<PAGE>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended JUNE 30, 2005

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number  0-17455

                               COMM BANCORP, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                      <C>
               PENNSYLVANIA                            23-2242292
     (State or other jurisdiction of     (I.R.S. Employer Identification Number)
      incorporation or organization)
</TABLE>

<TABLE>
<S>                                                      <C>
125 NORTH STATE STREET, CLARKS SUMMIT, PA                   18411
(Address of principal executive offices)                 (Zip Code)
</TABLE>

                                 (570) 586-0377
              (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)

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 [X] No [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). Yes [ ] No [X]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,861,870 at July 31, 2005.


                                  Page 1 of 54
                            Exhibit Index on Page 48

<PAGE>

                               COMM BANCORP, INC.
                                    FORM 10-Q

                                  JUNE 30, 2005

                                      INDEX

<TABLE>
<CAPTION>
CONTENTS                                                                PAGE NO.
--------                                                                --------
<S>                                                                     <C>
PART I.  FINANCIAL INFORMATION:

   Item 1: Financial Statements. ....................................

      Consolidated Statements of Income and Comprehensive Income
         for the Three Months and Six Months Ended June 30,
         2005 and 2004 ..............................................       3
      Consolidated Balance Sheets - June 30, 2005 and
         December 31, 2004 ..........................................       4
      Consolidated Statement of Changes in Stockholders' Equity
         for the Six Months Ended June 30, 2005 .....................       5
      Consolidated Statements of Cash Flows for the Six Months
         Ended June 30, 2005 and 2004 ...............................       6
      Notes to Consolidated Financial Statements ....................       7

   Item 2: Management's Discussion and Analysis of Financial
              Condition and Results of Operations ...................       8

   Item 3: Quantitative and Qualitative Disclosures About Market
              Risk ..................................................       *

   Item 4: Controls and Procedures ..................................      43

PART II. OTHER INFORMATION:

   Item 1: Legal Proceedings ........................................      44

   Item 2: Changes in Securities and Use of Proceeds and Issuer
              Purchases of Equity Securities ........................      44

   Item 3: Defaults Upon Senior Securities ..........................      44

   Item 4: Submission of Matters to a Vote of Security Holders ......      45

   Item 5: Other Information ........................................      45

   Item 6: Exhibits and Reports on Form 8-K .........................      46

   Signatures .......................................................      47
   Exhibit Index ....................................................      48
</TABLE>

*    Not Applicable


                                       2

<PAGE>

COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                                        JUNE 30,                  JUNE 30,
                                                                                -----------------------   -----------------------
                                                                                   2005         2004         2005         2004
                                                                                ----------   ----------   ----------   ----------
<S>                                                                             <C>          <C>          <C>          <C>
INTEREST INCOME:
Interest and fees on loans:
   Taxable ..................................................................   $    5,566   $    5,431   $   11,055   $   10,720
   Tax-exempt ...............................................................          347          208          677          413
Interest and dividends on investment securities available-for-sale:
   Taxable ..................................................................          475          499        1,030        1,034
   Tax-exempt ...............................................................          381          395          772          788
   Dividends ................................................................           14           11           22           21
Interest on federal funds sold ..............................................           14           22           14           38
                                                                                ----------   ----------   ----------   ----------
   Total interest income ....................................................        6,797        6,566       13,570       13,014
                                                                                ----------   ----------   ----------   ----------
INTEREST EXPENSE:
Interest on deposits ........................................................        2,363        2,240        4,743        4,478
Interest on short-term borrowings ...........................................           27                       106
                                                                                ----------   ----------   ----------   ----------
   Total interest expense ...................................................        2,390        2,240        4,849        4,478
                                                                                ----------   ----------   ----------   ----------
   Net interest income ......................................................        4,407        4,326        8,721        8,536
Provision for loan losses ...................................................          158          150          458          300
                                                                                ----------   ----------   ----------   ----------
   Net interest income after provision for loan losses ......................        4,249        4,176        8,263        8,236
                                                                                ----------   ----------   ----------   ----------
NONINTEREST INCOME:
Service charges, fees and commissions .......................................          828          752        1,665        1,478
Net gains on sale of loans ..................................................          122          128          278          324
Net gains on sale of merchant services ......................................          110                       235
                                                                                ----------   ----------   ----------   ----------
   Total noninterest income .................................................        1,060          880        2,178        1,802
                                                                                ----------   ----------   ----------   ----------
NONINTEREST EXPENSE:
Salaries and employee benefits expense ......................................        1,843        1,754        3,638        3,480
Net occupancy and equipment expense .........................................          584          599        1,222        1,263
Other expenses ..............................................................        1,373        1,242        2,560        2,479
                                                                                ----------   ----------   ----------   ----------
   Total noninterest expense ................................................        3,800        3,595        7,420        7,222
                                                                                ----------   ----------   ----------   ----------
Income before income taxes ..................................................        1,509        1,461        3,021        2,816
Provision for income tax expense ............................................          289          206          521          381
                                                                                ----------   ----------   ----------   ----------
   Net income ...............................................................        1,220        1,255        2,500        2,435
                                                                                ----------   ----------   ----------   ----------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains (losses) on investment securities available-for-sale .......          889       (1,991)          76       (1,441)
Income tax expense (benefit) related to other comprehensive income (loss) ...          302         (677)          26         (490)
                                                                                ----------   ----------   ----------   ----------
   Other comprehensive income (loss), net of income taxes ...................          587       (1,314)          50         (951)
                                                                                ----------   ----------   ----------   ----------
   Comprehensive income (loss) ..............................................   $    1,807   $      (59)  $    2,550   $    1,484
                                                                                ==========   ==========   ==========   ==========
PER SHARE DATA:
Net income ..................................................................   $     0.65   $     0.66   $     1.34   $     1.28
Cash dividends declared .....................................................   $     0.23   $     0.22   $     0.46   $     0.44
Average common shares outstanding ...........................................    1,863,478    1,900,321    1,864,656    1,903,947
</TABLE>

See Notes to Consolidated Financial Statements.


                                       3

<PAGE>

COMM BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                               JUNE 30,   DECEMBER 31,
                                                                                 2005         2004
                                                                               --------   ------------
<S>                                                                            <C>        <C>
ASSETS:
Cash and due from banks ...................................................    $ 16,400     $ 11,802
Federal funds sold ........................................................      13,000          900
Investment securities available-for-sale ..................................      97,336      118,756
Loans held for sale, net ..................................................       3,263        1,917
Loans, net of unearned income .............................................     389,274      381,723
   Less: allowance for loan losses ........................................       4,037        3,859
                                                                               --------     --------
Net loans .................................................................     385,237      377,864
Premises and equipment, net ...............................................      11,339       11,628
Accrued interest receivable ...............................................       2,322        2,319
Other assets ..............................................................       3,441        3,136
                                                                               --------     --------
      Total assets ........................................................    $532,338     $528,322
                                                                               ========     ========

LIABILITIES:
Deposits:
   Noninterest-bearing ....................................................    $ 73,397     $ 67,714
   Interest-bearing .......................................................     407,605      410,770
                                                                               --------     --------
      Total deposits ......................................................     481,002      478,484
Accrued interest payable ..................................................       1,038        1,075
Other liabilities .........................................................       1,396        1,445
                                                                               --------     --------
      Total liabilities ...................................................     483,436      481,004
                                                                               --------     --------

STOCKHOLDERS' EQUITY:
Common stock, par value $0.33, authorized 12,000,000 shares,
   issued and outstanding:
   June 30, 2005, 1,861,719 shares; December 31, 2004, 1,864,391 shares ...         614          615
Capital surplus ...........................................................       6,780        6,675
Retained earnings .........................................................      39,924       38,494
Accumulated other comprehensive income ....................................       1,584        1,534
                                                                               --------     --------
      Total stockholders' equity ..........................................      48,902       47,318
                                                                               --------     --------
      Total liabilities and stockholders' equity ..........................    $532,338     $528,322
                                                                               ========     ========
</TABLE>

See Notes to Consolidated Financial Statements.


                                       4

<PAGE>

COMM BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                                                                          OTHER           TOTAL
                                                        COMMON   CAPITAL   RETAINED   COMPREHENSIVE   STOCKHOLDERS'
                                                         STOCK   SURPLUS   EARNINGS      INCOME           EQUITY
                                                        ------   -------   --------   -------------   -------------
<S>                                                     <C>      <C>       <C>        <C>             <C>
BALANCE, DECEMBER 31, 2004 ..........................    $615     $6,675    $38,494       $1,534         $47,318
Net income ..........................................                         2,500                        2,500
Dividends declared: $0.46 per share .................                          (857)                        (857)
Dividend reinvestment plan: 2,972 shares issued .....       1        122                                     123
Repurchase and retirement: 5,644 shares .............      (2)       (17)      (213)                        (232)
Net change in other comprehensive income ............                                         50              50
                                                         ----     ------    -------       ------         -------
BALANCE, JUNE 30, 2005 ..............................    $614     $6,780    $39,924       $1,584         $48,902
                                                         ====     ======    =======       ======         =======
</TABLE>

See Notes to Consolidated Financial Statements.


                                       5

<PAGE>

COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,                                                        2005      2004
-------------------------                                                      -------   --------
<S>                                                                            <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................   $ 2,500   $  2,435
Adjustments:
   Provision for loan losses ...............................................       458        300
   Depreciation, amortization and accretion ................................     1,082      1,230
   Amortization of net loan costs (fees) ...................................        70        (29)
   Deferred income tax benefit .............................................      (180)       (76)
   Losses (gains) on the sale of foreclosed assets .........................       (57)         2
   Changes in:
      Loans held for sale, net .............................................    (1,346)       773
      Accrued interest receivable ..........................................        (3)        91
      Other assets .........................................................      (451)      (208)
      Accrued interest payable .............................................       (37)       (63)
      Other liabilities ....................................................       (80)       237
                                                                               -------   --------
         Net cash provided by operating activities .........................     1,956      4,692
                                                                               -------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayments of investment securities available-for-sale .......    23,666      8,331
Purchases of investment securities available-for-sale ......................    (2,601)    (4,620)
Proceeds from sale of foreclosed assets ....................................       326        140
Net increase in lending activities .........................................    (7,992)   (19,531)
Purchases of premises and equipment ........................................      (227)      (232)
                                                                               -------   --------
         Net cash provided by (used in) investing activities ...............    13,172    (15,912)
                                                                               -------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
   Money market, NOW, savings and noninterest-bearing accounts .............     6,443     11,226
   Time deposits ...........................................................    (3,925)    (2,997)
Proceeds from issuance of common shares ....................................       123        127
Repurchase and retirement of common shares .................................      (232)      (873)
Cash dividends paid ........................................................      (839)      (839)
                                                                               -------   --------
         Net cash provided by financing activities .........................     1,570      6,644
                                                                               -------   --------
         Net increase (decrease) in cash and cash equivalents ..............    16,698     (4,576)
         Cash and cash equivalents at beginning of year ....................    12,702     28,599
                                                                               -------   --------
         Cash and cash equivalents at end of period ........................   $29,400   $ 24,023
                                                                               =======   ========

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
   Interest ................................................................   $ 4,886   $  4,541
   Income taxes ............................................................       967        128
Noncash items:
   Transfer of loans to foreclosed assets ..................................        91         91
   Unrealized losses (gains) on investment securities available-for-sale ...   $   (50)  $    951
</TABLE>

See Notes to Consolidated Financial Statements.


                                       6

<PAGE>

COMM BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1.   BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements of Comm Bancorp,
Inc. and subsidiaries, Community Bank and Trust Company, including its
subsidiaries, Community Leasing Corporation and Comm Financial Services
Corporation, and Comm Realty Corporation (collectively, the "Company") have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information and with the
instructions to Form 10-Q and Article 10-01 of Regulation S-X. In the opinion of
management, all normal recurring adjustments necessary for a fair presentation
of the financial position and results of operations for the periods have been
included. All significant intercompany balances and transactions have been
eliminated in the consolidation. Prior-period amounts are reclassified when
necessary to conform with the current year's presentation.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported periods. Actual results could differ from those
estimates. For additional information and disclosures required under GAAP,
reference is made to the Company's Annual Report on Form 10-K for the period
ended December 31, 2004.

