<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, 2006

                                       OR

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

For the transition period from __________  to __________

                         Commission file number 0-17455

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]

Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,853,727 at October 31, 2006.


                                  Page 1 of 56
                            Exhibit Index on Page 50

<PAGE>

                               COMM BANCORP, INC.
                                    FORM 10-Q

                               SEPTEMBER 30, 2006

                                      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, 2006
         and 2005....................................................       3
      Consolidated Balance Sheets - September 30, 2006, and
         December 31, 2005...........................................       4
      Consolidated Statement of Changes in Stockholders' Equity for
         the Nine Months Ended September 30, 2006....................       5
      Consolidated Statements of Cash Flows for the Nine Months Ended
         September 30, 2006 and 2005.................................       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.....................................................       *

   Item 4.  Controls and Procedures..................................      46

PART II. OTHER INFORMATION:

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

   Item 1A. Risk Factors.............................................      47

   Item 2.  Unregistered Sales of Equity Securities and Use of
            Proceeds.................................................      47

   Item 3.  Defaults Upon Senior Securities..........................      47

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

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

   Item 6.  Exhibits.................................................      48

   Signatures........................................................      49

   Exhibit Index.....................................................      50
</TABLE>

*    Not Applicable


                                        2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED        NINE MONTHS ENDED
                                                                                   SEPTEMBER 30,             SEPTEMBER 30,
                                                                              -----------------------   -----------------------
                                                                                 2006         2005         2006         2005
                                                                              ----------   ----------   ----------   ----------
<S>                                                                           <C>          <C>          <C>          <C>
INTEREST INCOME:
Interest and fees on loans:
   Taxable.................................................................   $    7,133   $    5,809   $   20,190   $   16,864
   Tax-exempt..............................................................          352          337        1,228        1,014
Interest and dividends on investment securities available-for-sale:
   Taxable.................................................................          490          493        1,596        1,523
   Tax-exempt..............................................................          368          396        1,124        1,168
   Dividends...............................................................           14           10           50           32
Interest on federal funds sold.............................................          136          144          209          158
                                                                              ----------   ----------   ----------   ----------
      Total interest income................................................        8,493        7,189       24,397       20,759
                                                                              ----------   ----------   ----------   ----------

INTEREST EXPENSE:
Interest on deposits.......................................................        3,197        2,522        9,008        7,265
Interest on short-term borrowings..........................................                                    144          106
                                                                              ----------   ----------   ----------   ----------
      Total interest expense...............................................        3,197        2,522        9,152        7,371
                                                                              ----------   ----------   ----------   ----------
      Net interest income..................................................        5,296        4,667       15,245       13,388
Provision for loan losses..................................................          270          161          675          619
                                                                              ----------   ----------   ----------   ----------
      Net interest income after provision for loan losses..................        5,026        4,506       14,570       12,769
                                                                              ----------   ----------   ----------   ----------

NONINTEREST INCOME:
Service charges, fees and commissions......................................          795          746        2,393        2,411
Net gains on sale of loans.................................................           63          119          176          397
Net gains on sale of merchant services.....................................                                                 235
                                                                              ----------   ----------   ----------   ----------
      Total noninterest income.............................................          858          865        2,569        3,043
                                                                              ----------   ----------   ----------   ----------

NONINTEREST EXPENSE:
Salaries and employee benefits expense.....................................        1,903        1,778        5,611        5,416
Net occupancy and equipment expense........................................          571          588        1,772        1,810
Other expenses.............................................................        1,273        1,254        3,639        3,814
                                                                              ----------   ----------   ----------   ----------
      Total noninterest expense............................................        3,747        3,620       11,022       11,040
                                                                              ----------   ----------   ----------   ----------
Income before income taxes.................................................        2,137        1,751        6,117        4,772
Provision for income tax expense...........................................          512          371        1,367          892
                                                                              ----------   ----------   ----------   ----------
      Net income...........................................................        1,625        1,380        4,750        3,880
                                                                              ----------   ----------   ----------   ----------

OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains (losses) on investment securities available-for-sale......          868         (721)         129         (645)
Income tax expense (benefit) related to other comprehensive income (loss)..          295         (245)          44         (219)
                                                                              ----------   ----------   ----------   ----------
      Other comprehensive income (loss), net of income taxes...............          573         (476)          85         (426)
                                                                              ----------   ----------   ----------   ----------
      Comprehensive income.................................................   $    2,198   $      904   $    4,835   $    3,454
                                                                              ==========   ==========   ==========   ==========

PER SHARE DATA:
Net income.................................................................   $     0.87   $     0.74   $     2.56   $     2.08
Cash dividends declared....................................................   $     0.25   $     0.23   $     0.75   $     0.69
Average common shares outstanding..........................................    1,854,598    1,861,053    1,853,227    1,863,442
</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,
                                                                    2006           2005
                                                               -------------   ------------
<S>                                                            <C>             <C>
ASSETS:
Cash and due from banks.....................................      $ 17,778       $ 23,403
Federal funds sold..........................................         8,450         12,000
Investment securities available-for-sale....................        80,810        104,965
Loans held for sale, net....................................         1,849          1,934
Loans, net of unearned income...............................       426,867        388,603
   Less: allowance for loan losses..........................         4,453          4,128
                                                                  --------       --------
Net loans...................................................       422,414        384,475
Premises and equipment, net.................................        11,047         11,003
Accrued interest receivable.................................         3,219          2,487
Other assets................................................         3,473          3,310
                                                                  --------       --------
      Total assets..........................................      $549,040       $543,577
                                                                  ========       ========

LIABILITIES:
Deposits:
   Noninterest-bearing......................................      $ 73,713       $ 75,428
   Interest-bearing.........................................       419,102        415,937
                                                                  --------       --------
      Total deposits........................................       492,815        491,365
Accrued interest payable....................................         1,136          1,024
Other liabilities...........................................         1,830          1,499
                                                                  --------       --------
      Total liabilities.....................................       495,781        493,888
                                                                  --------       --------

STOCKHOLDERS' EQUITY:
Common stock, par value $0.33, authorized 12,000,000 shares,
   issued and outstanding:
   September 30, 2006, 1,853,137 shares; December 31, 2005,
      1,850,154 shares......................................           612            611
Capital surplus.............................................         7,085          6,869
Retained earnings...........................................        44,518         41,250
Accumulated other comprehensive income......................         1,044            959
                                                                  --------       --------
      Total stockholders' equity............................        53,259         49,689
                                                                  --------       --------
      Total liabilities and stockholders' equity............      $549,040       $543,577
                                                                  ========       ========
</TABLE>

See Notes to Consolidated Financial Statements.


