<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 SEPTEMBER 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
       incorporation or organization)                     Identification Number)
</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 Exchange Act). Yes [ ] No [X]

Indicate by checkmark whether registrant is a shell company (as defined in Rule
12b-2 of the Exchange 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: 1,850,404 at October 31, 2005.


                                  Page 1 of 56
                            Exhibit Index on Page 50

<PAGE>

                               COMM BANCORP, INC.
                                    FORM 10-Q

                               SEPTEMBER 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 Nine Months Ended September 30,
         2005 and 2004...............................................       3
      Consolidated Balance Sheets - September 30, 2005 and
         December 31, 2004...........................................       4
      Consolidated Statement of Changes in Stockholders' Equity
         for the Nine Months Ended September 30, 2005................       5
      Consolidated Statements of Cash Flows for the Nine Months
         Ended September 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...................................      46

PART II. OTHER INFORMATION:

   Item 1: Legal Proceedings.........................................      47

   Item 2: Unregistered Sales of Equity Securities and Use of
              Proceeds...............................................      47
   Item 3: Defaults Upon Senior Securities...........................      47

   Item 4: Submission of Matters to a Vote of Security Holders.......      47

   Item 5: Other Information.........................................      47

   Item 6: Exhibits and Reports on Form 8-K..........................      48

   Signatures........................................................      49
   Exhibit Index.....................................................      50
</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        NINE MONTHS ENDED
                                                                                    SEPTEMBER 30,             SEPTEMBER 30,
                                                                               -----------------------   -----------------------
                                                                                  2005         2004         2005         2004
                                                                               ----------   ----------   ----------   ----------
<S>                                                                            <C>          <C>          <C>          <C>
INTEREST INCOME:
Interest and fees on loans:
   Taxable .................................................................   $    5,809   $    5,405   $   16,864   $   16,125
   Tax-exempt ..............................................................          337          191        1,014          604
Interest and dividends on investment securities available-for-sale:
   Taxable .................................................................          493          495        1,523        1,529
   Tax-exempt ..............................................................          396          392        1,168        1,180
   Dividends ...............................................................           10            7           32           28
Interest on federal funds sold .............................................          144           68          158          106
                                                                               ----------   ----------   ----------   ----------
      Total interest income ................................................        7,189        6,558       20,759       19,572
                                                                               ----------   ----------   ----------   ----------

INTEREST EXPENSE:
Interest on deposits .......................................................        2,522        2,323        7,265        6,801
Interest on short-term borrowings ..........................................                                    106
                                                                               ----------   ----------   ----------   ----------
      Total interest expense ...............................................        2,522        2,323        7,371        6,801
                                                                               ----------   ----------   ----------   ----------
      Net interest income ..................................................        4,667        4,235       13,388       12,771
Provision for loan losses ..................................................          161          150          619          450
                                                                               ----------   ----------   ----------   ----------
      Net interest income after provision for loan losses ..................        4,506        4,085       12,769       12,321
                                                                               ----------   ----------   ----------   ----------

NONINTEREST INCOME:
Service charges, fees and commissions ......................................          746          780        2,411        2,258
Net gains on sale of loans .................................................          119           84          397          408
Net gains on sale of merchant services .....................................                                    235
                                                                               ----------   ----------   ----------   ----------
      Total noninterest income .............................................          865          864        3,043        2,666
                                                                               ----------   ----------   ----------   ----------

NONINTEREST EXPENSE:
Salaries and employee benefits expense .....................................        1,778        1,772        5,416        5,252
Net occupancy and equipment expense ........................................          588          566        1,810        1,829
Other expenses .............................................................        1,254        1,426        3,814        3,905
                                                                               ----------   ----------   ----------   ----------
      Total noninterest expense ............................................        3,620        3,764       11,040       10,986
                                                                               ----------   ----------   ----------   ----------
Income before income taxes .................................................        1,751        1,185        4,772        4,001
Provision for income tax expense ...........................................          371          120          892          501
                                                                               ----------   ----------   ----------   ----------
      Net income ...........................................................        1,380        1,065        3,880        3,500
                                                                               ----------   ----------   ----------   ----------

OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains (losses) on investment securities available-for-sale ......         (721)       1,203         (645)        (238)
Income tax expense (benefit) related to other comprehensive income (loss) ..         (245)         409         (219)         (81)
                                                                               ----------   ----------   ----------   ----------
      Other comprehensive income (loss), net of income taxes ...............         (476)         794         (426)        (157)
                                                                               ----------   ----------   ----------   ----------
      Comprehensive income .................................................   $      904   $    1,859   $    3,454   $    3,343
                                                                               ==========   ==========   ==========   ==========

PER SHARE DATA:
Net income .................................................................   $     0.74   $     0.56   $     2.08   $     1.84
Cash dividends declared ....................................................   $     0.23   $     0.22   $     0.69   $     0.66
Average common shares outstanding ..........................................    1,861,053    1,886,534    1,863,442    1,898,101
</TABLE>

See Notes to Consolidated Financial Statements.


                                       3

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                          SEPTEMBER 30,   DECEMBER 31,
                                                                                               2005           2004
                                                                                          -------------   ------------
<S>                                                                                       <C>             <C>
ASSETS:
Cash and due from banks ...............................................................      $ 13,662       $ 11,802
Federal funds sold ....................................................................        22,700            900
Investment securities available-for-sale ..............................................        98,756        118,756
Loans held for sale, net ..............................................................         3,538          1,917
Loans, net of unearned income .........................................................       389,606        381,723
   Less: allowance for loan losses ....................................................         4,067          3,859
                                                                                             --------       --------
Net loans .............................................................................       385,539        377,864
Premises and equipment, net ...........................................................        11,271         11,628
Accrued interest receivable ...........................................................         2,576          2,319
Other assets ..........................................................................         3,448          3,136
                                                                                             --------       --------
      Total assets ....................................................................      $541,490       $528,322
                                                                                             ========       ========

LIABILITIES:
Deposits:
   Noninterest-bearing ................................................................      $ 70,989       $ 67,714
   Interest-bearing ...................................................................       419,095        410,770
                                                                                             --------       --------
      Total deposits ..................................................................       490,084        478,484
Accrued interest payable ..............................................................         1,059          1,075
Other liabilities .....................................................................         1,106          1,445
                                                                                             --------       --------
      Total liabilities ...............................................................       492,249        481,004
                                                                                             --------       --------