2.   ACCOUNTING CHANGES AND ERROR CORRECTIONS:

On June 1, 2005, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 154, "Accounting
Changes and Error Corrections." SFAS No. 154 replaces Accounting Principles
Board Opinion No. 20, "Accounting Changes," SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements," and changes the requirements for the
accounting for and reporting of a change in accounting principle. SFAS No. 154
applies to all voluntary changes in accounting principles and changes required
by an accounting pronouncement when the pronouncement does not include specific
transition provisions. The requirements of this Statement improve financial
reporting by enhancing the consistency of financial information between periods.
SFAS No. 154 is effective for accounting changes and corrections of errors made
in fiscal years beginning after December 15, 2005. The adoption of this
Statement on January 1, 2006, is not expected to have a material effect on the
operating results or financial position of the Company.


                                       7

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

FORWARD-LOOKING DISCUSSION:

Certain statements in this Form 10-Q are forward-looking statements that involve
numerous risks and uncertainties. The following factors, among others, may cause
actual results to differ materially from projected results:

Local, domestic and international economic and political conditions, and
government monetary and fiscal policies affect banking both directly and
indirectly. Inflation, recession, unemployment, volatile interest rates, tight
money supply, real estate values, international conflicts, and other factors
beyond our control may also adversely affect our future results of operations.
Our management team, consisting of the Board of Directors and executive
officers, expects that no particular factor will affect the results of
operations. Downward trends in areas such as real estate, construction and
consumer spending, may adversely impact our ability to maintain or increase
profitability. Therefore, we cannot assure the continuation of our current rates
of income and growth.

Our earnings depend largely upon net interest income. The relationship between
our cost of funds, deposits and borrowings, and the yield on our
interest-earning assets, loans and investments all influence net interest income
levels. This relationship, defined as the net interest spread, fluctuates and is
affected by regulatory, economic and competitive factors that influence interest
rates, the volume, rate and mix of interest-earning assets and interest-bearing
liabilities, and the level of nonperforming assets. As part of our interest rate
risk ("IRR") strategy, we monitor the maturity and repricing characteristics of
interest-earning assets and interest-bearing liabilities to control our exposure
to interest rate changes.

To a certain extent, our success depends upon the general economic conditions in
the geographic market that we serve. Although we expect economic conditions in
our market area to remain favorable, assurance cannot be given that these
conditions will continue. Adverse changes to economic conditions would likely
impair loan collections and may have a materially adverse effect on the
consolidated results of operations and financial position.

The banking industry is highly competitive, with rapid changes in product
delivery systems and in consolidation of service providers. We compete with many
larger institutions in terms of asset size. These competitors also have
substantially greater technical, marketing and financial resources. The larger
size of these companies affords them the opportunity to offer some specialized
products and services not offered by us. We are constantly


                                       8

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

striving to meet the convenience and needs of our customers and to enlarge our
customer base, however, we cannot assure that these efforts will be successful.

CRITICAL ACCOUNTING POLICIES:

Our financial statements are prepared in accordance with United States generally
accepted accounting principles ("GAAP"). The preparation of financial statements
in conformity with GAAP requires us to establish critical accounting policies
and make accounting estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting periods.

An accounting estimate requires assumptions about uncertain matters that could
have a material effect on the financial statements if a different amount within
a range of estimates were used or if estimates changed from period to period.
Readers of this report should understand that estimates are made considering
facts and circumstances at a point in time, and changes in those facts and
circumstances could produce results that differ from when those estimates were
made. Significant estimates that are particularly susceptible to material change
in the next year relate to the allowance for loan losses, fair value of
financial instruments and the valuations of real estate acquired through
foreclosure and intangible assets. Actual amounts could differ from those
estimates.

We maintain the allowance for loan losses at a level we believe adequate to
absorb probable credit losses related to specifically identified loans, as well
as probable incurred losses inherent in the remainder of the loan portfolio as
of the balance sheet date. The balance in the allowance for loan losses account
is based on past events and current economic conditions.

The allowance for loan losses account consists of an allocated element and an
unallocated element. The allocated element consists of a specific portion for
the impairment of loans individually evaluated and a formula portion for the
impairment of those loans collectively evaluated. The unallocated element is
used to cover inherent losses that exist as of the evaluation date, but which
have not been identified as part of the allocated allowance using the above
impairment evaluation methodology due to limitations in the process.

We monitor the adequacy of the allocated portion of the allowance quarterly and
adjust the allowance for any deficiencies through normal operations.


                                       9

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

This self-correcting mechanism reduces potential differences between estimates
and actual observed losses. In addition, the unallocated portion of the
allowance is examined quarterly to ensure that it remains relatively constant in
relation to the total allowance unless there are changes in the related criteria
that would indicate a need to either increase or decrease it. The determination
of the allowance for loan loss level is inherently subjective as it requires
estimates that are susceptible to significant revision as more information
becomes available. Accordingly, we cannot ensure that charge-offs in future
periods will not exceed the allowance for loan losses or that additional
increases in the allowance for loan losses will not be required resulting in an
adverse impact on operating results.

Fair values of financial instruments, in cases where quoted market prices are
not available, are based on estimates using present value or other valuation
techniques which are subject to change.

Real estate acquired in connection with foreclosures or in satisfaction of loans
is written-down to the lower of the related loan balance or 80.0 percent of fair
market value for residential properties or 75.0 percent of fair market value for
commercial properties based upon estimates derived through independent
appraisals. However, proceeds realized from sales may ultimately be higher or
lower than those estimates.

Intangible assets include goodwill and a core deposit intangible. We evaluate
goodwill for impairment at least annually and we evaluate the useful life of the
core deposit in each reporting period in order to determine if it should be
adjusted.

For a further discussion of our significant account policies, refer to the note
entitled, "Summary of significant accounting policies," in the Notes to
Consolidated Financial Statements to our Annual Report on Form 10-K for the
period ended December 31, 2004. This note lists the significant accounting
policies used by management in the development and presentation of our financial
statements. This Management's Discussion and Analysis, The Notes to the
Consolidated Financial Statements, and other financial statement disclosures
identify and address key variables and other qualitative and quantitative
factors that are necessary for the understanding and valuation of our financial
position, results of operations and cash flows.

OPERATING ENVIRONMENT:

According to the Federal Open Market Committee ("FOMC"), the United States
economy continued to grow at a respectable pace during the second quarter of
2005. The gross domestic product, the value of all goods and services produced
in the United States, grew at an annual pace of 3.4 percent in the second
quarter of 2005, after growing 3.8 percent in the first quarter.


                                       10

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Both personal and business spending increased at solid rates of 3.3 percent and
9.0 percent. In addition, despite rising energy prices, consumer confidence
rebounded at the end of the second quarter amidst improved economic and
employment conditions. Core consumer prices, excluding food and energy, rose at
a contained annual rate of 2.0 percent in June 2005. However, the FOMC has
indicated that inflationary pressures remained elevated. Given the continued
economic growth and pressure on consumer prices, the FOMC at each of its
meetings on May 3, 2005 and June 29, 2005, increased the target for the federal
funds rate 25 basis points. The target rate for federal funds stood at 3.25
percent at June 30, 2005. Subsequent to the end of the second quarter, the FOMC
at its meeting on August 9, 2005, raised the target rate another 25 basis points
to 3.50 percent.

REVIEW OF FINANCIAL POSITION:

At June 30, 2005, total assets were $532.3 million, an increase of $4.0 million
from $528.3 million at December 31, 2004. We experienced only moderate loan and
deposit growth from year-end. Loans, net of unearned income, grew $7.6 million
to $389.3 million at the close of the second quarter from $381.7 million at the
end of 2004. Total deposits increased $2.5 million to $481.0 million at June 30,
2005, from $478.5 million at the end of last year. Noninterest-bearing deposits
rose $5.7 million. However, due to intense competition for deposits within our
market area, interest-bearing deposits declined $3.2 million. Investment
securities declined $21.5 million. At the close of the second quarter, we had
$13.0 million in federal funds sold outstanding as compared to $0.9 million at
year-end 2004. Stockholders' equity improved to $48.9 million at June 30, 2005,
from $47.3 million at December 31, 2004.

In comparison to the end of the first quarter of 2005, total assets grew $2.1
million. Deposits, which declined $5.7 million in the first quarter, grew $8.2
million from $472.8 million at March 31, 2005. Loans, net of unearned income,
decreased $1.9 million, and investment securities decreased $12.5 million.
Excess funds from deposit growth and repayments of investment securities was
used to repay $7.8 million in short-term borrowings outstanding at the end of
the first quarter.

INVESTMENT PORTFOLIO:

Since mid-2004, the FOMC has been gradually increasing short-term interest rates
in measured 25 basis point increments. From year-end 2004, the federal funds
target rate moved up 100 basis points from 2.25 percent to 3.25 percent at June
30, 2005. The increase in the federal funds rate resulted in a similar increase
in short-term U.S. Treasury rates. However, uncharacteristically,
intermediate-term and long-term U.S. Treasury rates


                                       11

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

fell, which caused a flattening in the yield curve. Changes in the yields of
U.S. Treasuries impact the market value of our investment portfolio.
Specifically, the parts of the yield curve most closely related to our
investments include the two-year and ten-year U.S. Treasuries, which affect the
values of U.S. Government-sponsored agency securities, mortgage-backed
securities, including CMOs, and other short-term investments, and state and
municipal obligations. The yield on the two-year U.S. Treasury, which closed
2004 at 3.08 percent, rose 58 basis points to 3.66 percent at June 30, 2005.
Conversely, the yield on the ten-year U.S. Treasury fell 30 basis points to 3.94
percent at the close of the second quarter of 2005 from 4.24 percent at December
31, 2004. The market value appreciation of state and municipal obligations
caused by the yield reduction in the ten year U.S. Treasury more than offset the
market value depreciation of short-term investments caused by the increase in
the two year U.S. Treasury. As a result, the unrealized holding gain on the
investment portfolio, rose $76 to $2,400 at June 30, 2005, from $2,324 at
December 31, 2004.

The carrying values of the major classifications of securities as they relate to
the total investment portfolio at June 30, 2005, and December 31, 2004, are
summarized as follows:

DISTRIBUTION OF INVESTMENT SECURITIES AVAILABLE-FOR-SALE

<TABLE>
<CAPTION>
                                      JUNE 30,          DECEMBER 31,
                                        2005                2004
                                 -----------------   -----------------
                                  AMOUNT       %      AMOUNT       %
                                 --------   ------   --------   ------
<S>                              <C>        <C>      <C>        <C>
U.S. Government agencies .....    $29,999    30.82%  $ 44,645    37.59%
State and municipals:
   Taxable ...................     15,126    15.54     16,898    14.23
   Tax-exempt ................     34,804    35.76     34,605    29.14
Mortgage-backed securities ...     16,101    16.54     21,281    17.92
Equity securities:
   Restricted ................      1,141     1.17      1,153     0.97
   Other .....................        165     0.17        174     0.15
                                  -------   ------   --------   ------
      Total ..................    $97,336   100.00%  $118,756   100.00%
                                  =======   ======   ========   ======
</TABLE>

Our investment portfolio played a less prominent role in our earning asset mix.
Available-for-sale investment securities totaled $97.3 million at June 30, 2005,
a decrease of $21.5 million from $118.8 million at December 31, 2005. Maturities
of U.S. Government agencies and repayments from mortgage-backed securities were
utilized to repay short-term borrowings and purchase federal funds sold, as loan
demand moderated during the first half of the year.

For the six months ended June 30, the investment portfolio averaged $106.3
million in 2005, compared to $98.7 million last year. The tax-equivalent yield
on the investment portfolio decreased 37 basis points to 4.21 percent


                                       12

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

for the six months ended June 30, 2005, from 4.58 percent for the same six
months of 2004. For the second quarter, the tax-equivalent yield improved 3
basis points to 4.23 percent compared to 4.20 percent in the first quarter.

In addition to yield analysis, we utilize a total return approach to measure the
investment portfolio's performance. This approach gives a more complete picture
of a portfolio's overall performance since it takes into consideration both
market value and reinvestment income from repayments. The investment portfolio's
total return is the sum of all interest income, reinvestment income on all
proceeds from repayments and capital gains or losses, whether realized or
unrealized. For the 12 months ended June 30, 2005, total return on the
investment portfolio improved to 4.4 percent, compared to 2.2 percent for the 12
months ended March 31, 2005.

