<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q


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

For the quarterly period ended JUNE 30, 2001


                                       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)

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

  125 N. STATE STREET, CLARKS SUMMIT, PA                        18411
---------------------------------------------  ---------------------------------
     (Address of principal executive offices)                        (Zip Code)

                                    (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 twelve 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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,985,935 at July 31, 2001.


                                  Page 1 of 44
<PAGE>   2
                               COMM BANCORP, INC.
                                    FORM 10-Q

                                  JUNE 30, 2001

                                      INDEX

<TABLE>
<CAPTION>

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

 Item 1: Financial Statements.

     Consolidated Statements of Income and Comprehensive Income -
      for the Three months and Six Months Ended June 30, 2001
      and 2000...................................................        3
     Consolidated Balance Sheets - June 30, 2001 and December
      31, 2000...................................................        4
     Consolidated Statement of Changes in Stockholders' Equity
      for the Six Months Ended June 30, 2001.....................        5
     Consolidated Statements of Cash Flows for the Six Months
      Ended June 30, 2001 and 2000...............................        6
     Notes to Consolidated Financial Statements..................        7

  Item 2: Management's Discussion and Analysis of Financial
           Condition and Results of Operations...................        9

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

PART II.  OTHER INFORMATION:

  Item 1: Legal Proceedings......................................       42

  Item 2: Changes in Securities and Use of Proceeds..............       42

  Item 3: Defaults Upon Senior Securities........................       42

  Item 4: Submission of Matters to a Vote of Security Holders....       42

  Item 5: Other Information......................................       43

  Item 6: Exhibits and Reports on Form 8-K.......................       43

  SIGNATURES.....................................................       44

  Exhibit Index..................................................        *
</TABLE>

* Not Applicable


                                        2
<PAGE>   3
COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                                     JUNE 30,                      JUNE 30,
                                                                               2001          2000            2001           2000
                                                                            -----------    -----------    -----------   -----------
<S>                                                                          <C>            <C>            <C>           <C>
INTEREST INCOME:
Interest and fees on loans:
  Taxable ................................................................  $     6,056    $     5,768    $    12,171   $    11,329
  Tax-exempt .............................................................           94            179            188           358
Interest and dividends on investment securities available-for-sale:
  Taxable ................................................................          798            893          1,508         1,857
  Tax-exempt .............................................................          448            407            764           883
  Dividends ..............................................................           31             31             62            64
Interest on federal funds sold ...........................................          239             20            543            29
                                                                            -----------    -----------    -----------   -----------
    Total interest income ................................................        7,666          7,298         15,236        14,520
                                                                            -----------    -----------    -----------   -----------

INTEREST EXPENSE:
Interest on deposits .....................................................        3,912          3,729          7,825         7,439
Interest on short-term borrowings ........................................                          29                           97
Interest on long-term debt ...............................................                           1              1             2
                                                                            -----------    -----------    -----------   -----------
    Total interest expense ...............................................        3,912          3,759          7,826         7,538
                                                                            -----------    -----------    -----------   -----------
    Net interest income ..................................................        3,754          3,539          7,410         6,982
Provision for loan losses ................................................          180             90            360           180
                                                                            -----------    -----------    -----------   -----------
    Net interest income after provision for loan losses ..................        3,574          3,449          7,050         6,802
                                                                            -----------    -----------    -----------   -----------

NONINTEREST INCOME:
Service charges, fees and commissions ....................................          718            485          1,280           925
Net gains on sale of loans ...............................................           52                            73             1
Net gains on sale of investment securities ...............................                           1                          173
                                                                            -----------    -----------    -----------   -----------
    Total noninterest income .............................................          770            486          1,353         1,099
                                                                            -----------    -----------    -----------   -----------

NONINTEREST EXPENSE:
Salaries and employee benefits expense ...................................        1,367          1,300          2,656         2,579
Net occupancy and equipment expense ......................................          475            399            888           790
Other expenses ...........................................................        1,135          1,002          2,053         1,959
                                                                            -----------    -----------    -----------   -----------
    Total noninterest expense ............................................        2,977          2,701          5,597         5,328
                                                                            -----------    -----------    -----------   -----------
Income before income taxes ...............................................        1,367          1,234          2,806         2,573
Provision for income tax expense .........................................          307            264            676           543
                                                                            -----------    -----------    -----------   -----------
    Net income ...........................................................        1,060            970          2,130         2,030
                                                                            -----------    -----------    -----------   -----------

OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains (losses) on investment securities available-for-sale ....         (246)           249            256           338
Reclassification adjustment for gains included in net income .............                          (1)                        (173)
Income tax expense (benefit) related to other comprehensive income (loss)           (84)            84             87            56
                                                                            -----------    -----------    -----------   -----------
    Other comprehensive income (loss), net of income taxes ...............         (162)           164            169           109
                                                                            -----------    -----------    -----------   -----------
    Comprehensive income .................................................  $       898    $     1,134    $     2,299   $     2,139
                                                                            ===========    ===========    ===========   ===========

PER SHARE DATA:
Net income ...............................................................  $      0.53    $      0.48    $      1.07   $      1.01
Cash dividends declared ..................................................  $      0.18    $      0.17    $      0.36   $      0.34
Average common shares outstanding ........................................    1,984,334      1,991,303      1,985,660     2,004,035
</TABLE>


See notes to consolidated financial statements.

                                        3
<PAGE>   4
COMM BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                         JUNE 30,       DECEMBER 31,
                                                                                                           2001            2000
                                                                                                         --------        --------
<S>                                                                                                      <C>           <C>
ASSETS:
Cash and due from banks ......................................................................           $ 11,430        $ 11,919
Federal funds sold ...........................................................................             18,700          25,500
Investment securities available-for-sale .....................................................            103,038          71,246
Loans held for sale, net .....................................................................              1,873              62
Loans, net of unearned income ................................................................            293,505         297,530
  Less: allowance for loan losses ............................................................              3,402           3,285
                                                                                                         --------        --------
Net loans ....................................................................................            290,103         294,245
Premises and equipment, net ..................................................................              9,505           9,708
Accrued interest receivable ..................................................................              2,281           2,014
Other assets .................................................................................              4,629           5,046
                                                                                                         --------        --------
    Total assets .............................................................................           $441,559        $419,740
                                                                                                         ========        ========

LIABILITIES:
Deposits:
  Noninterest-bearing ........................................................................           $ 41,424        $ 39,263
  Interest-bearing ...........................................................................            357,280         339,458
                                                                                                         --------        --------
    Total deposits ...........................................................................            398,704         378,721
Long-term debt ...............................................................................                                 36
Accrued interest payable .....................................................................              2,357           2,014
Other liabilities ............................................................................              1,319           1,351
                                                                                                         --------        --------
    Total liabilities ........................................................................            402,380         382,122
                                                                                                         --------        --------

STOCKHOLDERS' EQUITY:
Common stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding:
 June 30, 2001, 1,984,334 shares; December 31, 2000, 1,985,399 shares ........................                655             655
Capital surplus ..............................................................................              6,333           6,244
Retained earnings ............................................................................             31,613          30,310
Accumulated other comprehensive income .......................................................                578             409
                                                                                                         --------        --------
    Total stockholders' equity ...............................................................             39,179          37,618
                                                                                                         --------        --------
    Total liabilities and stockholders' equity ...............................................           $441,559        $419,740
                                                                                                         ========        ========
</TABLE>









See notes to consolidated financial statements.

                                        4
<PAGE>   5
COMM BANCORP, INC.
CONSOLIDATED STATEMENTS 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>         <C>             <C>
BALANCE, DECEMBER 31, 2000 ...............................   $    655       $  6,244       $ 30,310       $    409       $ 37,618
Net income ...............................................                                    2,130                         2,130
Dividends declared: $0.36 per share ......................                                     (715)                         (715)
Dividend reinvestment plan: 3,935 shares issued ..........          2            104                                          106
Repurchase and retirement: 5,000 shares ..................         (2)           (15)          (112)                         (129)
Net change in other comprehensive income .................                                                     169            169
                                                             --------       --------       --------       --------       --------
BALANCE, JUNE 30, 2001 ...................................   $    655       $  6,333       $ 31,613       $    578       $ 39,179
                                                             ========       ========       ========       ========       ========
</TABLE>












See notes to consolidated financial statements.

                                        5
<PAGE>   6
COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30                                                                                  2001                2000
------------------------                                                                               --------            --------
<S>                                                                                                    <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................................           $  2,130            $  2,030
Adjustments:
  Provision for loan losses ................................................................                360                 180
  Depreciation, amortization and accretion .................................................              1,018                 908
  Amortization of loan fees ................................................................                (55)                (49)
  Deferred income tax expense (benefit) ....................................................                (20)                 75
  Gains on sale of investment securities available-for-sale ................................                                   (173)
  Losses (gains) on sale of foreclosed assets ..............................................               (111)                 47
  Changes in:
    Loans held for sale, net ...............................................................             (1,811)
    Accrued interest receivable ............................................................               (267)                  6
    Other assets ...........................................................................               (298)               (329)
    Accrued interest payable ...............................................................                343                 (50)
    Other liabilities ......................................................................               (106)                 75
                                                                                                       --------            --------
      Net cash provided by operating activities ............................................              1,183               2,720
                                                                                                       --------            --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment securities available-for-sale .............................                                  5,304
Proceeds from repayments of investment securities available-for-sale .......................             12,684              12,023
Purchases of investment securities available-for-sale ......................................            (44,559)             (2,298)
Proceeds from sale of foreclosed assets ....................................................                919                  70
Net decrease (increase) in lending activities ..............................................              3,507             (11,942)
Purchases of premises and equipment ........................................................               (232)               (711)
                                                                                                       --------            --------
      Net cash provided by (used in) investing activities ..................................            (27,681)              2,446
                                                                                                       --------            --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
  Money market, NOW, savings and noninterest-bearing accounts ..............................             11,679              (3,686)
  Time deposits ............................................................................              8,304               3,365
  Short-term borrowings ....................................................................                                    800
Payments on long-term debt .................................................................                (36)                 (2)
Proceeds from issuance of common shares ....................................................                106                 110
Repurchase and retirement of common shares .................................................               (129)             (1,917)
Cash dividends paid ........................................................................               (715)               (668)
                                                                                                       --------            --------
      Net cash provided by (used in) financing activities ..................................             19,209              (1,998)
                                                                                                       --------            --------
      Net increase (decrease) in cash and cash equivalents .................................             (7,289)              3,168
      Cash and cash equivalents at beginning of year .......................................             37,419              10,991
                                                                                                       --------            --------
      Cash and cash equivalents at end of period ...........................................           $ 30,130            $ 14,159
                                                                                                       ========            ========

SUPPLEMENTAL DISCLOSURE:
Cash paid during the period for:
  Interest .................................................................................           $  7,483            $  7,588
  Income taxes .............................................................................                653                 476
Noncash items:
  Transfer of loans to foreclosed assets ...................................................                330                 468
  Unrealized gains on investment securities available-for-sale .............................           $   (169)           $   (109)
</TABLE>







See notes to consolidated financial statements.


