared to 1.00% and 1.10% for the respective 2008 periods. Return on average stockholders' equity was (22.63)% and (0.87)%, respectively, for the third quarter and year-to-date 2009, compared to 10.31% and 11.17% for the same periods of 2008.
"Regulatory oversight of banks has intensified primarily as a result of the recent escalation of bank failures reported in 2009," stated William F. Farber, Sr., President and Chief Executive Officer. "Regulators are being extremely critical in their evaluations of capital adequacy, and in particular, the reserves banks set aside for potential loan losses. As a result of this emphasis, coupled with the recent deterioration evidenced in the commercial and construction sectors of our loan portfolio and the continuation of the downturn in local economic conditions, we set aside additional reserves through recognizing a provision for loan losses of $8.7 million in the third quarter of 2009. The rapid devaluation of collateral values used to measure impairment on specifically identified loans, coupled with a shortening of the loss experience period utilized to estimate losses in the remainder of the portfolio, caused the large provision. With this provision, we believe the allowance for loan losses is adequate to absorb probable credit losses related to specifically identified criticized loans as well as probable incurred losses inherent in the remainder of the loan portfolio as of September 30, 2009. Our institution's challenges are specifically limited to certain sectors of the loan portfolio, accounting for only a portion of the overall balance sheet, as we did not experience the recent losses recognized by many banks in their investment portfolios," continued Farber. "Despite this significant charge, the Company's regulatory capital ratios continued to exceed the levels required to be considered "well capitalized" under applicable regulatory guidelines. Going forward, we will focus our efforts on remedying the status of our nonperforming assets, while continuing to meet the banking needs of our customers. Our goal is to return to profitability as soon as we are able," concluded Farber.
INCOME STATEMENT REVIEW
For the nine months ended September 30, tax-equivalent net interest income increased $352 thousand or 2.1% to $17,392 thousand in 2009 from $17,040 thousand in 2008. A $1,858 thousand or 19.7% decrease in interest expense was partially offset by a $1,506 thousand or 5.7% reduction in tax-equivalent interest revenue. The reduction in interest expense was a result of a decrease in our cost of funds of 79 basis points to 2.15% for the nine months ended September 30, 2009, from 2.94% for the same nine months of last year. We experienced significant reductions in the rates paid for all interest-bearing liability categories. Average interest-bearing liabilities grew $42.9 million or 10.0%, which partially mitigated the positive influence of the reduction in funding costs. The decline in interest revenue resulted primarily from an 88 basis point decrease in the tax-equivalent yield on earning assets to 5.67% for the nine months ended September 30, 2009, from 6.55% for the same period of 2008. Specifically, the tax-equivalent yield on the loan portfolio, which decreased 93 basis points to 5.71% in 2009 from 6.64% in 2008, had the greatest impact on interest revenue. Partially offsetting the decline in the tax-equivalent yield on earning assets was growth in average earning assets of $48.6 million or 9.0%. Average investments increased $35.8 million comparing the nine months ended September 30, 2009 and 2008. In addition, the average loan portfolio grew $19.2 million to $513.3 million in 2009 from $494.1 million in 2008. Our tax-equivalent net interest margin for the nine months ended September 30, contracted 26 basis points to 3.95% in 2009 compared to 4.21% in 2008.
The provision for loan losses equaled $8,670 thousand for the third quarter of 2009, compared to $400 thousand for the same quarter of 2008. The year-to-date provision for loan losses totaled $9,760 thousand in 2009, an increase of $8,747 thousand or 863.5% from $1,013 thousand in 2008. The large change in the provision for loan losses in 2009 reflects the effect of obtaining revised collateral valuations on certain large commercial real estate loans from independent appraisals which indicated significant market devaluations brought on by the rapid deterioration in the local economy. In addition, 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 the current market conditions. Management believes that recent historical data is a better basis for determining loss factors given the rapid economic decline in our market area.