The maturity distribution of the amortized cost, fair value and weighted-average
tax-equivalent yield of the available-for-sale portfolio at June 30, 2005, is
summarized as follows. The weighted-average yield, based on amortized cost, has
been computed for tax-exempt state and municipals on a tax-equivalent basis
using the statutory tax rate of 34.0 percent. The distributions are based on
contractual maturity with the exception of mortgage-backed securities, CMOs and
equity securities. Mortgage-backed securities and CMOs have been presented based
upon estimated cash flows, assuming no change in the current interest rate
environment. Equity securities with no stated contractual maturities are
included in the "After ten years" maturity distribution. Expected maturities may
differ from contracted maturities because borrowers have the right to call or
prepay obligations with or without call or prepayment penalties.


                                       13

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

MATURITY DISTRIBUTION OF AVAILABLE-FOR-SALE PORTFOLIO

<TABLE>
<CAPTION>
                                                      AFTER ONE         AFTER FIVE
                                      WITHIN          BUT WITHIN        BUT WITHIN          AFTER
                                     ONE YEAR         FIVE YEARS        TEN YEARS         TEN YEARS           TOTAL
                                 ---------------   ---------------   ---------------   ---------------   ---------------
JUNE 30, 2005                     AMOUNT   YIELD    AMOUNT   YIELD    AMOUNT   YIELD    AMOUNT   YIELD    AMOUNT   YIELD
-------------                    -------   -----   -------   -----   -------   -----   -------   -----   -------   -----
<S>                              <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
Amortized cost:
U.S. Government agencies......   $25,152    3.06%  $ 5,035    2.69%                                      $30,187    3.00%
State and municipals:
   Taxable....................     2,561    1.98    12,929    2.67                                        15,490    2.56
   Tax-exempt.................       447    2.59     3,991    6.48   $ 9,298    7.94%  $18,342    7.53%   32,078    7.45
Mortgage-backed securities....     5,846    5.60     9,925    5.37       224    6.49         7    6.62    16,002    5.47
Equity securities:
   Restricted.................                                                           1,141    3.46     1,141    3.46
   Other......................                                                              38   13.31        38   13.31
                                 -------           -------           -------           -------           -------
      Total...................   $34,006    3.41%  $31,880    3.99%  $ 9,522    7.91%  $19,528    7.30%  $94,936    4.86%
                                 =======           =======           =======           =======           =======
Fair value:
U.S. Government agencies......   $25,027           $ 4,972                                               $29,999
State and municipals:
   Taxable....................     2,545            12,581                                                15,126
   Tax-exempt.................       443             4,218           $10,012           $20,131            34,804
Mortgage-backed securities....     5,875             9,989               230                 7            16,101
Equity securities:
   Restricted.................                                                           1,141             1,141
   Other......................                                                             165               165
                                 -------           -------           -------           -------           -------
      Total...................   $33,890           $31,760           $10,242           $21,444           $97,336
                                 =======           =======           =======           =======           =======
</TABLE>

LOAN PORTFOLIO:

Similar to longer-term U.S. Treasury rates, the increase in short-term interest
rates had no effect on mortgage rates. The rate on a 30-year conventional
mortgage, which rose 18 basis points in the first quarter to 5.93 percent at
March 31, 2005, from 5.75 percent at year-end 2004, fell 35 basis points to 5.58
percent at the close of the second quarter. Due to the favorable mortgage rates,
both new and existing homes sales posted record highs in June 2005. In addition,
the median home price for all housing types appreciated 14.7 percent from a year
ago, the strongest increase since November of 1980. With a continuation of
demand in the housing market, activity in our secondary mortgage department
continued to be strong during the first half of 2005. Residential mortgage loans
serviced for the Federal National Mortgage Association ("FNMA") grew $5.8
million or at an annualized rate of 12.0 percent to $103.6 million at June 30,
2005, from $97.8 million at year-end 2004. In comparison to the first half of
2004, residential mortgages serviced for the FNMA grew at an annual pace of 8.9
percent. For the three months and six months ended June 30, 2005, residential
mortgages sold to the FNMA totaled $6.2 million and $11.6 million, compared to
$6.2 million and $12.9 million for the same periods last year. Net gains
realized on the sale of residential mortgages totaled $122 for the second
quarter and $278 year-to-date 2005, compared to $128 and $324 for the same
periods of 2004.


                                       14

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Rising confidence in the economy among corporate executives led
to a 9.0 percent increase in business spending in the second quarter of 2005.
Spending for equipment and software rose 11.0 percent, while structural
investment increased 3.1 percent. According to the April 2005 Senior Loan
Officer Opinion Survey issued by the Federal Reserve, banks indicated that they
experienced an increase in demand for commercial and industrial loans, as well
as commercial mortgages. However, banks reported an easing of lending standards
in response to elevated competition among institutions, as well. As a result,
commercial and industrial loans at all commercial banks increased at an annual
rate of 12.8 percent in the second quarter of 2005. Contrary to the banking
industry, our commercial loans, including commercial mortgages and lease
financing, decreased $3.3 million to $266.2 million at June 30, 2005, from
$269.5 million at the end of the first quarter. The decrease was due to a
decline in the demand for commercial mortgages, coupled with a decrease in the
outstanding balance of tax-exempt loans to local municipalities. On the other
hand, taxable commercial loans increased $8.9 million or 9.5 percent in the
second quarter.

Consumer spending was also robust, increasing 3.3 percent in the second quarter
of 2005. Spending on durable goods rose 8.3 percent, while nondurable goods rose
3.3 percent. Despite the increase in spending the banking industry experienced a
decline in demand for consumer loans. Consumer loans at all commercial banks
decreased at an annual rate of just under 1.0 percent during the second quarter
of 2005. Conversely, our consumer loans rose $0.7 million or at an annual rate
of 10.2 percent to $28.3 million at June 30, 2005, from $27.6 million at the
close of the first quarter. In addition, residential mortgage loans increased
$668 or at an annual rate of 2.8 percent.

For the six months ended June 30, 2005, loans averaged $398.5 million, an
increase of $27.2 million or 7.3 percent compared to $371.3 million for the same
period of 2004. Loan yields, which have declined significantly over the past two
years, appear to be not only stabilizing but beginning to rise. The
tax-equivalent yield on the loan portfolio declined only 3 basis points to 6.11
percent for the first six months of 2005, from 6.14 percent for the same six
months of last year. Despite the slight decline in the year-to-date yield, the
tax-equivalent yield on the loan portfolio increased 9 basis points in the
second quarter of 2005 in comparison to the previous quarter. Given the FOMC's
continued tightening of monetary policy, we anticipate that loan yields will
rise over the remainder of 2005 as variable rate loans tied to prime reprice at
a higher rate.


                                       15

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The composition of the loan portfolio at June 30, 2005, and December 31, 2004,
is summarized as follows:

DISTRIBUTION OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                           JUNE 30,           DECEMBER 31,
                                             2005                 2004
                                       -----------------   -----------------
                                        AMOUNT       %      AMOUNT       %
                                       --------   ------   --------   ------
<S>                                    <C>        <C>      <C>        <C>
Commercial, financial and others ...   $132,236    33.97%  $114,341    29.95%
Real estate:
   Construction ....................      5,457     1.40      6,704     1.76
   Mortgage ........................    221,342    56.86    230,555    60.40
Consumer, net ......................     28,307     7.27     27,893     7.31
Lease financing, net ...............      1,932     0.50      2,230     0.58
                                       --------   ------   --------   ------
   Loans, net of unearned income ...    389,274   100.00%   381,723   100.00%
                                                  ======              ======
Less: allowance for loan losses ....      4,037               3,859
                                       --------            --------
      Net loans ....................   $385,237            $377,864
                                       ========            ========
</TABLE>

In an attempt to limit IRR and liquidity strains, we continually examine the
maturity distribution and interest rate sensitivity of the loan portfolio. As
part of our asset/liability management strategy to reduce the amount of IRR in
the loan portfolio, we price our loan products to increase our holdings of
adjustable-rate loans and reduce the average term of fixed-rate loans.
Approximately 46.5 percent of the lending portfolio is expected to reprice
within the next 12 months.

The maturity and repricing information of the loan portfolio by major
classification at June 30, 2005, is summarized as follows:

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                         AFTER ONE
                                              WITHIN    BUT WITHIN     AFTER
JUNE 30, 2005                                ONE YEAR   FIVE YEARS   FIVE YEARS     TOTAL
-------------                                --------   ----------   ----------   --------
<S>                                          <C>        <C>          <C>          <C>
Maturity schedule:
Commercial, financial and others .........   $ 50,223    $ 29,888     $ 52,125    $132,236
Real estate:
   Construction ..........................      5,457                                5,457
   Mortgage ..............................     14,449      51,105      155,788     221,342
Consumer, net ............................      9,630      15,491        3,186      28,307
Lease financing, net .....................        705       1,227                    1,932
                                             --------    --------     --------    --------
      Total ..............................   $ 80,464    $ 97,711     $211,099    $389,274
                                             ========    ========     ========    ========
Repricing schedule:
Predetermined interest rates .............   $ 43,503    $ 69,247     $ 47,449    $160,199
Floating- or adjustable-interest rates ...    137,673      91,349           53     229,075
                                             --------    --------     --------    --------
      Total ..............................   $181,176    $160,596     $ 47,502    $389,274
                                             ========    ========     ========    ========
</TABLE>


                                       16

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

In addition to the risks inherent in our loan portfolio, in the normal course of
business, we are also a party to financial instruments with off-balance sheet
risk to meet the financing needs of our customers. These instruments include
legally binding commitments to extend credit, unused portions of home equity and
credit card lines and commercial letters of credit, and involve, to varying
degrees, elements of credit risk and IRR in excess of the amount recognized in
the financial statements.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Commercial letters of credit are conditional
commitments issued by us to support customers in the purchase of commercial
goods. Commercial letters of credit are guarantees of funding and do not
obligate us to make payments to the guaranteed party. These letters of credit
are automatically renewable upon their anniversary date unless canceled by us
prior to that date.

The contractual amounts of off-balance sheet commitments at June 30, 2005 and
December 31, 2004, are summarized as follows:

DISTRIBUTION OF OFF-BALANCE SHEET COMMITMENTS

<TABLE>
<CAPTION>
                                                           JUNE 30,   DECEMBER 31,
                                                             2005         2004
                                                           --------   ------------
<S>                                                        <C>        <C>
Commitments to extend credit ...........................    $55,438      $49,504
Unused portions of home equity and credit card lines ...     13,470       12,776
Commercial letters of credit ...........................      9,567        9,062
                                                            -------      -------
   Total ...............................................    $78,475      $71,342
                                                            =======      =======
</TABLE>

These commitments are generally issued for one year or less and often expire
unused in whole or in part by the customer. We record an allowance for credit
losses, if deemed necessary, separately as a liability. No allowance was deemed
necessary at June 30, 2005 and December 31, 2004. We do not anticipate that
losses, if any, that may occur as a result of funding off balance sheet
commitments, would have a material adverse effect on our operating results or
financial position.


                                       17

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSET QUALITY:

National, Pennsylvania and market area unemployment rates at June 30, 2005 and
2004, are summarized as follows:

<TABLE>
<CAPTION>
JUNE 30,                                                             2005   2004
--------                                                             ----   ----
<S>                                                                  <C>    <C>
United States ....................................................   5.0%   5.6%
Pennsylvania .....................................................   4.8    5.5
Lackawanna county ................................................   5.4    6.2
Monroe county ....................................................   4.9    6.3
Susquehanna county ...............................................   4.6    5.8
Wayne county .....................................................   4.7    5.8
Wyoming county ...................................................   5.1%   6.2%
</TABLE>

The employment conditions improved considerably for the Nation, the Commonwealth
of Pennsylvania and the counties within our market area from one year ago. Job
gains in service-producing industries, specifically professional and business
services and health care, continued to be the driving force behind the improved
employment climate. Similarly, employment conditions improved for all of the
counties in our local market area. Additional jobs created in our area more than
sustained the growth in the civilian labor force. We anticipate labor conditions
to remain favorable in our market area in the second half of 2005. However, no
assurance can be given that these favorable employment conditions will continue.
Our asset quality could be adversely affected should employment conditions
weaken.

Our asset quality deteriorated from year-end 2004 as evidenced by a $328 or 10.0
percent increase in nonperforming assets to $3,612 at June 30, 2005, from $3,284
at year-end 2004. An increase in nonaccrual loans, partially offset by
reductions in accruing loans past due 90 days or more and foreclosed assets was
primarily responsible for the deterioration. As a percentage of loans, net of
unearned income, nonperforming assets equaled 0.93 percent at June 30, 2005
compared to 0.86 percent at December 31, 2004.