                                        6
<PAGE>   7
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 generally accepted accounting principles ("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, 2000.

2. BUSINESS COMBINATIONS

On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations." SFAS No. 141 supercedes Accounting Principles Board
("APB")Opinion No. 16, "Business Combinations," and SFAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." Previously, under APB
No. 16 business combinations were accounted for using one of two methods, the
pooling-of-interests method or the purchase method. SFAS No. 141 eliminates the
pooling-of-interests method and requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. The
adoption of this Statement on July 1, 2001, is not expected to have a material
effect on operating results or financial position as the Company has no pending
business combinations.

3. GOODWILL AND OTHER INTANGIBLE ASSETS

On June 29, 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This Statement supercedes APB Opinion No. 17, "Intangible Assets." SFAS
No. 142 changes the accounting for goodwill from an amortization method to an
impairment only approach. Amortization of

                                        7
<PAGE>   8
COMM BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

goodwill, including goodwill recorded in past business combinations, will cease
upon adoption of the Statement. The provisions of this Statement are required to
be applied starting with fiscal years beginning after December 15, 2001. The
adoption of SFAS No. 142 on January 1, 2002, is expected to affect the results
of operations by increasing net income for the year ended December 31, 2002, by
$218. However, this estimate may change due to any impairment losses that arise
due to the initial application of this Statement.






















                                        8
<PAGE>   9
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.

In originating loans, some credit losses are likely to occur. This risk of loss
varies with, among other things:

     -    General economic conditions,

     -    Loan type,

     -    Creditworthiness and debt servicing capacity of the borrower over the
          term of the loan, and

     -    The value and marketability of the collateral securing the loan.

We maintain an allowance for loan losses based on, among other things:


     -    Historical loan loss experience,

     -    Known inherent risks in the loan portfolio,

     -    Adverse situations that may affect a borrower's ability to repay,


                                        9
<PAGE>   10
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     -    The estimated value of any underlying collateral, and

     -    An evaluation of current economic conditions.

We currently believe that the allowance for loan losses is adequate, but we
cannot assure that nonperforming loans will not increase in the future.

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

The banking industry is highly competitive, with rapid changes in product
delivery systems and in consolidation of service providers. We compete with many
larger institutions in terms of asset size. These competitors also have
substantially greater technical, marketing and financial resources. The larger
size of these companies affords them the opportunity to offer 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.


OPERATING ENVIRONMENT:

The gross domestic product ("GDP"), the value of all goods and services produced
in the United States grew at a very sluggish 0.7 percent in the second quarter
of 2001. Resilient consumer spending of 2.1 percent for the second quarter,
coupled with strong government outlays of 5.5 percent were able to slightly
offset the 16.3 percent dramatic plunge in business investment. In order to spur
the tepid economy, the Federal Open Market Committee ("FOMC") dropped the
federal funds rate another 125 basis points in the second quarter to 3.75
percent. This brings the cumulative decline to 275 basis points during the first
half of 2001. The FOMC has cited a number of reasons for this unusually steep
decline:

     -    The rapid and substantial slowdown in growth carried considerable
          risks that the sluggish performance would persist,

     -    The jarring of confidence could cause households and businesses to
          curtain spending, and

     -    A higher foreign exchange value of the dollar, lower equity prices and
          tighter lending standards by banks, were restraining


                                       10
<PAGE>   11
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

          aggregate demand and offsetting some of the influence of the lower
          federal funds rate.

At the end of the second quarter, the FOMC bias was directed towards easing and
as a result, additional rate cuts are possible.


REVIEW OF FINANCIAL POSITION:

Total assets amounted to $441.6 million at June 30, 2001, an increase of $21.9
million from $419.7 million at December 31, 2000. The growth in the balance
sheet was primarily attributable to an increase in total deposits. We
experienced substantial demand for our deposit products during the first half of
2001. Total deposits grew $20.0 million to $398.7 million at the end of the
second quarter of 2001, compared to $378.7 million at year-end 2000. As a result
of actions taken to replace securities sold from the fourth quarter of 2000
restructuring of the investment portfolio and a decline in loan demand,
investments increased $31.8 million to $103.0 million at June 30, 2001. Loans,
net of unearned income, declined by $4.0 million to $293.5 million at the close
of the second quarter, as unstable economic conditions negatively impacted loan
demand. In addition, federal funds sold were reduced by $6.8 million to $18.7
million at June 30, 2001, from $25.5 million at the end of 2000. Stockholders'
equity improved $1.6 million to $39.2 million at June 30, 2001, from $37.6
million at December 31, 2000. The improvement primarily resulted from net income
of $2,130, partially offset by net cash dividends declared of $609. Also
affecting capital was a positive net change in other comprehensive income of
$169 and common stock repurchases of $129. We experienced a decline in our asset
quality from year-end 2000, as evidenced by an increase in the ratio of
nonperforming assets to loans, net of unearned income. This ratio equaled 1.56
percent at the end of the second quarter of 2001, compared to 1.35 percent at
year-end 2000.

In comparison to the end of the first quarter of 2001, we experienced a $12.8
million increase in total assets. Deposits grew $12.0 million and the investment
portfolio increased $14.9 million, while federal funds sold declined $5.0
million. Loans, net of unearned income remained relatively unchanged, increasing
$0.5 million. Stockholders' equity improved $0.6 million.

Our management team believes the formation of long-term plans and goals are
imperative in order to gain market share and remain a viable financial
institution in today's ever-changing and increasingly competitive environment.
During the second quarter of 2001, we contracted with an outside consulting firm
to direct us in drafting a long-term strategic plan. We anticipate the
completion of the plan by the end of the third quarter of 2001.


                                       11
<PAGE>   12
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

INVESTMENT PORTFOLIO:

During the first half of 2001, the FOMC lowered the federal funds rate 275 basis
points in six steps in response to the abrupt halt in economic growth and the
threat of continued weakness in the economy. The policy easings and declining
equity prices, coupled with the economic slowdown led to declines in yields on
U.S. Treasury securities during the first quarter of 2001. During the second
quarter, short-term interest rates continued to decrease. However, despite the
FOMC's actions, yields on longer-term securities rose substantially. The market
value of our investment portfolio is impacted by changes in the yield curve.
Specifically, our holdings of mortgage-backed securities are closely related to
the two-year U.S. Treasury rate, while our municipal obligations correlate to
the ten-year U.S. Treasury rate. The two-year Treasury declined 103 basis points
from 5.11 percent at year-end 2000 to 4.08 percent at the end of the second
quarter of 2001. This resulted in a positive change with respect to the market
value of mortgage-backed securities, as a $236 unrealized holding loss at
December 31, 2000, converted to an unrealized gain of $118 at the end of the
second quarter. However, the ten-year U.S. Treasury, which fell 23 basis points
to 4.89 percent at March 31, 2001, rose 39 basis points to 5.28 percent at June
30, 2001. This caused a negative change of $89, net of income tax benefits of
$47, in the unrealized gain on our municipal obligations from $792 at the end of
2000 to $656 at June 30, 2001. Overall, we experienced an improvement of $169,
net of income taxes of $87, in the net unrealized holding gain on
available-for-sale investment securities.

The carrying values of the major classifications of securities as they relate to
the total investment portfolio at June 30, 2001, and December 31, 2000, are
summarized as follows:

DISTRIBUTION OF INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                             JUNE 30,                     DECEMBER 31,
                                              2001                           2000
                                      AMOUNT           %             AMOUNT           %
                                    --------       ----------       --------       ------
<S>                                 <C>            <C>             <C>             <C>
U.S. Treasury securities .                                         $  3,001          4.21%
U.S. Government agencies .          $  1,039         1.01%            1,025          1.44
State and municipals .....            39,172        38.02            20,075         28.18
Mortgage-backed securities            60,885        59.09            45,269         63.54
Equity securities ........             1,942         1.88             1,876          2.63
                                    --------       ------          --------        ------
  Total ..................          $103,038       100.00%         $ 71,246        100.00%
                                    ========       ======          ========        ======
</TABLE>


Our investment portfolio grew $31.8 million or 44.7 percent to $103.0 million at
June 30, 2001, from $71.2 million at December 31, 2000. From the end of the
first quarter of 2001, investments grew $14.9 million or 16.9 percent. Due to
the depressed loan demand, investment securities played a

                                       12
<PAGE>   13
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

more prominent role in our earning assets mix. At June 30, 2001, investment
securities equaled 24.7 percent of earning assets, compared to 21.8 percent at
March 31, 2001, and 18.1 percent at December 31, 2000. For the three months and
six months ended June 30, 2001, the investment portfolio averaged $94.8 million
and $86.8 million, compared to $94.4 million and $99.7 million for the
respective periods last year. As a result of the lower interest rate
environment, the tax-equivalent yield on the investment portfolio dropped 24
basis points to 6.34 percent for the six months ended June 30, 2001, from 6.58
percent for the same six months of 2000. For the second quarter of 2001, the
tax-equivalent yield was 6.38 percent, compared to 6.29 percent for the first
quarter.