STOCKHOLDERS' EQUITY:
Common stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding:
   September 30, 2005, 1,858,370 shares; December 31, 2004, 1,864,391 shares ..........           613            615
Capital surplus .......................................................................         6,831          6,675
Retained earnings .....................................................................        40,689         38,494
Accumulated other comprehensive income ................................................         1,108          1,534
                                                                                             --------       --------
      Total stockholders' equity ......................................................        49,241         47,318
                                                                                             --------       --------
      Total liabilities and stockholders' equity ......................................      $541,490       $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.......................................                        3,880                         3,880
Dividends declared: $0.69 per share..............                       (1,285)                       (1,285)
Dividend reinvestment plan: 4,623 shares issued..       1       188                                      189
Repurchase and retirement: 10,644 shares.........      (3)      (32)      (400)                         (435)
Net change in other comprehensive income.........                                      (426)            (426)
                                                     ----    ------    -------       ------          -------
BALANCE, SEPTEMBER 30, 2005......................    $613    $6,831    $40,689       $1,108          $49,241
                                                     ====    ======    =======       ======          =======
</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>
NINE MONTHS ENDED SEPTEMBER 30,                                              2005       2004
-------------------------------                                            --------   --------
<S>                                                                        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................   $  3,880   $  3,500
Adjustments:
   Provision for loan losses ...........................................        619        450
   Depreciation, amortization and accretion ............................      1,574      1,777
   Amortization of net loan costs (fees) ...............................        136        (15)
   Deferred income tax benefit .........................................       (209)       (84)
   Losses (gains) on the sale of foreclosed assets .....................        (57)        30
   Changes in:
      Loans held for sale, net .........................................     (1,621)       (97)
      Accrued interest receivable ......................................       (257)       (24)
      Other assets .....................................................       (281)       200
      Accrued interest payable .........................................        (16)       (40)
      Other liabilities ................................................       (119)       (95)
                                                                           --------   --------
         Net cash provided by operating activities .....................      3,649      5,602
                                                                           --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayments of investment securities available-for-sale ...     37,290     12,628
Purchases of investment securities available-for-sale ..................    (18,541)   (19,799)
Proceeds from sale of foreclosed assets ................................        331        161
Net increase in lending activities .....................................     (8,748)   (17,443)
Purchases of premises and equipment ....................................       (408)      (274)
                                                                           --------   --------
         Net cash provided by (used in) investing activities ...........      9,924    (24,727)
                                                                           --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
   Money market, NOW, savings and noninterest-bearing accounts .........     12,108     16,947
   Time deposits .......................................................       (508)     2,890
Proceeds from issuance of common shares ................................        189        186
Repurchase and retirement of common shares .............................       (435)    (1,383)
Cash dividends paid ....................................................     (1,267)    (1,254)
                                                                           --------   --------
         Net cash provided by financing activities .....................     10,087     17,386
                                                                           --------   --------
         Net increase (decrease) in cash and cash equivalents ..........     23,660     (1,739)
         Cash and cash equivalents at beginning of year ................     12,702     28,599
                                                                           --------   --------
         Cash and cash equivalents at end of period ....................   $ 36,362   $ 26,860
                                                                           ========   ========

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
   Interest ............................................................   $  7,387   $  6,841
   Income taxes ........................................................      1,252        483
Noncash items:
   Transfer of loans to foreclosed assets ..............................        318        187
   Unrealized losses on investment securities available-for-sale .......   $    426   $    157
</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.


                                        7

<PAGE>

COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
(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.


                                        8

<PAGE>

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

The larger size of these companies affords them the opportunity to offer some
specialized products and services not offered by us. We are constantly 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.


                                        9

<PAGE>

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

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


                                       10

<PAGE>

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

OPERATING ENVIRONMENT:

Despite rising energy prices and the damage caused by hurricane Katrina,
consumer spending surged in the third quarter, increasing at an annual pace of
3.9 percent. Business investment also remained strong, influenced by an 8.9
percent annualized increase in equipment and software purchases. Overall, the
United States economy grew at an annual rate of 3.8 percent in the third quarter
of 2005. This marked the 16th consecutive quarter of economic expansion and the
eighth consecutive quarter of a growth rate between 3.0 percent and 4.5 percent.
Rising fuel costs had little effect on overall inflation, as consumer prices,
excluding food and energy, remained relatively low. Given the economy's
continued strength, the Federal Open Market Committee ("FOMC") continued
tightening monetary policy in measured increments, through two additional 25
basis point increases in the target rate for federal funds. The federal funds
target rate was 3.75 percent at the close of the third quarter of 2005.
Subsequent to the end of the quarter, the FOMC again raised the target rate
another 25 basis points to 4.00 percent at its meeting on November 1, 2005. In
addition, the FOMC indicated that at least two more quarter-point increases were
imminent, one on December 13, 2005, and one on January 31, 2006.

REVIEW OF FINANCIAL POSITION:

Total assets grew $13.2 million to $541.5 million at September 30, 2005, from
$528.3 million at December 31, 2004. Loans, net of unearned income, grew $7.9
million to $389.6 million at the close of the third quarter from $381.7 million
at the end of 2004. Loan growth was entirely funded through deposit gathering
activities, as total deposits increased $11.6 million to $490.1 million at
September 30, 2005, from $478.5 million at the end of last year.
Noninterest-bearing deposits rose $3.3 million, while interest-bearing deposits
rose $8.3 million. Investment securities decreased $20.0 million, while federal
funds sold outstanding at the close of the third quarter rose $21.8 million.
Stockholders' equity improved to $49.2 million at September 30, 2005, from $47.3
million at December 31, 2004.

In comparison to the end of the previous quarter, total assets increased $9.2
million. We have deposit relationships with several school districts in our
market area. Cyclical deposit trends related to the influx of tax monies for
these customers in the third quarter led to a $9.1 million increase in total
deposits. Investment securities increased $1.5 million and federal funds sold
rose $9.7 million in comparison to June 30, 2005. The loan portfolio remained
relatively status quo, growing only $0.3 million from the end of the second
quarter.


                                       11

<PAGE>

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

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 150 basis points from 2.25 percent to 3.75 percent at
September 30, 2005. The increase in the federal funds rate resulted in a similar
increase in short-term U.S. Treasury rates. Intermediate-term and long-term U.S.
Treasury rates have until recently remained uncharacteristically low amid a
rising rate environment. However, rates for these bonds have also begun to
increase. 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 rose 58 basis points in the first half of 2005, climbed another
52 basis points to 4.18 percent at September 30, 2005. The yield on the ten-year
U.S. Treasury, which 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, rose 40 basis
points to 4.34 percent at September 30, 2005. The rise in U.S. Treasury rates
resulted in market value depreciation for all major categories of our
available-for-sale investment portfolio. The unrealized holding gain on the
investment portfolio, declined $721 to $1,679 at September 30, 2005, from $2,400
at June 30, 2005.

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

DISTRIBUTION OF INVESTMENT SECURITIES AVAILABLE-FOR-SALE

<TABLE>
<CAPTION>
                                   SEPTEMBER 30,       DECEMBER 31,
                                       2005                2004
                                 ----------------   -----------------
                                  AMOUNT      %      AMOUNT       %
                                 -------   ------   --------   ------
<S>                              <C>       <C>      <C>        <C>
U.S. Government agencies .....   $35,836    36.29%  $ 44,645    37.59%
State and municipals:
   Taxable ...................    13,715    13.89     16,898    14.23
   Tax-exempt ................    34,229    34.66     34,605    29.14
Mortgage-backed securities ...    13,825    14.00     21,281    17.92
Equity securities:
   Restricted ................       991     1.00      1,153     0.97
   Other .....................       160     0.16        174     0.15
                                 -------   ------   --------   ------
      Total ..................   $98,756   100.00%  $118,756   100.00%
                                 =======   ======   ========   ======
</TABLE>


                                       12

<PAGE>

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

Our investment portfolio played a less prominent role in our earning asset mix.
Available-for-sale investment securities totaled $98.8 million at September 30,
2005, a decrease of $20.0 million from $118.8 million at December 31, 2004.
Maturities of U.S. Government agencies and repayments from mortgage-backed
securities, not reinvested back into the portfolio were utilized to repay
short-term borrowings and purchase federal funds sold, as loan demand moderated
during the nine months ended September 30, 2005.

For the nine months ended September 30, the investment portfolio averaged $103.4
million in 2005, compared to $98.5 million last year. The tax-equivalent yield
on the investment portfolio decreased 24 basis points to 4.30 percent for the
nine months ended September 30, 2005, from 4.54 percent for the same nine months
of 2004. The tax-equivalent rate on the investment portfolio has steadily
improved for each of the past three quarters of 2005. For the third quarter, the
tax-equivalent yield improved 25 basis points to 4.48 percent compared to 4.23
percent in the second quarter. The tax-equivalent yield increased 3 basis points
in the second quarter and 13 basis points in the first.

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 September 30, 2005, the total return on the
investment portfolio remained unchanged at 4.4 percent in comparison to the 12
months ended June 30, 2005.