Loans on nonaccrual status increased $923. Commercial and industrial loans
placed on nonaccrual status rose $345, while nonaccruing mortgage loans
increased $578. Partially offsetting the increase in nonaccrual loans were
decreases of $417 in accruing loans past due 90 days or more and $178 in
foreclosed assets. Five loans totaling $91 were transferred to foreclosed assets
during the first half of 2005. Four properties with an aggregate carrying value
of $269 were sold for $326, resulting in a net realized gain of $57.


                                       18

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Information concerning nonperforming assets at June 30, 2005, and December 31,
2004, is summarized as follows. The table includes loans or other extensions of
credit classified for regulatory purposes and all material loans or other
extensions of credit that cause management to have serious doubts as to the
borrowers' ability to comply with present loan repayment terms.

DISTRIBUTION OF NONPERFORMING ASSETS

<TABLE>
<CAPTION>
                                                         JUNE 30,   DECEMBER 31,
                                                           2005         2004
                                                         --------   ------------
<S>                                                      <C>        <C>
Nonaccrual loans:
Commercial, financial and others .....................    $1,194       $  849
Real estate:
   Construction
   Mortgage ..........................................     1,701        1,123
Consumer, net
Lease financing, net
                                                          ------       ------
      Total nonaccrual loans .........................     2,895        1,972
                                                          ------       ------

Accruing loans past due 90 days or more:
Commercial, financial and others .....................       172           91
Real estate:
   Construction
   Mortgage ..........................................       152          653
Consumer, net ........................................       137          169
Lease financing, net .................................        35
                                                          ------       ------
      Total accruing loans past due 90 days or more ..       496          913
                                                          ------       ------
      Total nonperforming loans ......................     3,391        2,885
                                                          ------       ------
Foreclosed assets ....................................       221          399
                                                          ------       ------
      Total nonperforming assets .....................    $3,612       $3,284
                                                          ======       ======

Ratios:
Nonperforming loans as a percentage of loans, net ....      0.87%        0.76%
Nonperforming assets as a percentage of loans, net ...      0.93%        0.86%
</TABLE>

We maintain the allowance for loan losses at a level we believe adequate to
absorb probable credit losses related to specifically identified loans, as well
as probable incurred loan losses inherent in the remainder of the loan portfolio
as of the balance sheet date. The balance in the allowance for loan losses
account is based on past events and current economic conditions. We employ the
Federal Financial Institution Examination Council ("FFIEC") Interagency Policy
Statement and GAAP in assessing the adequacy of the allowance account. Under
GAAP, the adequacy of the allowance account is determined based on the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," for loans specifically
identified to be individually evaluated for impairment and the requirements of
SFAS No. 5, "Accounting for


                                       19

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Contingencies," for large groups of smaller-balance homogeneous loans to be
collectively evaluated for impairment.

We follow our systematic methodology in accordance with procedural discipline by
applying it in the same manner regardless of whether the allowance is being
determined at a high point or a low point in the economic cycle. Each quarter,
our loan review department identifies those loans to be individually evaluated
for impairment and those loans collectively evaluated for impairment utilizing a
standard criteria. Internal loan review grades are assigned quarterly to loans
identified to be individually evaluated. A loan's grade may differ from period
to period based on current conditions and events, however, we consistently
utilize the same grading system each quarter. We consistently use loss
experience from the latest eight quarters in determining the historical loss
factor for each pool collectively evaluated for impairment. Qualitative factors
are evaluated in the same manner each quarter and are adjusted within a relevant
range of values based on current conditions.

Information concerning impaired loans at June 30, 2005, and December 31, 2004,
is summarized as follows. The table includes credits classified for regulatory
purposes and all material credits that cause management to have serious doubts
as to the borrower's ability to comply with present loan repayment terms.

DISTRIBUTION OF IMPAIRED LOANS

<TABLE>
<CAPTION>
                                                         JUNE 30,   DECEMBER 31,
                                                           2005         2004
                                                         --------   ------------
<S>                                                      <C>        <C>
Nonaccrual loans:
Commercial, financial and others .....................    $1,194       $  849
Real estate:
   Construction
   Mortgage ..........................................     1,701        1,123
Consumer, net
Lease financing, net
                                                          ------       ------
      Total nonaccrual loans .........................     2,895        1,972
                                                          ------       ------

Accruing loans:
Commercial, financial and others .....................     1,544        3,889
Real estate:
   Construction
   Mortgage ..........................................     1,611        1,205
Consumer, net
Lease financing, net
                                                          ------       ------
      Total accruing loans ...........................     3,155        5,094
                                                          ------       ------
      Total impaired loans ...........................    $6,050       $7,066
                                                          ======       ======

Ratio:
Impaired loans as a percentage of loans, net .........      1.55%        1.85%
</TABLE>


                                       20

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Impaired loans decreased $1,016 or 14.4 percent to $6,050 at June 30, 2005, from
$7,066 at year-end 2004. A $1,939 reduction in accruing loans with impaired
status partially offset the $923 increase in nonaccrual loans. The majority of
the decrease in impaired loans was due to a reduction in our risk exposure
associated with one commercial customer involved in a land development. The
development interest was sold to an unrelated third party, resulting in a
reduction in the outstanding debt to this customer.

Information relating to the recorded investment in impaired loans at June 30,
2005 and December 31, 2004, is summarized as follows:

<TABLE>
<CAPTION>
                                                         JUNE 30,   DECEMBER 31,
                                                           2005         2004
                                                         --------   ------------
<S>                                                      <C>        <C>
Impaired loans:
With a related allowance..............................    $4,233       $2,930
With no related allowance.............................     1,817        4,136
                                                          ------       ------
   Total..............................................    $6,050       $7,066
                                                          ======       ======
</TABLE>

The analysis of changes affecting the allowance for loan losses related to
impaired loans for the six months ended June 30, 2005, is summarized as follows:

<TABLE>
<CAPTION>
                                                                        JUNE 30,
                                                                          2005
                                                                        --------
<S>                                                                     <C>
Balance at January 1.................................................    $1,179
Provision for loan losses............................................     1,240
Loans charged-off....................................................       182
Loans recovered
                                                                         ------
Balance at period-end................................................    $2,237
                                                                         ======
</TABLE>

Interest income on impaired loans that would have been recognized had the loans
been current and the terms of the loans not been modified, the aggregate amount
of interest income recognized and the amount recognized using the cash-basis
method and the average recorded investment in impaired loans for the three-month
and six-month periods ended June 30, 2005 and 2004 are summarized as follows:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED   SIX MONTHS ENDED
                                                        JUNE 30,            JUNE 30,
                                                  ------------------   ----------------
                                                     2005     2004       2005     2004
                                                    ------   ------     ------   ------
<S>                                               <C>        <C>       <C>       <C>
Gross interest due under terms.................     $  110   $   39     $  218   $   68
Interest income recognized.....................        100       28        167       60
                                                    ------   ------     ------   ------
Interest income not recognized.................     $   10   $   11     $   51   $    8
                                                    ======   ======     ======   ======

Interest income recognized (cash-basis)........     $  100   $   28     $  167   $   60
Average recorded investment in impaired loans..     $6,248   $2,487     $6,491   $2,080
</TABLE>


                                       21

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Cash received on impaired loans applied as a reduction of principal totaled
$4,885 and $1,006 for the six and three months ended June 30, 2005. For the
respective periods of 2004 cash receipts on impaired loans totaled $244 and $32.
There were no commitments to extend additional funds to such parties at June 30,
2005.

The allocation of the allowance for loan losses at June 30, 2005 and December
31, 2004, is summarized as follows:

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                               JUNE 30,          DECEMBER 31,
                                                 2005                2004
                                          -----------------   -----------------
                                                   CATEGORY            CATEGORY
                                                     AS A                AS A
                                                     % OF                % OF
                                          AMOUNT     LOANS    AMOUNT     LOANS
                                          ------   --------   ------   --------
<S>                                       <C>      <C>        <C>      <C>
Allocated allowance:
Specific:
Commercial, financial and others.......   $1,696      0.70%   $  728     1.24%
Real estate:
   Construction
   Mortgage............................      541      0.85       451     0.61
Consumer, net
Lease financing, net
                                          ------    ------    ------   ------
Total specific.........................    2,237      1.55     1,179     1.85
                                          ------    ------    ------   ------

Formula:
Commercial, financial and others.......      192     33.27       149    28.71
Real estate:
   Construction........................               1.40               1.76
   Mortgage............................      743     56.01       878    59.79
Consumer, net..........................      294      7.27       288     7.31
Lease financing, net...................        1      0.50         1     0.58
                                          ------    ------    ------   ------
      Total formula....................    1,230     98.45     1,316    98.15
                                          ------    ------    ------   ------
      Total allocated allowance........    3,467    100.00%    2,495   100.00%
                                                    ======             ======
Unallocated allowance..................      570               1,364
                                          ------              ------
      Total allowance for loan losses..   $4,037              $3,859
                                          ======              ======
</TABLE>

The allocated allowance for loan losses account increased $972 to $3,467 at June
30, 2005, from $2,495 at December 31, 2004. The increase resulted from a $1,058
addition to the specific portion of the allowance for impairment of loans
individually evaluated under SFAS No. 114, partially offset by an $86 reduction
in the formula portion of the allowance for loans collectively evaluated for
impairment under SFAS No. 5. The increase in the specific portion primarily
resulted from an increase in commercial loans which are still accruing loans but
have been identified as impaired with a recorded investment in excess of fair
value.


                                       22

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The unallocated portion of the allowance for loan losses equaled $570 at the end
of the second quarter of 2005 compared to $1,364 at year-end 2004. The decrease
in the unallocated portion of the allowance for loan losses account was deemed
appropriate due to the improvement in the economic climate in our market area.

A reconciliation of the allowance for loan losses and illustration of
charge-offs and recoveries by major loan category for the six months ended June
30, 2005, is summarized as follows:

RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                        JUNE 30,
                                                                          2005
                                                                        --------
<S>                                                                     <C>
Allowance for loan losses at beginning of period.....................    $3,859
Loans charged-off:
Commercial, financial and others.....................................        72
Real estate:
   Construction
   Mortgage..........................................................       115
Consumer, net........................................................       134
Lease financing, net
                                                                         ------
      Total..........................................................       321
                                                                         ------

Loans recovered:
Commercial, financial and others.....................................         1
Real estate:
   Construction
   Mortgage..........................................................         1
Consumer, net........................................................        39
Lease financing, net
                                                                         ------
      Total..........................................................        41
                                                                         ------
Net loans charged-off................................................       280
                                                                         ------
Provision charged to operating expense...............................       458
                                                                         ------
Allowance for loan losses at end of period...........................    $4,037
                                                                         ======

Ratios:
Net loans charged-off as a percentage of average loans outstanding...      0.14%
Allowance for loan losses as a percentage of period end loans........      1.04%
</TABLE>

The allowance for loan losses increased $178 to $4,037 at June 30, 2005, from
$3,859 at the end of 2004. For the six months ended June 30, 2005, a $458
provision for loan losses exceeded net charge-offs of $280. As a percentage of
loans, net of unearned income, the allowance equaled 1.04 percent at the end of
the second quarter of 2005 and 1.01 percent at year-end 2004. The allowance
account covered 111.8 percent of nonperforming assets at June 30, 2005 and 117.5
percent at December 31, 2004.


                                       23

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Past due loans not satisfied through repossession, foreclosure or related
actions, are evaluated individually to determine if all or part of the
outstanding balance should be charged against the allowance for loan losses
account. Any subsequent recoveries are credited to the allowance account. Net
charge-offs were $280 or 0.14 percent of average loans outstanding for the six
months ended June 30, 2005, compared to $141 or 0.08 percent for the same period
last year.

DEPOSITS:

Despite an increase in disposable personal income, consumers chose to spend
rather than save causing the personal savings rate throughout the United States
to drop considerably in the first and second quarters of 2005. The personal
savings rate equaled 0.7 percent for the first quarter and 0.2 percent in the
second, down from 1.8 percent for all of 2004. As a result, bank deposit
gathering moderated significantly during the first half of 2005.

