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

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

For the quarterly period ended SEPTEMBER 30, 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)

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

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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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: 1,981,926 at October 31, 2001.

                                  Page 1 of 65
                            Exhibit Index on Page 45
<PAGE>
                               COMM BANCORP, INC.
                                    FORM 10-Q

                               SEPTEMBER 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 Nine Months Ended September 30,
          2001 and 2000..........................................      3
     Consolidated Balance Sheets - September 30, 2001 and
      December 31, 2000..........................................      4
     Consolidated Statement of Changes in Stockholders' Equity
      for the Nine Months Ended September 30, 2001...............      5
     Consolidated Statements of Cash Flows for the Nine Months
      Ended September 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......................................     43

  Item 2: Changes in Securities and Use of Proceeds..............     43
  Item 3: Defaults Upon Senior Securities........................     43

  Item 4: Submission of Matters to a Vote of Security Holders....     43

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

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

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

  Exhibit Index..................................................     45
</TABLE>

* Not Applicable

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

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                                SEPTEMBER 30,               SEPTEMBER 30,
                                                                           2001            2000          2001           2000
                                                                       -----------     -----------    -----------    -----------
<S>                                                                    <C>             <C>            <C>            <C>
INTEREST INCOME:
Interest and fees on loans:
  Taxable .........................................................    $     6,162     $     6,066    $    18,333    $    17,395
  Tax-exempt ......................................................            124             147            312            505
Interest and dividends on investment securities available-for-sale:

  Taxable .........................................................            916             821          2,424          2,678
  Tax-exempt ......................................................            484             392          1,248          1,275
  Dividends .......................................................             31              32             93             96
Interest on federal funds sold ....................................            153              12            696             41
                                                                       -----------     -----------    -----------    -----------
    Total interest income .........................................          7,870           7,470         23,106         21,990
                                                                       -----------     -----------    -----------    -----------
INTEREST EXPENSE:

Interest on deposits ..............................................          3,796           3,690         11,621         11,129
Interest on short-term borrowings .................................                             53                           150
Interest on long-term debt ........................................                                             1              2
                                                                       -----------     -----------    -----------    -----------
    Total interest expense ........................................          3,796           3,743         11,622         11,281
                                                                       -----------     -----------    -----------    -----------
    Net interest income ...........................................          4,074           3,727         11,484         10,709
Provision for loan losses .........................................            180             120            540            300
                                                                       -----------     -----------    -----------    -----------
    Net interest income after provision for loan losses ...........          3,894           3,607         10,944         10,409
                                                                       -----------     -----------    -----------    -----------
NONINTEREST INCOME:

Service charges, fees and commissions .............................            598             579          1,878          1,504
Net gains on sale of loans ........................................            156               4            229              5
Net gains on sale of investment securities ........................                                                          173
                                                                       -----------     -----------    -----------    -----------
    Total noninterest income ......................................            754             583          2,107          1,682
                                                                       -----------     -----------    -----------    -----------
NONINTEREST EXPENSE:

Salaries and employee benefits expense ............................          1,446           1,337          4,102          3,916
Net occupancy and equipment expense ...............................            409             424          1,297          1,214
Other expenses ....................................................          1,200             976          3,253          2,935
                                                                       -----------     -----------    -----------    -----------
    Total noninterest expense .....................................          3,055           2,737          8,652          8,065
                                                                       -----------     -----------    -----------    -----------
Income before income taxes ........................................          1,593           1,453          4,399          4,026
Provision for income tax expense ..................................            363             293          1,039            836
                                                                       -----------     -----------    -----------    -----------
    Net income ....................................................          1,230           1,160          3,360          3,190
                                                                       -----------     -----------    -----------    -----------
OTHER COMPREHENSIVE INCOME:

Unrealized gains on investment securities available-for-sale ......          1,256             741          1,512          1,079
Reclassification adjustment for gains included in net income ......                                                         (173)
Income tax expense related to other comprehensive income ..........            426             252            513            308
                                                                       -----------     -----------    -----------    -----------
    Other comprehensive income, net of income taxes ...............            830             489            999            598
                                                                       -----------     -----------    -----------    -----------
    Comprehensive income ..........................................    $     2,060     $     1,649    $     4,359    $     3,788
                                                                       ===========     ===========    ===========    ===========

PER SHARE DATA:

Net income ........................................................    $      0.62     $      0.59    $      1.69    $      1.60
Cash dividends declared ...........................................    $      0.19     $      0.18    $      0.55    $      0.52
Average common shares outstanding .................................      1,985,726       1,989,025      1,985,682      1,998,995
</TABLE>



See notes to consolidated financial statements.

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

<TABLE>
<CAPTION>
                                                                               SEPTEMBER 30,    DECEMBER 31,
                                                                                    2001            2000
                                                                                  --------        --------
<S>                                                                            <C>              <C>
ASSETS:
Cash and due from banks ..................................................        $  9,501        $ 11,919
Federal funds sold .......................................................           1,000          25,500
Investment securities available-for-sale .................................         115,451          71,246
Loans held for sale, net .................................................             965              62
Loans, net of unearned income ............................................         315,590         297,530
  Less: allowance for loan losses ........................................           3,410           3,285
                                                                                  --------        --------
Net loans ................................................................         312,180         294,245
Premises and equipment, net ..............................................           9,534           9,708
Accrued interest receivable ..............................................           2,608           2,014
Other assets .............................................................           4,309           5,046
                                                                                  --------        --------
    Total assets .........................................................        $455,548        $419,740
                                                                                  ========        ========

LIABILITIES:
Deposits:

  Noninterest-bearing ....................................................        $ 43,744        $ 39,263
  Interest-bearing .......................................................         366,969         339,458
                                                                                  --------        --------
    Total deposits .......................................................         410,713         378,721
Long-term debt ...........................................................                              36
Accrued interest payable .................................................           2,246           2,014
Other liabilities ........................................................           1,783           1,351
                                                                                  --------        --------
    Total liabilities ....................................................         414,742         382,122
                                                                                  --------        --------

STOCKHOLDERS' EQUITY:

Common stock, par value $0.33, authorized 12,000,000 shares, issued and
outstanding: September 30, 2001, 1,982,091 shares; December 31, 2000,
  1,985,399 shares .......................................................             654             655
Capital surplus ..........................................................           6,369           6,244
Retained earnings ........................................................          32,375          30,310
Accumulated other comprehensive income ...................................           1,408             409
                                                                                  --------        --------
    Total stockholders' equity ...........................................          40,806          37,618
                                                                                  --------        --------
    Total liabilities and stockholders' equity ...........................        $455,548        $419,740
                                                                                  ========        ========
</TABLE>



See notes to consolidated financial statements.

                                        4
<PAGE>
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>
BALANCE, DECEMBER 31, 2000.......................  $655    $6,244    $30,310           $  409        $37,618
Net income.......................................                      3,360                           3,360
Dividends declared: $0.55 per share..............                     (1,093)                         (1,093)
Dividend reinvestment plan: 5,536 shares issued..     2       152                                        154
Repurchase and retirement: 8,844 shares..........    (3)      (27)      (202)                           (232)
Net change in other comprehensive income.........                                         999            999
                                                   ----    ------    -------           ------        -------
BALANCE, SEPTEMBER 30, 2001......................  $654    $6,369    $32,375           $1,408        $40,806
                                                   ====    ======    =======           ======        =======
</TABLE>



See notes to consolidated financial statements.

