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EX-13 - EXHIBIT 13 - COMM BANCORP INC | c98470exv13.htm |
EX-32 - EXHIBIT 32 - COMM BANCORP INC | c98470exv32.htm |
EX-21 - EXHIBIT 21 - COMM BANCORP INC | c98470exv21.htm |
EX-31.(I) - EXHIBIT 31(I) - COMM BANCORP INC | c98470exv31wxiy.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
Commission file number 0-17455
Comm Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania | 23-2242292 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
125 North State Street, Clarks Summit, PA | 18411 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (570) 586-0377
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
None | The NASDAQ Stock Market |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.33 per share
(Title of class)
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the
Exchange Act. Yes o No þ
State the aggregate market value of the voting common stock held by non-affiliates based on the
closing sale price as of the last business day of the registrants most recently completed second
fiscal quarter: $50,703,080 at June 30, 2009.
Indicate the number of shares outstanding of the registrants common stock, as of the latest
practicable date: 1,722,923 at March 10, 2010.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants Annual Report to Stockholders for the year ended December 31, 2009,
are incorporated by reference in Part II of this Annual Report. Portions of the registrants 2010
Proxy Statement are incorporated by reference in Part III of this Annual Report.
Page 1
of 168
Exhibit Index on Page 45
COMM BANCORP, INC.
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Exhibit 32 |
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COMM BANCORP, INC.
FORM 10-K
FORM 10-K
Special Note Regarding Forward-Looking Statements
This annual report on Form 10-K, other periodic reports filed by us under the Securities Exchange
Act of 1934 (Exchange Act), as amended, and any other written or oral statements made by or on
behalf of us may include forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which reflect our current views with respect to future events and
financial performance. Such forward-looking statements are based on general assumptions and are
subject to various risks, uncertainties and other factors that may cause actual results to differ
materially from the views, beliefs and projections expressed in such statements. Our business and
financial results are affected by business and economic conditions, both generally and specifically
in the Northeastern Pennsylvania market in which we operate. In particular, our businesses and
financial results may be impacted by:
| Changes in interest rates and valuations in the debt, equity and other financial
markets; |
| Disruptions in the liquidity and other functioning of financial markets,
including such disruptions in the market for real estate and other assets commonly
securing financial products; |
| Actions by the Board of Governors of the Federal Reserve System (Federal Reserve
Board) and other government agencies, including those that impact money supply and
market interest rates; |
| Changes in our customers and suppliers performance in general and their
creditworthiness in particular; |
| Changes in customer preferences and behavior, whether as a result of changing
business and economic conditions or other factors; |
| Changes resulting from the newly enacted Emergency Economic Stabilization Act of
2008; |
| A continuation of recent turbulence in significant segments of the United States
and global financial markets, particularly if it worsens, that could impact our
performance, both directly by affecting our revenues and the value of our assets and
liabilities, and indirectly by affecting our customers and suppliers and the economy
generally; |
| Changes in local, regional and national economic conditions and our assessment of
the impact of those changes on our estimates, including the allowance for loan losses; |
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| Changes in the competitive landscape that could impact our business and financial performance
as the financial industry restructures in the current environment; |
| Current economic and financial market conditions, as our forward-looking financial statements
are subject to the risk that these conditions will be substantially different than we are
currently expecting. These statements are based on our current expectations that interest
rates will remain low through 2010 with continued wide market credit spreads and our view that
economic trends currently point to a continuation of severe recessionary conditions through
2010; |
| Legal and regulatory developments that could have an impact on our ability to operate our
businesses, financial condition, results of operations, competitive position or reputation.
Reputational impacts, in turn, could affect matters such as business generation and retention,
our ability to attract and retain management, liquidity and funding. These legal and regulatory
developments could include: (i) the unfavorable resolution of legal proceedings or regulatory
and other governmental inquiries; (ii) increased litigation risk from recent regulatory and
other governmental developments; (iii) the results of the regulatory examination process, and
regulators future use of supervisory and enforcement powers; (iv) legislative and regulatory
reforms, including changes to laws and regulations involving tax, pension, education and
mortgage lending, the protection of confidential customer information, and other aspects of the
financial institution industry; and (v) changes in accounting policies and principles; |
| Our ability to identify and effectively manage risks inherent in our businesses, including
where appropriate, through the effective use of third-party insurance and capital management
techniques; |
| Our ability to anticipate and implement technological changes that can have an impact on our
ability to respond to customer needs and to meet competitive demands; |
| Our ability to implement our business initiatives and strategies that could affect our
financial performance over the next several years; |
| Competition that can impact our customer acquisition, growth and retention, as well as our
credit spreads and product pricing, which can affect market share, deposits and revenues; and |
| Widespread natural disasters, terrorist activities or international hostilities, either as a
result of the impact on the economy and capital and other financial markets generally, or on
us or on our customers and suppliers. |
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The words believe, expect, anticipate, project and similar expressions signify
forward-looking statements. Readers are cautioned not to place undue reliance on any
forward-looking statements made by or on behalf of us. Any such statements speak only as of the
date the statement was made. We undertake no obligation to update or revise any forward-looking
statements.
Part I
Item 1. Business
General
We are a registered bank holding company incorporated in 1983 as a Pennsylvania business
corporation and are headquartered in Clarks Summit, Pennsylvania. We have two wholly-owned
subsidiaries, Community Bank and Trust Company, referred to as Community Bank, and Comm Realty
Corporation, referred to as Comm Realty. Our business consists primarily of the management and
supervision of Community Bank. Comm Realty, a Pennsylvania business corporation, holds, manages and
sells foreclosed or distressed assets on behalf of Community Bank. Our principal source of income
is dividends paid by Community Bank. At December 31, 2009, we had approximately:
| $656.8 million in total assets; |
| $476.9 million in loans; |
| $590.8 million in deposits; and |
| $ 55.0 million in stockholders equity. |
Community Bank is a Pennsylvania commercial bank and a member of the Federal Reserve System whose
deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Community Bank is a
full-service commercial bank providing a wide range of products and services, including time and
demand deposit accounts, consumer, commercial and mortgage loans and commercial leases to
individuals and small- to medium-sized businesses. Community Banks principal market area comprises
Lackawanna, Luzerne, Monroe, Susquehanna, Wayne and Wyoming counties located in the Northeast
corner of the Commonwealth of Pennsylvania. At December 31, 2009, Community Bank had 15 community
banking offices and one loan production office located within this market area.
Community Bank competes with 26 commercial banks, 6 thrift institutions and 54 credit unions, many
of which are substantially larger in terms of assets and liabilities. In addition, Community Bank
experiences competition for deposits from mutual funds and security brokers, while consumer
discount, mortgage and insurance companies compete for various types of loans. Principal methods of
competing for banking, permitted nonbanking services and financial activities include price, nature
of product, quality of service and convenience of location.
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Community Bank has three wholly-owned subsidiaries, Community Leasing Corporation, referred to as
Community Leasing, Comm Financial Services Corporation, referred to as Comm Financial Services and
Community Abstract Services, LLC, referred to as Community Abstract. Community Leasing, a
Pennsylvania business corporation, engages in commercial leasing. Comm Financial Services, a
Pennsylvania business corporation, engages in selling insurance products and services and in
providing asset management services.
Community Abstract, a Pennsylvania limited liability company, offers title insurance and abstract
services to residential and commercial mortgage loan customers.
As of December 31, 2009, Community Bank had 189 full-time equivalent employees. We and Community
Bank are not parties to any collective bargaining agreement and employee relations are considered
to be good.
Our primary source of funds is the cash flow provided by our financing activities, mainly deposit
gathering. Our other sources of funds are provided by investing activities, including principal and
interest payments on loans and investment securities, and operating activities, primarily net
income. We offer a variety of deposit accounts with a range of interest rates and terms, including
money market accounts, NOW accounts, savings accounts, certificates of deposit and demand deposit
accounts. Our deposits are primarily obtained from areas surrounding our banking offices. We rely
primarily on marketing, new products, service and long-standing relationships with customers to
attract and retain these deposits. At December 31, 2009, our deposits totaled $590.8 million. Of
the total deposit balance, $162.9 million or 27.6 percent represented time deposits less than $100
thousand and $109.7 million or 18.6 percent represented savings accounts. We have maintained a high
level of core deposits, which has contributed to our low cost of funds. Core deposits include money
market, NOW, savings, time deposits less than $100 thousand and demand deposit accounts, which in
the aggregate, represented 84.9 percent of total deposits at December 31, 2009, and 85.0 percent of
total deposits at December 31, 2008. A further discussion of our deposits is filed at Exhibit 13 to
this report and is incorporated in its entirety by reference under this Item 1.
We are not dependent on deposits or exposed by loan concentrations to a single customer or to a
small group of customers, the loss of any one or more of whom would have a materially adverse
effect on our financial condition.
Supervision and Regulation
The following discussion sets forth the material elements of the basic regulatory framework
applicable to us and Community Bank and provides certain specific information. This basic
regulatory framework is primarily intended for the protection of investors in our common stock,
depositors of Community Bank and the FDIC that insures bank deposits. To the extent that the
following information describes statutory and regulatory provisions, it is qualified by reference
to those provisions. A change in the statutes, regulations or regulatory policies applicable to us
or Community Bank may have a material effect on our business.
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Intercompany Transactions
Various governmental requirements, including Sections 23A and 23B of the Federal Reserve Act and
Regulation W of the Federal Reserve Board, limit borrowings by us from Community Bank and also
limit various other transactions between us and Community Bank. For example, Section 23A limits to
no more than 10.0 percent of its total capital the aggregate outstanding amount of Community Banks
loans and other covered transactions with any particular nonbank affiliate including financial
subsidiaries, and limits to no more than 20.0 percent of its total capital the aggregate
outstanding amount of Community Banks covered transactions with all of its affiliates including
financial subsidiaries. At December 31, 2009, approximately $6.3 million was available for loans to
us from Community Bank. Section 23A also generally requires that Community Banks loans to its
nonbank affiliates, including financial subsidiaries, be secured, and Section 23B generally
requires that Community Banks transactions with its nonbank affiliates, including financial
subsidiaries, be at arms-length terms. Also, we and Community Bank and any financial subsidiary
are prohibited from engaging in certain tie-in arrangements in connection with extensions of
credit or provision of property or services.
