CLARKS SUMMIT, Pa., Jan. 28 /PRNewswire-FirstCall/ -- Comm Bancorp, Inc. (Nasdaq: CCBP) today reported 2008 earnings of $5.7 million or $3.26 per share, compared to $6.9 million or $3.87 per share for 2007. Fourth quarter earnings totaled $1.0 million or $0.58 per share in 2008 and $1.7 million or $0.97 per share in 2007.

Return on average stockholders' equity and return on average assets were 10.10% and 0.98% for the year ended December 31, 2008, and 12.94% and 1.24% for the same period of 2007. For the fourth quarter, return on average stockholders' equity and return on average assets were 6.96% and 0.65% in 2008 and 12.53% and 1.21% in 2007.

'The reduction in 2008 profitability is a direct result of the surfacing of asset quality weakness in a small number of loans concentrated in the commercial mortgage and land development sectors of the loan portfolio as a result of the downturn in economic conditions,' stated William F. Farber, Sr., President and Chief Executive Officer. 'The adverse impact from these certain larger balance loans does not reflect deterioration in asset quality of the overall loan portfolio. Management is taking a conservative posture on recognizing potential losses on these loans by placing these credits on nonaccrual status and reversing previously recorded income into the current period. We have placed special emphasis on remedying these credits in the near term through ramping up our special assets department,' continued Farber. 'Despite this specifically identified area of weakness, the overall financial condition of the Company continues to be strong as our capital position improved in comparison to last year and significantly exceeds regulatory standards for well capitalized institutions. Due to our strong capital position, our Company did not participate in, nor did we receive any monies from, the Troubled Asset Relief Program under the Emergency Economic Stabilization Act of 2008 enacted by the United States Government. I am confident that our strong capital base, favorable liquidity position and prudent management provide the structure we need to weather any challenges we may face in 2009,' concluded Farber.

HIGHLIGHTS

• Total assets grew 10.0%.
• Deposits grew $50.9 million.
• Key capital adequacy ratio improved to 9.62% compared to 9.54% one year ago.
• Net interest margin continued to exceed 4.0% in 2008.
• Noninterest revenue increased 11.8%.

INCOME STATEMENT REVIEW

For the year ended December 31, 2008, tax-equivalent net interest income decreased $528 thousand or 2.3% to $22.4 million compared to $22.9 million for the same period of 2007. Due to a significant decline in market rates, coupled with higher volumes of nonaccrual loans, earning asset yields declined to a greater extent than the cost of interest bearing liabilities, which resulted in a 15 basis point decline in the net interest spread. Partially mitigating the effect on net interest income from rates, was growth in average earning assets over that of average interest-bearing liabilities. The tax-equivalent yield on earning assets compressed 73 basis points to 6.33% in 2008 from 7.06% in 2007, which resulted in a $4.2 million reduction in tax-equivalent interest revenue. The cost of interest-bearing liabilities declined 58 basis points to 2.84% from 3.42%, which caused interest expense to decrease $2.6 million. Overall, the decline in spread had a negative effect on tax-equivalent net interest income of $1,621 thousand. Average earning assets grew $20.9 million or 4.0%, while average interest-bearing liabilities increased $16.2 million or 3.8%. The changes in the volume of earning assets increased interest revenue $1.7 million, while the growth in interest-bearing liabilities increased interest expense $643 thousand. Overall, the change in volumes resulted in additional tax-equivalent net interest income of $1,093 thousand, which partially offset the effect of the decline in spread. The tax-equivalent net interest margin fell 26 basis points to 4.07% in 2008 from 4.33% in 2007.

For the year and quarter ended December 31, 2008, the provision for loan losses totaled $1,760 thousand and $747 thousand, respectively, compared to $525 thousand and $225 thousand for the same periods of 2007. The amount of the provision charged to operations is a result of Management's application of its quarterly methodology for assessing the adequacy of the allowance for loan losses account. The increase in the provision from 2007 was due to increases in specific reserves required on certain impaired loans as part of Management's analysis.

Noninterest income increased $418 thousand or 11.8% to $3,961 thousand in 2008 from $3,543 thousand in 2007. Despite the nationwide housing market debacle, mortgage banking income increased $229 thousand or 61.1%. Increased revenue from our Trust and Wealth Management Division accounted for the majority of the $189 thousand or 6.0% increase in service charges, fees and commissions. For the fourth quarter of 2008, noninterest revenue totaled $1,028 thousand, an increase of $136 thousand or 15.2% from $892 thousand for the same quarter of 2007. Service charges, fees and commissions rose $80 thousand or 10.2%, while mortgage banking income increased $56 thousand or 53.8%.

Noninterest expense increased $897 thousand or 5.8% to $16,317 thousand in 2008 from $15,420 thousand in 2007. Salaries and employee benefits expense increased $527 thousand or 6.6% as a result of hiring business development personnel, additional staffing in the Trust and Wealth Management Division, and annual merit increases. Occupancy and equipment expense rose $66 thousand or 2.8% due to depreciation and maintenance costs associated with our remote deposit capture service offering. Increased marketing costs and loan collection expense were primarily responsible for the $304 thousand or 6.1% rise in other expenses. For the fourth quarter of 2008, noninterest expense increased $272 thousand or 6.9%. Other expenses increased $268 thousand or 21.9%, while salaries and employee benefits expense and net occupancy and equipment expense were relatively constant compared to the fourth quarter of 2007.

BALANCE SHEET REVIEW

Total assets increased $55.0 million to $604.0 million at December 31, 2008, from $549.0 million at December 31, 2007. The balance sheet growth was driven by an increase in total deposits of $50.9 million or 10.4% to $542.3 million at the end of 2008, from $491.4 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 $14.6 million to $485.9 million at December 31, 2008, from $471.3 million at December 31, 2007. Excess deposits not used to fund loans were directed into our investment portfolio. Available-for-sale investment securities increased $41.2 million to $80.6 million from $39.4 million comparing December 31, 2008 and 2007. There was $12.7 million in federal funds sold outstanding at the close of 2008 compared to $8.8 million one year earlier.

Stockholders' equity equaled $57.8 million or $33.41 per share at December 31, 2008, and $54.4 million or $31.01 per share at December 31, 2007. Our Leverage ratio improved to 9.62% at the end of 2008, compared to 9.54% at December 31, 2007. The Leverage ratio, as well as all of our capital ratios, significantly exceeded regulatory standards for well capitalized institutions. During 2008, 34,189 shares of common stock with a total cost of $1.4 million were repurchased. Dividends declared in 2008 totaled $1.08 per share, an increase of 3.8% from $1.04 per share in 2007.