                                        4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                                                                          OTHER           TOTAL
                                                       COMMON   CAPITAL   RETAINED   COMPREHENSIVE   STOCKHOLDERS'
                                                        STOCK   SURPLUS   EARNINGS       INCOME          EQUITY
                                                       ------   -------   --------   -------------   -------------
<S>                                                    <C>      <C>       <C>        <C>             <C>
BALANCE, DECEMBER 31, 2005 .........................    $611    $6,869    $41,250       $  959          $49,689
Net income .........................................                        4,750                         4,750
Dividends declared: $0.75 per share ................                       (1,390)                       (1,390)
Dividend reinvestment plan: 5,383 shares issued ....       2       223                                      225
Repurchase and retirement: 2,400 shares ............      (1)       (7)       (92)                         (100)
Net change in other comprehensive income ...........                                        85               85
                                                        ----    ------    -------       ------          -------
BALANCE, SEPTEMBER 30, 2006 ........................    $612    $7,085    $44,518       $1,044          $53,259
                                                        ====    ======    =======       ======          =======
</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,                                                 2006       2005
-------------------------------                                               --------   --------
<S>                                                                           <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................   $  4,750   $  3,880
Adjustments:
   Provision for loan losses ..............................................        675        619
   Depreciation, amortization and accretion ...............................        856      1,574
   Amortization of net loan costs .........................................        214        136
   Deferred income tax benefit ............................................       (165)      (209)
   Gains on the sale of foreclosed assets .................................         (3)       (57)
   Changes in:
      Loans held for sale, net ............................................         85     (1,621)
      Accrued interest receivable .........................................       (732)      (257)
      Other assets ........................................................       (296)      (281)
      Accrued interest payable ............................................        112        (16)
      Other liabilities ...................................................        268       (119)
                                                                              --------   --------
         Net cash provided by operating activities ........................      5,764      3,649
                                                                              --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayments of investment securities available-for-sale ......     41,492     37,290
Purchases of investment securities available-for-sale .....................    (17,305)   (18,541)
Proceeds from sale of foreclosed assets ...................................        596        331
Net increase in lending activities ........................................    (39,141)    (8,748)
Purchases of premises and equipment .......................................       (804)      (408)
                                                                              --------   --------
         Net cash provided by (used in) investing activities ..............    (15,162)     9,924
                                                                              --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
   Money market, NOW, savings and noninterest-bearing accounts ............     (5,462)    12,108
   Time deposits ..........................................................      6,912       (508)
Proceeds from issuance of common shares ...................................        225        189
Repurchase and retirement of common shares ................................       (100)      (435)
Cash dividends paid .......................................................     (1,352)    (1,267)
                                                                              --------   --------
      Net cash provided by financing activities ...........................        223     10,087
                                                                              --------   --------
      Net increase (decrease) in cash and cash equivalents ................     (9,175)    23,660
      Cash and cash equivalents at beginning of year ......................     35,403     12,702
                                                                              --------   --------
      Cash and cash equivalents at end of period ..........................   $ 26,228   $ 36,362
                                                                              ========   ========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
   Interest ...............................................................   $  9,040   $  7,387
   Income taxes ...........................................................      1,230      1,252
Noncash items:
   Transfer of loans to foreclosed assets .................................        313        318
   Unrealized losses (gains) on investment securities available-for-sale ..   $    (85)  $    426
</TABLE>

See Notes to Consolidated Financial Statements.


                                        6
<PAGE>

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

1. BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements of Comm Bancorp,
Inc. and subsidiaries, Community Bank and Trust Company, including its
subsidiaries, Community Leasing Corporation and Comm Financial Services
Corporation, and Comm Realty Corporation (collectively, the "Company") have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information and with the
instructions to Form 10-Q and Article 10-01 of Regulation S-X. In the opinion of
management, all normal recurring adjustments necessary for a fair presentation
of the financial position and results of operations for the periods have been
included. All significant intercompany balances and transactions have been
eliminated in the consolidation. Prior-period amounts are reclassified when
necessary to conform with the current year's presentation. These
reclassifications did not have a material effect on the operating results or
financial position of the Company. The operating results and financial position
of the Company for the nine months ended and as of September 30, 2006, are not
necessarily indicative of the results of operations that may be expected in the
future.

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, 2005.

2. EARNINGS PER COMMON SHARE:

The Company had no dilutive potential common shares outstanding during the
three-month or nine-month periods ended September 30, 2006 and 2005, therefore,
the per share data presented on the face of the Consolidated Statements of
Income and Comprehensive Income relates to basic per share amounts.

3. FAIR VALUE MEASUREMENT:

On September 15, 2006, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards "SFAS" No. 157, "Fair Value Measurements."
SFAS No. 157 provides enhanced guidance for using fair value to measure assets
and liabilities. This Standard responds to investors' requests for expanded
information about the extent to which companies


                                       7

<PAGE>

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

measure assets and liabilities at fair value, the information used to measure
fair value, and the effect of fair value measurements on earnings. SFAS No. 157,
which does not expand the use of fair value, applies whenever other Standards
require or permit assets or liabilities to be measured at fair value, and is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The adoption of SFAS No. 157 on January 1, 2008, is not
expected to have a material effect on the operating results or financial
position of the Company.