Strong deposit growth continued to moderate in the second quarter of 2005. As a
result, competition for deposits within our market area escalated, thereby
driving up the costs associated with deposit gathering. We did not aggressively
compete for new deposits. However, we were forced to raise interest rates paid
in order to retain our current customer base. Total deposits, which decreased
$5.7 million from year-end 2004 to $472.8 million at the end of the first
quarter of 2005, rebounded $8.2 million to $481.0 million at June 30, 2005.
Noninterest-bearing accounts rose $6.5 million or at an annualized rate of 38.7
percent, while interest-bearing accounts increased $1.7 million from the
previous quarter-end. With regard to interest-bearing accounts, we experienced
moderate growth in NOW accounts, savings accounts and time deposits less than
$100. However, this growth was almost entirely offset by reductions in money
market accounts and large denomination time deposits.


                                       24

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The average amount of, and the rate paid on, the major classifications of
deposits for the six months ended June 30, 2005 and 2004, are summarized as
follows:

DEPOSIT DISTRIBUTION

<TABLE>
<CAPTION>
                                              JUNE 30,             JUNE 30,
                                                2005                 2004
                                         ------------------   ------------------
                                          AVERAGE   AVERAGE    AVERAGE   AVERAGE
                                          BALANCE     RATE     BALANCE     RATE
                                         --------   -------   --------   -------
<S>                                      <C>        <C>       <C>        <C>
Interest-bearing:
Money market accounts.................   $ 21,547    1.30%    $ 18,222    0.93%
NOW accounts..........................     51,374    1.48       38,062    0.78
Savings accounts......................    122,220    0.83      129,360    0.74
Time deposits less than $100..........    178,605    3.62      180,589    3.68
Time deposits $100 or more............     30,720    3.39       28,713    3.28
                                         --------             --------
   Total interest-bearing.............    404,466    2.36%     394,946    2.28%
Noninterest-bearing...................     69,330               60,318
                                         --------             --------
   Total deposits.....................   $473,796             $455,264
                                         ========             ========
</TABLE>

For the six months ended June 30, 2005, average total deposits increased $18.5
million or 4.1 percent to $473.8 million compared to $455.3 million for the same
period of 2004. We experienced strong growth in our noninterest-bearing deposits
which rose $9.0 million or 14.9 percent. Average interest-bearing deposits grew
$9.6 million or 2.4 percent. NOW accounts, money market accounts and large
denomination time deposits averaged higher, while average savings accounts and
time deposits less than $100 declined. The rise in short-term interest rates
resulted in an 8 basis point increase in the cost of deposits to 2.36 percent
for the six months ended June 30, 2005, from 2.28 percent for the same period of
2004. The FOMC may continue to raise interest rates throughout the remainder of
2005. We anticipate a continued increase in our cost of funds given the FOMC's
current monetary policy stance coupled with heightened competition for deposits
within our market area.

Volatile deposits, time deposits in denominations of $100 or more, equaled $26.4
million at June 30, 2005, an $8.1 million decrease from $34.5 million at
December 31, 2004. These deposits averaged $30.7 million for the six months
ended June 30, 2005, compared to $28.7 million for the same six months of last
year. The average cost of these deposits rose 11 basis points to 3.39 percent
for the first half of 2005, compared to 3.28 percent for the same period of
2004.


                                       25

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Maturities of time deposits of $100 or more at June 30, 2005, and December 31,
2004, are summarized as follows:

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE

<TABLE>
<CAPTION>
                                                         JUNE 30,   DECEMBER 31,
                                                           2005         2004
                                                         --------   ------------
<S>                                                      <C>        <C>
Within three months...................................    $ 4,044      $ 7,353
After three months but within six months..............      4,449        4,426
After six months but within twelve months.............      3,535        6,198
After twelve months...................................     14,325       16,515
                                                          -------      -------
   Total..............................................    $26,353      $34,492
                                                          =======      =======
</TABLE>

MARKET RISK SENSITIVITY:

Market risk is the risk to our earnings or financial position resulting from
adverse changes in market rates or prices, such as interest rates, foreign
exchange rates or equity prices. Our exposure to market risk is primarily IRR
associated with our lending, investing and deposit-gathering activities. During
the normal course of business, we are not exposed to foreign currency exchange
risk or commodity price risk. Our exposure to IRR can be explained as the
potential for change in our reported earnings and/or the market value of our net
worth. Variations in interest rates affect earnings by changing net interest
income and the level of other interest-sensitive income and operating expenses.
Interest rate changes also affect the underlying economic value of our assets,
liabilities and off-balance sheet items. These changes arise because the present
value of future cash flows, and often the cash flows themselves, change with
interest rates. The effects of the changes in these present values reflect the
change in our underlying economic value and provide a basis for the expected
change in future earnings related to interest rates. IRR is inherent in the role
of banks as financial intermediaries. However, a bank with a high degree of IRR
may experience lower earnings, impaired liquidity and capital positions, and
most likely, a greater risk of insolvency. Therefore, banks must carefully
evaluate IRR to promote safety and soundness in their activities.

Short-term interest rates, which were at historically low levels for a
considerable period, began rising steadily since mid-2004. Due to these changes
in the interest rate environment, IRR and effectively managing it have become
very important to both bank management and regulators. Bank regulations require
us to develop and maintain an IRR management program, overseen by the Board of
Directors and senior management, that involves a comprehensive risk management
process in order to effectively identify, measure, monitor and control risk.
Should we have material weaknesses in our risk management process or high
exposure relative to our capital, bank


                                       26

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

regulatory agencies will take action to remedy these shortcomings. Moreover, the
level of IRR exposure and the quality of our risk management process is a
determining factor when evaluating capital adequacy.

The Asset/Liability Management Committee ("ALCO"), comprised of members of our
Board of Directors, senior management and other appropriate officers, oversees
our IRR management program. Specifically ALCO analyzes economic data and market
interest rate trends, as well as competitive pressures, and utilizes several
computerized modeling techniques to reveal potential exposure to IRR. This
allows us to monitor and attempt to control the influence these factors may have
on our rate-sensitive assets ("RSA") and rate-sensitive liabilities ("RSL"), and
overall operating results and financial position. One such technique utilizes a
static gap model that considers repricing frequencies of RSA and RSL in order to
monitor IRR. Gap analysis attempts to measure our interest rate exposure by
calculating the net amount of RSA and RSL that reprice within specific time
intervals. A positive gap occurs when the amount of RSA repricing in a specific
period is greater than the amount of RSL repricing within that same time frame
and is indicated by a RSA/RSL ratio greater than 1.0. A negative gap occurs when
the amount of RSL repricing is greater than the amount of RSA repricing and is
indicated by a RSA/RSL ratio less than 1.0. A positive gap implies that earnings
will be impacted favorably if interest rates rise and adversely if interest
rates fall during the period. A negative gap tends to indicate that earnings
will be affected inversely to interest rate changes.


                                       27

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Our interest rate sensitivity gap position, illustrating RSA and RSL at their
related carrying values, is summarized as follows. The distributions in the
table are based on a combination of maturities, call provisions, repricing
frequencies and prepayment patterns. Variable-rate assets and liabilities are
distributed based on the repricing frequency of the instrument. Mortgage
instruments are distributed in accordance with estimated cash flows, assuming
there is no change in the current interest rate environment.

INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
                                                     DUE AFTER      DUE AFTER
                                                    THREE MONTHS    ONE YEAR
                                     DUE WITHIN      BUT WITHIN    BUT WITHIN    DUE AFTER
JUNE 30, 2005                       THREE MONTHS   TWELVE MONTHS   FIVE YEARS   FIVE YEARS     TOTAL
-------------                       ------------   -------------   ----------   ----------   --------
<S>                                 <C>            <C>             <C>          <C>          <C>
Rate-sensitive assets:
Investment securities ...........     $ 13,149       $ 20,741       $ 31,760      $31,686    $ 97,336
Loans held for sale, net ........        3,263                                                  3,263
Loans, net of unearned income ...      116,791         64,385        160,596       47,502     389,274
Federal funds sold ..............       13,000                                                 13,000
                                      --------       --------       --------      -------    --------
   Total ........................     $146,203       $ 85,126       $192,356      $79,188    $502,873
                                      ========       ========       ========      =======    ========
Rate-sensitive liabilities:
Money market accounts ...........                    $ 20,127                                $ 20,127
NOW accounts ....................                      56,440                                  56,440
Savings accounts ................                                   $124,044                  124,044
Time deposits less than $100 ....     $ 19,915         57,989         79,876      $22,861     180,641
Time deposits $100 or more ......        4,044          7,984         10,718        3,607      26,353
                                      --------       --------       --------      -------    --------
   Total ........................     $ 23,959       $142,540       $214,638      $26,468    $407,605
                                      ========       ========       ========      =======    ========
Rate sensitivity gap:
   Period .......................     $122,244       $(57,414)      $(22,282)     $52,720
   Cumulative ...................     $122,244       $ 64,830       $ 42,548      $95,268    $ 95,268

RSA/RSL ratio:
   Period .......................         6.10           0.60           0.90         2.99
   Cumulative ...................         6.10           1.39           1.11         1.23        1.23
</TABLE>

Our cumulative one-year RSA/RSL ratio equaled 1.39 at June 30, 2005, compared to
1.31 at the end of the previous quarter. As previously mentioned, these ratios
indicate that if interest rates increase our earnings would likely be favorably
impacted. Given the current rate environment and the position of the FOMC that
rates will, more than likely, increase over the next 18 months, ALCO continued
to focus its efforts on making certain the gap position between RSA and RSL
remained positive. Specifically, we predominantly offer commercial loans with
adjustable-rate terms that either reprice immediately or within one year. Should
interest rates increase, a greater amount of RSA would reprice upward in the
near term and at a faster pace than RSL, thereby positively affecting net
interest income. However, these forward-looking statements are qualified in the
aforementioned section entitled "Forward-Looking Discussion" in this
Management's Discussion and Analysis.

The increase in our RSA/RSL ratio from the end of the first quarter of 2005
resulted from a $5.7 million increase in RSA repricing within the next


                                       28

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

twelve months coupled with a $6.1 million decrease in RSL repricing within the
same timeframe. The increase in RSA resulted primarily from a $13.0 million
increase in federal funds sold, partially offset by a $8.1 million reduction in
investment securities maturing or repricing in twelve months. For the most part,
the decrease in RSL was directly related to a $7.8 million decrease in
short-term borrowings which were outstanding at the end of the first quarter of
2005.

We also experienced an increase in our three-month ratio to 6.10 at June 30,
2005, from 3.14 at the end of the previous quarter. The increase primarily
resulted from a $13.9 million increase in the amount of RSA coupled with an
$18.2 million reduction in RSL maturing or repricing within three months.
Similarly, the increase in federal funds sold was primarily responsible for the
increase in RSA, while the reduction in RSL resulted from a $10.4 million
reduction in time deposits maturing or repricing within three months coupled
with the $7.8 million decrease in short-term borrowings.

Static gap analysis, although a credible measuring tool, does not fully
illustrate the impact of interest rate changes on future earnings. First, market
rate changes normally do not equally or simultaneously affect all categories of
assets and liabilities. Second, assets and liabilities that can contractually
reprice within the same period may not do so at the same time or to the same
magnitude. Third, the interest rate sensitivity table presents a one-day
position. Variations occur daily as we adjust our rate sensitivity throughout
the year. Finally, assumptions must be made in constructing such a table. For
example, the conservative nature of our Asset/Liability Management Policy
assigns money market and NOW accounts to the "Due after three but within twelve
months" repricing interval. In reality, these items may reprice less frequently
and in different magnitudes than changes in general interest rate levels.

As the static gap report fails to address the dynamic changes in the balance
sheet composition or prevailing interest rates, we utilize a simulation model to
enhance our asset/liability management. This model is used to create pro forma
net interest income scenarios under various interest rate shocks. Model results
at June 30, 2005, produced results similar to those indicated by the one-year
static gap position. Given parallel and instantaneous shifts in interest rates
of plus 100 and 200 basis points, net interest income should increase by 2.1
percent and 4.1 percent. Conversely, given an instantaneous and parallel shift
in general market rates of minus 100 basis points and 200 basis points, net
interest income would decrease by 2.2 percent and 7.1 percent. We will continue
to monitor our IRR for the remainder of 2005 and employ deposit and loan


                                       29

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

pricing strategies and direct the reinvestment of loan and investment repayments
in order to maintain a positive IRR position.