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,                                               2001             2000
                                                                            --------         --------
<S>                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .........................................................        $  3,360         $  3,190
Adjustments:
  Provision for loan losses ........................................             540              300
  Depreciation, amortization and accretion .........................           1,546            1,355
  Amortization of loan fees ........................................             (80)             (75)
  Deferred income tax expense ......................................              45              127
  Gains on sale of investment securities available-for-sale ........                             (173)
  Losses (gains) on sale of foreclosed assets ......................             (51)              57
  Changes in:
    Loans held for sale, net .......................................            (903)
    Accrued interest receivable ....................................            (594)             (50)
    Other assets ...................................................            (203)            (260)
    Accrued interest payable .......................................             232              190
    Other liabilities ..............................................             (82)             211
                                                                            --------         --------
      Net cash provided by operating activities ....................           3,810            4,872
                                                                            --------         --------

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          19,112           17,607
Purchases of investment securities available-for-sale ..............         (62,343)          (2,298)
Proceeds from sale of foreclosed assets ............................             969              251
Net increase in lending activities .................................         (18,803)         (16,163)
Purchases of premises and equipment ................................            (469)            (873)
                                                                            --------         --------
      Net cash provided by (used in) investing activities ..........         (61,534)           3,828
                                                                            --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
  Money market, NOW, savings and noninterest-bearing accounts ......          25,048           (4,025)
  Time deposits ....................................................           6,944            5,943
  Short-term borrowings ............................................                           (5,500)
Payments on long-term debt .........................................             (36)              (2)
Proceeds from issuance of common shares ............................             154              163
Repurchase and retirement of common shares .........................            (232)          (2,021)
Cash dividends paid ................................................          (1,072)          (1,006)
                                                                            --------         --------
      Net cash provided by (used in) financing activities ..........          30,806           (6,448)
                                                                            --------         --------
      Net increase (decrease) in cash and cash equivalents .........         (26,918)           2,252
      Cash and cash equivalents at beginning of year ...............          37,419           10,991
                                                                            --------         --------
      Cash and cash equivalents at end of period ...................        $ 10,501         $ 13,243
                                                                            ========         ========

SUPPLEMENTAL DISCLOSURE:
Cash paid during the period for:
  Interest .........................................................        $ 11,390         $ 11,091
  Income taxes .....................................................             923              771
Noncash items:
  Transfer of loans to foreclosed assets ...........................             408              597
  Unrealized gains on investment securities available-for-sale .....        $   (999)        $   (598)
</TABLE>



See notes to consolidated financial statements.

                                        6
<PAGE>
COMM BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements of Comm Bancorp,
Inc. and subsidiaries, Community Bank and Trust Company, including its
subsidiaries, Community Leasing Corporation and Comm Financial Services
Corporation, and Comm Realty Corporation (collectively, the "Company") have been
prepared in accordance with 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. ASSET RETIREMENT OBLIGATIONS:

On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 amends SFAS No. 19, "Financial
Accounting and Reporting by Oil and Gas Companies." SFAS No. 143 applies to all
entities and addresses financial accounting and reporting obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. It applies to the legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and normal operations of a long-lived asset, except for certain
obligations of lessees. This Statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The adoption of this
Statement on January 1, 2003, is not expected to have a material effect on
operating results or financial position of the Company.

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

3. IMPAIRMENT AND DISPOSAL OF LONG-LIVED ASSETS:

On August 31, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
and Disposal of Long-lived Assets." This Statement supercedes SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of business. This
Statement also amends Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 establishes
a single accounting model for long-lived assets to be disposed of by sale and
resolves significant implementation issues related to SFAS No. 121. SFAS No. 144
is effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. The adoption
of this Statement on January 1, 2002, is not expected to have a material effect
on operating results or financial position of the Company.

                                        8
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

FORWARD-LOOKING DISCUSSION:

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

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

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

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>
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:

At the beginning of the third quarter of 2001 the United States economy was
poised on the brink of recession. Corporate profits slid, as did business
investment. Companies began trying to shore up losses by cutting employment. The
resulting stock market volatility eroded consumer wealth and, in turn,
confidence. On September 11, 2001, the above trends escalated with the terrorist
attacks on the World Trade Center and Pentagon. Financial markets came to a
brief halt, the airline, hotel and tourism industries took substantial losses,
layoffs accelerated and consumer spending dropped. As a result, the gross
domestic product ("GDP"), the value of all goods and services produced in the
United States, fell 0.4 percent, the first decline since the first quarter of
1993. Prior to the attacks, in another effort to spur an ailing economy, the
FOMC lowered the fed funds rate 25 basis points on August 22, 2001. Subsequent
to the attacks, FOMC actions have been more pronounced in trying to turn around
an economy that is now in recession. In response to the uncertainty caused by
the terrorist attacks, the FOMC again lowered the federal funds rate, this time
by 50 basis points, which brought this rate to 3.00 percent at the end of the
third quarter. However, two further 50 basis point actions occurred subsequent
to the end of the third quarter, one on October 2, 2001, and

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

another on November 6, 2001. The federal funds rate is now at 2.00 percent, the
lowest rate since the Kennedy Administration in 1962. And still the United
States economy is stuck in a state of uncertainty and the FOMC position remains
biased towards weakness. Economists expect another rate reduction by year-end.

REVIEW OF FINANCIAL POSITION:

Waning confidence in a currently unstable stock market has caused consumers to
once again return to the safeness of banks. As a result, we have experienced a
boost in liquidity due to an influx of deposits. Total deposits grew $32.0
million to $410.7 million at September 30, 2001, from $378.7 million at December
31, 2000. As the growth in deposits thrived, loan demand subsided. Our loans,
net of unearned income, totaled $315.6 million at the end of the third quarter
of 2001. However, included in loans, net of unearned income, was a $15.0 million
short-term loan to a financial institution. Adjusting for this loan, loans, net
of unearned income, rose only $3.1 million from $297.5 million at the close of
2000. Federal funds sold equaled $1.0 million at September 30, 2001, compared to
$25.5 million at December 31, 2000. The majority of the excess liquidity was
invested in U.S. Government agency mortgage-backed securities and obligations of
states and municipalities. As a result, the investment portfolio grew $44.3
million to $115.5 million at the close of the third quarter of 2001, from $71.2
million at the end of last year. Overall, total assets increased $35.8 million
to $455.5 million at September 30, 2001, from $419.7 million at the end of 2000.
Stockholders' equity increased $3.2 million from $37.6 million at the end of
2000. Net income of $3,360 was the primary factor contributing to the capital
improvement. Other comprehensive income of $999, net cash dividends declared of
$939 and common stock repurchases of $232 also affected stockholders' equity.
Asset quality deteriorated slightly from year-end 2000 as evidenced by an $860
increase in nonperforming assets.

In comparison to the end of the previous quarter of 2001, we experienced a $13.9
million or 12.5 percent annualized increase in total assets in the third quarter
of 2001. Deposits grew $12.0 million, investments increased $12.5 million, and
loans, net of unearned income, improved $7.1 million, adjusting for the
aforementioned $15.0 million short-term loan. Stockholders' equity strengthened
by $1.6 million during the third quarter.

During the third quarter we continued the objective of establishing long-term
strategic goals for our Company. In cooperation with an outside consulting firm,
we began the formation of a strategic plan and the development of a profit
enhancement program. The strategic plan focuses on understanding market
demographics and core competencies, identifying diversification opportunities
and determining necessary marketing activities in order to create a vision for
the future, increase market

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

share and build shareholder value. The profit enhancement program involves
identifying, quantifying and implementing potential profit opportunities within
the Company. We anticipate the completion of the strategic plan by the end of
2001. The profit enhancement program is designed to be ongoing.

