CLARKS SUMMIT, Pa., Jan. 29 /PRNewswire-FirstCall/ -- Comm Bancorp, Inc. (Nasdaq: CCBP) today reported net income of $50 thousand or $0.03 per share in 2009 compared to $5,700 thousand or $3.26 per share in 2008. The earnings reduction resulted primarily from a significant increase in the provision for loan losses in the second half of the year. Net income for the fourth quarter was $435 thousand or $0.25 per share in 2009 and $1,000 thousand or $0.58 per share in 2008.
Return on average stockholders' equity and return on average assets were 0.09% and 0.01% for the year ended December 31, 2009, and 10.10% and 0.98% for the year ended December 31, 2008. For the fourth quarter, return on average stockholders' equity and return on average assets were 3.09% and 0.27% in 2009 and 6.96% and 0.65% in 2008.
"This past year was an extremely difficult time for the banking industry, particularly for community banks," commented William F. Farber, Sr., President and Chief Executive Officer. "The effects of the longest and worst recession since the Great Depression continued to permeate through our local economies as evidenced by rising unemployment and depressed real estate values, which have, in turn, resulted in weakened credit quality. We were not exempt from the effects of these conditions as evidenced by us experiencing an increase in the number of troubled loans and significant devaluations of collateral supporting the commercial and construction sectors of our loan portfolio. In the second half of 2009 we took a number of steps to address these conditions. First and foremost, we set aside additional reserves through recognizing a provision for loan losses of $8.7 million in the third quarter of 2009. With this provision, coupled with regular monthly provisions, 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 December 31, 2009. In addition, we initiated a Capital Plan through which we have made a commitment to aggressively improve asset quality and to increase our regulatory capital ratios," continued Farber. "At the end of 2009, we completed an $8.0 million subordinated debt offering to further strength our capital position in these uncertain times. The Company's ability to raise capital within a very short time is a testimonial to the market's perception of our ability to persevere in these very challenging times," Farber stated. "We believe that through these initiatives we will be able to successfully work through these difficulties," concluded Farber.
INCOME STATEMENT REVIEW
Tax-equivalent net interest income amounted to $22,568 thousand in 2009, an increase of $180 thousand compared to $22,388 thousand in 2008. A $2,367 thousand or 19.0% decrease in interest expense was almost entirely offset by a $2,187 thousand or 6.3% reduction in tax-equivalent interest revenue. The reduction in interest expense was a result of a decrease in our cost of funds of 73 basis points to 2.11% in 2009, from 2.84% in 2008. We experienced significant reductions in the rates paid for all interest-bearing liability categories. Average interest-bearing liabilities grew $39.5 million or 9.0%, which partially mitigated the positive influence of the reduction in funding costs. The decline in interest revenue resulted primarily from an 83 basis point decrease in the tax-equivalent yield on earning assets to 5.50% in 2009, from 6.33% in 2008. Specifically, a 77 basis point decline in the tax-equivalent yield on the loan portfolio to 5.66% in 2009 from 6.43% in 2008 had the greatest impact on interest income. Partially offsetting the decline in the tax-equivalent yield on earning assets was growth in average earning assets of $43.7 million or 7.9%. Average investments increased $20.8 million comparing 2009 and 2008. In addition, the loan portfolio, which averaged $495.4 million in 2008, grew $16.8 million or 3.4% to an average of $512.2 million in 2009. Our tax-equivalent net interest margin contracted 27 basis points to 3.80% in 2009 compared to 4.07% in 2008.
The provision for loan losses totaled $10,430 thousand in 2009, an increase of $8,670 thousand from $1,760 thousand in 2008. The material change in the provision for loan losses in 2009 reflects the effect of measures taken by management to improve its methodology used to determine the adequacy of the allowance for loan losses account in the face of current conditions. Specifically, management is requiring current independent appraisals on all impaired loans which are evaluated individually for impairment. These new appraisals indicate 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 historical periods considered for estimating loss factors in order to better reflect the current market conditions given the rapid economic decline in our market area. For the fourth quarter, the provision for loan losses equaled $670 thousand in 2009 compared to $747 thousand in 2008.