During the first six months of 2000, we sold state and municipal obligations
having an amortized cost of $5.1 million and equity holdings of local financial
institutions having an amortized cost of $63. We realized gains of $173 on the
sale of these securities. No securities were sold during the six months ended
June 30, 2001.

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. Total return for the investment portfolio decreased slightly for the
twelve months ended June 30, 2001, to 9.0 percent, compared to 9.7 percent for
the twelve months ended March 31, 2001. Furthermore, our investment portfolio
ranked in the upper 90th percentile of all banks throughout the United States
over the past twelve months according to latest results provided by a national
investment performance ranking company.

The maturity distribution of the amortized cost, fair value and weighted-
average, tax-equivalent yield of the available-for-sale portfolio at June 30,
2001, is summarized as follows. The weighted-average yield, based on amortized
cost, has been computed for 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 year maturity distribution. Expected maturities may
differ from

                                       13
<PAGE>   14
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

contracted maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.

MATURITY DISTRIBUTION OF AVAILABLE-FOR-SALE PORTFOLIO

<TABLE>
<CAPTION>
                                                     AFTER ONE          AFTER FIVE
                                       WITHIN       BUT WITHIN          BUT WITHIN             AFTER
                                      ONE YEAR      FIVE YEARS           TEN YEARS            TEN YEARS             TOTAL
                                      --------      ----------           ---------            ---------             -----

JUNE 30, 2001                     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 .                       $  1,008   6.20%                                              $  1,008        6.20%
State and municipals .....     $  1,220   6.59%     1,595   6.93   $  6,973    7.81%    $ 28,728      7.60%      38,516        7.58
Mortgage-backed securities       17,037   5.95     38,851   5.87      4,827    6.11           52      6.79       60,767        5.91
Equity securities ........                6.65              6.65                           1,871                  1,871
                               --------          --------          --------             --------               --------        ----
  Total ..................     $ 18,257   5.99%  $ 41,454   5.92%  $ 11,800    7.11%    $ 30,651      7.54%    $102,162        6.56%
                               ========          ========          ========             ========               ========        ====
Fair value:
U.S. Government agencies .....                   $  1,039                                                     $  1,039
State and municipals .........$  1,223              1,614          $  7,287             $ 29,048                39,172
Mortgage-backed securities ...  17,111             38,963             4,759                   52                60,885
Equity securities ............                                                             1,942                 1,942
                              --------           --------          --------             --------              --------
  Total ......................$ 18,334           $ 41,616          $ 12,046             $ 31,042              $103,038
                              ========           ========          ========             ========              ========
</TABLE>


LOAN PORTFOLIO:

Loans to finance one-to-four family residential properties account for over half
of our total lending activities. Accordingly, the housing market and the
economic conditions affecting it significantly impact our lending activities.
Despite weakened economic conditions and deflated consumer confidence, low
mortgage rates have kept the housing market buoyant during the first half of
this year. Although up 21 basis points from the end of the first quarter of
2001, the rate on a 30-year conventional mortgage closed the second quarter at
7.16 percent, down 22 basis points from year-end 2000 and 113 basis points from
the close of the second quarter of last year. Average annual sales of existing
homes equaled 5.19 million for the twelve months ended June 30, 2001, compared
to 5.04 million for the same period one year earlier. In addition, average
annual new home sales were up 3.6 percent to 928 thousand compared to 896
thousand last year. Furthermore, the number of housing starts surged in the last
month of the second quarter to the fastest pace since January 2001. However, the
risk exists that the pace of the housing market will ease should economic and
employment conditions worsen.

The additional 125 basis point decline in the prime rate to 6.75 percent at June
30, 2001, from 8.00 percent at the previous quarter-end, could not boost loan
demand. Loan activity subsided for all banks in the United States, as business
investment plummeted 16.3 percent in the second quarter of 2001. As a result of
the halt in business spending, commercial banks

                                       14
<PAGE>   15
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

posted a decline of $23.3 billion in commercial loans to $1,080.5 billion at
June 30, 2001, from $1,103.8 billion at March 31, 2001. However, consumer loans
for all commercial banks grew $6.1 billion to $540.6 billion at the end of the
second quarter of 2001, from $534.5 billion at the previous quarter-end.

The composition of the loan portfolio at June 30, 2001, and December 31, 2000,
is summarized as follows:

DISTRIBUTION OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                                 JUNE 30,                    DECEMBER 31,
                                                                   2001                          2000
                                                           AMOUNT         %              AMOUNT           %
                                                         --------      ------           --------      ------
<S>                                                      <C>           <C>              <C>          <C>
Commercial, financial and others .................       $ 46,517       15.85%          $ 49,476       16.63%
Real estate:
  Construction ...................................          4,255        1.45              3,546        1.19
  Mortgage .......................................        204,062       69.52            205,771       69.16
Consumer, net ....................................         37,531       12.79             37,800       12.70
Lease financing, net .............................          1,140        0.39                937        0.32
                                                         --------      ------           --------      ------
  Loans, net of unearned income ..................        293,505      100.00%           297,530      100.00%
                                                                       ======                         ======
Less: allowance for loan losses ..................          3,402                          3,285
                                                         --------                       --------
    Net loans ....................................       $290,103                       $294,245
                                                         ========                       ========
</TABLE>

Loans, net of unearned income declined $4.0 million to $293.5 million at June
30, 2001, from $297.5 million at the end of 2000. A $2.5 million decrease in
residential mortgage loans primarily caused the overall decline. Residential
real estate loans, including construction loans, equaled $155.1 million and
$157.6 million at June 30, 2001 and 2000. Similar to that of all commercial
banks, we also experienced a decline in our commercial loan portfolio.
Commercial loans, including commercial mortgage loans, decreased $1.4 million to
$99.8 million at the end of the second quarter from $101.2 million at year-end
2000. Loans averaged $295.0 million for the six months ended June 30, 2001, an
increase of $10.2 million from $284.8 million averaged for the same six months
of 2000. Still affected by the higher rates in the second half of 2000, the
tax-equivalent yield on the loan portfolio was 13 basis points higher at 8.51
percent for the six months ended June 30, 2001, compared to 8.38 percent for the
same period last year. However, we anticipate loan yields to decline during the
second half of 2001 due to the lower interest rates and possible future rate
cuts.

We continually examine the maturity distribution and interest rate sensitivity
of the loan portfolio in an attempt to limit IRR and liquidity strains.
Approximately 37.3 percent of the lending portfolio is expected to reprice
within the next twelve months. Management will price loan products

                                       15
<PAGE>   16
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

in the near term in order to reduce the average term of fixed-rate loans and
increase its holdings of variable-rate loans in attempting to reduce IRR in the
loan portfolio.

The maturity and repricing information of the loan portfolio by major
classification at June 30, 2001, is summarized as follows:

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                                                     AFTER ONE
                                                                    WITHIN           BUT WITHIN          AFTER
JUNE 30, 2001                                                      ONE YEAR          FIVE YEARS        FIVE YEARS             TOTAL
-------------                                                      --------          ----------        ----------             -----
<S>                                                                <C>               <C>               <C>                  <C>
Maturity schedule:
Commercial, financial and others .......................           $ 25,361           $ 13,467           $  7,689           $ 46,517
Real estate:
  Construction .........................................              4,255                                                    4,255
  Mortgage .............................................             22,352             61,511            120,199            204,062
Consumer, net ..........................................             13,148             20,423              3,960             37,531
Lease financing, net ...................................                417                723                                 1,140
                                                                   --------           --------           --------           --------
    Total ..............................................           $ 65,533           $ 96,124           $131,848           $293,505
                                                                   ========           ========           ========           ========

Repricing schedule:
Predetermined interest rates ...........................           $ 32,999           $ 81,957           $102,133           $217,089
Floating or adjustable interest rates ..................             76,416                                                   76,416
                                                                   --------           --------           --------           --------
    Total ..............................................           $109,415           $ 81,957           $102,133           $293,505
                                                                   ========           ========           ========           ========
</TABLE>


ASSET QUALITY:

National, Pennsylvania and market area unemployment rates at June 30, 2001 and
2000, are summarized as follows:

<TABLE>
<CAPTION>
JUNE 30,                                                2001               2000
--------                                                ----               ----
<S>                                                     <C>               <C>
United States ..............................             4.5%              4.0%
Pennsylvania ...............................             4.7               4.2
Lackawanna county ..........................             5.6               4.5
Susquehanna county .........................             4.9               4.3
Wayne county ...............................             4.2               4.8
Wyoming county .............................             4.8%              4.3%
</TABLE>

The slowing economy caused the demand for labor to weaken during the first half
of 2001. Much of the weakness occurred in the manufacturing sector, as
businesses sought to reduce inventory overruns and compensate for sluggish
demand by laying off workers. As a result, the national, state and the majority
of unemployment rates in our local market area rose in comparison to last year.
The United States unemployment rate increased to 4.5 percent

                                       16
<PAGE>   17
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

at June 30, 2001, compared to 4.0 percent one year earlier. Similarly, the
unemployment rate for the Commonwealth of Pennsylvania rose to 4.7 percent from
4.2 percent. Furthermore, the unemployment rates for three of the four counties
in our market area also rose. Lackawanna County saw the greatest deterioration
to 5.6 percent at June 30, 2001, compared to 4.5 percent one year ago.

Nonperforming assets were $4,580 at June 30, 2001, compared to $3,935 at the end
of the previous quarter and $4,024 at year-end 2000. The ratio of nonperforming
assets as a percentage of loans, net of unearned income, was 1.56 percent, 1.34
percent and 1.35 percent at June 30, 2001, March 31, 2001 and December 31, 2000.
An increase in the amount of nonaccrual loans, partially offset by a reductions
in accruing loans past due 90 days or more and foreclosed assets, primarily
attributed to the increase from both year-end and the previous quarter-end.