Supervisory Agencies
As a Pennsylvania commercial bank and member of the Federal Reserve System, Community Bank is
subject to primary supervision, regulation and examination by the Pennsylvania Department of
Banking and the Federal Reserve Board. Community Bank is subject to extensive Pennsylvania and
federal statutes and regulations that significantly affect its business and activities. Community
Bank must file reports with its regulators concerning its activities and financial condition and
obtain regulatory approval to
enter into certain transactions. Community Bank is also subject to periodic examinations by its
primary and secondary regulators to ascertain compliance with various regulatory requirements.
We, Community Bank and our subsidiaries, are also affected by various other governmental
requirements and regulations, general economic conditions and the fiscal and monetary policies of
the federal government and the Federal Reserve Board. The monetary policies of the Federal Reserve
Board influence, to a significant extent, the overall growth of loans, leases, investments,
deposits, interest rates charged on loans and interest rates paid on deposits. The nature and
impact of future changes in monetary policies are often unpredictable.
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We are subject to the jurisdiction of the United States Securities and Exchange Commission (SEC)
for matters relating to the offering and sale of our securities. We are also subject to the SECs
rules and regulations relating to periodic reporting, insider trading reports and proxy
solicitation materials. Our common stock is listed for quotation of prices on The NASDAQ Global
MarketSM and therefore, we are subject to the listing rules and regulations imposed by The
NASDAQ Global MarketSM.
Support of Community Bank
Under current Federal Reserve Board policy, we are expected to act as a source of financial and
managerial strength to Community Bank by standing ready to use available resources, or obtain
additional resources, to provide adequate capital funds during periods of financial adversity. The
support expected by the Federal Reserve Board may be required at times when we may not have the
resources or inclination to provide it.
If a default occurred with respect to Community Bank, any capital loans to Community Bank from us
would be subordinate in right of payment to depositors and certain other debt holders of Community
Bank.
Liability of Commonly Controlled Banks
Community Bank can be held liable for any loss incurred, or reasonably expected to be incurred, by
the FDIC in connection with the default of a commonly controlled FDIC-insured depository
institution, or any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default.
Default is generally defined as the appointment of a conservator or receiver, and in danger of
default is generally defined as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
Depositor Preference Statute
In the liquidation or other resolution of Community Bank by any receiver, federal law provides
that deposits and certain claims for administrative expenses and employee compensation against
Community Bank are afforded a priority over the general unsecured claims against Community Bank,
including federal funds and letters of credit.
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Capital Requirements
We are subject to risk-based capital requirements and guidelines imposed by the Federal Reserve
Board, which are substantially similar to the capital requirements and guidelines imposed by the
Federal Reserve Board on Community Bank. Under these risk-based capital requirements, bank holding
companies and banks are required to maintain Tier I and Total capital, less certain deductions, of
at least 4.0 percent and 8.0 percent of their total risk-weighted assets, including certain
off-balance sheet items, such as unused lending commitments and standby letters of credit. On
December 31, 2009, Community Bank issued $8.0 million in subordinated notes at a fixed interest
rate of 8.0 percent, which mature on December 31, 2016. The subordinated notes qualify as Tier II
capital for risk-based capital requirements for both us and Community Bank. At December 31, 2009,
we met both requirements, with Tier I and Total capital ratios of 10.6 percent and 13.4 percent.
Community Bank also met both requirements at December 31, 2009, with Tier I and Total capital
ratios of 9.6 percent and 12.4 percent.
The Federal Reserve Board also requires banks and bank holding companies to maintain a minimum
Leverage ratio, Tier I capital to total average assets less intangible assets, of 3.0 percent for
bank holding companies that meet certain specified criteria, including having the highest
regulatory rating.
Our Leverage ratio was 8.6 percent and Community Banks Leverage ratio was 7.8 percent at December
31, 2009.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires Federal
Reserve Board regulators to take prompt corrective action if an FDIC-insured depository institution
does not meet minimum capital requirements, including the termination of deposit insurance by the
FDIC and certain restrictions on its business. FDICIA establishes five capital categories for
insured banks: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized. FDICIA imposes progressively more restrictive
constraints on operations, management and capital distributions depending on the category into
which an institution is classified. Rules adopted by the Federal Reserve Board under FDICIA provide
that a state member bank is deemed to be well capitalized if the bank has a total risk-based
capital ratio of 10.0 percent or greater, a Tier I risk-based capital ratio of 6.0 percent or
greater, a Leverage ratio of 5.0 percent or greater and the institution is not subject to a written
agreement, order, capital directive or prompt corrective action directive to meet and maintain a
specific level of any capital measure. As of December 31, 2009, Community Bank was well
capitalized, based on the prompt corrective action ratios and guidelines described above. It should
be noted, however, that a banks capital category is determined solely for the purpose of applying
the Federal Reserve Boards prompt corrective action regulations, and that the capital category may
not constitute an accurate representation of the banks overall financial condition or prospects.
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Dividend Restrictions
We are a legal entity separate and distinct from Community Bank. In general, under Pennsylvania
law, we cannot pay a cash dividend if the payment would render us insolvent. Our revenues consist
primarily of dividends paid by Community Bank. Various federal and state statutory provisions limit
the amount of dividends Community Bank can pay to us without regulatory approval. Under
Pennsylvania law, Community Bank may declare and pay dividends to us only out of accumulated net
earnings and as long as the surplus of Community Bank would not be reduced below its stated paid-in
capital. More stringent dividend restrictions apply under Federal Reserve Regulation H, which
restricts calendar year dividend payments of member banks to the total of its net profits for that
year combined with its retained net profits for the preceding two calendar years, less any required
transfer to surplus, unless a bank has received prior approval from the Federal Reserve Board. At
December 31, 2009, Community Bank had no retained net profits available for dividend declaration
under Federal Reserve Regulation H.
On February 24, 2009, the Federal Reserve Board issued Supervisory Release (SR) 09-4, Applying
Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock
Repurchases at Bank Holding Companies. SR 09-4 clarifies previously issued supervisory guidance
regarding payment of cash dividends in times of stress on earnings and capital ratios. According to
the provisions of SR 09-4, a bank holding company should inform the Federal Reserve Board and
should eliminate, defer or significantly reduce its dividends if: (i) the bank holding companys
net income available to shareholders for the past four quarters, net of dividends previously paid
during the period, is not sufficient to fully fund the dividends; (ii) the bank holding companys
prospective rate of earnings is not consistent with the bank holding companys capital needs and
overall current and prospective financial condition and risk profile; or (iii) the bank holding
company will not meet, or is in danger of not meeting, its regulatory capital adequacy ratios.
Subsequent to year-end 2009, management requested the Federal Reserve Boards approval for us and
Community Bank to declare and pay a dividend for the first quarter of 2010. On March 1, 2010,
management received notification from the Federal Reserve Board recommending that we and Community
Bank not declare or pay a dividend for the first quarter of 2010. Accordingly, we and Community
Bank did not declare a dividend for the first quarter of 2010. We and Community Bank must inform
the Federal Reserve Board prior to declaring any future dividends, and there can be no assurance
that the Federal Reserve Board will not object to the payment of these dividends.
In addition, federal bank regulatory agencies have the authority to prohibit Community Bank from
engaging in an unsafe or unsound practice in conducting its business. Depending upon the financial
condition of the bank in question, the payment of dividends could be deemed to constitute an unsafe
or unsound practice. The ability of Community Bank to pay dividends in the future is currently
influenced, and could be further influenced, by bank regulatory policies and capital guidelines.
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Deposit Insurance Assessments
Community Banks deposits are insured by the FDIC and as a result, Community Bank is subject to
FDIC deposit insurance assessments. Under the provisions of The Federal Deposit Insurance Reform
Act of 2005 (the Reform Act), the Bank Insurance Fund and the Savings Association Insurance Fund
were merged to form the Deposit Insurance Fund (DIF). As a result, all insured institutions are
subject to the same assessment rate schedule issued by the FDIC. The assessment rate schedule is
determined by the Designated Reserve Ratio (DRR), the level that the FDIC would like the DIF to
achieve as a percentage of insured deposits. Current legislation permits the FDIC to set the DRR
between 1.15 percent and 1.50 percent. For 2009, the FDIC set the DRR at 1.25 percent.
Under the Reform Act, the amount each institution is assessed is based upon statutory factors that
include the balance of insured deposits as well as the degree of risk the institution poses to the
insurance fund. Each institution is placed into one of four risk categories depending on the
institutions capital ratios and supervisory ratings. Institutions, including Community Bank, in
Risk Category I will be charged a rate between $0.07 and $0.24 per $100 of assessable deposits. For
the majority of these institutions, base assessment rates will be based on the financial ratio
method. Under this method, each financial ratio and a weighted-average of capital, asset quality,
management, earnings, liquidity and sensitivity to market risk supervisory component ratings is
multiplied by a pricing multiplier. The sum of these products is added to a uniform amount to
produce an assessment rate between 2 and 4 basis points, the range of base rates for institutions
in Risk Category I. Any increase in rates above the base rate schedule is then added or any
decrease is subtracted. The annual assessment rate for Community Bank for 2009 was approximately
$0.13 per $100 of assessable deposits.
On February 27, 2009, the FDIC adopted a restoration plan designed to replenish the DIF over a
period of seven years ending December 31, 2015. In order to implement this restoration plan, the
FDIC changed its risk-based assessment system and its base assessment rates. For the first quarter
of 2009 only, the FDIC increased all deposit assessment rates by $0.07 per $100 of assessable
deposits. These new rates range from $0.12 to $0.14 per $100 of assessable deposits for Risk
Category I institutions to $0.50 per $100 of assessable deposits for Risk Category IV institutions.
Beginning April 1, 2009, the base assessment rates ranged from $0.12 to $0.16 per $100 of
assessable deposits for Risk Category I institutions to $0.45 per $100 of assessable deposits for
Risk Category IV institutions. Changes to the risk-based assessment system included increasing
premiums for institutions that rely on excessive amounts of brokered deposits, increasing premiums
for excessive use of secured liabilities, including Federal Home Loan Bank advances, lowering
premiums for small institutions with very high capital levels, and adding financial ratios and debt
issuer ratings to the premium calculations for banks with over $10.0 billion in assets, while
providing a reduction for their unsecured debt.
On May 22, 2009, due to the severity of the decrease in the DIF, the FDIC issued a final rule which
levied a special emergency assessment on all insured depository institutions of 5 basis points of
total assets less Tier I capital as of June 30, 2009, which was collected on September 30, 2009.
Based on the new assessment rates, our FDIC insurance expense was $798 thousand. In addition, we
paid $277 thousand for the special emergency assessment on September 30, 2009.