Noninterest income increased $2,556 thousand or 64.5% to $6,517 thousand in 2009 from $3,961 thousand in 2008. Included in noninterest income in 2009 were net gains of $1,590 thousand from the sale of available-for-sale investment securities and a net gain of $294 thousand from the disposition of the former Tunkhannock and Eaton Township, Pennsylvania branch offices. Adjusting for these gains, noninterest income increased $672 thousand or 17.0%. Due to significantly lower mortgage rates, mortgage banking income increased $760 thousand. Service charges, fees and commissions decreased $88 thousand. Adjusting for $91 thousand in net gains on the sale of investment securities, noninterest income decreased $18 thousand to $1,010 thousand for the fourth quarter of 2009 compared to $1,028 thousand for the same quarter of 2008. Service charges, fees and commissions decreased $43 thousand, while mortgage banking income increased $25 thousand.
Noninterest expense increased $2,651 thousand or 16.2% to $18,968 thousand in 2009 from $16,317 thousand in 2008. The increase resulted primarily from a 50.6% increase in other expenses, which were partially offset by slight decreases in salaries and employee benefits expense and net occupancy and equipment expense. Contributing to over half of the increase in other expenses was a rise 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. Also contributing were $467 thousand in losses on the sale of foreclosed assets, and increases of $428 thousand in loan collection and foreclosed asset-related expenses and $174 thousand in legal and consulting fees. For the fourth quarter, noninterest expense increased $852 thousand or 20.3% to $5,055 in 2009 from $4,203 in 2008. Other expenses rose $792 thousand or 53.2%, which was due primarily to the increase in FDIC insurance. Salaries and employee benefits rose $67 thousand, while net occupancy and equipment expenses decreased $7 thousand.
BALANCE SHEET REVIEW
Total assets amounted to $656.8 million at December 31, 2009, an increase of $52.8 million or 8.7% compared to $604.0 million at the end of 2008. The growth in the balance sheet resulted primarily from a $48.5 million or 8.9% increase in total deposits. Loans, net of unearned income, decreased $9.0 million to $476.9 million at December 31, 2009, from $485.9 million one year ago. Available-for-sale investment securities increased $27.4 million to $108.0 million at the end of 2009 from $80.6 million at December 31, 2008. Federal funds sold outstanding equaled $25.3 million at December 31, 2009, an increase of $12.6 million from $12.7 million at December 31, 2008.
Stockholders' equity equaled $55.0 million or $31.93 per share at December 31, 2009, compared to $57.8 million or $33.41 per share at the end of 2008. As part of the newly adopted Capital Plan, management implemented several steps for the purpose of improving risk-based capital ratios. Specifically, Community Bank and Trust Company ("Community Bank"), our wholly-owned subsidiary, completed a subordinated debt offering on December 31, 2009. The subordinated debt offering, which totaled $8.0 million, qualifies as Tier II Capital for risk-based capital purposes. At December 31, 2009, Community Bank far exceeded the requirements to be categorized as well capitalized under the regulatory framework for prompt corrective action with Tier I, Total and Leverage ratios of 9.5%, 12.3% and 7.8%. In addition to the debt offering, management reduced the Company's quarterly dividend by 50% in the fourth quarter of 2009 in order to conserve capital. For the quarter and year ended December 31, 2009, dividends declared were $0.14 per share and $0.98 per share compared to $0.27 per share and $1.08 per share for the respective periods of 2008.
Nonperforming assets equaled $28.2 million or 5.86% of loans, net of unearned income and foreclosed assets at December 31, 2009, compared to $24.2 million or 4.99% one year earlier. In comparison to the previous quarter end, nonperforming assets equaled $28.4 million or 5.59% of loans, net of unearned income and foreclosed assets. The allowance for loan losses equaled $10.5 million or 2.19% of loans, net of unearned income, at December 31, 2009, compared to $5.3 million or 1.08% one year ago. Loans charged-off, net of recoveries, increased $4,094 thousand or 362.6% to $5,223 thousand in 2009 from $1,129 thousand in 2008. The Capital Plan, in addition to strengthening risk-based capital ratios, complements other steps implemented by management to improve asset quality, which include:
- Retaining an independent loan review company to assist and advise management with credit risk management practices;
- Adding and redeploying staff to enhance the oversight and workout of classified assets;
- Establishing a Problem Loan Committee for the purpose of monitoring the status of problem assets and devising action plans for the timely workout or liquidation of these assets;
- Overhauling the appraisal process by requiring new appraisals on all impaired loans and certain delinquent loans over 60 days past due;
- Revising the allowance for loan losses methodology to ensure reserves are adequate to address risks; and
- Tightening underwriting standards to ensure a more rigorous review of potential loans.