Noninterest income for the third quarter rose $1,590 thousand to $2,520 thousand in 2009 from $930 thousand in 2008. Included in noninterest income in the third quarter of 2009 were net gains on the sale of available-for-sale investment securities of $1,385 thousand. Adjusting for these gains, noninterest income increased $205 thousand or 22.0%. Mortgage banking income increased $167 thousand, while service charges, fees and commissions rose $38 thousand. For the nine months ended September 30, 2009, noninterest income totaled $5,416 thousand, an increase of $2,483 thousand or 84.7% from $2,933 thousand for the same period last year. Included in year-to-date noninterest income in 2009 was a net gain of $294 thousand from the disposition of the former Tunkhannock and Eaton Township, Pennsylvania branch offices. In addition, noninterest income in 2009 included $1,499 thousand in net gains from the sale of available-for-sale investment securities. Due to the significantly lower mortgage rates, mortgage banking income increased $735 thousand comparing the nine months ended September 30, 2009 and 2008. Service charges, fees and commissions decreased $45 thousand or 1.8% to $2,444 thousand in 2009 from $2,489 thousand in 2008.
For the third quarter, noninterest expense increased $475 thousand or 11.6% to $4,558 thousand in 2009 from $4,083 thousand in 2008. The increase resulted primarily from a $611 thousand or 45.9% increase in other expenses. This increase was due largely to an increase in the cost of deposit insurance imposed by the FDIC on all insured-depository institutions to help mitigate the effects of recent bank failures on the Deposit Insurance Fund. Salaries and employee benefits expense decreased $144 thousand or 6.6%, while net occupancy and equipment expense increased $8 thousand. For the nine months ended September 30, 2009, noninterest expense increased $1,799 thousand or 14.9%. Other expenses rose $1,901 thousand or 49.6%, which was due primarily to the increase in FDIC insurance. Salaries and employee benefits and net occupancy and equipment expenses decreased $85 thousand and $17 thousand.
BALANCE SHEET REVIEW
Total assets amounted to $614.3 million at September 30, 2009, an increase of $3.5 million compared to $610.8 million at June 30, 2009. Loans, net of unearned income, decreased $3.8 million to $507.1 million at September 30, 2009, from $510.9 million at the end of the previous quarter. Available-for-sale investment securities declined $34.9 million to $38.3 million at the close of the third quarter from $73.2 million at June 30, 2009. Total deposits increased $16.3 million from $538.8 million at June 30, 2009, to $555.1 million at September 30, 2009. Federal funds sold amounted to $46.1 million at September 30, 2009. At June 30, 2009, there were $8.0 million in borrowed funds outstanding at the Federal Home Loan Bank of Pittsburgh.
Stockholders' equity equaled $55.5 million or $32.30 per share at September 30, 2009, compared to $59.5 million or $34.64 per share at the end of the previous quarter. Dividends declared were $0.28 per share and $0.84 per share, for the third quarter and nine months ended September 30, 2009. At September 30, 2009, Community Bank and Trust Company, our wholly-owned subsidiary, reported Tier I, Total and Leverage risked based capital ratios of 9.2%, 10.5% and 7.9%, respectively. As a result, our bank subsidiary continued to exceed the requirements to be categorized as well capitalized under the regulatory framework for prompt corrective action at the end of the third quarter of 2009.
Nonperforming assets equaled $23.7 million or 4.65% of loans, net of unearned income and foreclosed assets at September 30, 2009, compared to $18.2 million or 3.69% one year earlier. Nonperforming assets equaled $23.0 million or 4.49% of loans, net of unearned income and foreclosed assets at June 30, 2009, and $24.2 million or 4.99% at December 31, 2008. The allowance for loan losses equaled $11.6 million or 2.28% of loans, net of unearned income, at September 30, 2009, compared to $4.7 million or 0.95% one year ago. Loans charged-off, net of recoveries, increased $2,503 thousand or 264.6% to $3,449 thousand for the nine months ended September 30, 2009, from $946 thousand for the same period last year.
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.