The maturity distribution of the amortized cost, fair value and weighted-average
tax-equivalent yield of the available-for-sale portfolio at September 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
                                                     BUT WITHIN        BUT WITHIN
                                WITHIN ONE YEAR      FIVE YEARS        TEN YEARS      AFTER TEN YEARS        TOTAL
                                ---------------   ---------------   ---------------   ---------------   --------------
SEPTEMBER 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.....   $26,059   2.89%   $10,001   3.75%                                       $36,060    3.13%
State and municipals:
   Taxable...................     1,692   2.43     12,456   2.69                                         14,148    2.66
   Tax-exempt................     1,705   3.64      2,810   7.63    $10,097   7.96%   $17,447    7.50%   32,059    7.45
Mortgage-backed securities...     4,437   6.02      9,112   5.30        227   6.89          5    6.57    13,781    5.56
Equity securities:
 Restricted..................                                                             991    5.75       991    5.75
 Other.......................                                                              38   18.42        38   18.42
                                -------           -------           -------           -------           -------
      Total..................   $33,893   3.31%   $34,379   4.09%   $10,324   7.94%   $18,481   7.43%   $97,077    4.87%
                                =======           =======           =======           =======           =======

Fair value:
U.S. Government agencies.....   $25,924           $ 9,912                                               $35,836
State and municipals:
   Taxable...................     1,671            12,044                                                13,715
   Tax-exempt................     1,699             3,005           $10,739           $18,786            34,229
Mortgage-backed securities...     4,462             9,123               234                 6            13,825
Equity securities:
 Restricted..................                                                             991               991
 Other.......................                                                             160               160
                                -------           -------           -------           -------           -------
      Total.................    $33,756           $34,084           $10,973           $19,943           $98,756
                                =======           =======           =======           =======           =======
</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 fell 35 basis points in the second quarter to 5.58 percent at
June 30, 2005, from 5.93 percent at the end of the first quarter, rebounded 19
basis points to 5.77 percent at the close of the third quarter. Despite the
increase, mortgage rates remained at historically low levels, which continued to
keep sales of new and existing homes at record pace. In addition, the median
home price for all housing types appreciated 13.4 percent from a year ago. With
a continuation of demand in the housing market, activity in our secondary
mortgage department remained consistent in 2005. Residential mortgage loans
serviced for the Federal National Mortgage Association ("FNMA") grew $9.1
million or at an annualized rate of 12.4 percent to $106.9 million at September
30, 2005, from $97.8 million at year-end 2004. The rate of growth in 2005 is
greater than the growth of 7.4 percent exhibited for the same time period of
2004. For the three months and nine months ended September 30, 2005, residential
mortgages sold to the FNMA totaled $4.4 million and $16.0 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 $119 for the third quarter
and $397 year-to-date 2005, compared to $84 and $408 for the same periods of
2004.


                                       14

<PAGE>

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

Business spending rose 6.2 percent in the third quarter due to continued
confidence in the economy. Spending for equipment and software rose 8.9 percent,
while structural investment declined 1.4 percent. According to the October 2005
Senior Loan Officer Opinion Survey issued by the Federal Reserve, banks
continued to ease lending standards amid competition for commercial and
industrial loans. Demand for commercial and industrial loans slowed, as only
15.0 percent of banks reported an increase in demand, down from 40.0 percent in
the previous survey. As a result, the annual rate of growth for commercial and
industrial loans at all commercial banks declined to 12.6 percent in the third
quarter of 2005, from 14.2 percent at the end of 2004. Similarly, we experienced
only moderate demand for our commercial loan products while demand for
commercial mortgages declined in the third quarter. Commercial loans, including
commercial mortgages and lease financing, increased by a slight $2.7 million to
$268.9 million at September 30, 2005, from $266.2 million at the end of the
second quarter. Commercial loans, including lease financing, increased $6.7
million from the end of the previous quarter. However, partially offsetting the
increase in commercial loans, was a $3.9 million decrease in commercial
mortgages.

Consumer spending remained strong, increasing 3.9 percent in the third quarter
of 2005. Spending on durable goods rose 10.8 percent, while nondurable goods
rose 2.6 percent. In addition, the personal savings rate declined 1.1 percent in
the third quarter. A negative savings rate could indicate that consumers may
have used financing to fund outlays, as the increase in spending outweighed the
increase in disposable personal income. Consumer loans at all commercial banks
increased at an annual rate of 7.1 percent during the third quarter of 2005. Our
consumer loans were relatively unchanged, increasing $0.1 million to $28.4
million at September 30, 2005. However, residential mortgage loans decreased
$2.6 million, as the majority of loans originated are subsequently sold in the
secondary market.

For the nine months ended September 30, 2005, loans averaged $396.6 million, an
increase of $24.2 million or 6.5 percent compared to $372.4 million for the same
period of 2004. Loan yields, which have declined significantly over the past two
years, began to rebound. The tax-equivalent yield on the loan portfolio
increased 9 basis points to 6.20 percent for the nine months ended September 30,
2005, from 6.11 percent for the same nine months of last year. The increase in
the year-to-date yield resulted from a 22 basis point improvement in the third
quarter yield to 6.38 percent from 6.16 percent in the second 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 September 30, 2005, and December 31,
2004, is summarized as follows:

DISTRIBUTION OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                     SEPTEMBER 30, 2005   DECEMBER 31, 2004
                                     ------------------   -----------------
                                      AMOUNT       %       AMOUNT       %
                                     --------   -------   --------   ------
<S>                                  <C>        <C>       <C>        <C>
Commercial, financial and others..   $139,079     35.70%  $114,341    29.95%
Real estate:
   Construction...................      4,290      1.10      6,704     1.76
   Mortgage.......................    216,038     55.45    230,555    60.40
Consumer, net.....................     28,441      7.30     27,893     7.31
Lease financing, net..............      1,758      0.45      2,230     0.58
                                     --------    ------   --------   ------
   Loans, net of unearned income..    389,606    100.00%   381,723   100.00%
                                                 ======              ======
Less: allowance for loan losses...      4,067                3,859
                                     --------             --------
      Net loans...................   $385,539             $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 47.7 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 September 30, 2005, is summarized as follows:

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                       AFTER ONE
                                             WITHIN    BUT WITHIN      AFTER
SEPTEMBER 30, 2005                          ONE YEAR   FIVE YEARS   FIVE YEARS     TOTAL
------------------                          --------   ----------   ----------   --------
<S>                                         <C>        <C>          <C>          <C>
Maturity schedule:
Commercial, financial and others ........   $ 52,978    $ 29,244     $ 56,857    $139,079
Real estate:
   Construction .........................      4,290                                4,290
   Mortgage .............................     13,540      51,076      151,422     216,038
Consumer, net ...........................      9,604      15,525        3,312      28,441
Lease financing, net ....................        638       1,120                    1,758
                                            --------    --------     --------    --------
      Total .............................   $ 81,050    $ 96,965     $211,591    $389,606
                                            ========    ========     ========    ========

Repricing schedule:
Predetermined interest rates ............   $ 41,266    $ 69,035     $ 46,166    $156,467
Floating- or adjustable-interest rates ..    144,392      88,747                  233,139
                                            --------    --------     --------    --------
      Total .............................   $185,658    $157,782     $ 46,166    $389,606
                                            ========    ========     ========    ========
</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 September 30, 2005
and December 31, 2004, are summarized as follows:

DISTRIBUTION OF OFF-BALANCE SHEET COMMITMENTS

<TABLE>
<CAPTION>
                                                          SEPTEMBER 30,   DECEMBER 31,
                                                               2005           2004
                                                          -------------   ------------
<S>                                                       <C>             <C>
Commitments to extend credit ..........................      $55,724         $49,504
Unused portions of home equity and credit card lines ..       14,138          12,776
Commercial letters of credit ..........................       10,234           9,062
                                                             -------         -------
   Total ..............................................      $80,096         $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 September 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 September 30, 2005
and 2004, are summarized as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,                                                        2005   2004
-------------                                                        ----   ----
<S>                                                                  <C>    <C>
United States ....................................................   5.1%   5.1%
Pennsylvania .....................................................   4.8    5.3
Lackawanna county ................................................   5.0    5.6
Monroe county ....................................................   4.9    5.9
Susquehanna county ...............................................   4.4    4.6
Wayne county .....................................................   4.7    4.4
Wyoming county ...................................................   5.2%   5.7%
</TABLE>

The employment conditions were unchanged for the Nation, while improving for the
Commonwealth of Pennsylvania and the majority of 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 but one 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 for
the remainder 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 $1,405 or
42.8 percent increase in nonperforming assets to $4,689 at September 30, 2005,
from $3,284 at year-end 2004. The majority of the increase resulted from a $1.1
million rise in nonaccrual loans. Commercial loans placed on nonaccrual status
increased $736 and nonaccruing mortgage loans increased $395. Accruing loans
past due 90 days or more increased $215 and foreclosed assets rose $44.