                                       8

<PAGE>

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

FORWARD-LOOKING DISCUSSION:

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

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

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

To a certain extent, our success depends upon the general economic conditions in
the geographic market that we serve. Although we expect economic conditions in
our market area to remain stable, 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.


                                       9

<PAGE>

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

The larger size of these companies affords them the opportunity to offer some
specialized products and services not offered by us. We are constantly striving
to meet the convenience and needs of our customers and to enlarge our customer
base, however, we cannot assure that these efforts will be successful.

CRITICAL ACCOUNTING POLICIES:

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

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

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

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


                                       10

<PAGE>

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

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

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

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

Intangible assets include goodwill, which is evaluated for impairment at least
annually in order to determine if it should be adjusted.

For a further discussion of our significant account policies, refer to the note
entitled, "Summary of significant accounting policies," in the Notes to
Consolidated Financial Statements to our Annual Report on Form 10-K for the
period ended December 31, 2005. This note lists the significant accounting
policies used by management in the development and presentation of our financial
statements. The section entitled "Risk Factors" located in Part I, Item 1A. of
our Annual Report on Form 10-K for the year ended December 31, 2005, this
Management's Discussion and Analysis, The Notes to the Consolidated Financial
Statements, and other financial statement disclosures identify and address key
variables and other qualitative and quantitative factors that are necessary for
the understanding and valuation of our financial position, results of operations
and cash flows.

OPERATING ENVIRONMENT:

The pace of economic growth in the United States slowed during the third quarter
of 2006. Hindered by a downturn in the housing market, the economy expanded at
an annual rate of 1.6 percent for the three months ended


                                       11

<PAGE>

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

September 30, 2006, the slowest pace since 2003. Both consumer and business
spending remained strong, growing at annual rates of 3.1 percent and 8.6
percent. Offsetting the increases in consumer and business spending was a 17.4
percent retraction in residential fixed investment. Consumer spending was
bolstered by favorable employment conditions and a 6.3 percent increase in
disposable personal income, while higher corporate earnings favorably impacted
business investment. Inflationary pressures remained slightly elevated, as core
consumer prices rose at seasonally adjusted annual rates of 2.7 percent for the
third quarter and 3.0 percent for the nine months ended September 30, 2006. Due
to slower growth the Federal Open Market Committee ("FOMC") decided to keep its
target for the federal funds rate at 5.25 percent at each of its two meetings
during the third quarter and at its subsequent meeting on October 25, 2006.
Furthermore the FOMC indicated that the extent and timing of any future
movements would depend on the evolution of the outlook for both inflation and
economic growth.

REVIEW OF FINANCIAL POSITION:

Total assets grew $10.5 million from June 30, 2006. Loan demand, which slowed
slightly during the second quarter, picked up in the third quarter. As a result,
loans, net of unearned income, which decreased $6.5 million in the second
quarter, rose $9.6 million to $426.9 million at September 30, 2006. Deposit
gathering during the third quarter was favorably impacted by an influx of tax
monies into the accounts of our local area school district customers. This
directly lead to a $9.0 million increase in total deposits to $492.8 million at
the close of the third quarter. Investment securities decreased $3.0 million,
while federal funds sold rose $2.4 million.

At September 30, 2006, total assets were $549.0 million, an increase of $5.4
million from $543.6 million at December 31, 2005. Loans, net of unearned income,
increased $38.3 million in comparison to year-end 2005. Investment securities
decreased $24.2 million, as the majority of repayments received were invested
into the loan portfolio. Total deposits increased only $1.4 million to $492.8
million at September 30, 2006, from $491.4 million at the end of 2005.

During the third quarter of 2006, we began migrating our retail operations to a
new teller software platform. This platform, in addition to being compliant with
the Check Clearing for the 21st Century Act, will provide greater efficiency by
reducing transaction processing time and cost. This project, with an estimated
cost of $660 should be completed by year-end 2006.