[TABULAR MATERIAL FOLLOWS] Summary Data Comm Bancorp, Inc. Five Quarter Trend (In thousands, except per share data) Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2009 2009 2009 2008 2008 Key performance data: Per share data: Net income (loss) ($1.95) $0.70 $1.03 $0.58 $0.84 Cash dividends declared $0.28 $0.28 $0.28 $0.27 $0.27 Book value $32.30 $34.64 $34.22 $33.41 $32.45 Tangible book value $32.10 $34.44 $34.02 $33.21 $32.25 Market value: High $40.00 $40.00 $40.99 $42.00 $44.92 Low $31.00 $35.31 $35.04 $35.00 $40.75 Closing $34.50 $40.00 $36.75 $35.01 $42.00 Market capitalization $59,286 $68,651 $63,278 $60,569 $73,299 Common shares outstanding 1,718,439 1,716,263 1,721,845 1,730,062 1,745,220 Selected ratios: Return on average stockholders' equity (22.63)% 8.18% 12.30% 6.96% 10.31% Return on average assets (2.19)% 0.79% 1.15% 0.65% 1.00% Leverage ratio 8.68% 9.25% 9.10% 9.62% 9.81% Total risk- based capital ratio 11.42% 11.97% 11.89% 12.17% 12.00% Efficiency ratio 60.78% 74.60% 63.26% 71.88% 66.31% Nonperforming assets to loans, net, and foreclosed assets 4.65% 4.49% 4.60% 4.99% 3.69% Net charge-offs to average loans, net 2.42% 0.03% 0.23% 0.15% 0.65% Allowance for loan losses to loans, net 2.28% 1.18% 1.09% 1.08% 0.95% Earning assets yield (FTE) 5.35% 5.79% 5.88% 5.74% 6.21% Cost of funds 2.07% 2.11% 2.27% 2.58% 2.74% Net interest spread (FTE) 3.28% 3.68% 3.61% 3.16% 3.47% Net interest margin (FTE) 3.70% 4.09% 4.05% 3.67% 4.06% Comm Bancorp, Inc. Consolidated Statements of Income (In thousands, except per share data) Nine Months Ended Sept. 30, Sept. 30, 2009 2008 Interest income: Interest and fees on loans: Taxable $19,078 $21,979 Tax-exempt 1,883 1,694 Interest and dividends on investment securities available- for-sale: Taxable 869 133 Tax-exempt 1,417 1,072 Dividends 29 39 Interest on federal funds sold 5 145 Total interest income 23,281 25,062 Interest expense: Interest on deposits 7,492 9,269 Interest on short-term borrowings 97 178 Total interest expense 7,589 9,447 Net interest income 15,692 15,615 Provision for loan losses 9,760 1,013 Net interest income after provision for loan losses 5,932 14,602 Noninterest income: Service charges, fees and commissions 2,444 2,489 Mortgage banking income 1,179 444 Net gain on sale of premises and equipment 294 Net gains on sale of investment securities available-for-sale 1,499 - Total noninterest income 5,416 2,933 Noninterest expense: Salaries and employee benefits expense 6,329 6,414 Net occupancy and equipment expense 1,849 1,866 Other expenses 5,735 3,834 Total noninterest expense 13,913 12,114 Income (loss) before income taxes (2,565) 5,421 Provision for income tax expense (benefit) (2,180) 721 Net income (loss) $(385) $4,700 Other comprehensive income (loss): Unrealized holding gains (losses) on investment securities available-for-sale $1,473 $(1,024) Reclassification adjustment for gains included in net income (1,499) - Income tax benefit related to other comprehensive loss (9) (348) Other comprehensive loss, net of income taxes (17) (676) Comprehensive income (loss) $(402) $4,024 Per share data: Net income (loss) $(0.22) $2.68 Cash dividends declared $0.84 $0.81 Average common shares outstanding 1,722,994 1,750,872 Comm Bancorp, Inc. Consolidated Statements of Income (In thousands, except per share data) Three months ended Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2009 2009 2009 2008 2008 Interest income: Interest and fees on