In comparison to the previous quarter-end, nonperforming assets increased
$1,077, which resulted primarily from an increase of $632 in accruing loans past
due 90 days or more. Specifically, the amount of residential mortgages past due
90 days or more and still accruing rose $557. As a percentage of loans, net of
unearned income, nonperforming assets equaled 1.20 percent at September 30, 2005
compared to 0.93 percent at the close of the second quarter and 0.86 percent at
year-end 2004.


                                       18

<PAGE>

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

As of September 30, 2005, there were nine properties with an aggregate carrying
value of $443 held as foreclosed assets. We foreclosed upon eight loans totaling
$318 during the nine months ended September 30, 2005. Five properties with an
aggregate carrying value of $274 were sold for $331, resulting in a net realized
gain of $57.

Information concerning nonperforming assets at September 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>
                                                          SEPTEMBER 30,   DECEMBER 31,
                                                               2005           2004
                                                          -------------   ------------
<S>                                                       <C>             <C>
Nonaccrual loans:
Commercial, financial and others ......................      $1,585          $  849
Real estate:
   Construction .......................................
   Mortgage ...........................................       1,518           1,123
Consumer, net .........................................          15
Lease financing, net ..................................
                                                             ------          ------
      Total nonaccrual loans ..........................       3,118           1,972
                                                             ------          ------
Accruing loans past due 90 days or more:
Commercial, financial and others ......................         215              91
Real estate:
   Construction .......................................
   Mortgage ...........................................         709             653
Consumer, net .........................................         171             169
Lease financing, net ..................................          33
                                                             ------          ------
      Total accruing loans past due 90 days or more ...       1,128             913
                                                             ------          ------
      Total nonperforming loans .......................       4,246           2,885
                                                             ------          ------
Foreclosed assets .....................................         443             399
                                                             ------          ------
      Total nonperforming assets ......................      $4,689          $3,284
                                                             ======          ======
Ratios:
Nonperforming loans as a percentage of loans, net .....        1.09%           0.76%
Nonperforming assets as a percentage of loans, net ....        1.20%           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


                                       19

<PAGE>

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

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 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.


                                       20

<PAGE>

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

Information concerning impaired loans at September 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>
                                                    SEPTEMBER 30,   DECEMBER 31,
                                                         2005           2004
                                                    -------------   ------------
<S>                                                 <C>             <C>
Nonaccrual loans:
Commercial, financial and others ................       $1,585         $  849
Real estate:
   Construction .................................
   Mortgage .....................................        1,518          1,123
Consumer, net ...................................           15
Lease financing, net ............................
                                                        ------         ------
      Total nonaccrual loans ....................        3,118          1,972
                                                        ------         ------
Accruing loans:
Commercial, financial and others ................        1,258          3,889
Real estate:
   Construction .................................
   Mortgage .....................................        1,615          1,205
Consumer, net ...................................            1
Lease financing, net ............................
                                                        ------         ------
      Total accruing loans ......................        2,874          5,094
                                                        ------         ------
      Total impaired loans ......................       $5,992         $7,066
                                                        ======         ======
Ratio:
Impaired loans as a percentage of loans, net ....         1.54%          1.85%
</TABLE>

Impaired loans decreased $1,074 or 15.2 percent to $5,992 at September 30, 2005,
from $7,066 at year-end 2004. A $2,220 reduction in accruing loans with impaired
status was partially offset by a $1,146 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. In comparison to the
previous quarter end, impaired loans remained relatively stable, decreasing just
under 1.0 percent.


                                       21

<PAGE>

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

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

<TABLE>
<CAPTION>
                               SEPTEMBER 30,   DECEMBER 31,
                                    2005           2004
                               -------------   ------------
<S>                            <C>             <C>
Impaired loans:
With a related allowance ...       $4,188         $2,930
With no related allowance ..        1,804          4,136
                                   ------         ------
   Total ...................       $5,992         $7,066
                                   ======         ======
</TABLE>

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

<TABLE>
<CAPTION>
                               SEPTEMBER 30,
                                    2005
                               -------------
<S>                            <C>
Balance at January 1........       $1,179
Provision for loan losses...        1,709
Loans charged-off...........          263
Loans recovered.............
                                   ------
Balance at period-end.......       $2,625
                                   ======
</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 nine-month periods ended September 30, 2005 and 2004 are summarized as
follows:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED   NINE MONTHS ENDED
                                                      SEPTEMBER 30,       SEPTEMBER 30,
                                                   ------------------   -----------------
                                                      2005     2004       2005     2004
                                                     ------   ------     ------   ------
<S>                                                <C>        <C>       <C>       <C>
Gross interest due under terms .................     $  103   $  101     $  321   $  169
Interest income recognized .....................         76       90        243      150
                                                     ------   ------     ------   ------
Interest income not recognized .................     $   27   $   11     $   78   $   19
                                                     ======   ======     ======   ======

Interest income recognized (cash-basis) ........     $   76   $   90     $  243   $  150
Average recorded investment in impaired loans ..     $5,918   $6,846     $6,298   $3,680
</TABLE>

Cash received on impaired loans applied as a reduction of principal totaled
$5,093 and $208 for the nine and three months ended September 30, 2005. For the
respective periods of 2004 cash receipts on impaired loans totaled $851 and
$607. There were no commitments to extend additional funds to such parties at
September 30, 2005.


                                       22

<PAGE>

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

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

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                             SEPTEMBER 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 .......   $1,774      0.73%   $  728      1.24%
Real estate:
   Construction
   Mortgage ............................      835      0.80       451      0.61
Consumer, net ..........................       16      0.01
Lease financing, net ...................
                                           ------    ------    ------    ------
      Total specific ...................    2,625      1.54     1,179      1.85
                                           ------    ------    ------    ------

Formula:
Commercial, financial and others .......      201     34.97       149     28.71
Real estate:
   Construction ........................               1.10                1.76
   Mortgage ............................      607     54.65       878     59.79
Consumer, net ..........................      424      7.29       288      7.31
Lease financing, net ...................        1      0.45         1      0.58
                                           ------    ------    ------    ------
      Total formula ....................    1,233     98.46     1,316     98.15
                                           ------    ------    ------    ------
      Total allocated allowance ........    3,858    100.00%    2,495    100.00%
                                                     ======              ======
Unallocated allowance ..................      209               1,364
                                           ------              ------
      Total allowance for loan losses ..   $4,067              $3,859
                                           ======              ======
</TABLE>

The allocated allowance for loan losses account increased $1,363 to $3,858 at
September 30, 2005, from $2,495 at December 31, 2004. The increase resulted from
a $1,446 addition to the specific portion of the allowance for impairment of
loans individually evaluated under SFAS No. 114, partially offset by an $83
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 have been
identified as impaired with a recorded investment in excess of fair value.