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On November 12, 2009, the FDIC adopted a final rule that required all insured depository
institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of
2009 and for all of 2010, 2011 and 2012. The FDIC also adopted a uniform increase in assessment
rates of $0.03 per $100 of assessable deposits effective on January 1, 2011. On December 31, 2009,
Community Bank paid $3.5 million in prepaid deposit insurance assessments, which included $222
thousand for the fourth quarter of 2009. The remaining $3.3 million in prepaid deposit insurance is
included in other assets on the Consolidated Balance Sheets filed at Exhibit 13 to this report.
In addition to DIF assessments, the Deposit Insurance Funds Act of 1996 provides for assessments to
pay for the cost of Financing Corporation (FICO) funding. The FICO is a mixed ownership
government corporation whose sole purpose was to function as a financing vehicle for the now
defunct Federal Savings and Loan Insurance Corporation. In 2009, Community Bank paid FICO
assessments of $56 thousand.
Emergency Economic Stabilization Act of 2008
On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008
(EESA). Pursuant to the EESA, the United States Treasury has the authority to, among other
things, invest in financial institutions and purchase mortgages, mortgage-backed securities and
certain other financial instruments from financial institutions, in an aggregate amount up to
$700.0 billion, for the purpose of stabilizing and providing liquidity to the United States
financial markets. On October 14, 2008, the United States Treasury announced a plan, referred to
as the Capital Purchase Program (CPP) to invest up to $250.0 billion of this $700.0 billion in
certain eligible United States banks, thrifts and their holding companies in the form of
non-voting, senior preferred stock initially paying quarterly dividends at a 5.0 percent annual
rate. In the event the United States Treasury makes any such senior preferred investment in any
company, it will also receive 10-year warrants to acquire common shares of the company having an
aggregate market price of 15.0 percent of the amount of the senior preferred investment.
Our Board of Directors decided not to participate in the CPP after carefully evaluating the
objectives, requirements and restrictions of participating in the program. In addition, the
enactment of EESA temporarily raised the basic limit on federal deposit insurance coverage from
$100 thousand to $250 thousand per depositor. The temporary increase in deposit insurance coverage
became effective October 3, 2008. EESA provides that the basic deposit insurance limit will return
to $100 thousand after December 31, 2009. On May 20, 2009, President Obama signed the Helping
Families Save Their Homes Act, which extended the temporary increase from $100 thousand to $250
thousand per depositor until December 31, 2013.
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On October 14, 2008, the FDIC announced the Temporary Liquidity Guarantee Program (TLGP). The
final rule was adopted on November 21, 2008. The FDIC stated that its purpose is to strengthen
confidence and encourage liquidity in the banking system by guaranteeing newly issued senior
unsecured debt of banks of 31 days or greater, thrifts, and certain holding companies, and by
providing full coverage of all transaction accounts, regardless of dollar amount. Inclusion in the
program was voluntary. Participating institutions are assessed fees based on a sliding scale,
depending on length of maturity. Shorter-term debt has a lower fee structure and longer-term debt
has a higher fee. The range is from 50 basis points on debt of 180 days or less and a maximum of
100 basis points for debt with maturities of one year or longer, on an annualized basis. A 10 basis
point surcharge is added to a participating institutions current insurance assessment in order to
fully cover all transaction accounts. The Company and Community Bank opted out of the TLGP.
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of
2009 (ARRA), an economic stimulus package. ARRA significantly expanded the restrictions on
executive compensation that were included in Section 111 of EESA and imposed various corporate
governance standards on recipients of Troubled Asset Relief Program funds, including those under
the CPP, until such funds are repaid. We and Community Bank did not participate in the CPP and
therefore are not subject to the provisions of the ARRA related to executive compensation.
Interstate Banking and Branching
The Riegle-Neal Interstate Banking and Branch Efficiency Act of 1994 (Riegle-Neal) authorized
interstate acquisitions of banks and bank holding companies without geographic limitation. Under
Riegle-Neal, a bank holding company cannot make an interstate acquisition of a bank if, as a
result, it would control more than 10.0 percent of the total United States insured depository
deposits and more than 30.0 percent or the applicable state law limit of deposits in that state.
Subject to certain restrictions, Riegle-Neal also permits banks to merge across state lines through
purchases or branch openings. However, the ability of banks to acquire branch offices is contingent
on the host state having adopted legislation opting in to those provisions of Riegle-Neal. In
addition, interstate mergers are contingent upon the host state not having adopted legislation
opting out of that provision of Riegle-Neal. Pennsylvania has opted in to all of these provisions
upon the condition that another host state has similar or reciprocal requirements. As of the date
of this report, we have not entered into an agreement involving any interstate acquisitions of a
bank or a branch office.
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Control Acquisitions
Under the Change in Bank Control Act of 1978, a bank holding company is required to obtain prior
Federal Reserve Board approval before acquiring more than 5.0 percent of the voting shares, or
substantially all of the assets, of a bank holding company, bank or savings association. In
determining whether to approve a proposed acquisition, the Federal Reserve Board will consider,
among other factors, the effect of the acquisition on competition, the public benefits expected to
be received from the acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institutions record of addressing the credit needs of the communities it
serves, consistent with the safe and sound operations of the bank under the Community Reinvestment
Act of 1977 (CRA).
Permitted Nonbanking Activities
The Federal Reserve Board permits us or our subsidiaries to engage in nonbanking activities that
are so closely related to banking or managing or controlling banks as to be appropriate. The
Federal Reserve Board requires us to serve as a source of financial and managerial strength to
Community Bank and not to conduct our operations in an unsafe or unsound manner. The Federal
Reserve Board has enforcement powers to require us or our non-banking subsidiaries to terminate any
activity it believes constitutes a serious risk to the safety, soundness or stability of Community
Bank, and is inconsistent with sound banking principles or violates federal banking laws and
regulations.
Financial Services Modernization
We must also comply with the Gramm-Leach-Bliley Act of 1999 (GLB Act) in the conduct of our
operations. The GLB Act eliminates the restrictions placed on the activities of banks and bank
holding companies and creates two new structures, financial holding companies and financial
subsidiaries. We and Community Bank are now allowed to provide a wider array of financial products
and services that were reserved only for insurance companies and securities firms. In addition, we
can now affiliate with an insurance company and a securities firm. We can elect to become a
financial holding company, which would allow us to engage in activities referred to as financial
activities that are not permitted to bank holding companies. A financial holding company may also
affiliate with companies that are engaged in financial activities. A financial activity is an
activity that does not pose a safety and soundness risk and is financial in nature, incidental to
an activity that is financial in nature, or complimentary to a financial activity. As of the date
of this report, we have not elected to become a financial holding company nor do we anticipate
electing to become one in the near term.
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Privacy
The GLB Act also creates a minimum federal standard of privacy protections for consumers and
customers of financial institutions. According to this Act, we must provide notice to consumers and
customers about our privacy policies and practices, describe the conditions under which we may
disclose nonpublic personal information to non-affiliated third parties, and provide an opt-out
method to prevent us from disclosing such information to non-affiliated third parties. The GLB Act
distinguishes a customer from a consumer for purposes of the notice requirements imposed by this
Act. We are required to give a customer a privacy notice at the time a customer relationship is
established and then annually thereafter as long as the relationship continues. By contrast, we are
required to give notice to a consumer only if we intend to disclose nonpublic personal information
about the consumer to a non-affiliated third party.
Community Reinvestment Act
We are also subject to the CRA and the regulations promulgated to implement the CRA, which are
designed to create a system for bank regulatory agencies to evaluate a depository institutions
record in meeting the credit needs of its community. Community Bank received an outstanding
rating in its last CRA examination which was held on June 29, 2009. Outstanding is the highest
CRA rating that a depository institution can receive.
Terrorist Activities
The Office of Foreign Assets Control (OFAC) of the Department of the Treasury sends us and our
bank regulatory agencies, on a periodic basis, lists of names of persons and organizations
suspected of aiding, harboring or engaging in terrorist acts. Should Community Bank find a name on
any transaction, account or wire transfer that is on an OFAC list, Community Bank must freeze the
account, file a suspicious activity report and notify the Federal Bureau of Investigation.
Community Bank has appointed an OFAC Compliance Officer to oversee the inspection of its accounts
and the filing of any notifications.
The USA PATRIOT Act
Congress enacted The Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT) Act for the purpose of strengthening United States
security, law enforcement and intelligence in order to combat terrorism on a variety of fronts. The
USA PATRIOT Act contains extensive anti-money laundering and financial transparency laws and
imposes rules and regulations to promote cooperation among financial institutions, regulators and
law enforcement entities in identifying parties that may be involved in terrorism or money
laundering. In addition, under the USA PATRIOT Act, financial institutions are prohibited from
engaging in specified financial transactions and account relationships with foreign financial
institutions and foreign customers.
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Subprime and Predatory Lending
The Federal Reserve Board has issued regulations and is proposing more rigorous standards under new
rules, which implement the Home Ownership and Equity Protection Act (HOEPA). This Act imposes
additional disclosure requirements and certain substantive limitations on certain mortgage loans
with rates or fees above specified levels. The regulations lower the rate levels that trigger the
application of HOEPA and include additional fees in the calculation of the fee amount that triggers
HOEPA. The loans that Community Bank currently makes are generally below the rate and fee levels
that trigger HOEPA.
Community Bank must also comply with a Pennsylvania law, Act 55, the Mortgage Bankers and Brokers
and Consumer Equity Protection Act. This Act addresses what is known as predatory lending, among
other things, and is applicable to Community Banks closed-end home equity mortgage loans,
involving property located in Pennsylvania, in an amount less than $100 thousand made at a high
cost, which is generally the rate and point triggers in the HOEPA. Those HOEPA triggers are:
| An annual percentage rate exceeding 8.0 percentage points for 1st lien
loans or 10.0 percentage points for subordinate lien loans above comparable term U.S.