Financial institutions are affected differently by inflation than commercial and
industrial companies that have significant investments in fixed assets and
inventories. Most of our assets are monetary in nature and change
correspondingly with variations in the inflation rate. It is difficult to
precisely measure the impact inflation has on us, however we believe that our
exposure to inflation can be mitigated through asset/liability management.

LIQUIDITY:

Liquidity management is essential to our continuing operations as it gives us
the ability to meet our financial obligations as they come due, as well as to
take advantage of new business opportunities as they arise. Our financial
obligations include, but are not limited to, the following:

     -    Funding new and existing loan commitments;

     -    Payment of deposits on demand or at their contractual maturity;

     -    Repayment of borrowings as they mature;

     -    Payment of lease obligations; and

     -    Payment of operating expenses.

Our contractual obligations did not change significantly from the amounts
reported in our Annual Report on Form 10-K for the period ended December 31,
2004. We believe our liquidity position will be adequate to support our
contractual obligations as they come due.

We employ a number of analytical techniques in assessing the adequacy of our
liquidity position. One such technique is the use of ratio analysis related to
our reliance on noncore funds to fund our investments and loans maturing after
June 30, 2005. Our noncore funds consist of time deposits in denominations of
$100 or more. These funds are not considered to be a strong source of liquidity
since they are very interest rate sensitive and are considered to be highly
volatile. At June 30, 2005, our net noncore funding dependence ratio, the
difference between noncore funds and short-term investments to long-term assets,
was negative 4.7 percent. Similarly, our net short-term noncore funding
dependence ratio, noncore funds maturing within one-year, less short-term
investments to long-term assets equaled negative 8.0 percent at the end of the
second quarter of 2005. Negative ratios indicated that at June 30, 2005, we did
not rely on noncore sources to fund our long-term assets. In addition, our
liquidity position improved in comparison to the end of the previous quarter.
These ratios at March 31, 2005, were negative 0.9 percent and negative 4.3
percent. We believe that


                                       30

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

by maintaining adequate volumes of short-term investments and implementing
competitive pricing strategies on deposits, we can ensure adequate liquidity to
support future growth.

The Consolidated Statements of Cash Flows present the changes in cash and cash
equivalents from operating, investing and financing activities and further
illustrates the improvement in our liquidity position. Cash and cash
equivalents, consisting of cash on hand, cash items in the process of
collection, noninterest-bearing deposits with other banks, balances with the
Federal Reserve Bank of Philadelphia and the Federal Home Loan Bank of
Pittsburgh ("FHLB-Pgh"), and federal funds sold, increased $16.7 million during
the six months ended June 30, 2005. In comparison, cash and cash equivalents
decreased $4.6 million for the same period last year. For the first half of
2005, net cash of $13.2 million provided by investing activities was the primary
factor leading to the increase in cash and cash equivalents. In addition,
operating and financing provided us with net cash of $1.9 million and $1.6
million. For the same period of 2004, net cash provided by financing activities
of $6.6 million and operating activities of $4.7 million was more than offset by
net cash used in investing activities of $15.9 million.

Investing activities primarily involve transactions related to our investment
securities and lending activities. The change primarily resulted from a $15.4
million increase in repayments from investment securities coupled with a
reduction of $11.5 million in the net amount of cash used for lending
activities.

Deposit gathering is our predominant financing activity. Deposit gathering
slowed considerably comparing the first six months of 2005 and 2004. For the
first half of 2005, deposit gathering provided $2.5 million in net cash, a
decrease of $5.7 million compared to $8.2 million for the same period last year.
For the six months ended June 30, 2005, interest-bearing transaction accounts
increased $6.4 million while time deposits decreased $3.9 million.

Operating activities provided net cash of $1.9 million for the six months ended
June 30, 2005. Net income of $2.5 million, adjusted for the effects of noncash
transactions such as depreciation and the provision for loan losses and net
changes in current assets, was the primary source of funds from operations. In
comparison, for the first six months of 2004, net cash provided by operations
amounted to $4.7 million.

CAPITAL ADEQUACY:

Stockholders' equity totaled $48.9 million at June 30, 2005, an increase of $1.6
million compared to $47.3 million at December 31, 2004. Net income of $2.5
million was partially offset by common stock repurchased and net cash


                                       31

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

dividends declared. On a per share basis, stockholders' equity equaled $26.27
per share at the end of the second quarter of 2005, compared to $25.38 per share
at year-end 2004.

During the first half of 2005, 5,644 share of common stock were repurchased at
an aggregate cost of $232. Dividends declared during this same time period
totaled $857. On a per share basis year-to-date dividends declared equaled $0.46
in 2005, an increase of 4.5 percent compared to $0.44 in 2004. The dividend
payout ratio was 34.3 percent for the six months ended June 30, 2005 and 2004.
It is the intention of the Board of Directors to continue to pay cash dividends
in the future. However, these decisions are affected by operating results,
financial and economic decisions, capital and growth objectives, appropriate
dividend restrictions and other relevant factors. Stockholders may automatically
reinvest their dividends in shares of our common stock through our dividend
reinvestment plan. During the six months ended June 30, 2005, 2,972 shares were
issued under this plan.

We attempt to assure capital adequacy by monitoring our current and projected
capital positions to support future growth, while providing stockholders with an
attractive long-term appreciation of their investments. According to bank
regulation, at a minimum, banks must maintain a Tier I capital to risk-adjusted
assets ratio of 4.0 percent and a total capital to risk-adjusted assets ratio of
8.0 percent. Additionally, banks must maintain a Leverage ratio, defined as Tier
I capital to total average assets less intangibles, of 3.0 percent. The minimum
Leverage ratio of 3.0 percent only applies to institutions with a composite
rating of one under the Uniform Interagency Bank Rating System, that are not
anticipating or experiencing significant growth and have well-diversified risk.
An additional 100 to 200 basis points are required for all but these most
highly-rated institutions. Our minimum Leverage ratio was 4.0 percent at June
30, 2005 and 2004. If an institution is deemed to be undercapitalized under
these standards, banking law prescribes an increasing amount of regulatory
intervention, including the required institution of a capital restoration plan
and restrictions on the growth of assets, branches or lines of business. Further
restrictions are applied to significantly or critically undercapitalized
institutions, including restrictions on interest payable on accounts, dismissal
of management and appointment of a receiver. For well capitalized institutions,
banking law provides authority for regulatory intervention where the institution
is deemed to be engaging in unsafe and unsound practices or receives a less than
satisfactory examination report rating.


                                       32

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Our and Community Bank's capital ratios at June 30, 2005 and 2004, as well as
the required minimum ratios for capital adequacy purposes and to be well
capitalized under the prompt corrective action provisions as defined by the
Federal Deposit Insurance Corporation Improvement Act of 1991 are summarized as
follows:

REGULATORY CAPITAL

<TABLE>
<CAPTION>
                                                                                            MINIMUM TO BE WELL
                                                                                             CAPITALIZED UNDER
                                                                      MINIMUM FOR CAPITAL    PROMPT CORRECTIVE
                                                       ACTUAL          ADEQUACY PURPOSES     ACTION PROVISIONS
                                                -------------------   -------------------   ------------------
JUNE 30,                                          2005       2004        2005      2004        2005      2004
--------                                        --------   --------    -------   -------     -------   -------
<S>                                             <C>        <C>        <C>        <C>        <C>        <C>
Basis for ratios:
Tier I capital to risk-weighted assets:
      Consolidated...........................   $ 46,762   $ 44,456    $16,120   $15,486
      Community Bank.........................     44,634     42,954     16,087    15,465     $24,130   $23,197
Total capital to risk-weighted assets:
      Consolidated...........................     50,799     48,199     32,240    30,972
      Community Bank.........................     48,671     46,697     32,174    30,930      40,217    38,662
Tier I capital to total average assets
   less goodwill:
      Consolidated...........................     46,762     44,456     21,247    20,196
      Community Bank.........................     44,634     42,954    $21,340   $20,167     $26,675   $25,208

Risk-weighted assets:
      Consolidated...........................    392,611    378,119
      Community Bank.........................    391,781    377,591
Risk-weighted off-balance sheet items:
      Consolidated...........................     10,391      9,028
      Community Bank.........................     10,391      9,028
Average assets for Leverage ratio:
      Consolidated...........................    531,171    504,911
      Community Bank.........................   $533,505   $504,167

Ratios:
Tier I capital as a percentage of risk-
   weighted assets and off-balance sheet
   items:
      Consolidated...........................       11.6%      11.5%       4.0%      4.0%        6.0%      6.0%
      Community Bank.........................       11.1       11.1        4.0       4.0         6.0       6.0
Total of Tier I and Tier II capital as a
   percentage of risk-weighted assets and
   off-balance sheet items:
      Consolidated...........................       12.6       12.4        8.0       8.0        10.0      10.0
      Community Bank.........................       12.1       12.1        8.0       8.0        10.0      10.0
Tier I capital as a percentage of total
   average assets less intangible assets:
      Consolidated...........................        8.8        8.8        4.0       4.0         5.0       5.0
      Community Bank.........................        8.4%       8.5%       4.0%      4.0%        5.0%      5.0%
</TABLE>


                                       33

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

We and Community Bank have consistently maintained regulatory capital ratios
well above the minimum levels of 4.0 percent and 8.0 percent required for
adequately capitalized institutions. Regulatory agencies define institutions,
not under a written directive to maintain certain capital levels, as well
capitalized if they exceed the following:

     -    A Tier I risk-based ratio of at least 6.0 percent;

     -    A total risk-based ratio of at least 10.0 percent; and

     -    A Leverage ratio of at least 5.0 percent.

Based on the most recent notification from the Federal Deposit Insurance
Corporation ("FDIC"), Community Bank was categorized as well capitalized under
the regulatory framework for prompt corrective action at June 30, 2005. There
are no conditions or events since this notification that we believe have changed
Community Bank's category.

REVIEW OF FINANCIAL PERFORMANCE:

Net income for the second quarter of 2005 equaled $1,220 or $0.65 per share.
Year-to-date net income totaled $2,500 or $1.34 per share. Comparable earnings
for 2004 were $1,255 or $0.66 per share for the second quarter and $2,435 or
$1.28 per share year-to-date. Increased net interest income and noninterest
revenue were the leading factors contributing to the improvement in year-to-date
earnings, while a 5.7 percent increase in noninterest expense primarily caused
the reduction in second quarter earnings. Return on average assets was 0.93
percent and 0.95 percent for the three months and six months ended June 30,
2005, compared to 0.99 percent and 0.97 percent for the respective 2004 periods.
Return on average stockholders' equity was 10.12 percent for the second quarter
and 10.47 percent year-to-date 2005, compared to 10.61 percent and 10.32 percent
for the same periods of 2004.

NET INTEREST INCOME:

Net interest income is still the fundamental source of earnings for commercial
banks. Moreover, fluctuations in the level of noninterest income can have the
greatest impact on net profits. Net interest income is defined as the difference
between interest revenue, interest and fees earned on interest-earning assets,
and interest expense, the cost of interest-bearing liabilities supporting those
assets. The primary sources of earning assets are loans and investment
securities, while interest-bearing deposits, short-term borrowings and long-term
debt comprise interest-bearing liabilities. Net interest income is impacted by:

     -    Variations in the volume, rate and composition of earning assets and
          interest-bearing liabilities;

     -    Changes in general market rates; and

     -    The level of nonperforming assets.


                                       34

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Changes in net interest income are measured by the net interest spread and net
interest margin. Net interest spread, the difference between the average yield
earned on earning assets and the average rate incurred on interest-bearing
liabilities, illustrates the effects changing interest rates have on
profitability. Net interest margin, net interest income as a percentage of
earning assets, is a more comprehensive ratio, as it reflects not only spread,
but also the change in the composition of interest-earning assets and
interest-bearing liabilities. Tax-exempt loans and investments carry pre-tax
yields lower than their taxable counterparts. Therefore, in order to make the
analysis of net interest income more comparable, tax-exempt income and yields
are reported on a tax-equivalent basis using the prevailing statutory tax rate
of 34.0 percent.

We analyze interest income and interest expense by segregating rate and volume
components of earning assets and interest-bearing liabilities. The impact
changes in the interest rates earned and paid on assets and liabilities, along
with changes in the volume of earning assets and interest-bearing liabilities
have on net interest income are summarized in the following table. The net
change attributable to the combined impact of rate and volume has been allocated
proportionately to the change due to rate and the change due to volume.