                                       12

<PAGE>

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

INVESTMENT PORTFOLIO:

Due primarily to a slowing in economic growth, the FOMC decided to keep its
target for the federal funds rate unchanged at 5.25 percent during the third
quarter. The slowdown in economic growth caused investors to seek safety in the
bond market. As a result, bond prices rose, and in turn, yields declined. Since
the onset of monetary policy shift in mid-2004, rates for intermediate and
longer-term maturities were either unaffected by or reacted inversely to the
upward movements in the federal funds rate. In the second quarter, rates for
these maturities began to react to policy initiatives. However, the rally in the
bond market at the close of the third quarter caused yields to fall back down.
Changes in the yields of U.S. Treasuries impact the market value of our
investment portfolio. Specifically, the parts of the yield curve most closely
related to our investments include the two-year and ten-year U.S. Treasuries,
which affect the values of U.S. Government-sponsored agency securities,
mortgage-backed securities, including CMOs, and other short-term investments,
and state and municipal obligations. The yield on the two-year U.S. Treasury,
which rose 75 basis points from year-end 2005 to 5.16 percent at June 30, 2006,
fell 45 basis points to 4.71 percent at September 30, 2006. Correspondingly, the
yield on the ten-year U.S. Treasury, which rose 76 basis points to 5.15 percent
at the close of the second quarter of 2006, declined 51 basis points to 4.64
percent at September 30, 2006. Because all of our bonds held pay fixed interest
rates, their market values tend to react inversely to changes in interest rates.
As a result, the market value of our investment portfolio at September 30, 2006,
rose significantly from the end of the previous quarter. Net unrealized holding
gains, included in stockholders' equity, were $1,044, net of income taxes of
$538, at September 30, 2006, compared to $471, net of income taxes of $243, at
June 30, 2006.

The carrying values of the major classifications of securities as they relate to
the total investment portfolio at September 30, 2006, and December 31, 2005, are
summarized as follows:

DISTRIBUTION OF INVESTMENT SECURITIES AVAILABLE-FOR-SALE

<TABLE>
<CAPTION>
                                   SEPTEMBER 30,      DECEMBER 31,
                                       2006               2005
                                 ----------------   -----------------
                                  AMOUNT      %      AMOUNT       %
                                 -------   ------   --------   ------
<S>                              <C>       <C>      <C>        <C>
U.S. Government agencies .....   $25,914    32.07%  $ 42,711    40.69%
State and municipals:
   Taxable ...................    13,658    16.90     15,268    14.54
   Tax-exempt ................    31,198    38.61     33,795    32.20
Mortgage-backed securities ...     8,916    11.03     12,217    11.64
Equity securities:
   Restricted ................       951     1.18        808     0.77
   Other......................       173     0.21        166     0.16
                                 -------   ------   --------   ------
      Total...................   $80,810   100.00%  $104,965   100.00%
                                 =======   ======   ========   ======
</TABLE>


                                       13

<PAGE>

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

Our investment portfolio continued to play a less prominent role in our earning
asset mix, as the majority of maturities of U.S. Government agencies and
repayments from mortgage-backed securities were utilized to fund loan growth.
Available-for-sale investment securities totaled $80.8 million at September 30,
2006, a decrease of $24.2 million from $105.0 million at December 31, 2005.

For the nine months ended September 30, the investment portfolio averaged $87.9
million compared to $103.4 million for the same period of last year. The
tax-equivalent yield on the investment portfolio rose 79 basis points to 5.09
percent for the nine months ended September 30, 2006, from 4.30 percent for the
same nine months of 2005. In addition, the tax-equivalent yield on the
investment portfolio, improved 18 basis points to 5.35 percent for the third
quarter of 2006 compared to 5.17 percent in the second quarter.