Treasury securities; and/or |
| Total points and fees payable by the consumer at or before closing that exceed
the greater of 8.0 percent of the total loan amount or $480 for the year 2002 adjusted
for each calendar year based on the consumer price index. |
Mortgage Lending Acts
On July 8, 2008, Pennsylvania Governor Rendell signed into law Acts 56, 57, 58, 59 and 60 of 2008,
which pertain to the mortgage industry in Pennsylvania. Act 56 of 2008 combined two mortgage
licensing laws that pertain to first and secondary lien residential mortgage lending into a single
licensing law, which required individuals engaged in nonclerical mortgage activities to obtain
separate individual mortgage originator licenses. Act 57 of 2008 amended the Pennsylvania Usury
Law by increasing from $50 thousand to $218 thousand the applicability of the usury law to
residential mortgage loans. Act 58 of 2008 authorized the Department of Banking to require initial
and renewal license applicants for lender and broker licenses to use a national electronic
licensing system and to pay related processing fees. Act 59 of 2008 increased penalties for
violation of the Real Estate Appraisers Certification Act and added three government officials to
the State Board of Certified Real Estate Appraisers. Act 60 of 2008 amended the Pennsylvania
Housing Finance Agency (PHFA) Law by requiring mortgage lenders, including Community Bank, to
periodically provide to PHFA a list of residential mortgage foreclosure notices issued during the
most recent period and contains amendments to the rules for providing a mortgage borrower in default with a Notice of Intention to
Foreclose.
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On February 18, 2009, the Federal Government implemented the Homeowner Affordability and Stability
Plan (HASP), a $75.0 billion federal program intended to support recovery in the housing market
and ensure that eligible homeowners are able to continue to fulfill their mortgage obligations.
HASP includes the following initiatives:
| A refinance option for homeowners that are current in their mortgage payments and
whose mortgages are owned by the Federal National Mortgage Association (FNMA) or the
Federal Home Loan Mortgage Corporation (FHLMC); |
| A homeowner stability initiative to prevent foreclosures and help eligible
borrowers stay in their homes by offering loan modifications that reduce mortgage
payments to more sustainable levels; and |
| An increase in U.S. Treasury funding to FNMA and FHLMC to allow them to lower
mortgage rates. |
HASP also offers monetary incentives to mortgage servicers and mortgage holders for certain
modifications of at-risk loans and would establish an insurance fund designed to reduce
foreclosures.
Credit Card Reform
On May 22, 2009, President Obama signed into law The Credit Card Accountability, Responsibility,
and Disclosure Act of 2009 (the Credit Card Act). The Credit Card Act is comprehensive credit
card legislation that aims to establish fair and transparent practices relating to open end
consumer credit plans. The first phase of the legislation began in August 2009, under which the
payment period with no late fees was extended from 14 to 21 days, the advance warning period for
significant changes to credit card accounts was extended from 15 to 45 days, and opt-out provisions
were made available to customers. A second phase began in February 2010, which includes provisions
governing when rate increases can be applied on late accounts, requirements for clearer disclosures
of terms before opening an account, prohibitions on charging over-limit fees and double-cycle
billing, and various other restrictions. Additional rules will become effective in July 2010, which
deal with interest rate reinstatements on former overdue accounts, gift card expiration dates and
inactivity fees.
Overdraft Fee Regulation
On November 12, 2009, the Federal Reserve Board issued a final rule amending Regulation E,
Electronic Funds Transfers. According to the final rule, beginning July 1, 2010, banks may not
charge fees for paying overdrafts on ATM and debit card transactions unless the customer gives
consent, or opts in, to the payment of overdrafts for these transactions. Additional federal
legislation has been introduced which would limit the number and amount of overdraft fees which
banks can charge, prohibit ordering the posting transactions to cause customers to incur higher
fees, prohibit insufficient funds fees on ATM or debit card transactions and require banks to
provide a customer notice and opportunity to cancel transactions that would trigger an overdraft.
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Sales of Insurance
Our federal bank regulatory agencies have issued consumer protection rules with respect to the
retail sale of insurance products by us, Community Bank, or a subsidiary or joint venture of us or
Community Bank. These rules generally cover practices, solicitations, advertising or offers of any
insurance product by a depository institution or any person that performs such activities at an
office of,
or on behalf of, us or Community Bank. Moreover, these rules include specific provisions relating
to sales practices, disclosures and advertising, the physical separation of banking and nonbanking
activities and domestic violence discrimination.
Corporate Governance
The Sarbanes-Oxley Act of 2002 (SOX) has substantially changed the manner in which public
companies govern themselves and how the accounting profession performs its statutorily required
audit function. SOX made structural changes in the way public companies make disclosures and
strengthened the independence of auditors and audit committees. SOX requires direct responsibility
of senior corporate management, namely the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), for establishing and maintaining an adequate internal control structure and
procedures for financial reporting and disclosure by public companies.
Under SOX, audit committees will be primarily responsible for the appointment, compensation and
oversight of the work of their auditors. The independence of the members of the audit committee is
assured by barring members who accept consulting fees from the company or are affiliated with the
company other than in their capacity as members of the board of directors.
SOX prohibits insider trades during pension fund blackout periods and requires prompt disclosure of
insider transactions in company stock, which must be reported by the second business day following
an insider transaction.
Under Section 404 of SOX, we must provide an assertion of the adequacy of our internal controls
over financial reporting as part of each annual Exchange Act report. As a result of us being
classified as a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, our
independent registered public accounting firm is not required to attest on our internal controls
over financial reporting until fiscal years ending after June 15, 2010.
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Regulatory Reform
In July 2009, the Obama Administration proposed a wide range of regulatory reforms that, if
enacted, may have significant effects on the financial services industry in the United States.
Significant proposals that would affect us and Community Bank under this regulatory reform include:
(i) the creation of the Financial Services Oversight Council, which would coordinate activities
among regulators; (ii) the re-examination of capital standards for banks and bank holding
companies; (iii) increasing Federal Reserve supervision to more closely watch for systemic risks;
and (iv) the creation of the Consumer Financial Protection Agency with broad authority over
consumer-related financial products such as credit cards and mortgages. In response to the Obama
Administrations proposal, in December 2009, the U.S. House of Representatives passed The Wall
Street Reform and Consumer Protection Act of 2009 and the U.S. Senate is expected to consider its
version of the financial reform legislation in the near term. Such legislation would likely
increase regulation and oversight of the financial services industry and impose restrictions on the
ability of firms within the industry to conduct business consistent with historical practices. We
cannot predict whether, or in what form, further legislation or regulations may be enacted, or to
what extent we and Community Bank will be affected by such enactment.
Community Bank
Community Banks legal headquarters is located at 125 North State Street, Clarks Summit, Lackawanna
County, Pennsylvania 18411. Community Bank is a commercial bank that seeks to provide personal
attention and professional financial assistance to its customers. Community Bank is a locally
managed and oriented financial institution established to serve the needs of individuals and
small and medium-sized businesses. Community Banks business philosophy includes offering direct
access to its President 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.
Available Information
We file reports, proxy and information statements and other information electronically with the
SEC. You may read and copy any materials that we file with the SEC at the SECs Public Reference
Room located at 100 F. Street, N.E., Washington, DC 20549 on official business days between the
hours of 10:00am and 3:00pm EST. You can obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements and other information regarding issuers that
file electronically. The SECs website address is http://www.sec.gov. Copies of our Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those
reports filed with the SEC may be obtained without charge by writing to Comm Bancorp, Inc., 125
North State Street, Clarks Summit, PA 18411, Attn: Investor Relations or through our website at
http://www.combk.com.
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Item 2. Properties
Our corporate headquarters is located at 125 North State Street, Clarks Summit, Lackawanna County,
Pennsylvania. We own this facility which has approximately 24,000 square feet and contains our
main community banking office.
In addition to the above location, at December 31, 2009, we owned 10 and leased 4 retail community
banking offices and leased a limited purpose office used solely for loan production. We also lease
an office building located at 1212 South Abington Road, Clarks Summit, Lackawanna County,
Pennsylvania, which serves as our loan operations center. We consider our properties to be suitable
and adequate for our current and immediate future purposes.
Item 3. Legal Proceedings
We, Community Bank and our subsidiaries are not parties to any legal proceedings that could have
any significant effect upon our financial condition or operating results. In addition, we,
Community Bank and our subsidiaries are not parties to any legal proceedings under federal and
state environmental laws.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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Part II
Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
We had 1,194 stockholders of record, including individual participants in security position
listings, and 1,722,923 shares of common stock, par value of $0.33 per share, the only authorized
class of stock outstanding as of March 10, 2010. Our common stock trades on The NASDAQ Global
Market_ as CommBcp under the symbol CCBP. The high and low closing sale prices and
dividends per share of our common stock for the four quarters of 2009 and 2008 are summarized in
the following table:
Dividends | ||||||||||||
2009: | High | Low | Declared | |||||||||
First quarter |
$ | 40.99 | $ | 35.04 | $ | 0.28 | ||||||
Second quarter |
40.00 | 35.31 | 0.28 | |||||||||
Third quarter |
40.00 | 31.00 | 0.28 | |||||||||
Fourth quarter |
$ | 34.50 | $ | 21.80 | $ | 0.14 |
Dividends | ||||||||||||
2008: | High | Low | Declared | |||||||||
First quarter |
$ | 47.25 | $ | 41.00 | $ | 0.27 | ||||||
Second quarter |
48.00 | 41.00 | 0.27 | |||||||||
Third quarter |
44.92 | 40.75 | 0.27 | |||||||||
Fourth quarter |
$ | 42.00 | $ | 35.00 | $ | 0.27 |
We have paid cash dividends since 1983. The payment of future dividends must necessarily depend
upon earnings, financial position, appropriate restrictions under applicable laws and other factors
relevant at the time the Board of Directors considers any declaration of dividends. For information
on dividend restrictions on us and Community Bank, refer to our consolidated financial statements
and notes to these statements filed at Exhibit 13 to this report and incorporated in their entirety
by reference under this Item 5.
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There were no purchases made by or on behalf of us or any affiliated purchaser, as defined in the
Exchange Act Rule 10b-18(a)(3), of our common stock during each of the three months ended December
31, 2009. On August 19, 2009, the Board of Directors approved a resolution to suspend the Stock
Repurchase Program.
Item 6. Selected Financial Data
The information called for by this item is filed at Exhibit 13 to this report and is incorporated
in its entirety by reference under this Item 6.
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
The information called for by this item is filed at Exhibit 13 to this report and is incorporated
in its entirety by reference under this Item 7.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes to these statements are filed at Exhibit 13 to this
report and are incorporated in their entirety by reference under this Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Our Disclosure Controls and Internal Controls
As of December 31, 2009, the end of the period covered by this Annual Report on Form 10-K, our CEO
and CFO evaluated the effectiveness of our disclosure controls and procedures as defined in Rule
13a-15(e) under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that our
disclosure controls and procedures, as of December 31, 2009, were effective to provide reasonable
assurance that information required to be disclosed in our reports filed under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SECs rules
and forms, and to provide reasonable assurance that information required to be disclosed in such
reports is accumulated and communicated to the CEO and CFO to allow timely decisions regarding
required disclosure.