loans: Taxable $6,194 $6,436 $6,448 $6,442 $7,137 Tax-exempt 598 619 666 584 559 Interest and dividends on investment securities available-for- sale: Taxable 205 315 349 356 52 Tax-exempt 407 473 537 443 351 Dividends 9 9 11 6 12 Interest on federal funds sold 4 1 8 133 Total interest income 7,417 7,852 8,012 7,839 8,244 Interest expense: Interest on deposits 2,433 2,426 2,633 3,019 3,017 Interest on short- term borrowings 5 36 56 1 Total interest expense 2,438 2,462 2,689 3,020 3,017 Net interest income 4,979 5,390 5,323 4,819 5,227 Provision for loan losses 8,670 520 570 747 400 Net interest income (loss) after provision for loan losses (3,691) 4,870 4,753 4,072 4,827 Noninterest income: Service charges, fees and commissions 848 832 764 868 810 Mortgage banking income 287 490 402 160 120 Net gain on sale of premises and equipment 294 Net gains on sale of investment securities available-for- sale 1,385 114 Total noninterest income 2,520 1,322 1,574 1,028 930 Noninterest expense: Salaries and employee benefits expense 2,025 2,164 2,140 2,117 2,169 Net occupancy and equipment expense 591 583 675 596 583 Other expenses 1,942 2,260 1,533 1,490 1,331 Total noninterest expense 4,558 5,007 4,348 4,203 4,083 Income (loss) before income taxes (5,729) 1,185 1,979 897 1,674 Provision for income tax expense (benefit) (2,354) (30) 204 (103) 199 Net income (loss) $(3,375) $1,215 $1,775 $1,000 $1,475 Other comprehensive income (loss): Unrealized holding gains (losses) on investment securities available-for- sale $1,118 $13 $342 $1,867 $(686) Reclassification adjustment for gains included in net income (1,385) (114) Income tax expense (benefit) related to other comprehensive income (loss) (91) 4 78 635 (233) Other comprehensive income (loss), net of income taxes (176) 9 150 1,232 (453) Comprehensive income (loss) $(3,551) $1,224 $1,925 $2,232 $1,022 Per share data: Net income (loss) $(1.95) $0.70 $1.03 $0.58 $0.84 Cash dividends declared $0.28 $0.28 $0.28 $0.27 $0.27 Average common shares outstanding 1,718,439 1,722,282 1,728,371 1,741,392 1,747,438 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, 2009 2009 2009 2008 2008 Net interest income: Interest income Loans, net: Taxable $6,194 $6,436 $6,448 $6,442 $7,137 Tax-exempt 906 938 1,009 884 847 Total loans, net 7,100 7,374 7,457 7,326 7,984 Investments: Taxable 214 324 360 362 64 Tax-exempt 616 717 814 672 531 Total investments 830 1,041 1,174 1,034 595 Federal funds sold 4 1 8 133 Total interest income 7,934 8,415 8,632 8,368 8,712 Interest expense: Deposits 2,433 2,426 2,633 3,019 3,017 Borrowed funds 5 36 56 1 Total interest expense 2,438 2,462 2,689 3,020 3,017 Net interest income $5,496 $5,953 $5,943 $5,348 $5,695 Loans, net: Taxable 5.45% 5.80% 5.84% 5.78% 6.42% Tax-exempt 5.89% 5.66% 5.97% 6.34% 6.61% Total loans, net 5.50% 5.78% 5.86% 5.84% 6.44% Investments: Taxable 3.10% 3.92% 4.29% 3.84% 5.60% Tax-exempt 7.07% 7.43% 7.49% 7.73% 7.51% Total investments 5.32% 5.81% 6.09% 5.70% 7.25% Federal funds sold 0.11% 0.49% 0.36% 1.64% Total earning assets 5.35% 5.79% 5.88% 5.74% 6.21% Interest expense: Deposits 2.08% 2.18% 2.38% 2.58% 2.74% Borrowed funds 0.67% 0.68% 0.71% 1.01% Total interest- bearing liabilities 2.07% 2.11% 2.27% 2.58% 2.74% Net interest spread 3.28% 3.68% 3.61% 3.16% 3.47% Net interest margin 3.70% 4.09% 4.05% 3.67% 4.06% 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 2009 2009 2009 2008 2008 Assets: Cash and due from banks $8,728 $8,315 $9,441 $8,017 $11,174 Federal funds sold 46,100 12,700 8,000 Investment securities available-for-sale 38,302 73,169 75,249 80,574 76,706 Loans held for sale, net 787 2,243 1,390 1,243 Loans, net of unearned income 507,094 510,870 507,166 485,882 493,948 Less: allowance for loan losses 11,566 6,019 5,531 5,255 4,691 Net loans 495,528 504,851 501,635 480,627 489,257 Premises and equipment, net 11,631 11,709 11,785 11,753 11,345 Accrued interest receivable 2,597 2,526 2,456 2,143 3,072 Other assets 11,386 9,456 8,951 6,837 6,646 Total assets $614,272 $610,813 $611,760 $604,041 $607,443 Liabilities: Deposits: Noninterest-bearing $79,591 $82,002 $77,752 $79,674 $86,417 Interest-bearing 475,509 456,795 443,114 462,617 461,176 Total deposits 555,100 538,797 520,866 542,291 547,593 Borrowed funds 7,950 27,450 Accrued interest payable 1,185 1,696 2,124 1,815 1,446 Other liabilities 2,478 2,912 2,397 2,137 1,779 Total liabilities 558,763 551,355 552,837 546,243 550,818 Stockholders' equity: Common stock, par value $0.33 authorized 12,000,000, shares issued and outstanding 1,718,439; 1,716,263; 1,721,845; 1,730,062; 1,745,220 567 566 568 571 576 Capital surplus 7,881 7,799 7,741 7,694 7,661 Retained earnings 45,407 49,263 48,793 47,862 47,949 Accumulated other comprehensive income 1,654 1,830 1,821 1,671 439 Total stockholders' equity 55,509 59,458 58,923 57,798 56,625 Total liabilities and stockholders' equity $614,272 $610,813 $611,760 $604,041 $607,443 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 2009 2009 2009 2008 2008 Assets: Loans, net: Taxable $451,025 $444,905 $447,922 $443,690 $442,039 Tax-exempt 61,000 66,500 68,567 55,436 50,964 Total loans, net 512,025 511,405 516,489 499,126 493,003 Investments: Taxable 27,354 33,115 34,068 37,514 4,546 Tax-exempt 34,562 38,729 44,051 34,600 28,122 Total investments 61,916 71,844 78,119 72,114 32,668 Federal funds sold 14,709 37 833 8,897 32,297 Total earning assets 588,650 583,286 595,441 580,137 557,968 Other assets 22,649 30,625 27,910 31,815 30,657 Total assets $611,299 $613,911 $623,351 $611,952 $588,625 Liabilities and stockholders' equity: Deposits: Interest-bearing $464,411 $446,992 $449,242 $466,086 $437,595 Noninterest-bearing 81,047 82,221 79,997 85,434 91,084 Total deposits 545,458 529,213 529,239 551,520 528,679 Borrowed funds 2,970 21,359 31,773 393 Other liabilities 3,710 3,743 3,821 2,892 3,012 Total liabilities 552,138 554,315 564,833 554,805 531,691 Stockholders' equity 59,161 59,596 58,518 57,147 56,934 Total liabilities and stockholders' equity $611,299 $613,911 $623,351 $611,952 $588,625 Comm Bancorp, Inc. Asset Quality Data (In thousands) Sept. 30, June 30, March 31, Dec. 31, Sept. 30, At quarter end 2009 2009 2009 2008 2008 Nonperforming assets: Nonaccrual/restructured loans $20,567 $20,166 $20,154 $23,068 $11,155 Accruing loans past due 90 days or more 1,177 1,139 1,402 835 7,085 Foreclosed assets 1,932 1,726 1,854 336 Total nonperforming assets $23,676 $23,031 $23,410 $24,239 $18,240 Three months ended Allowance for loan losses: Beginning balance $6,019 $5,531 $5,255 $4,691 $5,101 Charge-offs 3,133 147 324 196 844 Recoveries 10 115 30 13 34 Provision for loan losses 8,670 520 570 747 400 Ending balance $11,566 $6,019 $5,531 $5,255 $4,691 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.
Comm Bancorp, Inc.
CONTACT: Scott A. Seasock of Comm Bancorp, Inc., +1-570-587-3421, ext.
323
Web Site: http://www.combk.com/