NET INTEREST INCOME CHANGES DUE TO RATE AND VOLUME

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED          SIX MONTHS ENDED
                                          JUNE 30,                   JUNE 30,
                                        2005 VS. 2004              2005 VS. 2004
                                     INCREASE (DECREASE)        INCREASE (DECREASE)
                                       ATTRIBUTABLE TO            ATTRIBUTABLE TO
                                   -----------------------   ------------------------
                                    TOTAL                     TOTAL
                                   CHANGE    RATE   VOLUME   CHANGE    RATE    VOLUME
                                   ------   -----   ------   ------   ------   ------
<S>                                <C>      <C>     <C>      <C>      <C>      <C>
Interest income:
Loans:
   Taxable .....................    $135    $ (30)   $165     $335    $(129)    $464
   Tax-exempt ..................     211       77     134      400      116      284
Investments:
   Taxable .....................     (21)     (54)     33       (3)    (126)     123
   Tax-exempt ..................     (20)     (11)     (9)     (24)       1      (25)
Federal funds sold .............      (8)      17     (25)     (24)      31      (55)
                                    ----    -----    ----     ----    -----     ----
      Total interest income ....     297       (1)    298      684     (107)     791
                                    ----    -----    ----     ----    -----     ----
Interest expense:
Money market accounts ..........      24       15       9       55       38       17
NOW accounts ...................     118       85      33      229      164       65
Savings accounts ...............      13       33     (20)      31       58      (27)
Time deposits less than $100 ...     (45)     (35)    (10)     (97)     (61)     (36)
Time deposits $100 or more .....      13       13               47       13       34
Short-term borrowings ..........      27               27      106        1      105
                                    ----    -----    ----     ----    -----     ----
      Total interest expense ...     150      111      39      371      213      158
                                    ----    -----    ----     ----    -----     ----
      Net interest income ......    $147    $(112)   $259     $313    $(320)    $633
                                    ====    =====    ====     ====    =====     ====
</TABLE>


                                       35

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Tax-equivalent net interest income for the six months ended June 30, improved
$313 or 3.4 percent to $9,468 in 2005 from $9,155 in 2004. Growth in earning
assets over that of interest-bearing liabilities more than offset the effects of
a negative rate variance. For the six months ended June 30, 2005, earning assets
averaged $505.8 million, an increase of $28.1 million from $477.7 million for
the same six months of 2004. The increase in the volume of earning assets
resulted in additional interest revenue of $791 for the six months ended June
30, 2005. Partially offsetting the effects of earning asset growth, was a $17.4
million increase in average interest-bearing liabilities, which resulted in
additional interest expense of $158. With regard to earning assets, taxable
loans grew $14.9 million and tax-exempt loans increased $12.3 million. These
volume changes caused interest revenue to increase $748 or 94.6 percent. With
regard to interest-bearing liabilities, short-term borrowings were used to
supplement deposit growth in order to satisfy liquidity requirements during the
first half of 2005. These borrowings, through the FHLB-Pgh, averaged $7.9
million and had the greatest impact on net interest income by increasing
interest expense $105. Interest-bearing deposit growth of $9.5 million resulted
in additional interest expense of $53. Growth of $13.3 million in NOW accounts,
$3.3 million in money market accounts and $2.0 million in time deposits $100 or
more, was partially offset by decreases in savings accounts of $7.1 million and
time deposits less than $100 of $2.0 million.

Partially offsetting the positive volume variance was a negative rate variance.
The net interest spread for the six months ended June 30, 2005, decreased 12
basis points to 3.34 percent from 3.46 percent for the same six months of 2004,
while the net interest margin fell 8 basis points to 3.77 percent from 3.85
percent. A 9 basis point rise in funds costs coupled with a 3 basis point
reduction in the tax-equivalent yield on average earning assets resulted in a
$320 decrease in tax-equivalent net interest income. The rise in short-term
interest rates coupled with heightened competition for deposits within our
market area directly impacted our cost of funds. Specifically, we experienced
intense rate competition for interest-bearing transaction accounts, which
include money market, NOW and savings accounts. The average rate paid for these
types of accounts rose 37 basis points, 70 basis points and 9 basis points.
These increases resulted in additional interest expense of $38, $164 and $58.
Although we also experienced rate competition with regard to time deposits, the
average rate paid for time deposits less than $100 fell 6 basis points and
resulted in a reduction in interest expense of $61, as higher-yielding,
long-term certificates repriced at lower rates. The rate paid for volatile,
large denomination time deposits rose 11 basis points. With regard to earning
assets, the yield on taxable loans and investments decreased 6 basis points and
35 basis points, which resulted in a reductions of $129 and $126 in net interest
income. Partially offsetting these reductions were increases in


                                       36

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

the tax-equivalent yield on tax-exempt loans of 70 basis points and federal
funds sold of 201 basis points.

For the quarter ended June 30, 2005, tax-equivalent net interest income improved
$147 in comparison to the same three months of last year. Similarly, the
increase was due to a positive volume variance of $259, partially offset by a
negative rate variance of $112. For the three months ended June 30, 2005,
average earning assets grew $19.0 million, while interest-bearing liabilities
increased $8.9 million. The growth in earning assets primarily resulted from
growth in average loans of $22.0 million partially offset, by a reduction in
investments and federal funds sold of $3.0 million. This resulted in additional
interest revenue of $298. The increase in average interest-bearing liabilities
resulted primarily from growth of $13.4 million and $3.4 million in NOW and
money market accounts and $3.5 million in short-term borrowings, partially
offset by a reduction of $10.2 million in savings accounts. These changes
resulted in a slight reduction in interest expense of $39. The additional net
interest income generated by a positive volume variance was partially offset by
a 10 basis point increase in the cost of funds to 2.37 percent for the second
quarter of 2005 from 2.27 percent for the same quarter of 2004. This caused a
reduction in net interest income of $111. Higher rates paid for interest-bearing
transaction accounts was primarily responsible for the increase in fund costs.
The tax-equivalent yield on earning assets for the second quarters of 2005 and
2004 remained constant at 5.75 percent. Decreases in the yields on taxable loans
and the investment portfolio were mitigated by an 86 basis point increase in the
tax-equivalent yield on tax-exempt loans.

Maintenance of an adequate net interest margin is one of our primary concerns.
As previously mentioned, we experienced slight margin contraction of 8 basis
points during the first six months of 2005. However, net interest margins have
rebounded, as evidenced by a 13 basis point improvement from 3.71 percent for
the first quarter of 2005 to 3.84 percent for the second quarter. This was the
second consecutive margin improvement. The net interest margin improved 5 basis
points from the fourth quarter of 2004 to the first quarter of 2005. Economic
conditions are expected to remain favorable for the remainder of 2005. In
addition, we anticipate that the current FOMC policy stance should positively
impact our margin. However, no assurance can be given that net interest income
will not be adversely affected by changes in general market rates. We believe
following prudent pricing practices, coupled with careful investing, will keep
our net interest margin from further contraction.


                                       37

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The average balances of assets and liabilities, corresponding interest income
and expense and resulting average yields or rates paid for the six months ended
June 30, 2005 and 2004, are summarized as follows. Earning assets averages
include nonaccrual loans. Investment averages include available-for-sale
securities at amortized cost. Income on investment securities and loans are
adjusted to a tax-equivalent basis using the statutory tax rate of 34.0 percent.

SUMMARY OF NET INTEREST INCOME

<TABLE>
<CAPTION>
                                                                JUNE 30, 2005                    JUNE 30, 2004
                                                       ------------------------------   ------------------------------
                                                                  INTEREST    AVERAGE              INTEREST    AVERAGE
                                                        AVERAGE    INCOME/   INTEREST    AVERAGE    INCOME/   INTEREST
                                                        BALANCE    EXPENSE     RATE      BALANCE    EXPENSE     RATE
                                                       --------   --------   --------   --------   --------   --------
<S>                                                    <C>        <C>        <C>        <C>        <C>        <C>
ASSETS:
Earning assets:
Loans:
   Taxable .........................................   $356,108    $11,055     6.26%    $341,206    $10,720     6.32%
   Tax-exempt ......................................     42,380      1,026     4.88       30,143        626     4.18
Investments:
   Taxable .........................................     74,798      1,052     2.84       66,526      1,055     3.19
   Tax-exempt ......................................     31,520      1,170     7.49       32,132      1,194     7.47
Federal funds sold .................................      1,052         14     3.00        7,729         38     0.99
                                                       --------    -------              --------    -------
      Total earning assets .........................    505,858     14,317     5.71%     477,736     13,633     5.74%
Less: allowance for loan losses ....................      3,978                            3,712
Other assets .......................................     29,847                           31,713
                                                       --------                         --------
      Total assets .................................   $531,727                         $505,737
                                                       ========                         ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts ..............................   $ 21,547        139     1.30%    $ 18,222         84     0.93%
NOW accounts .......................................     51,374        377     1.48       38,062        148     0.78
Savings accounts ...................................    122,220        505     0.83      129,360        474     0.74
Time deposits less than $100 .......................    178,605      3,206     3.62      180,589      3,303     3.68
Time deposits $100 or more .........................     30,720        516     3.39       28,713        469     3.28
Short-term borrowings ..............................      7,847        106     2.72
                                                       --------    -------              --------    -------

      Total interest-bearing liabilities ...........    412,313      4,849     2.37%     394,946      4,478     2.28%
Noninterest-bearing deposits .......................     69,330                           60,318
Other liabilities ..................................      1,928                            3,013
Stockholders' equity ...............................     48,156                           47,460
                                                       --------                         --------
      Total liabilities and stockholders' equity ...   $531,727                         $505,737
                                                       ========    -------              ========    -------
      Net interest/income spread ...................               $ 9,468     3.34%                $ 9,155     3.46%
                                                                   =======                          =======
      Net interest margin ..........................                           3.77%                            3.85%
Tax equivalent adjustments:
Loans ..............................................               $   349                          $   213
Investments ........................................                   398                              406
                                                                   -------                          -------
      Total adjustments ............................               $   747                          $   619
                                                                   =======                          =======
</TABLE>

Note: Average balances were calculated using average daily balances. Average
     balances for loans include nonaccrual loans. Available-for-sale securities,
     included in investment securities, are stated at amortized cost with the
     related average unrealized holding gains of $2,120 and $3,299 for the six
     months ended June 30, 2005 and 2004 included in other assets.
     Tax-equivalent adjustments were calculated using the prevailing statutory
     tax rate of 34.0 percent.


                                       38

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

PROVISION FOR LOAN LOSSES:

We evaluate the adequacy of the allowance for loan losses account on a quarterly
basis utilizing our systematic analysis in accordance with procedural
discipline. We take into consideration certain factors such as composition of
the loan portfolio, volumes of nonperforming loans, volumes of net charge-offs,
prevailing economic conditions and other relevant factors when determining the
adequacy of the allowance for loan losses account. We make monthly provisions to
the allowance for loan losses account in order to maintain the allowance at the
appropriate level indicated by our evaluations. Based on our most current
evaluation, we believe that the allowance is adequate to absorb any known and
inherent losses in the portfolio. For the three months and six months ended June
30, the provision for loan losses totaled $158 and $458 in 2005, compared to
$150 and $300 in 2004.

NONINTEREST INCOME:

Noninterest income totaled $2,178 for the six months ended June 30, 2005, an
increase of $376 or 20.9 percent from $1,802 for the same six months of last
year. Included in noninterest revenue was a $235 net gain on the sale of our
merchant services portfolio in an asset purchase and revenue sharing agreement
with a third party. Service charges, fees and commissions increased $187 or 12.7
percent, while net gains on the sale of residential mortgages declined $46 or
14.2 percent. For the second quarter, noninterest revenue increased $180 to
$1,060 in 2005, compared to $880 in 2004.

NONINTEREST EXPENSE:

In general, noninterest expense is categorized into three main groups:
employee-related expenses, occupancy and equipment expenses and other expenses.
Employee-related expenses are costs associated with providing salaries,
including payroll taxes and benefits, to our employees. Occupancy and equipment
expenses, the costs related to the maintenance of facilities and equipment,
include depreciation, general maintenance and repairs, real estate taxes, rental
expense offset by any rental income, and utility costs. Other expenses include
general operating expenses such as advertising, contractual services, insurance,
including FDIC assessment, other taxes and supplies. Several of these costs and
expenses are variable while the remainder are fixed. We utilize budgets and
other related strategies in an effort to control the variable expenses.