Management believes that these remedial initiatives will result in a significant reduction in the current level of nonperforming assets, while strengthening lending practices to ensure a higher quality of assets going forward.
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)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2009 2009 2009 2009 2008
Key performance data:
Per share data:
Net income (loss) $0.25 $(1.95) $0.70 $1.03 $0.58
Cash dividends
declared $0.14 $0.28 $0.28 $0.28 $0.27
Book value $31.93 $32.30 $34.64 $34.22 $33.41
Tangible book
value $31.73 $32.10 $34.44 $34.02 $33.21
Market value:
High $34.50 $40.00 $40.00 $40.99 $42.00
Low $21.80 $31.00 $35.31 $35.04 $35.00
Closing $21.84 $34.50 $40.00 $36.75 $35.01
Market
capitalization $37,587 $59,286 $68,651 $63,278 $60,569
Common shares
outstanding 1,721,007 1,718,439 1,716,263 1,721,845 1,730,062
Selected ratios:
Return on average
stockholders'
equity 3.09% (22.63)% 8.18% 12.30% 6.96%
Return on average
assets 0.27% (2.19)% 0.79% 1.15% 0.65%
Leverage 8.64% 8.68% 9.25% 9.10% 9.62%
Total risk-based
capital 13.31% 11.42% 11.97% 11.89% 12.17%
Efficiency 87.17% 60.78% 74.60% 63.26% 71.88%
Nonperforming
assets to loans,
net, and foreclosed
assets 5.86% 5.59% 5.45% 5.26% 4.99%
Net charge-offs
to average loans,
net 1.38% 2.42% 0.03% 0.23% 0.15%
Allowance for loan
losses to loans, net 2.19% 2.28% 1.18% 1.09% 1.08%
Earning assets
yield (FTE) 5.01% 5.35% 5.79% 5.88% 5.74%
Cost of funds 2.01% 2.07% 2.11% 2.27% 2.58%
Net interest
spread (FTE) 3.00% 3.28% 3.68% 3.61% 3.16%
Net interest
margin (FTE) 3.37% 3.70% 4.09% 4.05% 3.67%
Comm Bancorp, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
Year Ended Dec. 31, Dec. 31,
2009 2008
Interest income:
Interest and fees on loans:
Taxable $25,247 $28,421
Tax-exempt 2,485 2,278
Interest and dividends on investment
securities available-for-sale:
Taxable 987 489
Tax-exempt 1,743 1,515
Dividends 9 45
Interest on federal funds sold 19 153
Total interest income 30,490 32,901
Interest expense:
Interest on deposits 10,003 12,288
Interest on short-term borrowings 97 179
Total interest expense 10,100 12,467
Net interest income 20,390 20,434
Provision for loan losses 10,430 1,760
Net interest income after provision
for loan losses 9,960 18,674
Noninterest income:
Service charges, fees and commissions 3,269 3,357
Mortgage banking income 1,364 604
Net gain on sale of premises and equipment 294
Net gains on sale of investment
securities available-for-sale 1,590
Total noninterest income 6,517 3,961
Noninterest expense:
Salaries and employee benefits expense 8,513 8,531
Net occupancy and equipment expense 2,438 2,462
Other expenses 8,017 5,324
Total noninterest expense 18,968 16,317
Income (loss) before income taxes (2,491) 6,318
Provision for income tax expense (benefit) (2,541) 618
Net income $50 $5,700
Other comprehensive income (loss):
Unrealized holding gains on investment
securities available-for-sale $299 $843
Reclassification adjustment for gains
included in net income (1,590)
Income tax expense benefit related to
other comprehensive income (loss) (439) 287
Other comprehensive income (loss),
net of income taxes (852) 556
Comprehensive income (loss) $(802) $6,256
Per share data:
Net income $0.03 $3.26
Cash dividends declared $0.98 $1.08
Average common shares outstanding 1,722,493 1,748,489
Comm Bancorp, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
Three months ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2009 2009 2009 2009 2008
Interest income:
Interest and
fees on loans:
Taxable $6,169 $6,194 $6,436 $6,448 $6,442
Tax-exempt 602 598 619 666 584
Interest and
dividends on
investment
securities
available-for-
sale:
Taxable 118 205 315 349 356
Tax-exempt 326 407 473 537 443
Dividends (20) 9 9 11 6
Interest on
federal funds
sold 14 4 1 8
Total interest
income 7,209 7,417 7,852 8,012 7,839
Interest expense:
Interest on deposits 2,511 2,433 2,426 2,633 3,019
Interest on
short-term
borrowings 5 36 56 1
Total interest
expense 2,511 2,438 2,462 2,689 3,020
Net interest
income 4,698 4,979 5,390 5,323 4,819
Provision for
loan losses 670 8,670 520 570 747
Net interest
income (loss)
after provision
for loan losses 4,028 (3,691) 4,870 4,753 4,072
Noninterest
income:
Service charges,
fees and
commissions 825 848 832 764 868
Mortgage banking
income 185 287 490 402 160
Net gain on
sale of
premises and
equipment 294
Net gains on
sale of
investment
securities
available-for-
sale 91 1,385 114
Total
noninterest
income 1,101 2,520 1,322 1,574 1,028
Noninterest
expense:
Salaries and
employee
benefits expense 2,184 2,025 2,164 2,140 2,117
Net occupancy
and equipment
expense 589 591 583 675 596
Other expenses 2,282 1,942 2,260 1,533 1,490
Total
noninterest
expense 5,055 4,558 5,007 4,348 4,203
Income (loss)
before income
taxes 74 (5,729) 1,185 1,979 897
Provision for
income tax
expense
(benefit) (361) (2,354) (30) 204 (103)
Net income
(loss) $435 $(3,375) $1,215 $1,775 $1,000
Other comprehensive
income (loss):
Unrealized
holding gains
(losses) on
investment
securities
available-for-
sale $(1,174) $1,118 $13 $342 $1,867
Reclassification
adjustment for
gains
included in net
income (91) (1,385) (114)
Income tax
expense
(benefit)
related to
other
comprehensive
income (loss) (430) (91) 4 78 635
Other
comprehensive
income
(loss),
net of income
taxes (835) (176) 9 150 1,232
Comprehensive
income (loss) $(400) $(3,551) $1,224 $1,925 $2,232
Per share data:
Net income
(loss) $0.25 $(1.95) $0.70 $1.03 $0.58
Cash dividends
declared $0.14 $0.28 $0.28 $0.28 $0.27
Average common
shares
outstanding 1,721,007 1,718,439 1,722,282 1,728,371 1,741,392
Comm Bancorp, Inc.
Details of Net Interest and Net Interest Margin
(In thousands, fully taxable equivalent basis)
Three months ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2009 2009 2009 2009 2008
Net interest income:
Interest income
Loans, net:
Taxable $6,169 $6,194 $6,436 $6,448 $6,442
Tax-exempt 912 906 938 1,009 884
Total loans, net 7,081 7,100 7,374 7,457 7,326
Investments:
Taxable 98 214 324 360 362
Tax-exempt 494 616 717 814 672
Total investments 592 830 1,041 1,174 1,034
Federal funds sold 14 4 1 8
Total interest
income 7,687 7,934 8,415 8,632 8,368
Interest expense:
Deposits 2,511 2,433 2,426 2,633 3,019
Borrowed funds 5 36 56 1
Total interest
expense 2,511 2,438 2,462 2,689 3,020
Net interest
income $5,176 $5,496 $5,953 $5,943 $5,348
Loans, net:
Taxable 5.46% 5.45% 5.80% 5.84% 5.78%
Tax-exempt 5.96% 5.89% 5.66% 5.97% 6.34%
Total loans, net 5.52% 5.50% 5.78% 5.86% 5.84%
Investments:
Taxable 1.80% 3.10% 3.92% 4.29% 3.84%
Tax-exempt 7.33% 7.07% 7.43% 7.49% 7.73%
Total investments 4.86% 5.32% 5.81% 6.09% 5.70%
Federal funds sold 0.11% 0.11% 0.49% 0.36%
Total earning
assets 5.01% 5.35% 5.79% 5.88% 5.74%
Interest expense:
Deposits 2.01% 2.08% 2.18% 2.38% 2.58%
Borrowed funds 0.67% 0.68% 0.71% 1.01%
Total interest-
bearing
liabilities 2.01% 2.07% 2.11% 2.27% 2.58%
Net interest
spread 3.00% 3.28% 3.68% 3.61% 3.16%
Net interest
margin 3.37% 3.70% 4.09% 4.05% 3.67%
Comm Bancorp, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
At period end 2009 2009 2009 2009 2008