Nonaccrual loans totaled $2,954 at June 30, 2001, compared to $1,684 at December
31, 2000. The $1,270 increase resulted primarily from a rise in the amount of
mortgage loans placed on nonaccrual status. The amount of loans past due 90 days
or more and still accruing and foreclosed assets declined $112 and $478 from
year-end 2000. Further deterioration of economic conditions in our local market
area could hinder borrowers' abilities to make timely loan payments, which may
result in further asset quality deterioration. The ratio of nonperforming loans
as a percentage of loans, net of unearned income increased to 1.25 percent at
June 30, 2001, compared to 0.88 percent at the end of 2000. Our peer group also
experienced deterioration in asset quality, as evidenced by a similar increase
in this ratio. This ratio for our peer group equaled 0.70 percent at June 30,
2001, compared to 0.65 percent at December 31, 2000.














                                       17
<PAGE>   18
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Information concerning nonperforming assets at June 30 2001, and December 31,
2000, is summarized as follows. The table includes loans or other extensions of
credit classified for regulatory purposes and all material loans or other
extensions of credit that cause management to have serious doubts as to the
borrowers' ability to comply with present loan repayment terms.

DISTRIBUTION OF NONPERFORMING ASSETS

<TABLE>
<CAPTION>
                                                            JUNE 30,     DECEMBER 31,
                                                             2001           2000
                                                            -------      -----------
<S>                                                         <C>          <C>
NONACCRUAL LOANS:
Commercial, financial and others .....................      $  347       $  141
Real estate:
  Construction  ......................................
  Mortgage ...........................................       2,547        1,469
Consumer, net ........................................          60           74
Lease financing, net .................................
    Total nonaccrual loans ...........................       2,954        1,684
                                                            ------       ------
Restructured loans ...................................                      124
                                                            ------       ------
    Total impaired loans .............................       2,954        1,808
                                                            ------       ------

ACCRUING LOANS PAST DUE 90 DAYS OR MORE:
Commercial, financial and others .....................         278           23
Real estate:
  Construction .......................................
  Mortgage ...........................................         230          449
Consumer, net ........................................         205          353
Lease financing, net .................................
    Total accruing loans past due 90 days or more ....         713          825
                                                            ------       ------
    Total nonperforming loans ........................       3,667        2,633
                                                            ------       ------
Foreclosed assets ....................................         913        1,391
                                                            ------       ------
    Total nonperforming assets .......................      $4,580       $4,024
                                                            ======       ======

Ratios:
Impaired loans as a percentage of loans, net .........        1.01%        0.61%
Nonperforming loans as a percentage of loans, net ....        1.25         0.88
Nonperforming assets as a percentage of loans, net ...        1.56%        1.35%
</TABLE>








                                       18
<PAGE>   19
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 June 30,
2001 and December 31, 2000, is summarized as follows:

<TABLE>
<CAPTION>
                                                    JUNE 30,        DECEMBER 31,
                                                     2001              2000
                                                     ----              ----
<S>                                                 <C>             <C>
Impaired loans:
With a related allowance ...................        $2,954            $1,684
With no related allowance ..................                             124
                                                    ------            ------
  Total ....................................        $2,954            $1,808
                                                    ======            ======
</TABLE>

Impaired loans at December 31, 2000 included a $124 restructured loan to one
commercial customer. This loan is now performing according to its original terms
and has been removed from nonperforming status.

The analysis of changes affecting the allowance for loan losses related to
impaired loans at June 30, 2001 is summarized as follows:

<TABLE>
<CAPTION>
                                                           JUNE 30,
                                                              2001
                                                              ----
<S>                                                       <C>
Balance at January 1......................................   $405
Provision for loan losses.................................    160
Loans charged-off.........................................    112
Loans recovered...........................................      4
                                                             ----
Balance at period-end.....................................   $457
                                                             ====
</TABLE>

Interest income on impaired loans that would have been recognized had the loans
been current and the terms of the loan not been modified, the aggregate amount
of interest income recognized and the amount recognized using the cash-basis
method and the average recorded investment in impaired loans for the three-month
and six-month periods ended June 30, 2001 and 2000 are summarized as follows:


<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                                  JUNE 30,                          JUNE 30,
                                                                             2001            2000             2001             2000
                                                                             ----            ----             ----             ----

<S>                                                                        <C>              <C>              <C>              <C>
Gross interest due under terms .................................           $   41           $   78           $   78           $  147
Interest income recognized .....................................               10               21               30               24
                                                                           ------           ------           ------           ------
Interest income not recognized .................................           $   31           $   57           $   48           $  123
                                                                           ======           ======           ======           ======

Interest income recognized (cash-basis) ........................           $   10           $   21           $   30           $   24
Average recorded investment in  impaired loans .................           $1,814           $2,407           $1,747           $2,524
</TABLE>

Cash received on impaired loans applied as a reduction of principal totaled $92
and $63 for the six months and three months ended June 30, 2001. For the

                                       19
<PAGE>   20
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

respective 2000 periods cash receipts on impaired loans amounted to $82 and $43.
There were no commitments to extend additional funds to such parties at June 30,
2001.
Our allowance for loan losses account is established through charges to earnings
as a provision for loan losses. Loans, or portions of loans, determined to be
uncollectible are charged against the allowance account with any subsequent
recoveries being credited to the account. Nonaccrual, restructured and large
delinquent commercial and real estate loans are reviewed monthly to determine if
carrying value reductions are warranted. Consumer loans are considered losses
when they are 120 days past due, except those expected to be recovered through
insurance or collateral disposition proceeds. Under GAAP, the allowance for loan
losses related to impaired loans is based on discounted cash flows using the
loan's initial effective interest rate or the fair value of the collateral for
certain collateral- dependent loans. We maintain the allowance for loan losses
at a level believed adequate to absorb incurred credit losses. We employ the
federal banking regulatory agencies' Interagency Policy Statement on the
Allowance for Loan Losses as the primary analytical tool in assessing the
adequacy of the allowance account by assigning qualitative factors to each
element of the allowance. The allowance for loan losses consists of two
elements: allocated and unallocated.

The allocated element consists of a formula portion and a specific portion. We
utilize the loss mitigation method for estimating the formula portion of the
allocated element of the allowance for loan losses. Loss mitigation involves
determining the percentage of each classification of individual loans and loan
pools that are expected to ultimately result in loss based on historical
experience. This estimating method and the assumptions used for the method have
been followed in a consistent manner. Commercial loans and commercial real
estate loans are classified and have historical percentages applied on an
asset-by-asset basis. Residential mortgages and consumer loans have historical
percentages applied on a pool-by-pool basis. The historical loss percentages are
updated quarterly and are based on the actual amount of loans in each
classification that resulted in loss over the past eight quarters. The
historical loss experience is only a starting point for estimating the allowance
for loan losses. We add to these historical loss percentages a qualitative
percentage representing a number of other relevant factors that may cause
estimated credit losses associated with our current portfolio to differ from
historical loss. These risk factors include:

     -    Changes in lending policies and procedures,

     -    Economic conditions,

     -    Nature and volume of the portfolio,

     -    Loan review system,



                                       20
<PAGE>   21
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


            -           Volumes of past due and impaired loans,

            -           Concentrations,

            -           Borrowers' financial status,

            -           Collateral value,

            -           Experience, ability and depth of lending management,

            -           Volume of net charge-offs, and

            -           Other factors deemed relevant.

Specific allowances are established for individual loans, on a case-by-case
basis, where management has identified that certain conditions or circumstances
are present that indicate the probability of a loss will be incurred. Specific
reserves are determined through assessment of the borrower's ability to repay
and the fair value of the collateral, if the loan is collateral-dependent. If
the carrying amount of the loan exceeds the discounted expected cash flows or
the value of the underlying collateral, the excess is specifically reserved.

The unallocated portion is used to cover inherent losses that exist as of the
evaluation date, but which have not been identified by the loss mitigation
method due to limitations in the process. One such limitation is that it does
not take into account deviations of current losses from historical experience.
This may cause estimated credit losses associated with our current portfolio to
differ from historical loss experience resulting in an allowance that is higher
or lower than the appropriate level. We establish the unallocated element of the
allowance judgementally by considering a number of the risk factors similar to
the ones used for determining the allocated element.

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 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 inherently involves a high degree of uncertainty due to the fact
that knowledge of the portfolio may be incomplete. 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.

The volume of the allowance for loan losses and the composition of its elements
may vary due to changes in the aforementioned risk factors. There were no known
trends which would lead us to believe that the current level of the allowance
for loan losses is not adequate to cover expected loan losses.

                                       21
<PAGE>   22
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



The composition of the allowance for loan losses at June 30, 2001 and December
31, 2000, are summarized as follows:

COMPOSITION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                          JUNE 30,     DECEMBER 31,
                                                            2001           2000
                                                            ----           ----
<S>                                                       <C>          <C>
Allocated allowance:
  Formula ........................................         $2,739         $2,679
  Specific .......................................
  Total allocated allowance ......................          2,739          2,679
Unallocated allowance ............................            663            606
                                                           ------         ------
    Total allowance for loan losses ..............         $3,402         $3,285
                                                           ======         ======
</TABLE>


The formula portion of the allocated allowance was $2,739 at June 30, 2001, an
increase of $60 compared to $2,679 at December 31, 2000. The increase was due
primarily to an increase in the historical loss percentages for the past eight
quarters for residential mortgage loan pools.

There were no specific allocations to the allowance at June 30, 2001 and
December 31, 2000, as there were no loans designated as having the probability
for loss at either period end.

The unallocated portion of the allowance for loan losses increased $57 to $663
at June 30, 2001, from $606 at the end of 2000. Management deemed this increase
appropriate given the increase in impaired loans.



                                       22
<PAGE>   23
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


A reconciliation of the allowance for loan losses and illustration of
charge-offs and recoveries by major loan category for the six months ended June
30, 2001, is summarized as follows:

RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                         JUNE 30,
                                                                           2001
                                                                         ------
<S>                                                                      <C>
Allowance for loan losses at beginning of period ...................     $3,285
Loans charged-off:
Commercial, financial and others ...................................         25
Real estate:
  Construction .....................................................
  Mortgage .........................................................        126
Consumer, net ......................................................        156
Lease financing, net ...............................................