Under Section 404 of SOX, we are required to assess the effectiveness of our internal control over
financial reporting at the end of each fiscal year and report, based on that assessment, whether
our internal control over financial reporting is effective. The assessment report on the
effectiveness of our internal control over financial reporting as of December 31, 2009, is filed at
Exhibit 13 to this report and is incorporated in its entirety by reference under this Item 9A.
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Changes in Internal Control Over Financial Reporting
In the ordinary course of business, we may routinely modify, upgrade and enhance our internal
control and procedures for financial reporting. However, there were no changes in our internal
control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act that occurred
during the fourth quarter of our fiscal year ended December 31, 2009, that materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Directors
At December 31, 2009, we had 8 directors. Our directors are elected at each annual meeting of
stockholders for a one-year term and until their successors are duly elected and qualified. A
majority of the directors have been determined by the Board of Directors to satisfy the
independence requirements mandated by the SEC, The NASDAQ Global Market_ and any related
banking laws. Our independent directors met once during 2009 without the presence of management to
discuss managements performance and our overall strategic direction.
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The following information is presented for each of our current directors, all of whom have been
nominated to become a director at our 2010 Annual Stockholders Meeting.
Age as of | Director | |||||||||
Name | March 10, 2010 | Principal Occupation for Past Five Years | Since | |||||||
David L. Baker
|
64 | Senior Vice President of Community Bank. | 1988 | |||||||
William F. Farber, Sr.
|
72 | President and CEO of Comm Bancorp, Inc. and Community Bank. | 1983 | |||||||
Judd B. Fitze
|
58 | Partner in Farr, Davis & Fitze, a law firm. | 1995 | |||||||
Dean L. Hesser
|
43 | President of Tom Hesser Chevrolet, Inc. and Tom Hesser Nissan, LLC, automobile dealerships. | 2003 | |||||||
John P. Kameen
|
68 | Publisher of The Forest City News. | 1983 | |||||||
Erwin T. Kost
|
66 | President of Kost Tire Distributors, Inc. | 1997 | |||||||
Susan F. Mancuso
|
58 | Partner in Mancuso & Mancuso, Accounting & Tax Service. | 2003 | |||||||
Joseph P. Moore, III(1)
|
58 | Auto Dealer, Manheim Imports, an automobile dealership. | 2000 |
(1) | A son of Joseph P. Moore, Jr., who owns beneficially more than 5.0 percent of our common
stock. |
Committees
Our Board of Directors has two standing committees, namely the Nominating and Corporate Governance
Committee and the Joint Audit Committee, which also serves as the audit committee for Community
Bank. Each member of these committees satisfies the independence requirements applicable to the
SEC, The NASDAQ Global Market_ and any related banking laws.
The Nominating and Corporate Governance Committee assists the Board of Directors in fulfilling
their corporate oversight responsibilities. The primary duties of this committee are to:
| Develop and recommend corporate governance policies and guidelines for us and
monitor our compliance with these policies and guidelines; and |
| Identify and recommend to the Board, director nominees and committee member
candidates. |
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The following directors are members of the Nominating and Corporate Governance Committee: Joseph P.
Moore, III, Chairperson; Dean L. Hesser; and Susan F. Mancuso. The Nominating and Corporate
Governance Committee operates pursuant to a Charter approved and adopted by our Board of Directors.
A copy of our written Charter of the Nominating and Corporate Governance Committee is filed at
Exhibit 99(ii) to our Annual Report on Form 10-K for the year ended December 31, 2003, Commission
File Number: 0-17455, and is incorporated in its entirety by reference into this report. The text
of the Charter of the Nominating and Corporate Governance Committee and our Bylaws are posted on
our website at http://www.combk.com. Copies of this Charter will be provided, without charge, upon
written request to Comm Bancorp, Inc., 125 North State Street, Clarks Summit, PA 18411, Attn:
Investor Relations.
The Joint Audit Committee is responsible for assisting the Boards of Directors oversight of:
| The integrity of our financial statements; |
| The audit by the independent registered public accounting firm of our financial
statements; |
| Our report on internal control over financial reporting; |
| The independent registered public accounting firms and internal auditing firms
qualifications and independence; and |
| The performance of our internal audit function. |
The following directors are members of the Joint Audit Committee: Susan F. Mancuso, Chairperson;
Erwin T. Kost; and Joseph P. Moore, III. The Joint Audit Committee operates pursuant to a Charter
approved and adopted by our Board of Directors. A copy of our written Charter of the Joint Audit
Committee, as amended March 2, 2007, is filed as Exhibit 99(i) to our Annual Report on Form 10-K
for the year ended December 31, 2006, Commission File Number: 0-17455, and is incorporated in its
entirety by reference into this report. The text of this Charter is posted on our website at
http://www.combk.com. Copies of this Charter will be provided, without charge, upon written request
to Comm Bancorp, Inc., 125 North State Street, Clarks Summit, PA 18411, Attn: Investor Relations.
Our Board of Directors has identified Mrs. Mancuso as the Joint Audit Committees financial expert.
Mrs. Mancuso is a licensed Pennsylvania public accountant. Mrs. Mancuso received degrees of a
Bachelor of Science in Accounting and a Master of Business Administration. From 1976 to the
present, she has practiced in the area of taxation, specializing in taxation and financial
advisement. During the years 1980 through 1986, she was engaged to perform governmental and school
audits. She is a licensed Accredited Tax Preparer and Tax Advisor and member of the National
Society of Public Accountants and the Pennsylvania Society of Public Accountants.
In fulfilling its oversight responsibilities, the Joint Audit Committee reviewed with us the
audited financial statements and the footnotes to those statements for our fiscal year 2009 Annual
Report to Stockholders and discussed with us the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments and the clarity of disclosures
in the financial statements.
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The Joint Audit Committee reviewed and discussed with the independent registered public accounting
firm their judgments as to the quality, not just the acceptability, of our accounting principles
and such other matters required to be discussed by the Joint Audit Committee with the independent
registered public accounting firm under the auditing standards of the Public Company Accounting
Oversight Board (United States). Our independent registered public accounting firm has expressed
the opinion
that our audited financial statements present fairly, in all material respects, our financial
position, the results of operations and cash flows for the fiscal year 2009, in conformity with
accounting principles generally accepted in the United States of America.
The Joint Audit Committee discussed with the independent registered public accounting firm their
independence from us and our management, and received from them the written disclosures and the
letter required by the Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees.
Prior to the issuance of this report, the Joint Audit Committee discussed with the independent
registered public accounting firm, matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended, including the overall scope
and timing for their respective audits. In addition, the Joint Audit Committee met with the
internal auditing firm, the internal auditor and the independent registered public accounting firm
to discuss the results of their examinations, their consideration of our internal controls and the
overall quality of our financial reporting.
In relying on the reviews and discussions referred to above, the Joint Audit Committee recommended
to the Board of Directors that the audited financial statements be included in this report. The
Joint Audit Committee also recommended to the Board of Directors the selection of ParenteBeard LLC,
Certified Public Accountants, to serve as our independent registered public accounting firm.
Director Qualifications and Nominating Process
The Nominating and Corporate Governance Committee is responsible to search for qualified candidates
for director for us and Community Bank. The Committee performs its nominating function in
accordance with the Charter of the Nominating and Corporate Governance Committee and our Bylaws. In
making recommendations for nomination as a director, the committee reviews and considers the
qualifications, strengths and abilities of the potential candidates, including new candidates that
may be identified from time to time through our internal search and review procedures or as a
result of stockholder recommendations. For new candidates, the review process becomes more involved
as it becomes increasingly likely that a particular candidate may be recommended for nomination. In
deciding whether to recommend the re-nomination of an incumbent director or the nomination of a
director who previously served as an officer or director, the committee considers their prior
performance as a director or officer. The committee also makes specific recommendations to the
Board regarding the directors who it believes should be appointed to particular committees of the
Board, based upon its review and assessment of the qualifications and abilities of the individual
directors and the differing functions and membership requirements of the committees.
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The committee works with the Board, on an ongoing basis, to identify the particular qualities and
abilities that we generally seek in our directors, and the mix of experience, expertise and
attributes that are sought or required for the Board as a whole. These qualities and attributes
include, but are not limited to, integrity, business acumen, financial literacy and community
involvement. Target attributes for our Board as a whole include independence, diversity of
background and experience, and a range of expertise across all areas vital to corporate governance,
including financial expertise and knowledge of the banking business. All candidates for nomination
are evaluated against these target qualities and attributes, as well as our particular needs at the
time, both on the Board and on committees of the Board. The committee will determine, in its sole
discretion, whether a nominee meets the quality and attribute standards.
The committee oversees the internal procedures, adopted from time to time, to assist in the
identification of suitable candidates to serve as directors. The committee also has the authority
to retain professional consultants to assist in the task of identifying possible candidates,
although it did not do so in 2009.
The Board gives substantial weight to the recommendations of the Nominating and Corporate
Governance Committee in selecting nominees for election or appointment as directors. Under normal
circumstances, the Board will not select nominees, including incumbent directors, who have not been
recommended by a majority of the Nominating and Corporate Governance Committee members.
Under Section 10.1 of our Amended and Restated Bylaws, a stockholder may also nominate a person for
director to be elected at our annual meeting. A stockholder must submit a nomination for director
to the Secretary of the Board of Directors, in writing, no later than the close of business on the
60th day preceding the date for the annual meeting. This notification must contain the
following information:
| The nominees name and address; |
| The nominees principal occupation; |
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| The number of shares of our common stock held by the notifying stockholder and the nominee;
and |
| A certification, under oath before a notary public, that a nominee meets the eligibility
requirements under Section 10.3 of our Amended and Restated Bylaws. |
Under Section 10.3, a person is not qualified to serve as a director if he or she:
| Is under indictment for, or has ever been convicted of, a criminal offense involving
dishonesty or breach of trust and the penalty for such offense could be imprisonment for more
than one year; |
| Is a person against whom a federal or state bank regulatory agency has, within the past ten
years, issued a cease and desist order for conduct involving dishonesty or breach of trust and
that order is final and not subject to appeal; |
| Has been found either by any federal or state regulatory agency whose decision is final and
not subject to appeal or by a court to have: (i) breached a fiduciary duty involving personal
profit; or (ii) committed a willful violation of any law, rule or regulation governing
banking, securities, commodities or insurance, or any final cease and desist order issued by a
banking, securities, commodities or insurance regulatory agency; or |
| Has been nominated by a person who would be disqualified from serving as our director under
the above eligibility requirements. |
If a stockholders nomination is not timely and in proper form or in accordance with the above
requirements, the nominee will not be recommended by the Nominating and Corporate Governance
Committee for consideration by the full Board of Directors. Furthermore, nominations not timely and
in proper form, shall be disregarded by the presiding officer of the annual meeting, and upon his
or her instruction, the vote tellers may disregard all votes cast for such nominee.