INVESTMENT PORTFOLIO:

During the first nine months of 2001, the FOMC lowered the federal funds rate
350 basis points in eight steps in response to the abrupt halt in economic
growth and the threat of continued weakness in the economy. Short-term interest
rates were significantly impacted by monetary policy, however as the curve
lengthened the impact was less severe. The two-year Treasury declined
dramatically, 199 basis points from 5.11 percent at year-end 2000 to 3.12
percent at the close of the third quarter of 2001. The ten-year U.S. Treasury,
which actually rose 16 basis in the first six months of the year, finally fell
39 basis point in the third quarter to 4.73 percent. 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 yield, while our municipal obligations correlate to the ten-year
U.S. Treasury yield. The decline in the two-year and ten-year U.S. Treasury
rates resulted in a significant positive change in the market value of our
investment portfolio. With respect to our holdings of mortgage-backed
securities, a $236 unrealized holding loss at December 31, 2000, converted to an
unrealized gain of $771 at the end of the third quarter. The unrealized gain on
our municipal obligations increased $426 to $1,218 at September 30, 2001, from
$792 at the end of 2000. Overall, we experienced an improvement of $999, net of
income taxes of $513, 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 September 30, 2001, and December 31, 2000, are
summarized as follows:

DISTRIBUTION OF INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                      SEPTEMBER 30,                DECEMBER 31,
                                           2001                        2000
                                  AMOUNT           %           AMOUNT           %
                                  -------        -----         -------        -----
<S>                               <C>          <C>            <C>           <C>
U.S. Treasury securities .                                     $ 3,001         4.21%
U.S. Government agencies .        $ 1,077         0.93%          1,025         1.44
State and municipals .....         42,023        36.40          20,075        28.18
Mortgage-backed securities         70,407        60.99          45,269        63.54
Equity securities ........          1,944         1.68           1,876         2.63
                                  -------        -----         -------        -----
  Total ..................       $115,451       100.00%        $71,246       100.00%
                                  =======        =====         =======        =====
</TABLE>

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

Our investment portfolio grew $44.3 million or 62.2 percent to $115.5 million at
September 30, 2001, from $71.2 million at December 31, 2000. From the end of the
previous quarter, investments grew $12.5 million. Investment securities played
an increasing role in our earning asset mix as a result of the slower demand for
loans. At September 30, 2001, investment securities equaled 26.7 percent of
earning assets, compared to 24.7 percent at the end of the previous quarter and
18.1 percent at December 31, 2000. Investment securities averaged $93.3 million
for the nine months ended September 30, 2001, compared to $96.3 million for the
same nine months of last year. However, the change in emphasis can be seen when
comparing the third quarters, investment securities averaged $106.1 million in
2001, compared to $89.6 million in 2000. As a result of the lower interest rate
environment, the tax-equivalent yield on the investment portfolio dropped 21
basis points to 6.32 percent for the nine months ended September 30, 2001, from
6.53 percent for the same period last year. For the third quarter of 2001, the
tax-equivalent yield was 6.28 percent, 10 basis points lower compared to 6.38
percent for the previous quarter.

During the nine months ended September 30, 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 nine
months ended September 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. The total return on the investment portfolio decreased slightly for
the twelve months ended September 30, 2001, to 8.8 percent, compared to 9.0
percent for the twelve months ended June 30, 2001.

The maturity distribution of the amortized cost, fair value and weighted-
average, tax-equivalent yield of the available-for-sale portfolio at September
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,
Collateralized Mortgage Obligations ("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

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

contractual maturities are included in the after ten year maturity distribution.
Expected maturities may differ from contracted maturities because borrowers have
the right to call or prepay obligations with or without call or prepayment
penalties.

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
                               ------------------------------------------------------------------------------
SEPTEMBER 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.....                 $ 1,007   6.20%                                 $  1,007   6.20%
State and municipals......... $   855   6.47%     995   6.66  $ 7,266   7.79% $31,689   7.55%   40,805   7.55
Mortgage-backed securities...  18,580   5.94   43,560   5.40    7,441   5.97       55   6.71    69,636   5.61
Equity securities............                                                   1,871   6.66     1,871   6.66
                              -------         -------         -------         -------         --------
  Total...................... $19,435   5.96% $45,562   5.45% $14,707   6.87% $33,615   7.50% $113,319   6.33%
                              =======         =======         =======         =======         ========

Fair value:
U.S. Government agencies.....                 $ 1,077                                         $  1,077
State and municipals......... $   864           1,015         $ 7,708         $32,436           42,023
Mortgage-backed securities...  18,827          44,094           7,431              55           70,407
Equity securities............                                                   1,944            1,944
                              -------         -------         -------         -------         --------
  Total...................... $19,691         $46,186         $15,139         $34,435         $115,451
                              =======         =======         =======         =======         ========
</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.
Amid a year-long slump in our Nation's economy, the housing market, aided by low
interest rates, continued to be the one source of stability. However, since the
attacks on the World Trade Center and Pentagon, further declines in consumer
confidence, job layoffs and the declining stock market are beginning to
undermine the strength of this sector. Although the average annual rates of both
new and existing home sales for the trailing twelve months exceeded the rates
for the same period of 2000, they fell considerably in September from the
previous month. The rate of new home sales in September 2001 was 845 thousand, a
decline of 5.9 percent compared to a rate of 898 thousand in August. Similarly
the rate of existing home sales fell 8.2 percent to 5.05 million in September
from 5.50 million in the previous month. Although the number of housing starts
in the last month of the third quarter were up, the number of permits dropped
from 1.57 million in August to 1.52 million in September.

The prime rate fell an additional 75 basis points in the third quarter of 2001,
from 6.75 percent at June 30, 2001, to 6.00 percent at September 30, 2001.
Year-to-date, the prime rate dropped 350 basis points. However, lowering the
prime rate did little to boost loan demand. Loan activity,

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

similar to the previous quarter, remained soft for all banks in the United
States, as business investment plummeted another 11.6 percent in the third
quarter of 2001. This halt in business spending, caused a $15.2 billion decline
in commercial loans at all commercial banks to $1,064.2 billion at September 30,
2001, from $1,079.4 billion at June 30, 2001.

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

DISTRIBUTION OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                 SEPTEMBER 30,           DECEMBER 31,
                                                     2001                    2000
                                               AMOUNT       %         AMOUNT       %
---------------------------------------------------------------------------------------
<S>                                          <C>         <C>        <C>         <C>
Commercial, financial and others............ $ 73,106     23.16%    $ 49,476     16.63%
Real estate:
  Construction..............................    4,329      1.37        3,546      1.19
  Mortgage..................................  199,060     63.08      205,771     69.16
Consumer, net...............................   37,901     12.01       37,800     12.70
Lease financing, net........................    1,194      0.38          937      0.32
                                             --------    ------     --------    ------
  Loans, net of unearned income.............  315,590    100.00%     297,530    100.00%
                                                         ======                 ======
Less: allowance for loan losses.............    3,410                  3,285
                                             --------               --------
    Net loans............................... $312,180               $294,245
                                             ========               ========
</TABLE>

Loans, net of unearned income increased $18.1 million to $315.6 million at
September 30, 2001, from $297.5 million at the end of 2000. Included in loans at
the end of the third quarter was a $15.0 million short-term loan to a financial
institution. Adjusting for this loan, loans, net of unearned income, grew $3.1
million. Commercial loans, including commercial real estate loans and lease
financing, increased $9.4 million to $111.5 million at September 30, 2001, from
$102.1 million at the end of 2000. Conversely, residential real estate loans,
including construction loans, declined $6.4 million to $151.2 million at the end
of the third quarter of 2001, from $157.6 million at year-end 2000. Consumer
loans remained relatively unchanged at $37.9 million and $37.8 million at
September 30, 2001 and December 31, 2000. For the nine months ended September
30, 2001, loans averaged $297.1 million, an increase of $10.4 million compared
to $286.7 million averaged for the same nine months of 2000. Despite the decline
in interest rates, the tax-equivalent yield on the loan portfolio for the nine
months ended September 30 was unchanged at 8.46 percent in 2001 and 2000.
However, in comparison to the previous quarter, the tax-equivalent yield fell 7
basis points to 8.36 percent in the third quarter of 2001 from 8.43 percent.

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

The average rate of a 30-year conventional mortgage fell 34 basis points to 6.82
percent at September 30, 2001, from 7.16 at the end of the second quarter,
making the total decline from year-end 2000 a dramatic 109 basis points. As a
result, mortgage refinancing activity picked up significantly. For the nine
months ended September 30, 2001, 292 mortgage loans with an approximate volume
of $27.8 million refinanced, more than half of which refinanced during the third
quarter.