    Total ..........................................................        307
                                                                         ------

Loans recovered:
Commercial, financial and others ...................................         14
Real estate:
  Construction .....................................................
  Mortgage .........................................................         13
Consumer, net ......................................................         37
Lease financing, net ...............................................

    Total ..........................................................         64
                                                                         ------
Net loans charged-off ..............................................        243
                                                                         ------
Provision charged to operating expense .............................        360
                                                                         ------
Allowance for loan losses at end of period .........................     $3,402
                                                                         ======

Ratios:
Net loans charged-off as a percentage of average loans outstanding .       0.17%
Allowance for loan losses as a percentage of period end loans ......       1.16%
</TABLE>

The allowance for loan losses was $3,402 at June 30, 2001, an increase of $58
compared to $3,344 at the previous quarter-end. A $180 provision for loan losses
exceeded net charge-offs of $122 for the second quarter of 2001, which caused
the increase from March 31, 2001. The allowance for loan losses equaled 1.16
percent of loans, net of unearned income at the end of the second quarter of
2001. For our peer group this ratio equaled 1.26 percent. The coverage ratio,
the allowance account as a percentage of nonperforming loans, was 92.8 percent
at June 30, 2001 and 130.0 percent at March 31, 2001. With regard to all
nonperforming assets the allowance covered 74.3 percent and 85.0 percent for the
respective periods.

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

                                       23
<PAGE>   24
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

account. Any subsequent recoveries are credited to the allowance account. Net
charge-offs totaled $243 or 0.17 percent of average loans outstanding for the
first half of 2001, compared to $523 or 0.37 percent for the same six months of
2000. Net charges-offs as a percentage of average loans outstanding for our peer
group equaled 0.14 percent and 0.11 percent for the respective periods.

DEPOSITS:

The average amount of, and the rate paid on, the major classifications of
deposits for the six months ended June 30, 2001 and 2000, are summarized as
follows:

DEPOSIT DISTRIBUTION

<TABLE>
<CAPTION>
                                        JUNE 30, 2001                 JUNE 30, 2000
                                 --------------------------    --------------------------
                                 AVERAGE            AVERAGE    AVERAGE            AVERAGE
                                 BALANCE             RATE      BALANCE             RATE
                                 -------             ----      -------             ----
<S>                              <C>                <C>        <C>                <C>
Interest-bearing:
Money market accounts ......     $ 29,748            4.10%     $ 21,274            3.54%
NOW accounts ...............       25,185            1.93        25,585            2.48
Savings accounts ...........       74,288            2.43        73,387            2.52
Time deposits less than $100      183,194            5.73       177,178            5.58
Time deposits $100 or more .       31,763            5.58        31,279            5.88
                                 --------                      --------
  Total interest-bearing ...      344,178            4.58%      328,703            4.55%
Noninterest-bearing ........       39,824                        37,085
                                 --------                      --------
  Total deposits ...........     $384,002                      $365,788
                                 ========                      ========
</TABLE>

Deposit gathering activities have benefitted from the recent stock market
volatility. Consumers, not willing to accept the high risk of the stock market,
began placing their money in traditional bank products. Our total deposits
amounted to $398.7 million at June 30, 2001, an increase of $12.0 million from
the end of the first quarter of 2001, and $20.0 million from year-end 2000. The
growth was primarily due to increases in time deposits less than $100 and
savings accounts. Time deposit less than $100 grew $10.5 million to $187.8
million at the close of the second quarter, from $177.3 million at December 31,
2000. Savings accounts totaled $81.0 million at June 30, 2001, an increase of
$6.4 million from the end of 2000. In addition, noninterest-bearing deposits
rose $2.1 million to $41.4 million at June 30, 2001, from $39.3 million at
December 31, 2000.

For the six months ended June 30, 2001, total deposits averaged $384.0 million,
an increase of $18.2 million or 5.0 percent compared to $365.8

                                       24
<PAGE>   25
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

million averaged for the same period of 2000. Average interest-bearing deposits
rose $15.5 million and average noninterest-bearing deposits grew $2.7 million.
Contributing primarily to the growth in average interest- bearing deposits were
increases in average money market accounts of $8.5 million, time deposits less
than $100 of $6.0 million and $0.9 million in savings accounts. Despite the
decline in market rates, our cost of deposits for the first half of 2001 rose 3
basis points to 4.58 percent, from 4.55 percent for the same six months of last
year. However, for the second quarter of 2001 we experienced a 23 basis point
reduction in our cost of deposits to 4.47 percent, from 4.70 percent for the
previous quarter. We anticipate our cost of deposits to decrease during the
remainder of 2001. At June 30, 2001, there were approximately $50.1 million in
time deposits scheduled to mature or reprice within three months. We anticipate
that these certificates will renew at lower costs. In addition, at the end of
the second quarter, the FOMC's position with regard to economic conditions
remained weighted toward weakness. This position indicates further rate cuts are
possible should economic weakness continue.

Volatile deposits, time deposits in denominations of $100 or more, equaled $31.5
million at June 30, 2001, a $2.2 million decline from $33.7 million at December
31, 2000. The decline was due to cyclical changes in deposit requirements of
local area school districts. Due to the short-term structure of volatile
deposits and significantly lower market rates, the average cost of these
deposits fell 30 basis points to 5.58 percent for the six months ended June 30,
2001, compared to 5.88 percent for the same six months of last year. In
addition, the average cost of these deposits for the second quarter of 2001 was
5.44 percent, 28 basis points lower than the 5.72 percent recorded for the first
quarter.

Maturities of time deposits of $100 or more at June 30, 2001, and December 31,
2000, are summarized as follows:

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE

<TABLE>
<CAPTION>
                                                                     JUNE 30,     DECEMBER 31,
                                                                       2001           2000
                                                                       ----           ----
<S>                                                                  <C>          <C>
Within three months............................................      $16,748        $17,281
After three months but within six months.......................        5,927          3,357
After six months but within twelve months......................        3,531          5,761
After twelve months............................................        5,286          7,327
                                                                     -------        -------
  Total........................................................      $31,492        $33,726
                                                                     =======        =======
</TABLE>




                                       25
<PAGE>   26
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 IRR level 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.

Interest rate sensitivity management attempts to limit and, to the extent
possible, control the effects interest rate fluctuations have on net interest
income and the market value of financial instruments. The responsibility of this
management has been delegated to the Asset/Liability Management Committee
("ALCO"). Specifically, ALCO utilizes a number of computerized modeling
techniques to monitor and attempt to control the influence that market changes
have on our rate-sensitive assets and liabilities. One such technique utilizes a
static gap report, which attempts to measure our interest rate exposure by
calculating the net amount of rate-sensitive assets ("RSA") and rate-sensitive
liabilities ("RSL") that reprice within specific time intervals. A positive gap,
indicated by a RSA/RSL ratio greater than 1.0, implies that earnings will be
impacted favorably if interest rates rise and adversely if interest rates fall
during the period. A negative gap, a RSA/RSL ratio less than 1.0, tends to
indicate that earnings will be affected inversely to interest rate changes.

Our interest rate sensitivity gap position, illustrating RSA and RSL at their
related carrying values, is summarized as follows. The distributions

                                       26
<PAGE>   27
COMM BANCORP, INC.

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

in the table are based on a combination of maturities, call provisions,
repricing frequencies and prepayment patterns. Variable-rate assets and
liabilities are distributed based on the repricing frequency of the instrument.
Mortgage instruments are distributed in accordance with estimated cash flows,
assuming there is no change in the current interest rate environment.

INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
                                                 DUE AFTER     DUE AFTER
                                               THREE MONTHS     ONE YEAR
                                  DUE WITHIN    BUT WITHIN     BUT WITHIN    DUE AFTER
JUNE 30, 2001                    THREE MONTHS  TWELVE MONTHS   FIVE YEARS    FIVE YEARS      TOTAL
----------------------------------------------------------------------------------------------------
<S>                              <C>           <C>             <C>           <C>           <C>
Rate sensitive assets:
Investment securities .......     $   5,239     $  13,095      $  41,616      $ 43,088     $ 103,038
Loans held for sale, net ....         1,873                                                    1,873
Loans, net of unearned income        89,737        19,678         81,957       102,133       293,505
Federal funds sold ..........        18,700                                                   18,700
                                  ---------     ---------      ---------      --------     ---------
  Total .....................     $ 115,549     $  32,773      $ 123,573      $145,221     $ 417,116
                                  =========     =========      =========      ========     =========

Rate sensitive liabilities:
Money market accounts .......                   $  29,947                                  $  29,947
NOW accounts ................                      27,040                                     27,040
Savings accounts ............                                  $  80,959                      80,959
Time deposits less than $100      $  33,393        76,826         76,915      $    708       187,842
Time deposits $100 or more ..        16,748         9,458          5,286                      31,492
                                  ---------     ---------      ---------      --------     ---------
  Total .....................     $  50,141     $ 143,271      $ 163,160      $    708     $ 357,280
                                  =========     =========      =========      ========     =========

Rate sensitivity gap:
  Period ....................     $  65,408     $(110,498)     $ (39,587)     $144,513
  Cumulative ................     $  65,408     $ (45,090)     $ (84,677)     $ 59,836     $  59,836

RSA/RSL ratio:
  Period ....................          2.30          0.23           0.76        205.11
  Cumulative ................          2.30          0.77           0.76          1.17          1.17
</TABLE>

Our cumulative one-year RSA/RSL ratio remained the same at 0.77 at both June 30,
and March 31, 2001, and falls within our asset/liability guidelines of 0.70 and
1.30. The amount of RSA maturing or repricing within one year increased $2.2
million to $148.3 million at June 30, 2001, from $146.1 million at the previous
quarter-end, while the amount of RSL maturing or repricing within this time
frame increased $4.4 million to $193.4 million from $189.0 million. The increase
in RSA resulted from increases of $4.5 million in loans, net of unearned income,
$1.8 million in loans held for sale and $0.9 million in investment securities,
offset partially by a $5.0 million reduction in federal funds sold. Changes to
RSL included increases of $6.7 million and $3.3 million in time deposits less
than $100 and NOW accounts, partially offset by declines of $5.5 million and
$0.1 million in money market accounts and time deposits $100 or more.

