CLARKS SUMMIT, Pa., Oct. 15 /PRNewswire-FirstCall/ -- Comm Bancorp, Inc. (Nasdaq: CCBP) today reported third quarter 2008 earnings of $1,475 thousand or $0.84 per share. Year-to-date earnings totaled $4,700 thousand or $2.68 per share. For 2007, comparable earnings were $1,815 thousand or $1.03 per share for the third quarter and $5,200 thousand or $2.90 per share year-to-date.

For the three months and nine months ended September 30, return on average assets was 1.00% and 1.10%, respectively, in 2008, compared to 1.30% and 1.25% for the comparable 2007 periods. Return on average stockholders' equity was 10.31% and 11.17%, respectively, for the third quarter and year-to-date 2008, compared to 13.73% and 13.08% for the same periods of 2007.

'The downturn in the economic cycle and current financial crisis adversely effected our commercial customer base and has had a corresponding negative impact on our profitability during the first nine months of 2008,' stated William F. Farber, Sr., President and Chief Executive Officer. 'We experienced increases in net charge-off levels and a reduction in our tax-equivalent net interest margin primarily due to an increase in loans placed on nonaccrual status. Despite these circumstances, our capital position improved in comparison to last year and significantly exceeds regulatory standards for well capitalized institutions,' continued Farber. 'I am confident that our strong capital base, favorable liquidity position and prudent management provide the structure we need to weather the current financial storm,' concluded Farber.

    HIGHLIGHTS
    -- Year-to-date noninterest revenue improved 10.6%.
    -- Deposits grew 8.6% over prior year.
    -- Leverage ratio improved to 9.81% at the end of the third quarter of
       2008 from 9.34% one year ago.

INCOME STATEMENT REVIEW

Changes in the rates and volumes of earning assets and interest-bearing liabilities for the nine months ended September 30, 2008, resulted in a negligible increase of $17 thousand in tax-equivalent net interest income. A $1,450 thousand decrease in interest expense slightly more than offset a decline of $1,433 thousand in tax-equivalent interest revenue. The decrease in interest expense resulted primarily from a 51 basis point reduction in our cost of funds, as we experienced significant reductions in the rates paid for all interest-bearing liability categories. Average interest-bearing liabilities grew $6.6 million, the effect of which partially offset the reduction in interest expense resulting from the decline in rates. The decline in interest revenue resulted primarily from a 49 basis point decrease in the tax-equivalent yield on earning assets to 6.55% for the nine months ended September 30, 2008, from 7.04% for the same nine 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 $38.3 million or 52.4% comparing the nine months ended September 30, 2008 and 2007. These funds were redirected into loan products bearing higher interest rates. As a result, loans, net of unearned income, grew $39.1 million. Our tax-equivalent net interest margin for the nine months ended September 30, contracted 8 basis points to 4.21% in 2008 compared to 4.29% in 2007. Comparing the second and third quarters of 2008, our net interest margin decreased 25 basis points to 4.06% from 4.31%, respectively.

For the three months and nine months ended September 30, 2008, the provision for loan losses totaled $400 thousand and $1,013 thousand. For the respective periods of 2007, the provision for loan losses amounted to $75 thousand and $300 thousand. The increase in the provision from 2007 was due to increases in both nonperforming loans and net charge-offs.

Noninterest revenue for the third quarter rose $41 thousand or 4.6% to $930 thousand in 2008 from $889 thousand in 2007. Despite the housing market debacle, mortgage banking income increased $22 thousand or 22.4%. Service charges, fees and commissions increased $19 thousand. For the nine months ended September 30, 2008, noninterest revenue totaled $2,933 thousand, an increase of $282 thousand or 10.6% from $2,651 thousand for the same nine months of 2007. Revenue received from our Trust and Wealth Management Division primarily accounted for the $109 thousand or 4.6% rise in service charges, fees and commissions. In addition, we experienced a $173 thousand or 63.8% increase in mortgage banking income.

For the third quarter, noninterest expense increased $162 thousand or 4.1% to $4,083 thousand in 2008 from $3,921 thousand in 2007. Payroll-related expenses rose $111 thousand or 5.4% as a result of additional staffing in the Private Banking and Trust and Wealth Management Divisions, annual merit increases and employee benefit costs. In addition, we experienced a $25 thousand or 4.5% 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 nine months ended September 30, 2008, noninterest expense increased $625 thousand or 5.4%.

BALANCE SHEET REVIEW

Total assets increased $47.1 million to $607.4 million at September 30, 2008, from $560.3 million at September 30, 2007. The balance sheet growth was driven by an increase in total deposits of $43.5 million or 8.6% to $547.6 million at the close of the third quarter of 2008, from $504.1 million one year ago. Reduced tolerance for risk due to the declining stock market, coupled with our new service offering, CB&T Direct(SM), and promotional certificate of deposit offerings impacted our deposit gathering. Loans, net of unearned income, rose $23.3 million to $493.9 million at September 30, 2008, from $470.6 million at September 30, 2007. Excess deposits not used to fund loans were directed into our investment portfolio. Available-for-sale investment securities increased $29.6 million to $76.7 million from $47.1 million comparing September 30, 2008 and 2007.

Stockholders' equity equaled $56.6 million or $32.45 per share at September 30, 2008, and $53.1 million or $30.24 per share at September 30, 2007. Our Leverage ratio was 9.81% at the close of the third quarter of 2008, an improvement compared to 9.34% one year earlier. The Leverage ratio, as well as all of our capital ratios significantly exceeded regulatory standards for well capitalized institutions. Dividends declared were $0.27 per share for the third quarter and $0.81 per share year-to-date in 2008. Accumulated other comprehensive income decreased $676 thousand from year-end 2007, which resulted directly from a decline in the market value of available-for-sale investment securities.

Nonperforming assets equaled $18.2 million or 3.69% of loans, net of unearned income and foreclosed assets at September 30, 2008, compared to $7.9 million or 1.67% 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.