We continually examine the maturity distribution and interest rate sensitivity
of the loan portfolio in an attempt to limit IRR and liquidity strains.
Approximately 42.2 percent of the lending portfolio is expected to reprice
within the next twelve months. Management will price loan products 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 September 30, 2001, is summarized as follows:

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                  AFTER ONE
                                       WITHIN     BUT WITHIN       AFTER
SEPTEMBER 30, 2001                    ONE YEAR    FIVE YEARS     FIVE YEARS       TOTAL
---------------------------------------------------------------------------------------
<S>                                   <C>         <C>            <C>           <C>
Maturity schedule:
Commercial, financial and others..... $ 44,223       $15,398       $ 13,485    $ 73,106
Real estate:
  Construction.......................    4,329                                    4,329
  Mortgage...........................   22,921        60,988        115,151     199,060
Consumer, net........................   13,494        20,631          3,776      37,901
Lease financing, net.................      437           757                      1,194
                                      --------       -------       --------    --------
    Total............................ $ 85,404       $97,774       $132,412    $315,590
                                      ========       =======       ========    ========

Repricing schedule:
Predetermined interest rates......... $ 49,896       $81,303       $101,023    $232,222
Floating or adjustable interest rates   83,368                                   83,368
                                      --------       -------       --------    --------
    Total............................ $133,264       $81,303       $101,023    $315,590
                                      ========       =======       ========    ========
</TABLE>

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

ASSET QUALITY:

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

<TABLE>
<CAPTION>
SEPTEMBER 30,                                           2001     2000
---------------------------------------------------------------------
<S>                                                      <C>      <C>
United States..........................................  4.9%     3.9%
Pennsylvania...........................................  4.5      4.1
Lackawanna county......................................  5.8      3.7
Susquehanna county.....................................  7.2      4.0
Wayne county...........................................  4.3      4.5
Wyoming county.........................................  4.1%     3.8%
</TABLE>

The slowing economy and threat of recession has caused the demand for labor to
weaken during the first nine months 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. In addition, the September
11, 2001, attacks caused the weakening to spill over into the service sector, as
the hotel, tourism and airline industries responded to the sharp decline in
demand for their services by cutting employees. 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 4.9
percent at September 30, 2001, compared to 3.9 percent one year earlier.
Similarly, the unemployment rate for the Commonwealth of Pennsylvania rose to
4.5 percent from 4.1 percent. Furthermore, the unemployment rates for three of
the four counties in our market area also rose. Susquehanna and Lackawanna
Counties saw the greatest deterioration to 7.2 percent and 5.8 percent at
September 30, 2001, compared to 4.0 percent and 3.7 percent one year ago.

Given the weakened economic conditions, our asset quality deteriorated from
year-end 2000. Nonperforming assets totaled $4,884 at September 30, 2001, an
increase of $860 from $4,024 at December 31, 2000. Increases in nonaccrual loans
primarily caused the deterioration. As a percentage of loans, net of unearned
income, nonperforming assets equaled 1.55 percent at the end of the third
quarter of 2001 and 1.35 percent at the end of 2000. Nonperforming assets
increased $304 in comparison to the previous quarter-end. Reductions in
nonaccrual loans and foreclosed assets were more than offset by an increase in
accruing loans past due 90 days or more.

Nonaccrual loans totaled $2,771 at September 30, 2001, compared to $1,684 at
December 31, 2000. The $1,087 increase resulted primarily from a rise in the
amount of mortgage loans placed on nonaccrual status. The amount of

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

loans past due 90 days or more and still accruing rose $407, while foreclosed
assets declined $510 from year-end 2000. Continued 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 1.27 percent at September 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 0.75 percent at September 30, 2001, compared to 0.65
percent at December 31, 2000.

Information concerning nonperforming assets at September 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>
                                                      SEPTEMBER 30,   DECEMBER 31,
                                                           2001           2000
                                                          ------         ------
<S>                                                   <C>             <C>
NONACCRUAL LOANS:
Commercial, financial and others .................        $  342         $  141
Real estate:
  Construction ...................................
  Mortgage .......................................         2,376          1,469
Consumer, net ....................................            53             74
Lease financing, net .............................
                                                          ------         ------
    Total nonaccrual loans .......................         2,771          1,684
                                                          ------         ------
Restructured loans ...............................                          124
                                                          ------         ------
    Total impaired loans .........................         2,771          1,808
                                                          ------         ------

ACCRUING LOANS PAST DUE 90 DAYS OR MORE:

Commercial, financial and others .................           358             23
Real estate:
  Construction ...................................
  Mortgage .......................................           626            449
Consumer, net ....................................           248            353
Lease financing, net .............................
                                                          ------         ------
    Total accruing loans past due 90 days or more          1,232            825
                                                          ------         ------
    Total nonperforming loans ....................         4,003          2,633
                                                          ------         ------
Foreclosed assets ................................           881          1,391
                                                          ------         ------
    Total nonperforming assets ...................        $4,884         $4,024
                                                          ======         ======

Ratios:
Impaired loans as a percentage of loans, net .....          0.88%          0.61%
Nonperforming loans as a percentage of loans, net           1.27           0.88
Nonperforming assets as a percentage of loans, net          1.55%          1.35%
</TABLE>

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

Information relating to the recorded investment in impaired loans at September
30, 2001 and December 31, 2000, is summarized as follows:

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30,  DECEMBER 31,
                                                                 2001          2000
---------------------------------------------------------------------------------------
<S>                                                          <C>            <C>
Impaired loans:
With a related allowance....................................... $2,771           $1,684
With no related allowance......................................                     124
                                                                ------           ------
  Total........................................................ $2,771           $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 September 30, 2001,is summarized as follows:

<TABLE>
<CAPTION>
                                                                           SEPTEMBER 30,
                                                                                 2001
---------------------------------------------------------------------------------------
<S>                                                                       <C>
Balance at January 1.............................................................. $405
Provision for loan losses.........................................................  221
Loans charged-off.................................................................  174
Loans recovered...................................................................    8
                                                                                   ----
Balance at period-end............................................................. $460
                                                                                   ====
</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 nine-month periods ended September 30, 2001 and 2000 are summarized as
follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED    NINE MONTHS ENDED
                                                    SEPTEMBER 30,        SEPTEMBER 30,
                                                   2001       2000      2001       2000
---------------------------------------------------------------------------------------
<S>                                              <C>        <C>       <C>        <C>
Gross interest due under terms.................  $   58     $   78    $  136     $  225
Interest income recognized.....................     182         53       212         77
                                                 ------     ------    ------     ------
Interest income not recognized (recognized in
 excess of due)................................  $ (124)    $   25    $  (76)    $  148
                                                 ======     ======    ======     ======

Interest income recognized (cash-basis)........  $  182     $   53    $  212     $   77
Average recorded investment in impaired loans..  $2,887     $2,521    $2,131     $2,553
</TABLE>

Cash received on impaired loans applied as a reduction of principal totaled $166
and $74 for the nine months and three months ended September 30, 2001. For the
respective 2000 periods cash receipts on impaired loans amounted to

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

$118 and $36.  There were no commitments to extend additional funds to such
parties at September 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,
         -        Volumes of past due and impaired loans,
         -        Concentrations,

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

         -        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>
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 September 30, 2001 and
December 31, 2000, are summarized as follows:

COMPOSITION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                         SEPTEMBER 30,     DECEMBER 31,
                                                             2001             2000
--------------------------------------------------------------------------------------
<S>                                                      <C>               <C>
Allocated allowance:
  Formula................................................... $3,023            $2,679
  Specific..................................................
                                                             ------            ------
   Total allocated allowance................................  3,023             2,679
Unallocated allowance.......................................    387               606
                                                             ------            ------
    Total allowance for loan losses......................... $3,410            $3,285
                                                             ======            ======
</TABLE>

The formula portion of the allocated allowance was $3,023 at September 30, 2001,
an increase of $344 compared to $2,679 at December 31, 2000. The increase was
due primarily to an increase in the volume of unclassified commercial loans.