Assets:
Cash and due from banks $23,978 $8,728 $8,315 $9,441 $8,017
Federal funds sold 25,300 46,100 12,700
Investment securities
available-for-sale 108,005 38,302 73,169 75,249 80,574
Loans held for sale, net 2,016 787 2,243 1,390
Loans, net of unearned
income 476,944 507,094 510,870 507,166 485,882
Less: allowance for loan
losses 10,462 11,566 6,019 5,531 5,255
Net loans 466,482 495,528 504,851 501,635 480,627
Premises and equipment, net 11,616 11,631 11,709 11,785 11,753
Accrued interest receivable 2,122 2,597 2,526 2,456 2,143
Other assets 17,254 11,386 9,456 8,951 6,837
Total assets $656,773 $614,272 $610,813 $611,760 $604,041
Liabilities:
Deposits:
Noninterest-bearing $88,335 $79,591 $82,002 $77,752 $79,674
Interest-bearing 502,448 475,509 456,795 443,114 462,617
Total deposits 590,783 555,100 538,797 520,866 542,291
Short-term borrowings 7,950 27,450
Long-term debt 8,000
Accrued interest payable 1,296 1,185 1,696 2,124 1,815
Other liabilities 1,740 2,478 2,912 2,397 2,137
Total liabilities 601,819 558,763 551,355 552,837 546,243
Stockholders' equity:
Common stock, par value
$0.33 authorized 12,000,000,
shares issued and outstanding
1,721,007; 1,718,439;
1,716,263; 1,721,845;
1,730,062 568 567 566 568 571
Capital surplus 7,966 7,881 7,799 7,741 7,694
Retained earnings 45,601 45,407 49,263 48,793 47,862
Accumulated other
comprehensive income 819 1,654 1,830 1,821 1,671
Total stockholders'
equity 54,954 55,509 59,458 58,923 57,798
Total liabilities and
stockholders' equity $656,773 $614,272 $610,813 $611,760 $604,041
Comm Bancorp, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
Average quarterly balances 2009 2009 2009 2009 2008
Assets:
Loans, net:
Taxable $448,359 $451,025 $444,905 $447,922 $443,690
Tax-exempt 60,710 61,000 66,500 68,567 55,436
Total loans, net 509,069 512,025 511,405 516,489 499,126
Investments:
Taxable 21,598 27,354 33,115 34,068 37,514
Tax-exempt 26,740 34,562 38,729 44,051 34,600
Total investments 48,338 61,916 71,844 78,119 72,114
Federal funds sold 51,706 14,709 37 833 8,897
Total earning assets 609,113 588,650 583,286 595,441 580,137
Other assets 29,950 22,649 30,625 27,910 31,815
Total assets $639,063 $611,299 $613,911 $623,351 $611,952
Liabilities and stockholders'
equity:
Deposits:
Interest-bearing $495,714 $464,411 $446,992 $449,242 $466,086
Noninterest-bearing 84,139 81,047 82,221 79,997 85,434
Total deposits 579,853 545,458 529,213 529,239 551,520
Short-term borrowings 2,970 21,359 31,773 393
Long-term debt 87
Other liabilities 3,223 3,710 3,743 3,821 2,892
Total liabilities 583,163 552,138 554,315 564,833 554,805
Stockholders' equity 55,900 59,161 59,596 58,518 57,147
Total liabilities and
stockholders' equity $639,063 $611,299 $613,911 $623,351 $611,952
Comm Bancorp, Inc.
Asset Quality Data
(In thousands)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
At quarter end 2009 2009 2009 2009 2008
Nonperforming assets:
Nonaccrual loans $19,015 $20,567 $20,166 $20,154 $23,068
Restructured loans 4,302 4,773 4,888 3,357
Accruing loans past due
90 days or more 1,634 1,177 1,139 1,402 835
Foreclosed assets 3,209 1,932 1,726 1,854 336
Total nonperforming assets $28,160 $28,449 $27,919 $26,767 $24,239
Three months ended
Allowance for loan losses:
Beginning balance $11,566 $6,019 $5,531 $5,255 $4,691
Charge-offs 1,814 3,133 147 324 196
Recoveries 40 10 115 30 13
Provision for loan losses 670 8,670 520 570 747
Ending balance $10,462 $11,566 $6,019 $5,531 $5,255
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.
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