We experienced an increase in our three-month ratio to 2.30 at June 30, 2001,
from 2.19 at the end of the previous quarter. The increase primarily resulted
from a $4.3 million increase in the amount of RSA maturing or repricing within
three months. Increases in loans, net of unearned income,

                                       27
<PAGE>   28
COMM BANCORP, INC.

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

and loans held for sale, offset in part by the reduction in federal funds sold,
contributed to this increase in the three-month ratio.

According to the results of the static gap report, we were liability
rate-sensitive for the cumulative one-year period. This indicates that should
general market rates increase, the likelihood exists that net interest income
would be adversely affected. Conversely, a decline in market rates would likely
have a favorable effect on net interest income. However, these forward-looking
statements are qualified in the aforementioned section entitled "Forward-Looking
Discussion" in this Management's Discussion and Analysis.

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

As the static gap report fails to address the dynamic changes in the balance
sheet composition or prevailing interest rates, we utilize a simulation model to
enhance our asset/liability management. This model is used to create pro forma
net interest income scenarios under various interest rate shocks. Model results
at June 30, 2001, produced results similar to those indicated by the one-year
static gap position. Given parallel and instantaneous shifts in interest rates
of plus 100 basis points and 200 basis points, net interest income should
decrease by 2.6 percent and 5.6 percent. Conversely, similar declines in
interest rates would result in increases in net interest income of 2.6 percent
and 5.5 percent.

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

                                       28
<PAGE>   29
COMM BANCORP, INC.

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

believe that our exposure to inflation can be mitigated through asset/liability
management.

LIQUIDITY:

Liquidity is defined as the ability to generate cash at a reasonable cost to
fulfill lending commitments and support asset growth, while satisfying the
withdrawal demands of customers and any borrowing requirements. Our principal
sources of liquidity are core deposits and loan and investment payments and
prepayments. Providing a secondary source of liquidity is our available-for-sale
portfolio. As a final source of liquidity, we can exercise existing credit
arrangements. We manage liquidity daily, thus enabling us to effectively monitor
fluctuations in our liquidity position and to adapt the position according to
market changes. We believe our liquidity is adequate to meet both present and
future financial obligations and commitments on a timely basis. There are
presently no known trends, demands, commitments, events or uncertainties that
have resulted or are reasonably likely to result in material changes with
respect to our liquidity.

Our liquidity position at June 30, 2001, although favorable, deteriorated
slightly from March 31, 2001. The change primarily resulted from a reduction in
the amount of federal funds sold outstanding at June 30, 2001 compared to the
close of the first quarter. The net noncore funding dependence ratio and net
short-term noncore funding dependence ratio best illustrate the change in our
liquidity position. The net noncore funding dependence ratio, defined as the
difference between noncore funds, time deposits $100 or more and brokered time
deposits less than $100, and short- term investments to long-term assets, was
negative 1.5 percent at the end of the second quarter of 2001, compared to
negative 2.5 percent at the previous quarter-end. In addition, the net
short-term noncore funding dependence ratio, defined as the difference between
noncore funds maturing within one year, including borrowed funds, less
short-term investments to long-term assets, equaled negative 2.9 percent at June
30, 2001, and negative 4.1 percent at March 31, 2001. We consider our liquidity
position adequate to meet our present and future financial obligations and
commitments. Management believes maintaining adequate volumes of short- term
investments and remaining competitive in our deposit pricing will ensure
sufficient 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. Cash and cash
equivalents, consisting of cash on hand, cash items in the process

                                       29
<PAGE>   30
COMM BANCORP, INC.

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

of collection, noninterest-bearing deposits with other banks, balances with the
Federal Reserve Bank of Philadelphia ("FRB") and the Federal Home Loan Bank of
Pittsburgh ("FHLB-Pgh"), and federal funds sold, decreased $7.3 million during
the first six months of 2001. Net cash provided by operating activities totaled
$1.2 million. Net income of $2,130 earned for the six months ended June 30,
2001, was the primary factor contributing to the net cash inflow.

Net cash used in investing activities totaled $27.7 million for the first half
of 2001. Contributing primarily to the net cash outflow were purchases of
investment securities totaling $44.6 million, partially offset by $12.7 million
in repayments on investment securities and a $3.5 million net decline in lending
activities. Other investing activities affecting cash included proceeds received
from the sale of foreclosed assets totaling $0.9 million and purchases of
premises and equipment totaling $0.2 million. For the six months ended June 30,
2001, net cash provided by financing activities totaled $19.2 million. The net
cash inflow resulted primarily from a $20.0 million net increase in deposits.

CAPITAL ADEQUACY:

Stockholders' equity increased $1.6 million to $39.2 million at June 30, 2001,
from $37.6 million at December 31, 2000. The increase resulted principally from
net income of $2,130, offset partially by net cash dividends declared of $609.
Stockholders' equity was also affected by the repurchase and retirement of 5,000
shares of common stock for $129 and a $169 positive change in other
comprehensive income related entirely to unrealized gains on available-for-sale
investment securities.

Dividends declared for the six months ended June 30, 2001, totaled $715 or $0.36
per share. For the same six months of 2000, dividends declared amounted to $680
or $0.34 per share. The dividend payout ratio was 33.6 for the first half of
2001 and 2000. 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.

Our dividend reinvestment plan allows stockholders to automatically reinvest
their dividends in shares of our common stock. During the six months ended June
30, 2001, 3,935 shares were issued under this plan.

We attempt to assure capital adequacy by monitoring our current and

                                       30
<PAGE>   31
COMM BANCORP, INC.

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

projected capital positions to support future growth, while providing
stockholders with an attractive long-term appreciation of their investments.
According to bank regulation, at a minimum, banks must maintain a Tier I capital
to risk-adjusted assets ratio of 4.0 percent and a total capital to
risk-adjusted assets ratio of 8.0 percent. Additionally, banks must maintain a
Leverage ratio, defined as Tier I capital to total average assets less
intangibles, of 3.0 percent. The minimum Leverage ratio of 3.0 percent only
applies to institutions with a composite rating of one under the Uniform
Interagency Bank Rating System, that are not anticipating or experiencing
significant growth and have well- diversified risk. An additional 100 to 200
basis points are required for all but these most highly-rated institutions. Our
minimum Leverage ratio was 4.0 percent at June 30, 2001 and 2000. 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.

                                       31
<PAGE>   32
COMM BANCORP, INC.

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

Our and Community Bank's capital ratios at June 30, 2001 and 2000, 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 Act of 1991 are summarized as follows:

RISK-ADJUSTED CAPITAL

<TABLE>
<CAPTION>
                                                                                                           MINIMUM TO BE WELL
                                                                                                           CAPITALIZED UNDER
                                                                            MINIMUM FOR CAPITAL            PROMPT CORRECTIVE
                                                     ACTUAL                  ADEQUACY PURPOSES             ACTION PROVISIONS
                                             -----------------------     -------------------------     -------------------------
JUNE 30,                                       2001          2000           2001           2000           2001           2000
--------                                       ----          ----           ----           ----           ----           ----
<S>                                          <C>           <C>           <C>            <C>            <C>            <C>
Basis for ratios:
Tier I capital to risk-adjusted assets:
  Consolidated .........................     $ 36,920      $ 33,635      $  10,193      $   9,675      $  15,289      $  14,513
  Community Bank .......................       35,128        32,368         10,139          9,618         15,209         14,427
Total capital to risk-adjusted assets:
  Consolidated .........................       40,108        36,664         20,385         19,351         25,481         24,189
  Community Bank .......................       38,300        35,379         20,279         19,237         25,348         24,046
Tier I capital to total average assets
 less goodwill:
  Consolidated .........................       36,920        33,635         16,968         16,212         21,210         20,265
  Community Bank .......................       35,128        32,368      $  16,912      $  16,135      $  21,140      $  20,169
Risk-adjusted assets:
  Consolidated .........................      240,166       226,912
  Community Bank .......................      238,836       225,482
Risk-adjusted off-balance sheet items:
  Consolidated .........................       14,648        14,975
  Community Bank .......................       14,648        14,975
Average assets for Leverage ratio:
  Consolidated .........................      424,192       405,303
  Community Bank .......................     $422,810      $403,384

Ratios:
Tier I capital as a percentage of
 risk-adjusted assets and off-balance
 sheet items:
  Consolidated .........................         14.5%         13.9%           4.0%           4.0%           6.0%           6.0%
  Community Bank .......................         13.9          13.5            4.0            4.0            6.0            6.0
Total of Tier I and Tier II capital as a
 percentage of risk-adjusted assets and
 off-balance sheet items:
  Consolidated .........................         15.7          15.2            8.0            8.0           10.0           10.0
  Community Bank .......................         15.1          14.7            8.0            8.0           10.0           10.0
Tier I capital as a percentage of total
 average assets less goodwill:
  Consolidated .........................          8.7           8.3            4.0            4.0            5.0            5.0
  Community Bank .......................          8.3%          8.0%           4.0%           4.0%           5.0%           5.0%
</TABLE>

At June 30, 2001, our risk-based capital ratios improved in comparison to one
year earlier. The Leverage ratio, Tier I capital divided by average total assets
less intangible assets, improved to 8.7 percent at June 30, 2001, from 8.3
percent at June 30, 2000. At the close of the second

                                       32
<PAGE>   33
COMM BANCORP, INC.

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



quarter for both 2001 and 2000, we exceeded all relevant regulatory capital
measurements and were considered well capitalized. 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.

REVIEW OF FINANCIAL PERFORMANCE:

For the three months and six months ended June 30, 2001, net income totaled
$1,060 or $0.53 per share and $2,130 or $1.07 per share. For the comparable
periods of 2000, net income was $970 or $0.48 per share and $2,030 or $1.01 per
share. Higher net interest income and noninterest income contributed to the
improvement in earnings. This improvement was partially offset by an increase in
the provision for loan losses and greater noninterest expense. Return on average
equity was 10.94 percent and 11.13 percent for the three months and six months
ended June 30, 2001, compared to 11.10 percent and 11.61 percent for the same
periods of 2000. For the three months and six months ended June 30, return on
average assets was 0.98 percent and 1.01 percent for 2001, and 0.96 percent and
1.00 percent for 2000. We had other comprehensive income, related entirely to
unrealized gains and losses on investment securities, of $169 for the six months
ended June 30, 2001, compared to $109 for the same period of 2000.