Communications with Directors
Stockholders and other interested parties who wish to communicate with our directors may do so by
writing to Comm Bancorp, Inc., 125 North State Street, Clarks Summit, PA 18411, Attn: Investor
Relations-Corporate Secretary. The Office of the Corporate Secretary will forward such written
correspondence to the applicable director or to the Nominating and Corporate Governance Committee
if such correspondence is not addressed to a specific director. Periodically, the Nominating and
Corporate Governance Committee will summarize all stockholder communications it has received and
will make all such communications available for the directors review. In order to efficiently
process all stockholder communications, the Nominating and Corporate Governance Committee, with the
Boards approval, may seek the assistance of counsel or advisors in reviewing and evaluating
particular communications. In all cases, the complete text of communications will be made available
to the directors in an appropriate and timely manner.
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Executive Officers
Our executive officers are appointed by the Board of Directors and serve at the will of the Board
of Directors, subject to certain change in control agreements discussed later in this report.
The following information is presented for our executive officers:
Held | Employee | Age as of | ||||
Name and Position | Since | Since | March 10, 2010 | |||
William R. Boyle |
2001 | 2001 | 50 | |||
Executive Vice President and Chief Credit Officer |
||||||
William F. Farber, Sr. |
2001 | 2001 | 72 | |||
President and CEO, Chairman of the Board |
||||||
John P. Kameen |
1996 | (1) | 68 | |||
Secretary |
||||||
Scott A. Seasock |
1989 | 1989 | 52 | |||
Executive Vice President and CFO |
(1) | Not our employee or an employee of Community Bank. This person did not receive any additional
fees for serving as an Executive Officer. |
Section 16(a) Beneficial Ownership Reporting Compliance
Executive officers, directors and beneficial owners of more than 10.0 percent of our common stock
must file initial reports of ownership and reports of changes in ownership with the SEC and The
NASDAQ Global Market_ pursuant to Section 16(a).
We have reviewed the reports and written representations from the executive officers and directors.
Based on this review, we believe that all filing requirements were met during 2009 with the
following exceptions:
| On June 12, 2009, Joseph P. Moore, III, a director, sold 1,500 shares of our
common stock at a price of $37.00 per share or $55,500 in the aggregate. A Form 4 was
required to be filed on or before June 16, 2009. Mr. Moore failed to do so. Mr. Moore
filed his Form 4 with
the SEC for this sale on September 4, 2009. |
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| On August 27, 2009, Judd B. Fitze, a director, sold 226 shares of our common stock at a price
of $38.00 per share or $8,588 in the aggregate. A Form 4 was required to be filed on or before
August 31, 2009. Attorney Fitze failed to do so. Attorney Fitze filed his Form 4 with the SEC
for this sale on September 1, 2009. |
| On November 24, 2009, Dean L. Hesser, a director, purchased 200 shares of our common stock at
a price of $27.00 per share or $5,400 in the aggregate. A Form 4 was required to be filed on
or before November 27, 2009. Mr. Hesser failed to do so. Mr. Hesser filed his Form 4 with the
SEC on November 30, 2009. |
| On December 10, 2009, David L. Baker, a director, purchased 200 shares of our common stock at
a price of $27.00 per share or $5,400 in the aggregate. A Form 4 was required to be filed on
or before December 14, 2009. Mr. Baker failed to do so. Mr. Baker filed his Form 4 on December
22, 2009. |
| On May 15, 2009, Judd B. Fitze, a director, became the administrator for an estate holding
49,391.524 shares of our common stock. A Form 4 was required to be filed on or before May 19,
2009. Attorney Fitze failed to do so. Attorney Fitze filed the Form 4 on September 15, 2009.
As administrator for this estate, Attorney Fitze authorized the following sale transactions: |
| sold 1,100 shares of our common stock on October 27, 2009, at a price of $30.74 per
share or $33,814 in the aggregate. A Form 4 was required to be filed on or before October
29, 2009. Attorney Fitze failed to do so. |
| sold 28,900 shares of our common stock on November 11, 2009, at a price of $30.59 per
share or $884,051 in the aggregate. A Form 4 was required to be filed on or before
November 13, 2009. Attorney Fitze failed to do so. |
| sold 2,000 shares of our common stock on December 16, 2009, at a price of $26.00 per
share or $52,000 in the aggregate. A Form 4 was required to be filed on or before December
18, 2009. Attorney Fitze failed to do so. |
Attorney Fitze filed a Form 5 on January 25, 2010, for the above transactions in lieu of filing
a Form 4.
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Codes of Ethics and Business Conduct
The Boards of Directors of us and Community Bank have adopted a Code of Ethics that applies to the
CEO and Principal Executive Officer, CFO and Principal Financial Officer, and the Vice President of
Finance and Principal Accounting Officer (collectively referred to as the Senior Financial
Officers). This Code of Ethics for Senior Financial Officers is designed to deter wrongdoing and
to promote the following, among other responsibilities:
| Honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships; |
| Full, fair, accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the SEC and in other public communications
made by us; |
| Compliance with applicable governmental laws, rules and regulations; |
| Prompt internal reporting of Code of Ethics violations to an appropriate person
or persons identified in the Code of Ethics; and |
| Accountability of adherence to the Code of Ethics. |
In addition, all of our employees, including our Senior Financial Officers, are required to abide
by our Code of Business Conduct to ensure that our business is conducted in a consistently legal
and ethical manner. This Code of Business Conduct forms the foundation of a comprehensive process
that includes compliance with all corporate policies and procedures, an open relationship among
colleagues that contributes to good business conduct, and an abiding belief in the integrity of our
employees. Our policies and procedures cover all areas of professional conduct, including
employment policies, conflicts of interest, intellectual property and the protection of
confidential information, as well as strict adherence to all laws and regulations applicable to the
conduct of our business.
Employees are required to report any conduct they believe in good faith to be an actual or apparent
violation of the standards contained in our Code of Business Conduct or any other unusual or
suspicious business arrangement or behavior. SOX requires audit committees to have procedures to
receive, retain and treat complaints received regarding accounting, internal accounting controls or
auditing matters and to allow for the confidential and anonymous submission by employees of
concerns regarding questionable accounting or auditing matters. We currently have such procedures
in place.
In addition, the members of our Board of Directors are required to comply with the Code of Business
Conduct, which is intended to focus the Board and the individual directors on areas of ethical
risk, help directors recognize and deal with ethical issues, provide mechanisms to report unethical
conduct and foster a culture of honesty and accountability. The Code of Business Conduct covers all
areas of professional conduct relating to service on the Board, including conflicts of interest,
unfair or unethical use of corporate opportunities, strict maintenance of confidential information,
compliance with all applicable laws and regulations and oversight of ethics and compliance by our
employees.
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A copy of our written Code of Ethics for Senior Financial Officers has been filed as Exhibit
14 to our Annual Report on Form 10-K for the year ended December 31, 2003, Commission File Number:
0-17455, and is incorporated in its entirety by reference into this report. The text of the Codes
of Ethics for Senior Financial Officers and Business Conduct are posted on our website at
http://www.combk.com. Copies of our Codes of Ethics for Senior Financial Officers and Business
Conduct will be provided, without charge, upon written request to Comm Bancorp, Inc., 125 North
State Street, Clarks Summit, PA 18411, Attn: Investor Relations. Any amendment to, or waiver from,
the provisions of the Code of Ethics for Senior Financial Officers that require disclosure under
applicable rules of the SEC or The NASDAQ Global MarketSM will be disclosed along with the
reasons for the amendment or waiver in Item 10 of a current report on Form 8-K and posted on our
website.
Item 11. Executive Compensation
Executive compensation is determined by the Executive Compensation Committee of Community Banks
Board of Directors. We utilize annual compensation which includes salary, bonus, non-equity
incentive plan compensation and contributions to Community Banks defined contribution plan on
behalf of the executive officers. Compensation for the executive officers is reviewed annually. All
executive compensation is paid by Community Bank to the applicable executive. Our named executive
officers include, William F. Farber, Sr., President and CEO, Scott A. Seasock, Executive Vice
President and CFO and William R. Boyle, Executive Vice President and Chief Credit Officer (CCO).
We do not have any long-term compensation program including those that are based upon the award of
stock options and restricted stock or other long-term incentive awards.
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Summary Compensation Table
The following table presents compensation information for each of the years ended December 31, 2009
and 2008, for the named executive officers.
SUMMARY COMPENSATION TABLE
Non-Equity | ||||||||||||||||||||||||
Incentive Plan | All Other | |||||||||||||||||||||||
Salary | Bonus | Compensation | Compensation | Total | ||||||||||||||||||||
Name & Position | Year | ($) | ($) | ($) | ($)(1) | ($) | ||||||||||||||||||
William F. Farber, Sr. |
2009 | 161,090 | -0- | -0- | 64,894 | 225,984 | ||||||||||||||||||
President and CEO |
2008 | 161,090 | 30,000 | -0- | 70,274 | 261,364 | ||||||||||||||||||
Scott A. Seasock |
2009 | 155,410 | -0- | -0- | 5,322 | 160,732 | ||||||||||||||||||
Executive Vice President and CFO |
2008 | 155,410 | 13,800 | 6,200 | 8,924 | 184,334 | ||||||||||||||||||
William R. Boyle |
2009 | 155,410 | -0- | -0- | 4,745 | 160,155 | ||||||||||||||||||
Executive Vice President and CCO |
2008 | 155,410 | 20,000 | -0- | 8,905 | 184,315 |
(1) | Represents contributions Community Bank made on behalf of the named executive officers
pursuant to the defined contribution plan, except for Mr. Farber who also received director
fees of $60,000 in 2009 and $61,500 in 2008 for services as Chairman of the Board of Community
Bank. Aggregate perquisites and other personal benefits were less than $10,000 for each named
executive officer, and therefore, need not be presented. |
Annual Bonuses and Non-Equity Incentive Plan Compensation
Except for Mr. Seasock who has an employment agreement that contains a non-equity incentive plan,
the Executive Compensation Committee bases their decision for discretionary annual bonuses paid to
each named executive officer on two factors. The first factor is the Executive Compensation
Committees evaluation of each executives salary to the base pay levels in our peer group,
consisting of 10 financial institutions located in the Northeast Region of Pennsylvania, for
executives with similar responsibilities. The second factor is the evaluation of the executives
unique role, job performance and contribution in meeting our strategic business plan and long-term
objectives. There were no discretionary cash bonuses paid to each named executive officer in 2009.