There were no specific allocations to the allowance at September 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 decreased $219 to $387
at September 30, 2001, from $606 at the end of 2000. After giving consideration
to the previously mentioned risk factors, management deemed the level
appropriate to cover any inherent losses at September 30, 2001, which have not
been identified by the loss mitigation method.

                                       22
<PAGE>
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 nine months ended
September 30, 2001, is summarized as follows:

RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                            SEPTEMBER 30,
                                                                                  2001
-----------------------------------------------------------------------------------------
<S>                                                                         <C>
Allowance for loan losses at beginning of period...............................  $3,285
Loans charged-off:
Commercial, financial and others...............................................      77
Real estate:
  Construction.................................................................
  Mortgage.....................................................................     185
Consumer, net..................................................................     243
Lease financing, net...........................................................
                                                                                 ------
    Total......................................................................     505
                                                                                 ------

Loans recovered:
Commercial, financial and others...............................................      23
Real estate:
  Construction.................................................................
  Mortgage.....................................................................      18
Consumer, net..................................................................      49
Lease financing, net...........................................................
                                                                                 ------
    Total......................................................................      90
                                                                                 ------
Net loans charged-off..........................................................     415
                                                                                 ------
Provision charged to operating expense.........................................     540
                                                                                 ------
Allowance for loan losses at end of period.....................................  $3,410
                                                                                 ======

Ratios:
Net loans charged-off as a percentage of average loans outstanding.............    0.19%
Allowance for loan losses as a percentage of period end loans..................    1.08%
</TABLE>

The allowance for loan losses was $3,410 at September 30, 2001, an increase of
$125 from $3,285 at December 31, 2000. The provision of $540 exceeded net
charge-offs of $415 for the nine months ended September 30, 2001. In comparison
to the end of the second quarter of 2001, the allowance for loan losses
increased slightly, as the provision of $180 was almost entirely offset by net
charge-offs of $172 for the third quarter. The allowance for loan losses equaled
1.08 percent of loans, net of unearned income at the end of the third quarter of
2001, compared to 1.16 percent at the end of the previous quarter and 1.10
percent at year-end 2000. For our peer group this ratio equaled 1.26 percent at
the current and previous quarter-end and 1.18 percent at year-end 2000. The
coverage ratio, the allowance account as a percentage of nonperforming loans,
equaled 85.2 percent at September 30, 2001, compared to 92.8 percent at June 30,
2001. With regard to all

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

nonperforming assets the allowance covered 69.8 percent and 74.3 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
account. Any subsequent recoveries are credited to the allowance account. Net
charge-offs totaled $415 or 0.19 percent of average loans outstanding for the
nine months ended September 30, 2001, compared to $713 or 0.33 per cent for the
same period of 2000. Net charges-offs as a percentage of average loans
outstanding for our peer group equaled 0.17 percent and 0.13 percent for the
respective periods.

DEPOSITS:

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

DEPOSIT DISTRIBUTION

<TABLE>
<CAPTION>
                                                 SEPTEMBER 30,         SEPTEMBER 30,
                                                      2001                  2000
                                              -----------------     -------------------
                                              AVERAGE   AVERAGE      AVERAGE   AVERAGE
                                              BALANCE      RATE      BALANCE      RATE
---------------------------------------------------------------------------------------
<S>                                          <C>        <C>         <C>        <C>
Interest-bearing:
Money market accounts....................... $ 29,407      4.01%    $ 20,655      3.46%
NOW accounts................................   27,141      1.91       25,808      2.41
Savings accounts............................   76,885      2.35       73,161      2.50
Time deposits less than $100................  184,292      5.62      175,832      5.61
Time deposits $100 or more..................   31,643      5.28       31,011      5.94
                                             --------               --------
  Total interest-bearing....................  349,368      4.45%     326,467      4.56%
Noninterest-bearing.........................   41,253                 37,604
                                             --------               --------
  Total deposits............................ $390,621               $364,071
                                             ========               ========
</TABLE>

Deposit growth in the current year benefitted from the stock market volatility.
Consumers, not willing to accept the higher risk of the stock market, are once
again placing their money in traditional bank products. As a result, all insured
commercial banks in the United States experienced a 6.8 percent increase in
total deposits.

We also experienced significant deposit growth similar to the banking industry.
Our total deposits amounted to $410.7 million at September 30, 2001, an increase
of $32.0 million or 8.4 percent from $378.7 million at

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

December 31, 2000. Interest-bearing deposits grew $27.5 million or 8.1 percent,
while noninterest-bearing deposits rose $4.5 million or 11.5 percent. With
regard to interest-bearing deposits, the most substantial growth occurred in our
transaction accounts. NOW, savings and money market accounts grew $8.5 million
or 34.1 percent, $10.1 million or 13.5 percent and $2.0 million or 6.9 percent.
In comparison to the second quarter, total deposits increased $12.0 million. The
growth was again concentrated in our noninterest-bearing accounts and our
interest-bearing transaction accounts.

Total deposits averaged $390.6 million for the nine months ended September 30,
2001. This was a $26.5 million or 7.3 percent increase compared to $364.1
million averaged for the same nine months of last year. Average interest-bearing
deposits rose $22.9 million and average noninterest-bearing deposits grew $3.6
million. We experienced growth in the average balances of all major deposit
categories. Specifically, significant growth was exhibited in average money
market accounts of $8.7 million, average time deposits less than $100 of $8.5
million and average savings accounts of $3.7 million. Our cost of deposits was
aided by the decline in interest rates. For the nine months ended September 30,
our cost of deposits fell 11 basis points to 4.45 percent in 2001, from 4.56
percent in 2000. In addition, our cost of deposits for the third quarter of 2001
was 4.19 percent, a 28 basis point reduction from 4.47 percent for the previous
quarter. We anticipate our cost of deposits to further decrease during the
remainder of 2001. At September 30, 2001, there were approximately $65.0 million
in time deposits scheduled to reprice within three months. Should these
certificates renew, they will do so at current market rates which are
significantly lower than when the certificates were originated. In addition, at
the end of the third quarter, the FOMC's position with regard to economic
conditions remained weighted toward weakness. This position indicates further
rate cuts are probable.

Volatile deposits, time deposits in denominations of $100 or more, equaled $33.0
million at September 30, 2001, a $0.7 million decline from $33.7 million at
year-end 2000. These deposits increased $1.5 million from the previous
quarter-end. The fluctuations were 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 66 basis points to 5.28 percent for the nine months ended
September 30, 2001, compared to 5.94 percent for the same nine months of last
year. In addition, the average cost of these deposits for the third quarter of
2001 was 4.69 percent, 75 basis points lower than the 5.44 percent averaged for
the second quarter.