NET INTEREST INCOME:

Our principle source of operating income is net interest income. Net interest
income is defined as the difference between income, interest and fees, from
earning assets, and the cost of interest-bearing liabilities supporting those
assets. The primary sources of earning assets are loans and investment
securities, while deposits, short-term borrowings and long- term debt comprise
interest-bearing liabilities. Net interest income is impacted by:

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

            -           Changes in general market rates, and

            -           The level of nonperforming assets.

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
average earning assets, is a more comprehensive ratio, as it

                                       33
<PAGE>   34
COMM BANCORP, INC.

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

reflects not only spread, but also the change in the composition of
interest-earning assets and interest-bearing liabilities. Tax-exempt loans and
investments carry pre-tax yields lower than their taxable counterparts.
Therefore, in order to make the analysis of net interest income more comparable,
tax-exempt income and yields are reported on a tax-equivalent basis using the
prevailing statutory tax rate of 34.0 percent.

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

NET INTEREST INCOME CHANGES DUE TO RATE AND VOLUME

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED               SIX MONTHS ENDED
                                           JUNE 30,                        JUNE 30,
                                         2001 VS. 2000                   2001 VS. 2000
                                      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 ..................     $ 288      $ (64)     $ 352      $ 842      $  98      $ 744
  Tax-exempt ...............      (129)         3       (132)      (258)         2       (260)
Investments:
  Taxable ..................       (95)       (37)       (58)      (351)       (80)      (271)
  Tax-exempt ...............        62        (24)        86       (180)       (42)      (138)
Federal funds sold .........       219         (5)       224        514         (2)       516
                                 -----      -----      -----      -----      -----      -----
    Total interest income ..       345       (127)       472        567        (24)       591
                                 -----      -----      -----      -----      -----      -----
Interest expense:
Money market accounts ......       136         27        109        230         65        165
NOW accounts ...............       (42)       (39)        (3)       (75)       (70)        (5)
Savings accounts ...........       (25)       (55)        30        (25)       (38)        13
Time deposits less than $100       167         36        131        292        129        163
Time deposits $100 or more .       (53)       (47)        (6)       (36)       (51)        15
Short-term borrowings ......       (29)                  (29)       (97)                  (97)
Long-term debt .............        (1)        (2)         1         (1)         1         (2)
                                 -----      -----      -----      -----      -----      -----
    Total interest expense .       153        (80)       233        288         36        252
                                 -----      -----      -----      -----      -----      -----
    Net interest income ....     $ 192      $ (47)     $ 239      $ 279      $ (60)     $ 339
                                 =====      =====      =====      =====      =====      =====
</TABLE>

                                       34
<PAGE>   35
COMM BANCORP, INC.

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

For the six months ended June 30, 2001, tax-equivalent net interest income
increased $279 to $7,901, from $7,622 for the six months of last year. The
improvement entirely resulted from an increase in the volume of average earning
assets over that of average interest-bearing liabilities. Total average earning
assets increased $18.3 million to $403.8 million for the first six months of
2001, from $385.5 million for the same period of 2000. This resulted in an
increase in total interest income of $591. Loans, net of unearned income and
federal funds sold averaged $10.2 million and $20.9 million higher, while
average investments declined $12.9 million. The increase in average loans and
federal funds sold resulted in positive volume variances of $484 and $516, while
the decline in average investments negatively affected interest income by $409.
Interest-bearing liabilities averaged $344.2 million for the six months ended
June 30, 2001, an increase of $12.3 million from $331.9 million averaged for the
same period of 2000. This increase resulted in a negative impact to net interest
income as total interest expense rose $252. The growth resulted primarily from
increases of $8.5 million in average money market accounts and $6.0 million in
average time deposits less than $100, partially offset by a $3.2 million
reduction in average short-term borrowings. Total interest expense increased
$165 and $163 due to the growth in average money market accounts and time
deposits less than $100, but declined by $97 due to the reduction in short-term
borrowings.

Partially mitigating the positive influence of volume changes on tax- equivalent
net interest income was a negative rate variance of $60. The tax-equivalent
yield on earning assets declined 6 basis points to 7.85 percent for the six
months ended June 30, 2001, from 7.91 percent for the same six months of 2000,
and caused a negative rate variance of $24. Primarily affecting the
tax-equivalent yield on earning assets was a 24 basis point decline in the
tax-equivalent yield on investments, which more than offset a 13 basis point
increase in the tax-equivalent yield on loans. In addition, the cost of funds
increased 2 basis points to 4.59 percent for the first half of 2001, from 4.57
percent for the same period last year. This rise in the cost of funds resulted
in additional interest expense of $36. We experienced average rate increases of
15 basis points in time deposits less than $100 and 56 basis points in money
market accounts. These rate increases were partially offset by declines of 55
basis points, 30 basis points and 9 basis points in NOW accounts, time deposits
$100 or more and savings accounts.

                                       35
<PAGE>   36
COMM BANCORP, INC.

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


For the three months ended June 30, 2001, tax-equivalent interest income
improved $192 in comparison to the same three months of last year. The
improvement was due to a favorable volume variance of $239, as total average
earning assets grew $26.8 million, while interest-bearing liabilities rose $20.3
million. Contributing to the growth in average earning assets was a $5.7 million
increase in average loans, net of unearned income and a $20.6 million increase
in average federal funds sold. Similar to the explanation of the six month
improvement, the growth in average interest-bearing liabilities resulted
primarily from an $11.2 million increase in average money market accounts
coupled with a $9.4 million increase in time deposits less than $100. Partially
mitigating the positive effects of volume changes on net interest income was a
negative rate variance of $47. The tax-equivalent yield on average earning
assets decreased 20 basis points, which was partially offset by an 11 basis
decline in the cost of funds. The tax-equivalent yield on average earning assets
was 7.74 percent for the second quarter of 2001, compared to 7.94 percent for
the same quarter last year. For the three months ended June 30, the cost of
funds was 4.47 percent in 2001 and 4.58 percent in 2000.

Maintenance of an adequate net interest margin is one of our primary concerns.
Our net interest margin weakened slightly to 3.95 percent for the first half of
2001 from 3.98 percent for the same period of 2000. Due to the sluggish loan
demand brought on by a weakened economy, excess funds from increases in deposits
had to be directed into lower yielding instruments such as investment securities
and federal funds sold. We believe following prudent pricing practices coupled
with careful implementation of resources, will keep our net interest margin in
check. However, no assurance can be given that net interest income will not be
adversely affected should economic conditions deteriorate further.

                                       36
<PAGE>   37
COMM BANCORP, INC.

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

The average balances of assets and liabilities, corresponding interest income
and expense and resulting average yields or rates paid for the six months ended
June 30, 2001 and 2000, 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 a statutory tax rate of 34.0 percent.

SUMMARY OF NET INTEREST INCOME

<TABLE>
<CAPTION>
                                                         JUNE 30, 2001                   JUNE 30, 2000
                                                ------------------------------  ------------------------------
                                                           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.....................................  $288,680   $12,171      8.50%   $272,733   $11,329      8.35%
  Tax-exempt..................................     6,325       285      9.09      12,053       543      9.06
Investments:
  Taxable.....................................    56,171     1,570      5.64      65,535     1,921      5.89
  Tax-exempt..................................    30,618     1,158      7.63      34,131     1,338      7.88
Federal funds sold............................    21,974       543      4.98       1,070        29      5.45
                                                --------   -------              --------   -------
    Total earning assets......................   403,768    15,727      7.85%    385,522    15,160      7.91%
Less: allowance for loan losses...............     3,389                           3,563
Other assets..................................    25,493                          25,510
                                                --------                        --------
    Total assets..............................  $425,872                        $407,469
                                                ========                        ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts.........................  $ 29,748       605      4.10%   $ 21,274       375      3.54%
NOW accounts..................................    25,185       241      1.93      25,585       316      2.48
Savings accounts..............................    74,288       894      2.43      73,387       919      2.52
Time deposits less than $100..................   183,194     5,206      5.73     177,178     4,914      5.58
Time deposits $100 or more....................    31,763       879      5.58      31,279       915      5.88
Short-term borrowings.........................                                     3,183        97      6.13
Long-term debt................................        11         1      7.50          38         2      7.50
                                                --------   -------              --------   -------
    Total interest-bearing liabilities........   344,189     7,826      4.59%    331,924     7,538      4.57%
Noninterest-bearing deposits..................    39,824                          37,085
Other liabilities.............................     3,275                           3,304
Stockholders' equity..........................    38,584                          35,156
                                                --------                        --------
    Total liabilities and stockholders' equity  $425,872                        $407,469
                                                ========   -------              ========
    Net interest/income spread................             $ 7,901      3.26%              $ 7,622      3.34%
                                                           =======                         =======
    Net interest margin.......................                          3.95%                           3.98%
Tax equivalent adjustments:
Loans.........................................             $    97                         $   185
Investments...................................                 394                             455
                                                           -------                         -------
    Total adjustments.........................             $   491                         $   640
                                                           =======                         =======
</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 gain of $714 for the first half of 2001 and an unrealized
            holding loss of $1,399 for the first half of 2000 included in other
            assets. Tax-equivalent adjustments were calculated using the
            prevailing statutory tax rate of 34.0 percent.

                                       37
<PAGE>   38
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. As previously mentioned, 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 first six months of 2001, the provision for loan losses totaled $360, an
increase of $180 compared to $180 for the same six months of 2000. For the
second quarter of 2001, the provision for loan losses was $180, an increase of
$90 compared to the same quarter of 2000. We consider the provision to be
appropriate according to our adequacy calculations of the allowance for loan
losses account.