The unallocated portion of the allowance for loan losses equaled $209 at the end
of the third quarter of 2005 compared to $1,364 at year-end 2004.


                                       23

<PAGE>

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

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 nine months ended
September 30, 2005, is summarized as follows:

RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                        SEPTEMBER 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 .........................................................         124
Consumer, net .......................................................         276
Lease financing, net ................................................
                                                                           ------
      Total .........................................................         472
                                                                           ------

Loans recovered:
Commercial, financial and others ....................................           1
Real estate:
   Construction .....................................................
   Mortgage .........................................................          12
Consumer, net .......................................................          48
Lease financing, net ................................................
                                                                           ------
      Total .........................................................          61
                                                                           ------
Net loans charged-off ...............................................         411
                                                                           ------
Provision charged to operating expense ..............................         619
                                                                           ------
Allowance for loan losses at end of period ..........................      $4,067
                                                                           ======

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 account equaled $4,067 at September 30, 2005, an
increase of $208 from $3,859 at the end of 2004. For the nine months ended
September 30, 2005, the provision for loan losses of $619 exceeded net
charge-offs of $411. As a percentage of loans, net of unearned income, the
allowance equaled 1.04 percent at the end of the third quarter of 2005 and 1.01
percent at year-end 2004. The allowance account covered 86.7 percent of
nonperforming assets at September 30, 2005 and 117.5 percent at December 31,
2004.


                                       24

<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 $411 or 0.14 percent of average loans outstanding for the nine
months ended September 30, 2005, compared to $225 or 0.08 percent for the same
period last year.

DEPOSITS:

Disposable personal income rose at an annual rate of 3.8 percent in the third
quarter of 2005. Despite the increase in income, personal savings for the three
months ended September 30, 2005, declined at an annual rate of 1.1 percent as
consumers spent more than they made. Personal spending rose at an annual rate of
3.9 percent in the third quarter. The negative savings rate directly impacted
the banking industry as demand for deposits slowed considerably. As a result,
competition for deposits escalated in 2005, which in turn drove up the costs
associated with deposit gathering.

Total deposits increased $9.1 million or at an annual rate of 7.5 percent to
$490.1 million at September 30, 2005 from $481.0 million at the close of the
previous quarter. Interest-bearing deposits increased $11.5 million, while
noninterest-bearing deposits declined $2.4 million. The majority of the growth
in interest-bearing deposits was concentrated in money market and NOW accounts
due to the cyclical influx of monies in the third quarter from tax deposits of
local area school districts. Money market accounts increased $12.0 million and
NOW accounts rose $3.4 million. Although we did not aggressively compete for
certificates of deposit, we did continue to offer a promotional rate for
certificates of deposit having a 13-month maturity term in order to retain our
current customer base. As a result, time deposits, including large denomination
time deposits, rose by a moderate $3.4 million to $210.4 million at September
30, 2005, from $207.0 million at June 30, 2005. However, indicative of the
negative savings rate nationally, our savings deposits declined $7.3 million, or
at an annual rate of 23.4 percent, to $116.7 million at the close of the third
quarter, from $124.0 million at the previous quarter end. The majority of the
decrease was concentrated in the consumer sector, as personal savings accounted
for 62.2 percent of the overall decline.

In comparison to year-end 2004, total deposits increased $11.6 million or at an
annualized rate of 3.2 percent. Noninterest-bearing deposits rose $3.3 million
and interest-bearing accounts increased $8.3 million.


                                       25

<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 nine months ended September 30, 2005 and 2004, are summarized
as follows:

DEPOSIT DISTRIBUTION

<TABLE>
<CAPTION>
                                     SEPTEMBER 30,        SEPTEMBER 30,
                                         2005                 2004
                                  ------------------   ------------------
                                   AVERAGE   AVERAGE    AVERAGE   AVERAGE
                                   BALANCE     RATE     BALANCE     RATE
                                  --------   -------   --------   -------
<S>                               <C>        <C>       <C>        <C>
Interest-bearing:
Money market accounts..........   $ 22,266    1.36%    $ 18,416    0.96%
NOW accounts...................     52,889    1.56       40,351    0.88
Savings accounts...............    121,536    0.88      130,053    0.75
Time deposits less than $100...    179,427    3.62      180,608    3.68
Time deposits $100 or more.....     29,600    3.45       28,206    3.32
                                  --------             --------
   Total interest-bearing......    405,718    2.39%     397,634    2.28%
Noninterest-bearing............     71,190               62,316
                                  --------             --------
   Total deposits..............   $476,908             $459,950
                                  ========             ========
</TABLE>

For the nine months ended September 30, 2005, average total deposits increased
$17.0 million or 3.7 percent to $476.9 million compared to $459.9 million for
the same period of 2004. We experienced strong growth in our noninterest-bearing
deposits which rose $8.9 million or 14.3 percent. Average interest-bearing
deposits grew $8.1 million or 2.0 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 11 basis point increase in the cost of deposits to
2.39 percent for the nine months ended September 30, 2005, from 2.28 percent for
the same period of 2004. It is anticipated that the FOMC will 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 $27.6
million at September 30, 2005, a $6.9 million decrease from $34.5 million at
December 31, 2004. These deposits averaged $29.6 million for the nine months
ended September 30, 2005, compared to $28.2 million for the same nine months of
last year. The year-to-date average cost of these deposits rose 13 basis points
to 3.45 percent in 2005, compared to 3.32 percent in 2004.


                                       26

<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 September 30, 2005, and December
31, 2004, are summarized as follows:

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE

<TABLE>
<CAPTION>
                                               SEPTEMBER 30,   DECEMBER 31,
                                                    2005           2004
                                               -------------   ------------
<S>                                            <C>             <C>
Within three months.........................      $ 7,146         $ 7,353
After three months but within six months....        2,251           4,426
After six months but within twelve months...        4,349           6,198
After twelve months.........................       13,833          16,515
                                                  -------         -------
   Total....................................      $27,579         $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


                                       27

<PAGE>

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

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 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.


                                       28

<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
SEPTEMBER 30, 2005                  THREE MONTHS   TWELVE MONTHS   FIVE YEARS   FIVE YEARS     TOTAL
------------------                  ------------   -------------   ----------   ----------   --------
<S>                                 <C>            <C>             <C>          <C>          <C>
Rate-sensitive assets:
Investment securities ...........     $  8,399       $ 25,357       $ 34,084      $30,916    $ 98,756
Loans held for sale, net ........        3,538                                                  3,538
Loans, net of unearned income ...      124,072         61,586        157,782       46,166     389,606
Federal funds sold ..............       22,700                                                 22,700
                                      --------       --------       --------      -------    --------
   Total ........................     $158,709       $ 86,943       $191,866      $77,082    $514,600
                                      ========       ========       ========      =======    ========

Rate-sensitive liabilities:
Money market accounts ...........                    $ 32,163                                $ 32,163
NOW accounts ....................                      59,842                                  59,842
Savings accounts ................                                   $116,679                  116,679
Time deposits less than $100 ....     $ 26,528         54,557         80,619      $21,128     182,832
Time deposits $100 or more ......        7,146          6,600         10,550        3,283      27,579
                                      --------       --------       --------      -------    --------
   Total ........................     $ 33,674       $153,162       $207,848      $24,411    $419,095
                                      ========       ========       ========      =======    ========

Rate sensitivity gap:
   Period .......................     $125,035       $(66,219)      $(15,982)     $52,671
   Cumulative ...................     $125,035       $ 58,816       $ 42,834      $95,505    $ 95,505

RSA/RSL ratio:
   Period .......................         4.71           0.57           0.92         3.16
   Cumulative ...................         4.71           1.31           1.11         1.23        1.23
</TABLE>

Our cumulative one-year RSA/RSL ratio equaled 1.31 at September 30, 2005,
compared to 1.39 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 near term, ALCO
continued to focus its efforts on maintaining the positive gap position between
RSA and RSL. 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,


                                       29

<PAGE>

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

these forward-looking statements are qualified in the aforementioned section
entitled "Forward-Looking Discussion" in this Management's Discussion and
Analysis.