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

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

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,   DECEMBER 31,
                                                                 2001           2000
---------------------------------------------------------------------------------------
<S>                                                         <C>             <C>
Within three months............................................ $18,767         $17,281
After three months but within six months.......................   3,535           3,357
After six months but within twelve months......................   4,507           5,761
After twelve months............................................   6,173           7,327
                                                                -------         -------
  Total........................................................ $32,982         $33,726
                                                                =======         =======
</TABLE>

MARKET RISK SENSITIVITY:

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

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

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

INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
                                                  DUE AFTER           DUE AFTER
                                                  THREE MONTHS        ONE YEAR
                                  DUE WITHIN      BUT WITHIN          BUT WITHIN       DUE AFTER
SEPTEMBER 30, 2001               THREE MONTHS     TWELVE MONTHS       FIVE YEARS       FIVE YEARS       TOTAL
-------------------------------------------------------------------------------------------------------------
<S>                              <C>              <C>                 <C>              <C>           <C>
Rate sensitive assets:
Investment securities............... $  5,480         $  14,211         $ 46,186         $ 49,574    $115,451
Loans held for sale, net............      965                                                             965
Loans, net of unearned income.......  112,001            21,263           81,303          101,023     315,590
Federal funds sold..................    1,000                                                           1,000
                                     --------         ---------         --------         --------    --------
  Total............................. $119,446         $  35,474         $127,489         $150,597    $433,006
                                     ========         =========         ========         ========    ========

Rate sensitive liabilities:
Money market accounts...............                  $  30,878                                      $ 30,878
NOW accounts........................                     33,429                                        33,429
Savings accounts....................                                    $ 84,688                       84,688
Time deposits less than $100........ $ 46,270            64,254           73,745         $    723     184,992
Time deposits $100 or more..........   18,767             8,042            6,173                       32,982
                                     --------         ---------         --------         --------    --------
  Total............................. $ 65,037         $ 136,603         $164,606         $    723    $366,969
                                     ========         =========         ========         ========    ========

Rate sensitivity gap:
  Period............................ $ 54,409         $(101,129)        $(37,117)        $149,874
  Cumulative........................ $ 54,409         $ (46,720)        $(83,837)        $ 66,037    $ 66,037

RSA/RSL ratio:
  Period............................     1.84              0.26             0.77           208.29
  Cumulative........................     1.84              0.77             0.77             1.18        1.18
</TABLE>

Our cumulative one-year RSA/RSL ratio was constant at 0.77 at both September 30,
and June 30, 2001, and falls within our asset/liability guidelines of 0.70 and
1.30. At September 30, 2001, the amount of RSA maturing or repricing within one
year increased $6.6 million to $154.9

                                       27
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

million, from $148.3 million at the previous quarter-end, while the amount of
RSL maturing or repricing within this time frame increased $8.2 million to
$201.6 million from $193.4 million. The increase in RSA primarily resulted from
an increase in loans, net of unearned income, of $23.9 million, partially offset
by a reduction in federal funds sold of $17.7 million. Included in the change in
loans, net of unearned, was the $15.0 million short-term loan to a financial
institution. A $6.4 million increase in NOW accounts, coupled with a $1.0
million rise in money market accounts, primarily caused the higher amount of RSL
maturing or repricing within one year. The amount of time deposits maturing or
repricing within this time frame remained relatively stable from the end of the
second quarter.

We experienced a decline in our three-month ratio to 1.84 at the close of the
third quarter of 2001, from 2.30 at the previous quarter-end. The decline in the
ratio primarily resulted from an increase of $14.9 million in the amount of RSL
maturing or repricing within three months. The amount of time deposits less than
$100, maturing or repricing within the next three months rose $12.9 million,
while time deposits $100 or more increased $2.0 million.

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.

                                       28
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

As the static gap report fails to address the dynamic changes in the balance
sheet composition or prevailing interest rates, we utilize a simulation model to
enhance our asset/liability management. This model is used to create pro forma
net interest income scenarios under various interest rate shocks. Model results
at September 30, 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 and 200 basis points, net interest income should
decrease by 2.9 percent and 5.8 percent. Conversely, similar declines in
interest rates would result in increases in net interest income of 2.9 percent
and 5.7 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 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 September 30, 2001, although favorable, deteriorated
slightly from the end of the previous 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 0.7 percent at the

                                       29
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

end of the third quarter of 2001, compared to negative 1.5 percent at the
previous quarter-end. Similarly, 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 2.2 percent at September 30, 2001, compared to negative 2.9
percent at June 30, 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 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 $26.9 million during
the nine months ended September 30, 2001. Net cash used in investing activities
of $61.5 million more than offset $30.8 million provided by financing activities
and $3.8 million provided by operating activities.

With regard to operating activities, the $3.8 million net cash inflow primarily
resulted from $3.4 million in net income from operations for the nine months
ended September 30, 2001. The $30.8 million in cash provided by financing
activities was due primarily to a $32.0 million net increase in deposits.

For the nine months ended September 30, 2001, net cash used in investing
activities totaled $61.5 million. Contributing primarily to the net cash outflow
were purchases of investment securities totaling $62.3 million and a net
increase in lending activities of $18.8 million, partially offset by $19.1
million in repayments on investment securities.

CAPITAL ADEQUACY:

Stockholders' equity totaled $40.8 million at September 30, 2001, an increase of
$3.2 million from $37.6 million at December 31, 2000. The capital improvement
principally resulted from net income of $3,360. Also affecting stockholders'
equity was a positive change in other comprehensive income of $999, net cash
dividends declared of $939 and the repurchase of 8,844 shares of common stock
for $232.

                                       30
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the nine months ended September 30, 2001, dividends declared totaled $1,093
or $0.55 per share, compared to $1,038 or $0.52 per share for the same period of
2000. The dividend payout ratio was 32.5 percent for the nine months ended
September 30, 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 without incurring fees or
commissions. During the nine months ended September 30, 2001, 5,536 shares were
issued under this plan.

We attempt to assure capital adequacy by monitoring our current and projected
capital positions to support future growth, while providing stockholders with an
attractive long-term appreciation of their investments. According to bank
regulation, at a minimum, banks must maintain a Tier I capital to risk-adjusted
assets ratio of 4.0 percent and a total capital to risk-adjusted assets ratio of
8.0 percent. Additionally, banks must maintain a Leverage ratio, defined as Tier
I capital to total average assets less intangibles, of 3.0 percent. The minimum
Leverage ratio of 3.0 percent only applies to institutions with a composite
rating of one under the Uniform Interagency Bank Rating System, that are not
anticipating or experiencing significant growth and have well-diversified risk.
An additional 100 to 200 basis points are required for all but these most
highly-rated institutions. Our minimum Leverage ratio was 4.0 percent at
September 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>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Our and Community Bank's capital ratios at September 30, 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
SEPTEMBER 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........................... $ 37,833  $ 34,508    $11,320      $ 9,840      $16,979    $14,760
  Community Bank.........................   36,097    33,242     11,273        9,780       16,909     14,670
Total capital to risk-adjusted assets:

  Consolidated...........................   41,243    37,587     22,639       19,679       28,299     24,599
  Community Bank.........................   39,507    36,302     22,546       19,560       28,182     24,450
Tier I capital to total average assets
  less goodwill:

  Consolidated...........................   37,833    34,508     17,262       16,161       21,578     20,201
  Community Bank.........................   36,097    33,242    $17,206      $16,087      $21,508    $20,109

Risk-adjusted assets:
  Consolidated...........................  265,541   229,605
  Community Bank.........................  264,376   228,112
Risk-adjusted off-balance sheet items:

  Consolidated...........................   17,447    16,387
  Community Bank.........................   17,447    16,387
Average assets for Leverage ratio:

  Consolidated...........................  431,557   404,013
  Community Bank......................... $430,155  $402,186

Ratios:
Tier I capital as a percentage of risk-
adjusted assets and off-balance sheet
 items:
  Consolidated............................    13.4%     14.0%       4.0%         4.0%         6.0%       6.0%
  Community Bank..........................    12.8      13.6        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............................    14.6      15.3        8.0          8.0         10.0       10.0
  Community Bank..........................    14.0      14.8        8.0          8.0         10.0       10.0
Tier I capital as a percentage of total
average assets less goodwill:

  Consolidated............................     8.8       8.5        4.0          4.0          5.0        5.0
  Community Bank..........................     8.4%      8.3%       4.0%         4.0%         5.0%       5.0%
</TABLE>



                                       32
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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.

At September 30, 2001, we exceeded all relevant regulatory capital measurements
and were considered well capitalized. In addition, our Leverage ratio, a key
industry ratio defined as Tier I capital to average total assets less
intangibles, improved to 8.8 percent at September 30, 2001, from 8.5 percent one
year ago.