NONINTEREST INCOME:

For the first half of 2001, noninterest income totaled $1,353, an increase of
$254 or 23.1 percent from $1,099 for the same period of 2000. Included in
noninterest income for the first half of 2000 were gains on the sale of
investment securities of $173. The majority of these gains resulted from the
sale of equity securities of local financial institutions. Adjusting for these
gains, noninterest income improved $427 or 46.1 percent over the prior year.
Service charges, fees and commission rose $355 and net gains on the sale of
mortgage loans increased $72.

For the second quarter, noninterest income totaled $770 in 2001 and $486 in
2000. This increase of $284 or 58.4 percent resulted primarily from a $233 rise
in service charges, fees and commissions.

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

                                       38
<PAGE>   39
COMM BANCORP, INC.

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

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.

Major components of noninterest expense for the three months and six months
ended June 30, 2001 and 2000, are summarized as follows:

NONINTEREST EXPENSES

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED     SIX MONTHS ENDED
                                                  JUNE 30,              JUNE 30,
                                              2001       2000       2001       2000
                                              ----       ----       ----       ----
<S>                                          <C>        <C>        <C>        <C>
Salaries and employee benefits expense:
Salaries and payroll taxes .............     $1,159     $1,101     $2,264     $2,194
Employee benefits ......................        208        199        392        385
                                             ------     ------     ------     ------
  Salaries and employee benefits expense      1,367      1,300      2,656      2,579
                                             ------     ------     ------     ------

Net occupancy and equipment expense:

Net occupancy expense ..................        210        175        411        368
Equipment expense ......................        265        224        477        422
                                             ------     ------     ------     ------
  Net occupancy and equipment expense ..        475        399        888        790
                                             ------     ------     ------     ------

Other noninterest expenses:
Marketing expense ......................        104         86        162        173
Other taxes ............................        100         54        196        138
Stationery and supplies ................        106        102        197        223
Contractual services ...................        324        286        605        558
Insurance including FDIC assessment ....         42         40         83         83
Other ..................................        459        434        810        784
                                             ------     ------     ------     ------
  Other noninterest expenses ...........      1,135      1,002      2,053      1,959
                                             ------     ------     ------     ------
    Total noninterest expense ..........     $2,977     $2,701     $5,597     $5,328
                                             ======     ======     ======     ======
</TABLE>


For the six months ended June 30, 2001, noninterest expense totaled $5,597, an
increase of $269 or 5.0 percent from $5,328 for the same six months of 2000. The
increase was attributable to normal growth and was spread between all major
expense categories. For the second quarter, noninterest expense equaled $2,977
in 2001 and $2,701 in 2000. Our efficiency ratio, noninterest expense less
nonrecurring expenses as a percentage of net interest income and noninterest
income less nonrecurring income, improved for the first six months of 2001,
compared to the same period last year. This ratio was 63.9 percent in 2001 and
66.4 percent in 2000. However, our overhead ratio, noninterest expense as a
percentage of total average assets, rose slightly to 2.7 percent for the first
half of 2001, compared to 2.6 percent for the same period last year.

Salaries and employee benefits expense comprise the majority of our

                                       39
<PAGE>   40
COMM BANCORP, INC.

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

noninterest expense. These expenses totaled $2,656 or 47.5 percent of
noninterest expense for the six months ended June 30, 2001, and $2,579 or 48.4
percent for the same six months of 2000. The increase of $77 or 3.0 percent was
due to merit increases related to employee performance appraisals. For the
second quarter of 2001, employee-related expenses totaled $1,367, an increase of
$67 compared to the second quarter of 2000.

For the first half of 2000, net occupancy and equipment expenses rose $98 to
$888 from $790 for the same period last year. The increase was due to
implementation of various technological enhancements. For the three months ended
June 30, 2001 and 2000, net occupancy and equipment expenses amounted to $475
and $399, an increase of $76.

Other expenses amounted to $2,053 for the six months ended June 30, 2001, and
increase of $94 or 4.8 percent from $1,959 for the same six months of the prior
year. For the quarter ended June 30, other expenses totaled $1,135 in 2001 and
$1,002 in 2000. The increase in other expenses resulted primarily from increases
in state shares tax and contractual services.

Recently, the Federal Deposit Insurance Corporation ("FDIC") decided to retain
the existing Bank Insurance Fund ("BIF") and Savings Association Insurance Fund
("SAIF") assessment schedules of 0 to 27 basis points per year for the second
semiannual assessment period of 2001. According to FDIC statistics:

            -       92.7 percent of all BIF-member institutions and 88.8 percent
                    of SAIF-member institutions are estimated to be listed in
                    the lowest risk category, thus paying no premiums,

            -       Only 0.1 percent of SAIF-member institutions and 0.0 percent
                    of BIF-member institutions are estimated to be in the
                    highest risk category, paying a premium of 27 cents per 100
                    dollars in deposits,

            -       The average annual assessment rate is projected to be 13
                    cents per 100 dollars for BIF-member institutions and 42
                    cents per 100 dollars for SAIF-member institutions,

            -       The FDIC-approved rate schedules are expected to maintain
                    the reserve ratios for both the BIF and SAIF above the
                    Congressional mandated 1.25 percent through year-end 2001,

            -       At December 31, 2000, the BIF reserve ratio was 1.35 percent
                    and the SAIF reserve ratio was 1.43 percent, and

            -       There will continue to be a separate levy assessed on all
                    FDIC-insured institutions to bear the cost of bonds sold by
                    the Finance Corporation ("FICO") between 1987 and 1989 in
                    support of the former Federal Savings and Loan Insurance
                    Corporation. As of January 1, 2000, all institutions are
                    assessed the same rate by FICO, as provided for in the
                    Deposit Insurance Funds Act of 1996.

                                       40
<PAGE>   41
COMM BANCORP, INC.

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

We were included in the 92.7 percent of all BIF-member institutions classified
in the well capitalized supervisory risk subgroup at June 30, 2001. Accordingly,
we will be exempt from paying a BIF assessment for the second half of 2001.
However, along with all banks, we continue to be assessed quarterly for
assistance in interest payments on FICO bonds used to capitalize the SAIF. Our
assessments totaled $35 and $37 for the six months ended June 30, 2001 and 2000.

INCOME TAXES:

Income tax expense totaled $676 for the six months ended June 30, 2001, and
resulted in an effective tax rate of 24.1 percent. For the same period of 2000,
income tax expense was $543 with an effective tax rate of 21.1 percent. The
increase in the effective tax rate resulted from lower amounts of tax-exempt
income. Our effective tax rate is more favorable in comparison to that of our
peer group. For the first six months of 2001 and 2000, the peer group posted
effective tax rates of 26.6 percent and 27.6 percent. We expect our effective
tax rate to improve for the remainder of 2001 by placing greater emphasis on
income from tax-exempt investments and loans as well as through the utilization
of investment tax credits available through our investment in a residential
housing program for elderly and low- to moderate-income families.

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.

                                       41
<PAGE>   42
COMM BANCORP, INC.
OTHER INFORMATION

PART II.  Other Information

ITEM 1. LEGAL PROCEEDINGS

          NONE

ITEM 2. CHANGES IN SECURITIES

          NONE

ITEM 3. DEFAULTS OF SENIOR SECURITIES

          NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS AT THE COMPANY'S
        ANNUAL MEETING OF STOCKHOLDERS HELD ON JUNE 8, 2001, FOR WHICH PROXIES
        WERE SOLICITED PURSUANT TO SECTION 14 UNDER THE SECURITIES EXCHANGE ACT
        OF 1934, THE FOLLOWING MATTERS WERE VOTED UPON BY THE STOCKHOLDERS.

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

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

<TABLE>
<CAPTION>
          Nominee                             For              Against
          -------                        -------------       -----------
<S>                                      <C>                 <C>
          David L. Baker ...........     1,581,302.891        82,046.797
          Thomas M. Chesnick .......     1,582,024.688        81,325.000
          William B. Farber, Sr. ...     1,557,659.498       105,690.190
          Judd B. Fitze ............     1,582,024.688        81,325.000
          John P. Kameen ...........     1,581,254.688        82,095.000
          William A. Kerl ..........     1,558,021.030       105,328.658
          Erwin T. Kost ............     1,581,424.688        81,925.000
          William B. Lopatofsky ....     1,582,024.688        81,325.000
          Robert A. Mazzoni ........     1,579,924.688        83,425.000
          J. Robert McDonnell ......     1,569,921.030        93,428.658
          Joseph P. Moore, III .....     1,567,924.688        95,425.000
          Theodore W. Porosky ......     1,558,024.688       105,325.000
          Eric G. Stephens .........     1,663,349.688             0.000
</TABLE>

     2.   To ratify the selection of Kronick, Kalada, Berdy & Co. of Kingston,
          Pennsylvania, Certified Public Accountants, as the independent
          auditors for the year ending December 31, 2001. The votes cast on this
          matter were as follows:

<TABLE>
<CAPTION>
                       For                                             Against
                  -------------                                      ----------
<S>                                                                  <C>
                  1,593,366.206                                      87,565.311
</TABLE>




                                       42
<PAGE>   43
COMM BANCORP, INC.
OTHER INFORMATION

ITEM 5.   OTHER INFORMATION

                    NONE

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)       Exhibits:

                    None

          (b)       Reports on Form 8-K

                    None

                                       43
<PAGE>   44
                               COMM BANCORP, INC.
                                    FORM 10-Q

                                 SIGNATURE PAGE

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

                                       Registrant, Comm Bancorp, Inc.



Date: August 10, 2001                  /s/William F. Farber, Sr.
     -------------------------         -----------------------------------
                                       William F. Farber, Sr.
                                       Chief Executive Officer



Date: August 10, 2001                  /s/ Scott A. Seasock
     -------------------------         ----------------------------------
                                       Scott A. Seasock
                                       Chief Financial Officer
                                       (Principal Financial Officer)



Date: August 10, 2001                  /s/ Stephanie A. Ganz
     -------------------------         ----------------------------------
                                       Stephanie A. Ganz
                                       Vice President of Finance
                                       (Principal Accounting Officer)


                                       44