Mr. Seasock takes part in our non-equity incentive plan. His bonus is based on a formula for us
achieving a certain return on average assets and percentage increase in net income ranges and is
intended to serve as incentive for performance to occur over a specified period. Under the bonus
formula for Mr. Seasock, the achievement ranges for return on average assets and percentage
increase in net income are given equal weighting. The minimum achievement ranges were 1.00 percent
to 1.05 percent for return on average assets and 5.00 percent to 5.90 percent for percentage
increase in net income for 2009. Based on the above performance measures, Mr. Seasock did not earn
a bonus in 2009. The Executive Compensation Committee has the ability to award bonuses in excess of
the amounts calculated pursuant to this formula based on the aforementioned criteria for
discretionary annual bonuses. There was no discretionary bonus awarded to Mr. Seasock in 2009.
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Discretionary Annual and Matching Contributions to Community Banks Defined Contribution Plan
Community Bank has a defined contribution plan, which covers all employees who have completed 1,000
hours of service, attained twenty-one (21) years of age and have been employed by Community Bank
for at least one year. Normal retirement age is sixty-five (65). The normal retirement benefit is
the accumulated account balance of contributions, investment income and forfeitures. The annual
contribution is determined by the Board of Directors and is based on a prescribed percentage of
annual net income allocated to each participant on a pro-rata share of compensation covered under
the plan. Investment income is allocated to each participant based on a pro-rata share of the
account balances accumulated at the beginning of the year. Forfeitures are allocated to each
participant based on a pro-rata share of compensation covered under the plan.
The defined contribution plan includes the provisions under section 401(k) of the Internal Revenue
Code (401(k)). This 401(k) feature of the plan permits employees to make voluntary, pre-tax
contributions up to 25.0 percent of their compensation. Our contributions to the 401(k) are based
on 100.0 percent matching of voluntary contributions up to 3.0 percent of the employees eligible
compensation. If a participant separates from service prior to retirement, the participant will be
entitled to 100.0 percent of their contributions made under the 401(k) and also a portion of
Community Banks matching 401(k) contributions and annual discretionary contributions based on
years of service according to the following schedule:
Years of Service | Vested Interest | |||
Less than 1 |
0 | % | ||
1 |
20 | % | ||
2 |
40 | % | ||
3 |
60 | % | ||
4 |
80 | % | ||
5 |
100 | % |
A participant is always 100.0 percent vested in pension plan transferred balances.
During 2009, there were no annual discretionary contributions allocated among participants
accounts under the defined contribution plan. Discretionary matching contributions under the 401(k)
feature of the plan totaled $168,071 in 2009. Contributions made by Community Bank on behalf of the
named executive officers to the plan are included in the All Other Compensation column of the
Summary Compensation Table.
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Executive Employment Agreements
In order to retain our long-serving and key named executive officers, we entered into employment
agreements with William F. Farber, Sr., President and CEO, Scott A. Seasock, Executive Vice
President and CFO and William R. Boyle, Executive Vice President and CCO.
The employment agreement for Mr. Farber, which was entered into on March 1, 2010, contains a
provision for severance payments based on our non-renewal of the agreement or disability of Mr.
Farber, termination of the agreement for good reason as defined below or a change-in-control of us
or Community Bank. Under the agreement, on or after February 28, 2011, Mr. Farber may also, upon
providing us or Community Bank 60 days notice, voluntarily retire from his positions and be
entitled to receive post-retirement benefits which are equivalent to the severance payment for
non-renewal, disability, termination for good reason or change-in-control. With respect to the
severance payments, including post-retirement benefits, Mr. Farber would be entitled to receive the sum of $14,000 per
month for 60 consecutive months or until his death, whichever occurs first. Community Bank would
also be required to pay premiums on a commercially-reasonable comprehensive medical insurance plan
on Mr. Farbers behalf. Mr. Farber would also be entitled to the use of his current executive
office suite and the provision of secretarial support for a period of 12 months after termination
of employment.
The estimated aggregate amount of severance payments, including post-retirement benefits, that Mr.
Farber would receive based upon the provisions under his employment agreement dated March 1, 2010,
if a termination event as described above occurred is $886,500. This estimated aggregate amount
includes payments of $14,000 per month for 60 months for post-retirement benefits without any
deductions for applicable taxes and $775 per month for 60 months for medical insurance premiums.
The estimated aggregate amount has not been reduced to a present value worth.
The employment agreements for Messrs. Seasock and Boyle contain a provision for a severance payment
based on our non-renewal of the agreement or a change-in-control of us or Community Bank. With
respect to the severance payment for our non-renewal under these employment agreements, the
affected named executive officer may, at his sole discretion, terminate his employment and receive
a lump-sum severance payment equal to 24 months of his then current salary, net of all applicable
withholding taxes. The affected named executive officer will receive no other benefits and
perquisites as a result of such termination.
With respect to these employment agreements, if a change-in-control of us or Community Bank occurs
and the affected named executive officer is terminated because of the change-in-control or for any
other good reason, as defined below, then we, or our successor, are obligated to pay to such
terminated named executive officer, for a 24-month period, his then current salary, net of all
applicable withholding taxes, and premiums to maintain his long-term disability insurance and
medical insurance. Any other benefits and perquisites for such affected named executive officer
shall cease upon such termination.
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On March 17, 2010, Mr. Seasocks employment agreement was amended to increase the term of the
agreement from a constant two year period to a constant three year period. This First Amendment to
Mr. Seasocks employment agreement was filed at Exhibit 10.1 to our Current Report on Form 8-K on
March 19, 2010, Commission File Number: 0-17455, and is incorporated in its entirety by reference
into this report. The disclosure in the subsequent table for Mr. Seasock reflects the new amendment
to his agreement.
The following table sets forth the estimated aggregate amount of such severance and
change-in-control payments that each of the two named executive officers would receive based upon
their salary and benefits as of December 31, 2009, if a termination event as described above had
occurred:
Estimated Lump-Sum | Estimated Aggregate Amount | |||||||
Severance Payment | to be Paid as a Result of | |||||||
as a Result of | Change-In-Control under | |||||||
Non-Renewal of | the Employment Agreement | |||||||
Name and Title | Agreement ($)(1) | ($)(2) | ||||||
Scott A. Seasock, Executive Vice President and CFO |
466,230 | 520,318 | ||||||
William R. Boyle, Executive Vice President and CCO |
310,820 | 321,364 |
(1) | This estimated amount is gross salary without any deductions for applicable withholding
taxes. |
|
(2) | This estimated amount includes gross salary without any deductions for applicable withholding
taxes and 24 months of premiums for long-term disability insurance and medical insurance.
This estimated amount has not been reduced to a present value worth. |
All three employment agreements have a non-compete restriction that is triggered if the affected
named executive officer is terminated for cause or such executive officer resigns from employment
for other than a good reason. These executive officers agreed not to enter into competition with
us or Community Bank after such termination within the Pennsylvania counties of Lackawanna,
Susquehanna, Wayne and Wyoming, and within 20 miles of any branch office located outside these
counties which was established during such executive officers employment with us and Community
Bank. The non-compete restriction for Mr. Farber is for a period of five years after termination.
For Messrs. Seasock and Boyle, the non-compete restriction is for a period of six months.
A change in control under all three agreements is generally defined as:
| A substantial sale or disposition of our or Community Banks assets or
operations; |
| A person holding beneficial ownership of enough shares of our stock to gain
majority control of the Board of Directors; or |
| At any time during any 24 consecutive months commencing with the date of these
agreements, a majority of the directors of us or Community Bank are persons who were not
members of the respective boards at the beginning of such period, unless changes in the
boards membership were the result of death, voluntary resignation or retirement. |
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A termination for good reason under these three agreements is generally defined as:
| Without the officers consent, any assignment of duties other than duties
described in the agreement; |
| Any removal of the officer from, or failure to re-elect the officer to, his
position, except in connection with termination of the officer for cause; |
| Any failure to pay the officer his benefits as described in his agreement; |
| Any material breach of the agreement by us or Community Bank; or |
| A change in control. |
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of Community Banks Board of Directors is responsible for
developing and implementing our executive compensation program. The Executive Compensation
Committee is comprised of four of our directors who also serve as directors of Community Bank, all
of whom meet the independence standards contained in Rule 4200(a)(15) of the listing rules for The
NASDAQ Global Market_ and Joseph P. Moore, Jr., a director emeritus and one of our principal
stockholders.
In 2009, the Executive Compensation Committee met three times to discuss the performance of the
named executive officers and compared their performance, and our performance, with peer group
companies. The Chair of the Executive Compensation Committee distributes relevant material to the
members to assist them in discussion and review of each named executive officers total
compensation package. For example, the Human Resources Director of Community Bank prepares a
spreadsheet delineating each named executive officers salary, benefits and perquisites for this
committee to review. In addition, the Chair reviews current bank industry trade journals and other
publications for articles on executive compensation in the banking industry and the Chair
disseminates that information to members of this committee.
The members of this committee also discuss his and other named executive officers compensation
packages with Mr. Farber, our Chairman, President and CEO, to solicit his views. Generally, this
committee meets in November of each year to discuss and award bonuses to the named executive
officers to be paid prior to year-end. Moreover, the committee meets at least once in the second
quarter of each year to fix that years compensation package for each named executive officer. The
Executive Compensation Committee
fixes each named executive officers compensation package and the Chair of this committee then
informs the Human Resources Director of Community Bank of that decision.
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In addition to the spreadsheet information that this committee will receive, we will also consider
for 2010 compensation the contribution of each named executive officer in creating a culture of
performance with integrity. We will also consider the years of service that each named executive
officer has given to us and their contributions to civic life in the communities in which we
conduct business.
Executive Compensation Committee
Judd B. Fitze
John P. Kameen
Erwin T. Kost
J. Robert McDonnell
Joseph P. Moore, Jr.