REVIEW OF FINANCIAL PERFORMANCE:

Based on the most current financial data available, the banking industry has
faired well in 2001. Insured commercial banks posted 14.1 percent higher
year-to-date net income in 2001 compared to the prior year. Large commercial
banks experienced significant restructuring and credit related charges in 2000
that did not occur in the current year. In addition, lower interest rates
allowed commercial banks to realize gains on the sale of investment securities.
However, the lower interest rates continued to put pressure on the net interest
margins of all insured commercial banks. The average year-to-date yield on
earning assets fell 28 basis points in comparison to last year, while the cost
of funds dropped only 15 basis points. Additionally, the industry's net interest
margin remained 9 basis points lower than the previous year.

Net income for the nine months ended September 30, 2001, improved $170 or 5.3
percent to $3,360 or $1.69 per share from $3,190 or $1.60 per share for the same
nine months of 2000. Increases in net interest income and noninterest income,
offset in part by higher noninterest expense, primarily caused the improvement.
Net income for the third quarter of 2001 reached $1,230 or $0.62 per share,
compared to $1,160 or $0.59 per share for the same quarter last year. Return on
average equity was 11.49 percent and 12.17 percent for the nine months and three
months ended September 30, 2001, compared to 12.03 percent and 12.82 percent for
the respective periods of 2000. Return on average assets was 1.04 percent
year-to-date 2001 and 1.09 percent for the third quarter, compared to 1.05
percent and 1.14 percent for the same periods of the prior year. We recorded
other comprehensive income, related entirely to net unrealized holding gains on
investment securities available-for-sale, of $999 and $598 for the nine months
ended September 30, 2001 and 2000.

                                       33
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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 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.

                                       34
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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

NET INTEREST INCOME CHANGES DUE TO RATE AND VOLUME

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED          NINE MONTHS ENDED
                                          SEPTEMBER 30,              SEPTEMBER 30,
                                         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.............................  $ 96  $ (37)   $133      $  938  $  61  $  877
  Tax-exempt..........................   (35)   (45)     10        (293)   (43)   (250)
Investments:
  Taxable.............................    94    (28)    122        (257)  (108)   (149)
  Tax-exempt..........................   139    (27)    166         (41)   (69)     28
Federal funds sold....................   141   (174)    315         655   (176)    831
                                        ----  -----    ----      ------  -----  ------
    Total interest income.............   435   (311)    746       1,002   (335)  1,337
                                        ----  -----    ----      ------  -----  ------
Interest expense:
Money market accounts.................   117     30      87         347     95     252
NOW accounts..........................    (3)   (34)     31         (78)  (104)     26
Savings accounts......................     7    (78)     85         (18)  (116)     98
Time deposits less than $100..........    77   (116)    193         369     13     356
Time deposits $100 or more............   (92)  (106)     14        (128)  (157)     29
Short-term borrowings.................   (53)           (53)       (150)          (150)
Long-term debt........................            2      (2)         (1)     3      (4)
                                        ----  -----    ----      ------  -----  ------
    Total interest expense............    53   (302)    355         341   (266)    607
                                        ----  -----    ----      ------  -----  ------
    Net interest income...............  $382  $  (9)   $391      $  661  $ (69) $  730
                                        ====  =====    ====      ======  =====  ======
</TABLE>

For the nine months ended September 30, 2001, tax-equivalent net interest income
improved $661 or 5.7 percent to $12,288 from $11,627 for the same period of
2000. The improvement resulted from a positive volume variance, offset slightly
by a negative rate variance. Average earning assets grew in excess of average
interest-bearing liabilities and resulted in additional tax-equivalent net
interest income of $730. For the nine months ended September 30, 2001, earning
assets averaged $410.7 million, an increase of

                                       35
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

$26.7 million compared to the same period last year. Average interest-bearing
liabilities grew $19.8 million to $349.4 million from $329.6 million for the
respective periods of 2001 and 2000. Primarily contributing to the growth in
average earning assets were increases of $19.2 million in average federal funds
sold and $10.4 million in average loans, net of unearned income, which had
corresponding increases to tax-equivalent net interest income of $831 and $627.
The growth in average interest-bearing liabilities was due to increases in the
averages of all major deposit categories, offset in part by a reduction in
average short-term borrowings. Specifically, average money market and NOW
accounts grew $8.7 million and $1.3 million, average savings accounts increased
$3.7 million and average time deposits less than $100 and average time deposits
$100 or more rose $8.5 million and $0.6 million. Average short-term borrowings
declined $3.1 million. The growth in average interest-bearing liabilities caused
a reduction in tax-equivalent net interest income of $607 when comparing the
nine months ended September 30, 2001 and 2000.

A negative rate variance slightly mitigated the effects of the positive volume
variance on net interest income. The reduction in general market rates reduced
both the yield on earning assets and the cost of funds. Specifically, the cost
of funds declined 12 basis points to 4.45 percent for the nine months ended
September 30, 2001, from 4.57 percent for the same nine months of 2000. This
reduction in the cost of funds caused a positive rate variance of $266. This
positive effect was more than entirely offset by a 19 basis point reduction in
the tax-equivalent yield on average earning assets to 7.78 percent for the nine
months ended September 30, 2001 and reduced net interest income by $335.
Overall, the negative rate variance caused a reduction in net interest income of
$69 and a corresponding reduction in the net interest spread of 7 basis points.

For the third quarter of 2001, tax-equivalent net interest income improved $382,
compared to the same quarter of 2000. The reasons that caused the three-month
improvement were similar to those that caused the year-to-date increase. We
experienced a favorable volume variance of $391, slightly offset by a negative
rate variance of $9. With regard to volume, average earning assets grew $43.4
million, while average interest-bearing liabilities rose $34.5 million. The
negative rate variance resulted from a 44 basis point reduction in the
tax-equivalent yield on average earning assets almost entirely mitigated by a 39
basis point reduction in the cost of funds.

Similar to the trend of the banking industry, we also experienced margin
compression as our net interest margin weakened to 4.00 percent for the nine
months ended September 30, 2001, from 4.05 percent for the same period of 2000.
In addition to the pressure caused by lower interest rates, net interest margins
also felt the effects of sluggish loan demand brought on

                                       36
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

by a weakened economy. Excess funds from increased deposit growth had to be
directed into lower yielding instruments such as investment securities and
federal funds sold, which put further pressure on net interest margins.
Maintenance of an adequate net interest margin is one of our primary concerns.
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.

                                       37
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The average balances of assets and liabilities, corresponding interest income
and expense and resulting average yields or rates paid for the nine months ended
September 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>
                                                    SEPTEMBER 30, 2001             SEPTEMBER 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..................................... $290,015   $18,333      8.45%   $275,901   $17,395      8.42%
  Tax-exempt..................................    7,088       473      8.92      10,777       766      9.49
Investments:
  Taxable.....................................   59,855     2,517      5.62      63,287     2,774      5.85
  Tax-exempt..................................   33,448     1,891      7.56      33,006     1,932      7.82
Federal funds sold............................   20,244       696      4.60         968        41      5.66
                                               --------   -------              --------   -------
    Total earning assets......................  410,650    23,910      7.78%    383,939    22,908      7.97%
Less: allowance for loan losses...............    3,409                           3,518
Other assets..................................   25,881                          25,636
                                               --------                        --------
    Total assets.............................. $433,122                        $406,057
                                               ========                        ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts......................... $ 29,407       882      4.01%   $ 20,655       535      3.46%
NOW accounts..................................   27,141       388      1.91      25,808       466      2.41
Savings accounts..............................   76,885     1,353      2.35      73,161     1,371      2.50
Time deposits less than $100..................  184,292     7,748      5.62     175,832     7,379      5.61
Time deposits $100 or more....................   31,643     1,250      5.28      31,011     1,378      5.94
Short-term borrowings.........................                                    3,134       150      6.39
Long-term debt................................        7         1      7.49          37         2      7.22
                                               --------   -------              --------   -------
    Total interest-bearing liabilities........  349,375    11,622      4.45%    329,638    11,281      4.57%
Noninterest-bearing deposits..................   41,253                          37,604
Other liabilities.............................    3,397                           3,381
Stockholders' equity..........................   39,097                          35,434
                                               --------                        --------
    Total liabilities and stockholders' equity $433,122                        $406,057
                                               ========   -------              ========   -------
    Net interest/income spread................            $12,288      3.33%              $11,627      3.40%
                                                          =======                         =======
    Net interest margin.......................                         4.00%                           4.05%
Tax equivalent adjustments:
Loans.........................................            $   161                         $   261
Investments...................................                643                             657
                                                          -------                         -------
    Total adjustments.........................            $   804                         $   918
                                                          =======                         =======
</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 $920 for the
         nine months ended September 30, 2001, and an unrealized holding loss of
         $1,101 for the nine months ended September 30, 2000, included in other
         assets. Tax-equivalent adjustments were calculated using the prevailing
         statutory tax rate of 34.0 percent.