The change in our RSA/RSL ratio from the end of the second quarter of 2005
resulted from a $20.3 million increase in RSL repricing within the next twelve
months, partially offset by a $14.3 million increase in RSA repricing within the
same timeframe. The increase in RSL resulted primarily from a $15.4 million
increase in interest-bearing transaction accounts, specifically money market
accounts and NOW accounts. We have deposit relationships with several school
districts in our market area. We cyclically experience an increase in these
types of deposit accounts due to an influx of monies from school tax payments
due during the third quarter. Also affecting RSL maturing or repricing within
this timeframe were increases of $3.2 million in time deposits less than $100
and $1.7 million in time deposits of $100 or more. An increase in federal funds
sold of $9.7 million was the predominant factor leading to the change in RSA. In
addition, loans, net of unearned income, maturing or repricing within the next
twelve months rose $4.5 million. The change in investment securities maturing or
repricing during the same timeframe and loans held for sale, net was negligible.

We experienced a decrease in our three-month ratio to 4.71 at September 30,
2005, from 6.10 at the end of the previous quarter. RSL increased $9.7 million
and RSA increased $12.5 million as compared to the previous quarter. At the end
of 2004, we began offering promotional rates on certificates of deposit with a
13-month maturity term. Certificates of deposit opened at the onset of this
promotion will begin maturing during the fourth quarter of 2005. Similar to the
twelve-month ratio, the increase in federal funds sold led to the increase in
RSA maturing or repricing within the next three months.

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.


                                       30

<PAGE>

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

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 September 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 1.9 percent and 4.2 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 2.7 percent and 8.1 percent. We
will continue to monitor our IRR for the remainder of 2005 and employ deposit
and loan 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


                                       31

<PAGE>

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

maturing after September 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 September 30, 2005, our net noncore funding
dependence ratio, the difference between noncore funds and short-term
investments to long-term assets, was negative 6.7 percent. In addition, our net
short-term noncore funding dependence ratio, noncore funds maturing within
one-year, less short-term investments to long-term assets equaled negative 10.0
percent at the end of the third quarter of 2005. Negative ratios indicated that
at September 30, 2005, we did not rely on noncore sources to fund our long-term
assets. As a result of achieving higher negative ratios, our liquidity position
improved in comparison to the end of the previous quarter. These ratios at June
30, 2005, were negative 4.7 percent and negative 8.0 percent. We believe that 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 $23.7 million during
the nine months ended September 30, 2005. In comparison, cash and cash
equivalents decreased $1.7 million for the same period last year. Net cash of
$10.1 million provided by financing activities, coupled with net cash of $9.9
million provided by investing activities were the primary factors leading to the
increase in cash and cash equivalents. In addition, operating activities
provided us with net cash of $3.7 million. For the same period of 2004, net cash
provided by financing activities of $17.4 million and operating activities of
$5.6 million was more than offset by net cash used in investing activities of
$24.7 million.

Deposit gathering is our predominant financing activity. Deposit gathering
slowed somewhat comparing the nine months ended September 30, 2005 and 2004.
Deposit gathering provided $11.6 million in net cash in 2005, a decrease of $8.2
million compared to $19.8 million in 2004. For the nine months ended September
30, 2005, interest-bearing transaction accounts increased $12.1 million while
time deposits decreased $0.5 million.


                                       32

<PAGE>

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

Investing activities primarily involve transactions related to our investment
securities and lending activities. The net cash provided by investing activities
of $9.9 million was caused primarily by repayments of investment securities of
$37.3 million surpassing purchases of investment securities of $18.5 million and
a net increase in lending activities of $8.7 million.

Operating activities provided net cash of $3.7 million for the nine months ended
September 30, 2005. Net income of $3.9 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 same period of 2004, net cash provided by operations
amounted to $5.6 million. The $1.9 million decrease in net cash provided by
operating activities primarily resulted from a $1.6 million decrease in loans
held for sale, net.

CAPITAL ADEQUACY:

Stockholders' equity totaled $49.2 million at September 30, 2005, an increase of
$1.9 million compared to $47.3 million at December 31, 2004. Net income of $3.9
million was partially offset by common stock repurchased and net cash dividends
declared. On a per share basis, stockholders' equity equaled $26.50 per share at
the end of the third quarter of 2005, compared to $25.38 per share at year-end
2004.

During the nine months ended September 30, 2005, 10,644 shares of common stock
were repurchased at an aggregate cost of $435. Dividends declared during this
same time period totaled $1,285. On a per share basis year-to-date dividends
declared equaled $0.69 in 2005, an increase of 4.5 percent compared to $0.66 in
2004. The dividend payout ratio was 33.1 percent for the nine months ended
September 30, 2005, compared to 35.7 percent for the same nine months of 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 nine months ended September 30, 2005, 4,623 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


                                       33

<PAGE>

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

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 September 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.


                                       34

<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 September 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
                                               -------------------   -------------------   ------------------
SEPTEMBER 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.............................   $ 47,644   $ 44,726    $16,296   $15,598
   Community Bank...........................     45,552     43,153     16,270    15,580     $24,405   $23,369
Total capital to risk-weighted assets:
   Consolidated.............................     51,711     48,535     32,591    31,196
   Community Bank...........................     49,619     46,962     32,540    31,159      40,675    38,949
Tier I capital to total average assets
   less goodwill:
   Consolidated.............................     47,644     44,726     21,283    20,377
   Community Bank...........................     45,552     43,153    $21,254   $20,349     $26,568   $25,436
Risk-weighted assets:
   Consolidated.............................    396,723    378,925
   Community Bank...........................    396,083    378,463
Risk-weighted off-balance sheet items:
   Consolidated.............................     10,669     11,025
   Community Bank...........................     10,669     11,025
Average assets for Leverage ratio:
   Consolidated.............................    532,076    509,437
   Community Bank...........................   $531,357   $508,716

Ratios:
Tier I capital as a percentage of risk-
   weighted assets and off-balance sheet
   items:
   Consolidated.............................       11.7%      11.5%       4.0%      4.0%        6.0%      6.0%
   Community Bank...........................       11.2       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.............................       12.7       12.5        8.0       8.0        10.0      10.0
   Community Bank...........................       12.2       12.1        8.0       8.0        10.0      10.0
Tier I capital as a percentage of total
   average assets less intangible assets:
   Consolidated.............................        9.0        8.8        4.0       4.0         5.0       5.0
   Community Bank...........................        8.6%       8.5%       4.0%      4.0%        5.0%      5.0%
</TABLE>


                                       35

<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 September 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 third quarter of 2005 increased $315 to $1,380 or $0.74 per
share in 2005 from $1,065 or $0.56 per share in 2004. The 29.6 percent
improvement resulted primarily from a 10.2 percent increase in net interest
income. In addition, greater operating efficiency also factored into the
earnings improvement, as noninterest expense declined 3.8 percent comparing the
third quarters of 2005 and 2004. Year-to-date net income improved $380 to $3,880
or $2.08 per share in 2005 compared to $3,500 or $1.84 per share in 2004.

For the third quarter, return on average assets and return on average
stockholders' equity improved to 1.02 percent and 11.10 percent in 2005 compared
to 0.82 percent and 9.00 percent in 2004. Return on average assets and return on
average stockholders' equity for the nine months ended September 30, 2005, were
0.97 percent and 10.69 percent compared to 0.92 percent and 9.88 percent for the
same period 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,


                                       36

<PAGE>

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

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.

