CLARKS SUMMIT, Pa., July 16 /PRNewswire-FirstCall/ -- Comm Bancorp, Inc. (Nasdaq: CCBP) today reported second quarter 2008 earnings of $1,660 thousand or $0.95 per share. Year-to-date earnings totaled $3,225 thousand or $1.84 per share. Comparable earnings for 2007 were $1,880 thousand or $1.06 per share for the second quarter and $3,385 thousand or $1.87 per share year-to-date.

Return on average assets was 1.19% for the second quarter and 1.16% for the first half of 2008, compared to 1.35% and 1.23% for the respective 2007 periods. Return on average stockholders' equity was 11.85% and 11.62%, respectively, for the second quarter and year-to-date 2008, compared to 14.46% and 12.75% for the same periods of 2007.

'Our net income was impacted by increases in noninterest expense and the provision for loan losses, partially offset by increases in noninterest income,' stated William F. Farber, Sr., President and Chief Executive Officer. 'Despite the slight decrease in earnings from last year, I am pleased with our Company's performance during the first half of 2008 given the downturn in economic conditions,' continued Farber. 'Our net interest margin improved over the prior year. In addition, we were able to increase our noninterest revenue by nearly 14%. For the second half of 2008, we will continue to focus our efforts on developing new sources of noninterest revenue and improving our operating efficiency,' concluded Farber.

INCOME STATEMENT REVIEW

For the six months ended June 30, tax-equivalent net interest income increased $180 thousand or 1.6% to $11,345 thousand in 2008 from $11,165 thousand in 2007. A $900 thousand or 12.3% decrease in interest expense was almost entirely offset by a $720 thousand or 3.9% reduction in tax-equivalent interest revenue. With regard to interest expense,, our cost of funds decreased 44 basis points to 3.04% for the first half of 2008 from 3.48% for the same period of last year. We experienced significant reductions in the rates paid for all interest-bearing liability categories. Growth in average interest-bearing liabilities was negligible, which had little effect on interest expense. The decline in interest revenue resulted primarily from a 31 basis point decrease in the tax-equivalent yield on earning assets to 6.72% for the six months ended June 30, 2008, from 7.03% for the same six months of 2007. Partially offsetting the decline in the tax-equivalent yield on earning assets was the change in the composition of our earning assets. Average investments decreased $44.1 million or 55.2% comparing the first six months of 2008 and 2007. These funds were redirected into loan products bearing higher interest rates. Our tax-equivalent net interest margin for the six months ended June 30, improved 5 basis points to 4.29% in 2008 compared to 4.24% in 2007. In addition, our net interest margin of 4.31% for the second quarter of 2008 improved 5 basis points in comparison to 4.26% for the second quarter of 2007 and improved 3 basis points in comparison to 4.28% for the previous quarter.

For the three months and six months ended June 30, 2008, the provision for loan losses totaled $283 thousand and $613 thousand. There was no provision for loan losses recorded during the second quarter of 2007. The provision for loan losses was $225 thousand for the six months ended June 30, 2007.

Noninterest revenue for the second quarter rose $53 thousand or 5.4% to $1,035 thousand in 2008 from $982 thousand in 2007. A $56 thousand or 57.1% increase in mortgage banking income was the primary factor contributing to the second quarter increase. For the six months ended June 30, 2008, noninterest revenue totaled $2,003 thousand, an increase of $241 thousand or 13.7% from $1,762 thousand for the same six months of 2007. Commissions received from our Trust and Wealth Management Division primarily accounted for the $90 thousand or 5.7% rise in service charges, fees and commissions. In addition, we experienced a $151 thousand or 87.3% increase in mortgage banking income.

For the second quarter, noninterest expense increased $217 thousand or 5.7% to $4,032 thousand in 2008 from $3,815 thousand in 2007. Payroll-related expenses rose $156 thousand or 8.0% as a result of additional staffing in the Private Banking and Trust and Wealth Management Divisions, annual merit increases and higher health insurance and pension costs. In addition, we experienced a $42 thousand or 7.0% increase in occupancy and equipment expense which resulted from depreciation and maintenance costs associated with our new service offering, CB&T Direct(SM). For the six months ended June 30, 2008, noninterest expense increased $463 thousand or 6.1%.

BALANCE SHEET REVIEW

Total assets equaled $561.9 million at June 30, 2008, an increase of $7.2 million compared to $554.7 million at June 30, 2007. Strong loan demand resulted in an increase of $36.1 million or 7.9% in loans, net of unearned income, to $491.1 million at the close of the second quarter of 2008 from $455.0 million one year earlier. Repayments from the investment portfolio were used to fund loan demand, which resulted in a corresponding decrease of $35.7 million in investment securities available-for-sale. Competition for deposits within our market area was strong. As a result, total deposits increased only $8.0 million or 1.6% to $502.5 million from $494.5 million comparing June 30, 2008 and 2007. There were no short-term borrowings outstanding at June 30, 2008. Short-term borrowings outstanding at June 30, 2007 amounted to $5.7 million.

Stockholders' equity equaled $56.2 million or $32.14 per share at June 30, 2008, and $51.4 million or $29.30 per share at June 30, 2007. Common stock repurchases totaled $512 thousand for the six months ended June 30, 2008. Dividends declared were $0.27 per share and $0.54 per share, for the second quarter and first half of 2008. Accumulated other comprehensive income decreased $223 thousand from year-end 2007, which resulted directly from a decline in the market value of available-for-sale investment securities.

Nonperforming assets equaled $13.9 million or 2.83% of loans, net of unearned income and foreclosed assets at June 30, 2008, compared to $4.6 million or 1.01% one year earlier. The weakening in asset quality resulted from increases in nonaccrual loans and accruing loans past due 90 days or more, partially offset by a reduction in foreclosed assets. The provision for loan losses increased 172.4% comparing the first six months of 2008 and 2007 corresponding with the increase in the volume of nonperforming assets. Loans charged-off, net of recoveries, increased $37 thousand or 37.4% to $136 thousand for the six months ended June 30, 2008, from $99 thousand for the same period last year.