John P. Kameen
Erwin T. Kost
J. Robert McDonnell
Joseph P. Moore, Jr.
The following table presents compensation information for Community Banks directors for 2009.
DIRECTORS COMPENSATION TABLE
Fees Earned | All Other | |||||||||||
Name | or Paid in Cash ($) | Compensation ($)(1) | Total ($) | |||||||||
Judd B. Fitze |
23,000 | 1,350(2) | 24,350 | |||||||||
John P. Kameen |
23,000 | 4,235(2) | 27,235 | |||||||||
Each of our other
directors |
23,000 | -0- | 23,000 |
(1) | Aggregate perquisites and other personal benefits were less than $10,000 for each director,
and therefore, need not be presented. |
|
(2) | Represents fees for appraisal services provided to Community Bank. |
Mr. Baker is employed by Community Bank as Senior Vice President and is responsible for business
development in the Susquehanna and Wyoming Counties of Pennsylvania. Mr. Baker, in addition to
having extensive banking experience, is well known and respected in the communities we serve. For
his services as Senior Vice President, Mr. Baker received a salary of $57,158, and discretionary
matching contributions of $1,756 under the 401(k) feature of Community Banks defined contribution
plan in 2009. The total amount of all other perquisites received by Mr. Baker was less than
$10,000.
Director fees and all other compensation are paid to the directors by Community Bank. Our directors
are not paid for attendance at Comm Bancorp, Inc.s Board of Directors meetings. There were no
stock awards, option awards, non-equity incentive plan compensation, other long-term compensation
or nonqualified deferred compensation earnings paid to any director in 2009.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
This section describes how much stock our directors and executive officers own. It also describes
the persons or entities that own more than 5.0 percent of our voting stock.
Stock Owned by Directors and Executive Officers
This table indicates the number of shares of our common stock owned by the directors and executive
officers as of March 10, 2010. The aggregate percentage of shares owned by all directors and
executive officers is 14.19 percent. Unless otherwise noted, each individual has sole voting and
investment power for the shares indicated below.
Amount and Nature of | ||||||||
Name of Individual or Identity of Group | Beneficial Ownership(1) | Percent of Class | ||||||
David L. Baker |
14,522.691 | | ||||||
William R. Boyle(2) |
3,541.307 | | ||||||
William F. Farber, Sr. |
150,960.000 | 8.76 | % | |||||
Judd B. Fitze |
25,257.656 | 1.47 | % | |||||
Dean L. Hesser |
2,000.000 | | ||||||
John P. Kameen |
19,572.000 | 1.14 | % | |||||
Erwin T. Kost |
11,505.124 | | ||||||
Susan F. Mancuso |
7,339.287 | | ||||||
Joseph P. Moore, III |
100.000 | | ||||||
Scott A. Seasock(2) |
9,677.542 | | ||||||
All Directors and Executive Officers as a group (8
Directors, 4 Executive Officers, 10 persons in total) |
244,475.607 | 14.19 | % |
(1) | Includes shares held: (i) directly; (ii) jointly with spouse; (iii) jointly with various
relatives; (iv) by the transfer agent in our dividend reinvestment account; (v) individually
in employee benefit plans; (vi) in various trusts; and (vii) as an administrator of an estate. |
|
(2) | Executive officer, not a director. |
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Voting Stock Owned by Beneficial Owners
The following are the persons or entities known by us to own beneficially more than 5.0 percent of
our common stock as of March 10, 2010.
Name and Address | Number of Shares(1) | Percent of Class | ||||||
Joseph P. Moore, Jr. |
169,330.000 | 9.83 | % | |||||
400 Williamson Road Gladwyne, PA 19035 |
||||||||
William F. Farber, Sr. |
150,960.000 | 8.76 | % | |||||
Crystal Lake Road R.R.1, Box 1281 Carbondale, PA 18407 |
(1) | Includes shares held: (i) directly; and (ii) in various trusts. |
Item 13. Certain Relationships and Related Transactions and Director Independence
We encourage our directors and executive officers to have banking and financial transactions with
Community Bank. All of these transactions are made on comparable terms and with similar interest
rates as those prevailing for other customers.
The total consolidated loans made by Community Bank at December 31, 2009 to our directors and
officers as a group, members of their immediate families and companies in which they have a 10.0
percent or more ownership interest was $6.8 million or 12.3 percent of our total consolidated
capital accounts. The largest aggregate balance for these loans in 2009 was $7.6 million or 13.8
percent of our total consolidated capital accounts. During 2009, advances and repayments on these
loans were $0.5 million and $1.3 million. These loans did not involve more than the normal risk of
collectibility nor did they present any other unfavorable features.
Item 14. Principal Accounting Fees and Services
The fees billed for professional services rendered by our independent registered public accounting
firm for each of the two years ended December 31, 2009 and 2008, are summarized as follows:
Year Ended December 31, | 2009 | 2008 | ||||||
Audit fees(1) |
$ | 122,925 | $ | 107,730 | ||||
Other fees(2) |
600 | |||||||
Total |
$ | 123,525 | $ | 107,730 | ||||
(1) | Audit fees consist of fees billed for services rendered for the audit of our annual financial
statements on Form 10-K and review of financial statements included in our Form 10-Q, or
services that are normally provided in connection with statutory and regulatory filings. |
|
(2) | Other fees consist of fees billed for services related to alternative minimum tax issues. |
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The Joint Audit Committees pre-approval policies and procedures related to products and services
provided by our independent registered public accounting firm are set forth in the Charter of the
Joint Audit Committee of us and Community Bank. For the two years ended December 31, 2009 and 2008,
all of the audit fees, audit-related fees, tax fees and other fees were pre-approved by the Joint
Audit Committee.
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) | 1. | The consolidated financial statements and notes to these statements as well as the
applicable report of the independent registered public accounting firm are filed at Exhibit 13
to this report and are incorporated in their entirety by reference under this Item 15(a)1. |
2. | All schedules are omitted because they are not applicable or the required information
is shown in the financial statements or notes to these statements. |
3. | The exhibits required by Item 601 of Regulation S-K are included under Item 15(b) to
this report. |
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(b) | Exhibits required by Item 601 of Regulation S-K: |
Exhibit Number | ||||
Referred to | ||||
Item 601 of | ||||
Regulation S-K | Description of Exhibit | |||
2 | None. |
|||
3 | (i) | Articles of Incorporation, as amended, filed at Exhibit 3(i) to our Annual Report on
Form 10-K for the year ended December 31, 2006, Commission file number 0-17455 on
March 30, 2007, and incorporated hereto by reference. |
||
3 | (ii) | Bylaws, as amended, filed at Exhibit 3(ii) to our Annual Report on Form 10-K for the
year ended December 31, 2006, Commission file number 0-17455 on March 30, 2007, and
incorporated hereto by reference. |
||
4 | None. |
|||
9 | None. |
|||
10 | Executive Employment Agreements of Scott A. Seasock and William R. Boyle filed as
Exhibits 10.01 and 10.02 to our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001, Commission file number 0-17455 on November 13, 2001, and
incorporated hereto by reference. Executive Employment Agreement of William F.
Farber, Sr. filed as Exhibit 10.1 to our Current Report on Form 8-K, Commission file
number 0-17455 on March 2, 2010, and incorporated hereto by reference. First
amendment to Executive Employment Agreement of Scott A. Seasock filed as Exhibit 10.1
to our Current Report on Form 8-K, Commission file number 0-17455 on March 19, 2010,
and incorporated hereto by reference. |
|||
11 | None. |
|||
12 | None. |
|||
13 | Portions of the Annual Report to Stockholders for Fiscal Year Ended December 31, 2009. |
|||
14 | Code of Ethics, filed at Exhibit 14 to our Annual Report on Form 10-K for the
year ended December 31, 2003, Commission file number 0-17455 on March 29, 2004,
and incorporated hereto by reference. |
|||
16 | None. |
|||
18 | None. |
|||
21 | List of Subsidiaries. |
|||
22 | None. |
|||
23 | None. |
|||
24 | None. |
|||
31 | (i) | CEO certification pursuant to Rule 13a-14(a)/15d-14(a). |
||
CFO certification pursuant to Rule 13a-14(a)/15d-14(a). |
||||
31 | (ii) | Not Applicable. |
||
32 | CEO certification pursuant to Section 1350. |
|||
CFO certification pursuant to Section 1350. |
||||
33 | Not Applicable. |
|||
34 | Not Applicable. |
|||
35 | Not Applicable. |
|||
99 | (i) | Charter of the Joint Audit Committee, as amended, filed at Exhibit 99(i) to our
Annual Report on Form 10-K for the year ended December 31, 2006, Commission file
number 0-17455 on March 30, 2007, and incorporated hereto by reference. |
||
100 | None. |
42
Table of Contents
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto, duly authorized.
COMM BANCORP, INC. (Registrant) |
Date | |||
BY:
|
/s/ William F. Farber, Sr.
|
March 29, 2010 | ||
William F. Farber, Sr., President and Chief Executive Officer |
||||
Chairman of the Board (Principal Executive Officer) |
Pursuant to the requirements of the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature and Capacity | Date | |
/s/ David L. Baker
|
March 29, 2010 | |
/s/ William F. Farber, Sr.
President and Chief Executive Officer Chairman of the Board/Director (Principal Executive Officer) |
March 29, 2010 | |
/s/ Judd B. Fitze
|
March 29, 2010 | |
/s/ Dean L. Hesser
|
March 29, 2010 | |
/s/ John P. Kameen
|
March 29, 2010 | |
/s/ Erwin T. Kost
|
March 29, 2010 |
43
Table of Contents
Signature and Capacity | Date | |
/s/ Susan F. Mancuso
|
March 29, 2010 | |
/s/ Joseph P. Moore, III
|
March 29, 2010 | |
/s/ Scott A. Seasock
Chief Financial Officer (Principal Financial Officer) |
March 29, 2010 | |
/s/ Stephanie A. Westington
Vice President of Finance (Principal Accounting Officer) |
March 29, 2010 |
44
Table of Contents
EXHIBIT INDEX
Exhibit | ||||||||
Number | Description | Page | ||||||
13 | Portions of the Annual Report to Stockholders for
Fiscal Year Ended December 31, 2009.
|
46 | ||||||
21 | List of Subsidiaries.
|
164 | ||||||
31 | (i) | CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a).
|
165 | |||||
CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a). |
||||||||
32 | CEO Certification Pursuant to Section 1350.
|
167 | ||||||
CFO Certification Pursuant to Section 1350. |
45