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.


                                       37

<PAGE>

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

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        NINE MONTHS ENDED
                                             SEPTEMBER 30,            SEPTEMBER 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...........................    $404    $284    $120    $  739   $ 155   $  584
   Tax-exempt........................     220      71     149       620     187      433
Investments:
   Taxable...........................       1       1                (2)   (125)     123
   Tax-exempt........................       6       2       4       (18)      3      (21)
Federal funds sold...................      76     100     (24)       52     131      (79)
                                         ----    ----    ----    ------   -----   ------
      Total interest income..........     707     458     249     1,391     351    1,040
                                         ----    ----    ----    ------   -----   ------
Interest expense:
Money market accounts................      39      24      15        94      62       32
NOW accounts.........................     122      85      37       351     249      102
Savings accounts.....................      40      63     (23)       71     121      (50)
Time deposits less than $100.........     (16)    (15)     (1)     (113)    (76)     (37)
Time deposits $100 or more...........      14      14                61      27       34
Short-term borrowings................                               106       1      105
                                         ----    ----    ----    ------   -----   ------
      Total interest expense.........     199     171      28       570     384      186
                                         ----    ----    ----    ------   -----   ------
      Net interest income............    $508    $287    $221    $  821   $ (33)  $  854
                                         ====    ====    ====    ======   =====   ======
</TABLE>

For the three months ended September 30, tax-equivalent net interest income
improved $508 to $5,044 in 2005 from $4,536 in 2004. Rising interest rates
coupled with strategic balance sheet positioning were the primary factors
leading to the 11.2 percent improvement. In addition, a positive volume variance
also contributed, as earning assets grew at a faster pace than interest-bearing
liabilities. In anticipation of a change in monetary policy, for the prior two
years management took steps to strategically reposition the repricing structure
of the balance sheet. Specifically, commercial loans were originated with terms
repricing either immediately or


                                       38

<PAGE>

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

within the near term. On the liability side, management sought to lengthen the
terms of time deposits through offering special pricing for longer-term
maturities. Due to these efforts, rising interest rates have caused earning
asset yields to reprice at a faster comparable pace than that of our cost of
interest-bearing liabilities. Specifically, tax-equivalent loan yields for the
third quarter improved 33 basis points to 6.38 percent in 2005 from 6.05 percent
in 2004. Yields on the investment portfolio and federal funds sold rose 3 basis
points and 203 basis points. Overall, the tax-equivalent yield on earning assets
increased 37 basis points. Conversely, the rate paid on interest-bearing
liabilities rose 16 basis points comparing the third quarters of 2005 and 2004.
These changes together resulted in a positive variance of $287 in tax-equivalent
net interest income.

With regard to volume, earning assets averaged $507.1 million for the third
quarter of 2005, an increase of $15.4 million compared to $491.7 million for the
same quarter of 2004. Specifically, loans, net of unearned income averaged $18.3
million higher, while average investments and federal funds sold declined $2.9
million. These changes in the volume of earning assets resulted in additional
interest revenue of $249. Partially offsetting the additional interest revenue
was an increase in interest expense of $28 resulting from growth in
interest-bearing liabilities of $5.2 million. The majority of the growth was
concentrated in interest-bearing transaction accounts, specifically money market
and NOW accounts. The average balances of savings accounts and time deposits
decreased when comparing the third quarters of 2005 and 2004.

On a year-to-date basis, tax-equivalent net interest income increased $821 or
6.0 percent to $14,512 in 2005 from $13,691 in 2004. Growth in average earning
assets over that of interest-bearing liabilities resulted in additional
tax-equivalent net interest income of $854. Slightly offsetting, the positive
volume variance was a negative rate variance of $33, as the net interest spread
decreased 1 basis point to 3.38 percent in 2005. With regard to volume, average
loans, net of unearned income grew $24.2 million or 6.5 percent in 2005, which
resulted in additional interest revenue of $1,017. In total, growth in earning
assets impacted tax-equivalent interest income by $1,040. Partially offsetting
the increase in interest revenue was additional interest expense of $186 which
resulted from growth in average interest-bearing liabilities of $13.3 million.
Average interest-bearing deposits rose $8.1 million, while short-term borrowings
increased $5.2 million.

Partially offsetting the positive volume variance was a negative rate variance.
A 12 basis point rise in funds costs, almost entirely mitigated by an 11 basis
point increase in the tax-equivalent yield on average


                                       39

<PAGE>

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

earning assets, resulted in a $33 decrease in tax-equivalent net interest
income. The rise in short-term interest rates directly impacted our cost of
funds. Specifically, we experienced increased costs from variable rate
interest-bearing commercial transaction accounts, which include money market,
NOW and savings accounts. The average rate paid for these types of accounts rose
40 basis points, 68 basis points and 13 basis points. These increases resulted
in additional interest expense of $62, $249 and $121. Although we have
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 $76, as higher-yielding, long-term certificates repriced
at lower rates. The rate paid for volatile, large denomination time deposits
rose 13 basis points. With regard to earning assets, the tax-equivalent yield on
loans increased 9 basis points to 6.20 percent in 2005 from 6.11 percent in
2004. This resulted in additional interest revenue of $342. In addition, the
average yield on federal funds sold improved 213 basis points, adding $131 to
interest revenue. Partially offsetting these increases was a 24 basis point
reduction in the tax-equivalent yield on investments, which resulted in a $122
reduction in net interest income.

Maintenance of an adequate net interest margin is one of our primary concerns.
For the third quarter of 2005, our net interest margin improved 11 basis points
to 3.95 percent compared to 3.84 percent for the previous quarter. In comparison
to the same quarter of 2004, this was a 28 basis point improvement. For the nine
months ended September 30, 2005, our net interest margin widened 4 basis points
to 3.83 percent compared to 3.79 percent for the same nine months of 2004.
Although this 4 basis point increase appears only to be a minor improvement, it
is in fact significant as it is a marked improvement in the year-to-date
comparison of the net interest margin over the prior period. On a year-to-date
basis for the six months ended June 30, the net interest margin declined 8 basis
points from 3.85 percent in 2004 to 3.77 percent in 2005. We anticipate that any
further actions by the FOMC to raise interest rates will continue to 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 assist
us in widening our net interest margin.


                                       40

<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 nine months ended
September 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>
                                                              SEPTEMBER 30, 2005               SEPTEMBER 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 ..........................................   $356,739   $ 16,864     6.32%    $344,361    $16,125     6.25%
   Tax-exempt .......................................     39,826      1,536     5.16       28,050        916     4.36
Investments:
   Taxable ..........................................     71,712      1,555     2.90       66,379      1,557     3.13
   Tax-exempt .......................................     31,706      1,770     7.46       32,089      1,788     7.44
Federal funds sold ..................................      6,280        158     3.36       11,550        106     1.23
                                                        --------   --------              --------    -------
      Total earning assets ..........................    506,263     21,883     5.78%     482,429     20,492     5.67%
Less: allowance for loan losses .....................      4,000                            3,745
Other assets ........................................     30,302                           31,510
                                                        --------                         --------
      Total assets ..................................   $532,565                         $510,194
                                                        ========                         ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts ...............................   $ 22,266        226     1.36%    $ 18,416        132     0.96%
NOW accounts ........................................     52,889        618     1.56       40,351        267     0.88
Savings accounts ....................................    121,536        799     0.88      130,053        728     0.75
Time deposits less than $100 ........................    179,427      4,859     3.62      180,608      4,972     3.68
Time deposits $100 or more ..........................     29,600        763     3.45       28,206        702     3.32
Short-term borrowings ...............................      5,203        106     2.72
                                                        --------   --------                          -------
      Total interest-bearing liabilities ............    410,921      7,371     2.40%     397,634      6,801     2.28%
Noninterest-bearing deposits ........................     71,190                           62,316
Other liabilities ...................................      1,906                            2,907
Stockholders' equity ................................     48,548                           47,337
                                                        --------                         --------
      Total liabilities and stockholders' equity ....   $532,565                         $510,194
                                                        ========   --------              ========    -------
      Net interest/income spread ....................              $ 14,512     3.38%                $13,691     3.39%
                                                                   ========                          =======
      Net interest margin ...........................                           3.83%                            3.79%
Tax equivalent adjustments:
Loans ...............................................              $    522                          $   312
Investments .........................................                   602                              608
                                                                   --------                          -------
      Total adjustments .............................              $  1,124                          $   920
                                                                   ========                          =======
</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 $2,089 and $2,882 for the nine
     months ended September 30, 2005 and 2004 included in other assets.
     Tax-equivalent adjustments were calculated using the prevailing statutory
     tax rate of 34.0 percent.