                                       38
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

PROVISION FOR LOAN LOSSES:

We evaluate the adequacy of the allowance for loan losses account on a quarterly
basis. 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.

The provision for loan losses totaled $540 for the nine months ended September
30, 2001, an increase of $240 compared to $300 for the same nine months of 2000.
For the third quarter of 2001, the provision for loan losses was $180, an
increase of $60 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 nine months ended September 30, 2001, noninterest income totaled $2,107,
an increase of $425 or 25.3 percent from $1,682 for the same period of 2000.
Included in noninterest income last year were gains on the sale of investment
securities of $173. Low mortgage rates caused heightened activity in our
secondary mortgage department, which resulted in an increase of $224 in net
gains on the sale of residential mortgages. Adjusting for these gains, net
interest income improved $374 or 24.9 percent over the prior year. Changes to
our service charge structure primarily caused the increase in service charges,
fees and commissions.

For the third quarter, noninterest income amounted to $754 in 2001, compared to
$583 in 2000. The $171 or 29.3 percent improvement primarily resulted from an
increase of $152 in net gains on the sale of residential mortgages. Service
charges, fees and commissions rose $19 over the comparable quarter of 2000.

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

                                       39
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

facilities and equipment, include depreciation, general maintenance and repairs,
real estate taxes, rental expense offset by any rental income, and utility
costs. Other expenses include general operating expenses such as advertising,
contractual services, insurance, including FDIC assessment, other taxes and
supplies. Several of these costs and expenses are variable while the remainder
are fixed. We utilize budgets and other related strategies in an effort to
control the variable expenses.

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

NONINTEREST EXPENSES

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED    NINE MONTHS ENDED
                                                   SEPTEMBER 30,          SEPTEMBER 30,
                                                  2001       2000        2001      2000
---------------------------------------------------------------------------------------
<S>                                             <C>        <C>         <C>       <C>
Salaries and employee benefits expense:
Salaries and payroll taxes..................... $1,214     $1,124      $3,478    $3,318
Employee benefits..............................    232        213         624       598
                                                ------     ------      ------    ------
  Salaries and employee benefits expense.......  1,446      1,337       4,102     3,916
                                                ------     ------      ------    ------

Net occupancy and equipment expense:

Net occupancy expense..........................    180        178         591       546
Equipment expense..............................    229        246         706       668
                                                ------     ------      ------    ------
  Net occupancy and equipment expense..........    409        424       1,297     1,214
                                                ------     ------      ------    ------

Other noninterest expenses:
Marketing expense..............................     94         90         256       263
Other taxes....................................    106         82         302       220
Stationery and supplies........................     93         86         290       309
Contractual services...........................    329        268         934       826
Insurance including FDIC assessment............     42         41         125       124
Other..........................................    536        409       1,346     1,193
                                                ------     ------      ------    ------
  Other noninterest expenses...................  1,200        976       3,253     2,935
                                                ------     ------      ------    ------
    Total noninterest expense.................. $3,055     $2,737      $8,652    $8,065
                                                ======     ======      ======    ======
</TABLE>

For the nine months ended September 30, 2001, noninterest expense totaled
$8,652, an increase of $587 or 7.3 percent from $8,065 for the same nine months
of 2000. The increase was attributable to normal growth and was spread between
all major expense categories. For the third quarter, noninterest expense equaled
$3,055 in 2001 and $2,737 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 nine months ended
September 30, 2001, compared to the same period last year. This ratio was 63.3
percent in 2001 and 65.2 percent in 2000. Our overhead ratio, noninterest
expense as a percentage of total average assets, remained constant at 2.7
percent for the nine months ended September 30, 2001 and 2000.

                                       40
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Salaries and employee benefits expense comprise the majority of our noninterest
expense. These expenses totaled $4,102 or 47.4 percent of noninterest expense
for the nine months ended September 30, 2001, and $3,916 or 48.6 percent for the
same period of 2000. Additional personnel hired in our lending and credit
administration divisions, coupled with annual merit increases resulted in the
$186 increase. For the third quarter of 2001, employee-related expenses totaled
$1,446, an increase of $109 in comparison to the same quarter of last year.

Net occupancy and equipment expenses amounted to $1,297 for the nine months
ended September 30, 2001, compared to $1,214 for the same nine months of the
prior year. The $83 increase primarily resulted from the implementation of
various technological improvements. For the third quarter, net occupancy and
equipment expenses equaled $409 in 2001 and $424 in 2000.

Other expenses amounted to $3,253 for the nine months ended September 30, 2001,
and increase of $318 from $2,935 for the same nine months of 2000. For the
quarter ended September 30, other expenses totaled $1,200 in 2001 and $976 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

                                       41
<PAGE>
COMM BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

         -     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.

We were included in the 92.7 percent of all BIF-member institutions classified
in the well capitalized supervisory risk subgroup at September 30, 2001.
Accordingly, we will be exempt from paying a BIF assessment for the remainder 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 $53 and $56 for the nine months ended September 30, 2001 and
2000.

INCOME TAXES:

For the nine months ended September 30, 2001, income tax expense totaled $1,039
and resulted in an effective tax rate of 23.6 percent. For the same period of
2000, income tax expense was $836 with an effective tax rate of 20.8 percent.
The increase in the effective tax rate resulted from higher pre-tax income,
coupled with a lower amount of tax-exempt income. Our effective tax rate is more
favorable in comparison to that of our peer group. For the first nine months of
2001 and 2000, the peer group posted effective tax rates of 26.4 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.

                                       42
<PAGE>
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.
                           NONE

ITEM 5.        OTHER INFORMATION

                           NONE

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K
               (a)         Exhibits:

                           10.01 - Executive Employment Agreement between Scott
                           A. Seasock and Comm Bancorp, Inc. dated July 1, 2001.

                           10.02 - Executive Employment Agreement between
                           William R. Boyle and Comm Bancorp, Inc. dated October
                           1, 2001.

               (b)         Reports on Form 8-K
                           None

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

                                 SIGNATURE PAGE

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

                                       Registrant, Comm Bancorp, Inc.



Date: November 9, 2001                 /s/William F. Farber, Sr.
     -------------------------         -----------------------------------
                                       William F. Farber, Sr.
                                       Chief Executive Officer



Date: November 9, 2001                 /s/ Scott A. Seasock
     -------------------------         ----------------------------------
                                       Scott A. Seasock
                                       Chief Financial Officer
                                       (Principal Financial Officer)



Date: November 9, 2001                 /s/ Stephanie A. Ganz
     -------------------------         ----------------------------------
                                       Stephanie A. Ganz
                                       Vice President of Finance
                                       (Principal Accounting Officer)



                                       44
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
ITEM NUMBER                                 DESCRIPTION                                             PAGE
-----------                                 -----------                                             ----
<S>                                         <C>                                                      <C>
  10.01                                     Executive Employment Agreement                           46
                                            between Scott A. Seasock and
                                            Comm Bancorp, Inc. dated
                                            July 1, 2001

  10.02                                     Executive Employment Agreement                           56
                                            between William R. Boyle and
                                            Comm Bancorp, Inc. dated
                                            October 1, 2001
</TABLE>



                                       45