                                       39

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Major components of noninterest expense for the three months and six months
ended June 30, 2005 and 2004, are summarized as follows:

NONINTEREST EXPENSES

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED   SIX MONTHS ENDED
                                                 JUNE 30,            JUNE 30,
                                            ------------------   ----------------
                                               2005     2004      2005     2004
                                              ------   ------    ------   ------
<S>                                         <C>        <C>       <C>      <C>
SALARIES AND EMPLOYEE BENEFITS EXPENSE:
Salaries and payroll taxes .................  $1,498   $1,409    $2,954   $2,804
Employee benefits ..........................     345      345       684      676
                                              ------   ------    ------   ------
   Salaries and employee benefits expense ..   1,843    1,754     3,638    3,480
                                              ------   ------    ------   ------

NET OCCUPANCY AND EQUIPMENT EXPENSE:
Net occupancy expense ......................     280      257       613      575
Equipment expense ..........................     304      342       609      688
                                              ------   ------    ------   ------
   Net occupancy and equipment expense .....     584      599     1,222    1,263
                                              ------   ------    ------   ------

OTHER EXPENSES:
Marketing expense ..........................     158      145       302      279
Other taxes ................................     120       98       242      196
Stationery and supplies ....................      93       86       181      166
Contractual services .......................     468      377       920      773
Insurance including FDIC assessment ........      73       50       142      107
Other ......................................     461      486       773      958
                                              ------   ------    ------   ------
   Other expenses ..........................   1,373    1,242     2,560    2,479
                                              ------   ------    ------   ------
      Total noninterest expense ............  $3,800   $3,595    $7,420   $7,222
                                              ======   ======    ======   ======
</TABLE>

Noninterest expense for the six months ended June 30, 2005, amounted to $7,420,
an increase of $198 or 2.7 percent from $7,222 for the same six months of 2004.
For the second quarter, noninterest expense rose $205 or 5.7 percent in
comparison to the same quarter of last year. For both the three-and six-month
periods, higher salaries and employee benefits expense and other expenses were
partially offset by a reduction in net occupancy and equipment costs. We utilize
two key industry ratios, the operating efficiency ratio and the overhead ratio,
to measure our productivity. The operating efficiency ratio is defined as
noninterest expense as a percentage of net interest income and noninterest
income, and the overhead ratio is calculated by dividing noninterest expense by
average total assets. Both ratios indicated an improvement in our year-to-date
productivity. Our operating efficiency ratio improved to 68.1 percent for the
six months ended June 30, 2005, from 69.9 percent for the same six months of
last year. Similarly, our overhead ratio improved to 2.8 percent from 2.9
percent comparing the first half of 2005 and 2004.


                                       40

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Salaries and employee benefits expense, which comprise the majority of
noninterest expense, totaled $3,638 or 49.0 percent of noninterest expense for
the six months ended June 30, 2005. The $158 or 4.5 percent increase resulted
from annual merit increases and additional employee educational and training
costs. In comparison, these expenses were $3,480 or 48.2 percent of noninterest
expense for the same period of 2004. For the second quarter of 2005,
employee-related expenses totaled $1,843, an increase of $89 compared to the
second quarter of 2004.

Net occupancy and equipment expense decreased $15 or 2.5 percent for the second
quarter of 2005 and $41 or 3.2 percent year-to-date. Higher maintenance costs
and real estate taxes were more than offset by a reduction in depreciation
expense.

Other expenses increased $81 to $2,560 for the six months ended June 30, 2005,
from $2,479 for the same six months of the prior year. For the quarter ended
June 30, other expenses totaled $1,373 in 2005 and $1,242 in 2004. Higher
audit-related expenses incurred to comply with the Sarbanes-Oxley Act,
additional marketing costs and increased Pennsylvania bank shares tax all
factored into the rise in other expenses.

Our deposits are insured by the FDIC and are subject to deposit assessments to
maintain the Bank Insurance Fund ("BIF") administered by the FDIC. The FDIC
places each insured bank into one of nine risk categories based on the bank's
capitalization and supervisory evaluations provided to the FDIC by the bank's
primary federal regulator. An insured bank's assessment rate is then determined
by the risk category into which it is classified. Recently, the FDIC decided to
retain the existing BIF assessment schedules of $0.00 per 100 dollars of
deposits for banks classified in the highest capital and supervisory evaluation
category and $0.27 per 100 dollars of deposits for banks classified in the
lowest category. We were classified in the highest capital and supervisory
evaluation category at June 30, 2005, and will be exempt from paying a BIF
assessment in the second half of 2005.

There is a separate levy assessed on all FDIC-insured institutions to cover the
cost of Finance Corporation ("FICO") funding. The FDIC established the annual
FICO assessment rates effective for the second quarter of 2005 at $0.0142 per
100 dollars of BIF-assessable deposits. Our assessments totaled $33 and $35 for
the six months ended June 30, 2005 and 2004.


                                       41

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME TAXES:

For the six months ended June 30, income tax expense totaled $521 in 2005 and
$381 in 2004. Our effective tax rate increased from 13.5 percent in 2004 to 17.2
percent in 2005.

During the first six months of 2004 we recognized $209 of a one-time Federal
Historic Tax Credit of $418. We did not recognize any tax credits in 2005.
Partially mitigating the increase in tax burden was a $248 or 20.6 percent
increase in tax-exempt income. Tax-exempt interest income as a percentage of
total interest income increased to 10.7 percent for the six months ended June
30, 2005, from 9.2 percent for the same period of 2004.

The difference between the amount of income tax currently payable and the
provision for income tax expense reflected in the income statements arise from
temporary differences. Temporary differences are differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements, which result in deferred tax assets or liabilities. We perform
quarterly reviews on the tax criteria related to the recognition of deferred tax
assets. We decided not to establish a valuation reserve for the deferred tax
assets since it is likely that these assets will be realized through carry-back
to taxable income in prior years and by future reversals of existing taxable
temporary differences or, to a lesser extent, through future taxable income.


                                       42

<PAGE>

COMM BANCORP, INC.
CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:

As of June 30, 2005, the end of the period covered by this Quarterly Report on
Form 10-Q, our Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), evaluated the effectiveness of our disclosure controls and procedures
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the, "Exchange Act"). Based upon that evaluation, the CEO and CFO
concluded that as of the period covered by this Quarterly Report on Form 10-Q,
we maintained effective disclosure controls and procedures.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the
fiscal quarter ended June 30, 2005, that materially affected, or is reasonably
likely to materially effect, our internal control over financial reporting.


                                       43

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     NONE

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
     SECURITIES

The following table presents information with respect to 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 six months ended June 30,
2005:

<TABLE>
<CAPTION>
                                                     Total Number of       Maximum Number
                                                     Shares Purchased    of Shares that may
                       Total Number     Average    as Part of Publicly    yet be Purchased
                         of Shares    Price Paid     Announced Plans       Under the Plans
Month Ending           Purchased(1)    Per Share       or Programs           or Programs
------------           ------------   ----------   -------------------   ------------------
<S>                    <C>            <C>          <C>                   <C>
January 31, 2005 ...                                                           67,808
February 28, 2005 ..                                                           67,808
March 31, 2005 .....                                                           67,808
April 30, 2005 .....       4,144        $41.26            4,144                63,664
May 31, 2005 .......       1,500         40.36            1,500                62,164
June 30, 2005 ......                                                           62,164
                           -----        ------            -----
   Total ...........       5,644        $41.02            5,644
                           =====        ======            =====
</TABLE>

(1)  All purchases were made pursuant to resolutions given by our Board of
     Directors, which authorize Management to repurchase shares of our common
     stock from time to time in unsolicited open market purchases through a
     licensed broker-dealer and in accordance with terms, conditions and
     restrictions contained in Rule 10b-18 under the Exchange Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     NONE


                                       44

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION (CONTINUED)

ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS AT THE COMPANY'S ANNUAL MEETING OF
     STOCKHOLDERS HELD ON JUNE 3, 2005, FOR WHICH PROXIES WERE SOLICITED
     PURSUANT TO SECTION 14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, THE
     FOLLOWING MATTERS WERE VOTED UPON BY THE STOCKHOLDERS.

     1. To elect thirteen directors to serve for a one-year term and until their
     successors are duly elected and qualified.

     All nominees of the Board of Directors were elected. The number of votes
     cast for or opposed to each of the nominees for election to the Board of
     Directors were as follows:

<TABLE>
<CAPTION>
Nominee                       For          Against
-------                  -------------   ----------
<S>                      <C>             <C>
David L. Baker           1,536,988.644    1,016.475
Thomas M. Chesnick       1,509,149.119   28,856.000
William F. Farber, Sr.   1,534,843.060    3,162.059
Judd B. Fitze            1,471,109.119   66,896.000
Dean L. Hesser           1,537,905.119      100.000
John P. Kameen           1,471,009.119   66,996.000
William A. Kerl          1,528,259.119    9,746.000
Erwin T. Kost            1,525,509.119   12,496.000
Susan F. Mancuso         1,537,905.119      100.000
Robert A. Mazzoni        1,537,805.119      200.000
J. Robert McDonnell      1,461,759.119   76,246.000
Joseph P. Moore, III     1,537,409.119      596.000
Eric G. Stephens         1,496,369.119   41,636.000
</TABLE>

     2. To ratify the selection of Kronick, Kalada, Berdy & Co. of Kingston,
     Pennsylvania, Certified Public Accountants, as the independent auditors for
     the year ending December 31, 2005. The votes cast on this matter were as
     follows:

<TABLE>
<CAPTION>
     For          Against
-------------   ----------
<S>             <C>
1,548,800.180   47,125.091
</TABLE>

ITEM 5. OTHER INFORMATION

     NONE


                                       45

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION (CONTINUED)

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

<TABLE>
<S>                <C>
          31(i)    Certification of Chief Executive Officer pursuant to Section
                   302 of the Sarbanes-Oxley Act of 2002.

          31(ii)   Certification of Chief Financial Officer pursuant to Section
                   302 of the Sarbanes-Oxley Act of 2002.

          32(i)    Certification of Chief Executive Officer pursuant to 18 U.S.C.
                   Section 1350, as adopted pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002.

          32(ii)   Certification of Chief Financial Officer pursuant to 18 U.S.C.
                   Section 1350, as adopted pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002.
</TABLE>

     (b)  Reports on Form 8-K

          Item 2.02 - On April 25, 2005, we filed a report on Form 8-K, to
          disclose our results of operations for the three months ended March
          31, 2005.


                                       46

<PAGE>

                               COMM BANCORP, INC.
                                    FORM 10-Q

                                 SIGNATURE PAGE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto, duly authorized.

                                        Registrant, Comm Bancorp, Inc.


Date: August 10, 2005                   /s/ William F. Farber, Sr.
                                        ----------------------------------------
                                        William F. Farber, Sr.
                                        President and Chief Executive Officer
                                        Chairman of the Board/Director
                                        (Principal Executive Officer)


Date: August 10, 2005                   /s/ Scott A. Seasock
                                        ----------------------------------------
                                        Scott A. Seasock
                                        Executive Vice President and
                                        Chief Financial Officer
                                        (Principal Financial Officer)


Date: August 10, 2005                   /s/ Stephanie A. Ganz, CPA
                                        ----------------------------------------
                                        Stephanie A. Ganz, CPA
                                        Vice President of Finance
                                        (Principal Accounting Officer)


                                       47

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
ITEM NUMBER   DESCRIPTION                                                   PAGE
-----------   -----------                                                   ----
<S>           <C>                                                           <C>
   31(i)      Certification of Chief Executive Officer pursuant to
              Section 302 of the Sarbanes-Oxley Act of 2002                  49

   31(ii)     Certification of Chief Financial Officer pursuant to
              Section 302 of the Sarbanes-Oxley Act of 2002                  51

   32(i)      Certification of Chief Executive Officer pursuant to 18
              U.S.C. Section 1350, as adopted pursuant to Section 906 of
              the Sarbanes-Oxley Act of 2002                                 53

   32(ii)     Certification of Chief Financial Officer pursuant to 18
              U.S.C. Section 1350, as adopted pursuant to Section 906 of
              the Sarbanes-Oxley Act of 2002                                 54
</TABLE>


                                       48