                                       41

<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 nine months ended
September 30, the provision for loan losses totaled $161 and $619 in 2005,
compared to $150 and $450 in 2004.

NONINTEREST INCOME:

For the third quarter, noninterest income remained relatively stable at $865 in
2005 and $864 in 2004. Continued strength in the housing market fueled by low
mortgage rates resulted in a $35 increase in net gains on the sale of
residential mortgages. Service charges, fees and commissions decreased $34.
Year-to-date noninterest revenue totaled $3,043 in 2005, an increase of $377 or
14.1 percent from $2,666 in 2004. Included in noninterest revenue in 2005 was a
$235 net gain on the sale of the merchant services portfolio in an asset
purchase and revenue sharing agreement with a third party. Service charges, fees
and commissions improved $153 or 6.8 percent.

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.


                                       42

<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 nine months
ended September 30, 2005 and 2004, are summarized as follows:

NONINTEREST EXPENSES

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED   NINE MONTHS ENDED
                                                  SEPTEMBER 30,       SEPTEMBER 30,
                                               ------------------   -----------------
                                                  2005     2004       2005      2004
                                                 ------   ------    -------   -------
<S>                                            <C>        <C>       <C>       <C>
SALARIES AND EMPLOYEE BENEFITS EXPENSE:
Salaries and payroll taxes .................     $1,444   $1,424    $ 4,398   $ 4,228
Employee benefits ..........................        334      348      1,018     1,024
                                                 ------   ------    -------   -------
   Salaries and employee benefits expense ..      1,778    1,772      5,416     5,252
                                                 ------   ------    -------   -------

NET OCCUPANCY AND EQUIPMENT EXPENSE:
Net occupancy expense ......................        297      259        910       834
Equipment expense ..........................        291      307        900       995
                                                 ------   ------    -------   -------
   Net occupancy and equipment expense .....        588      566      1,810     1,829
                                                 ------   ------    -------   -------

OTHER EXPENSES:
Marketing expense ..........................        155      170        457       449
Other taxes ................................         88       99        330       295
Stationery and supplies ....................         84      106        265       272
Contractual services .......................        495      392      1,415     1,165
Insurance including FDIC assessment ........         64       60        206       167
Other ......................................        368      599      1,141     1,557
                                                 ------   ------    -------   -------
   Other expenses ..........................      1,254    1,426      3,814     3,905
                                                 ------   ------    -------   -------
      Total noninterest expense ............     $3,620   $3,764    $11,040   $10,986
                                                 ======   ======    =======   =======
</TABLE>

For the three months ended September 30, 2005, noninterest expense declined $144
or 3.8 percent in comparison to the same three months of 2004. Other expense
decreased $172, while salary and employee benefits expense and net occupancy and
equipment expense increased by $6 and $22. The expense curtailment led to
greater efficiency as evidenced by an improvement in the efficiency ratio, an
industry measure of productivity. This ratio, defined as noninterest expense as
a percentage of net interest income and noninterest income, improved to 65.4
percent for the third quarter of 2005 from 73.8 percent for the same quarter of
2004. Year-to-date noninterest expense totaled $11,040 in 2005, an increase of
$54 compared to $10,986 in 2004.

For the nine months ended September 30, 2005, salaries and employee benefits
expense, which comprise the majority of noninterest expense, totaled $5,416, an
increase of $164 or 3.1 percent compared to $5,252 for the same period of 2004.
The increase resulted from annual merit increases partially offset by a slight
decrease in employee benefit costs. Recently, management decided to require
employees to contribute a portion of the


                                       43

<PAGE>

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

premium charged for additional family members covered under the traditional
health plan. As a result, a higher percentage of employees opted for the
lower-costing HMO option for health insurance.

Year-to-date net occupancy and equipment expense decreased $19 or 1.0 percent in
2005. Higher maintenance costs, utility costs and real estate taxes were more
than offset by a reduction in depreciation expense.

Other expenses decreased $91 to $3,814 for the nine months ended September 30,
2005, from $3,905 for the same nine months of the prior year. Higher
audit-related expenses incurred to prepare for compliance with the
Sarbanes-Oxley Act, additional marketing costs and increased Pennsylvania bank
shares tax, were offset by a reduction in fees associated with operating our
merchant services portfolio.

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 September 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 third quarter of 2005 at $0.0134 per 100
dollars of BIF-assessable deposits. Our assessments totaled $49 and $51 for the
nine months ended September 30, 2005 and 2004.

INCOME TAXES:

For the nine months ended September 30, income tax expense totaled $892 in 2005
and $501 in 2004. Our effective tax rate increased from 12.5 percent in 2004 to
18.7 percent in 2005.

For the nine months ended September 30, 2004, we recognized $314 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 $398 or 22.3 percent
increase in tax-exempt income. Tax-exempt interest income


                                       44

<PAGE>

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

as a percentage of total interest income increased to 10.5 percent for the nine
months ended September 30, 2005, from 9.1 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.


                                       45

<PAGE>

COMM BANCORP, INC.
CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:

As of September 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 September 30, 2005, that materially affected, or is
reasonably likely to materially effect, our internal control over financial
reporting.


                                       46

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     NONE

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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 nine months ended September
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
July 31, 2005........       1,500         40.10             1,500               60,664
August 31, 2005......       2,100         41.80             2,100               58,564
September 30, 2005...       1,400         39.70             1,400               57,164
                           ------        ------            ------
   Total.............      10,644        $40.87            10,644
                           ======        ======            ======
</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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     NONE

ITEM 5. OTHER INFORMATION

     NONE


                                       47

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION (CONTINUED)

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

          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.

     (b)  Reports on Form 8-K

          Item 2.02 - On July 22, 2005, we filed a report on Form 8-K, to
          disclose our results of operations for the three months ended June 30,
          2005.


                                       48

<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: November 9, 2005                  /s/ William F. Farber, Sr.
                                        ----------------------------------------
                                        William F. Farber, Sr.
                                        President and Chief Executive Officer
                                        Chairman of the Board/Director
                                        (Principal Executive Officer)


Date: November 9, 2005                  /s/ Scott A. Seasock
                                        ----------------------------------------
                                        Scott A. Seasock
                                        Executive Vice President and
                                        Chief Financial Officer
                                        (Principal Financial Officer)


Date: November 9, 2005                  /s/ Stephanie A. Ganz, CPA
                                        ----------------------------------------
                                        Stephanie A. Ganz, CPA
                                        Vice President of Finance
                                        (Principal Accounting Officer)


                                       49

<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                 51

   31(ii)     Certification of Chief Financial Officer pursuant to
              Section 302 of the Sarbanes- Oxley Act of 2002                 53

   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                                55

   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                                56
</TABLE>


                                    50