In addition to yield analysis, we utilize a total return approach to measure the
investment portfolio's performance. This approach gives a more complete picture
of a portfolio's overall performance since it takes into consideration both
market value and reinvestment income from repayments. The investment portfolio's
total return is the sum of all interest income, reinvestment income on all
proceeds from repayments and capital gains or losses, whether realized or
unrealized. The annualized total return of the investment portfolio at September
30, 2006 improved to 5.3 percent, compared to 3.4 percent at June 30, 2006. In
addition, based on a study from an independent national investment performance
ranking company, our investment portfolio ranked in the 82nd percentile of all
FDIC-insured bank holding companies with respect to total return over the
previous 12 months.


                                       14
<PAGE>

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

The maturity distribution of the amortized cost, fair value and weighted-average
tax-equivalent yield of the available-for-sale portfolio at September 30, 2006,
is summarized as follows. The weighted-average yield, based on amortized cost,
has been computed for tax-exempt state and municipals on a tax-equivalent basis
using the statutory tax rate of 34.0 percent. The distributions are based on
contractual maturity with the exception of mortgage-backed securities, CMOs and
equity securities. Mortgage-backed securities and CMOs have been presented based
upon estimated cash flows, assuming no change in the current interest rate
environment. Equity securities with no stated contractual maturities are
included in the "After ten years" maturity distribution. Expected maturities may
differ from contracted maturities because borrowers have the right to call or
prepay obligations with or without call or prepayment penalties.

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, 2006               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.....   $21,949   4.79%   $ 4,042   4.00%                                       $25,991    4.67%
State and municipals:
      Taxable................     8,680   2.98      5,263   2.77                                         13,943    2.90
      Tax-exempt.............       190   4.02      4,158   7.86    $14,809   7.70%   $10,184    7.33%   29,341    7.57
Mortgage-backed securities...     6,546   5.31      2,406   4.23         12   6.11                        8,964    5.02
Equity securities:
   Restricted................                                                             951    4.87       951    4.87
   Other.....................                                                              38   10.11        38   10.11
                                -------           -------           -------           -------           -------
         Total...............   $37,365   4.46%   $15,869   4.64%   $14,821   7.70%   $11,173    7.13%  $79,228    5.48%
                                =======           =======           =======           =======           =======

Fair value:
U.S. Government agencies.....   $21,918           $ 3,996                                               $25,914
State and municipals:
      Taxable................     8,580             5,078                                                13,658
      Tax-exempt.............       189             4,366           $15,697           $10,946            31,198
Mortgage-backed securities...     6,526             2,378                12                               8,916
Equity securities:
   Restricted................                                                             951               951
   Other.....................                                                             173               173
                                -------           -------           -------           -------           -------
         Total...............   $37,213           $15,818           $15,709           $12,070           $80,810
                                =======           =======           =======           =======           =======
</TABLE>

LOAN PORTFOLIO:

Nationally, the rate for a fixed-rate first mortgage, which increased 41 basis
points during the first half of 2006 to 6.68 percent at June 30, 2006, fell 28
basis points in the third quarter to 6.40 percent at September 30, 2006. Despite
the decrease in mortgage rates, the housing market continued to wane in the
third quarter. Existing home sales fell 1.9 percent in September. This marked
the sixth consecutive month of decline.


                                       15

<PAGE>

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

In addition, the median home price for September was 2.2 percent lower than one
year ago. Although new home sales and housing starts were up in September, the
pace was considerably off 2005 levels. Activity in our secondary mortgage
department reflected the waning housing market. Residential mortgage loans
serviced for the Federal National Mortgage Association ("FNMA") grew $4.2
million or at an annualized rate of 5.1 percent to $114.3 million at September
30, 2006, from $110.1 million at year-end 2005. In comparison to the same nine
months of 2005, residential mortgages serviced for the FNMA grew at an annual
pace of 12.4 percent. For the three months and nine months ended September 30,
2006, residential mortgages sold to the FNMA totaled $4.4 million and $13.5
million, compared to $4.4 million and $16.0 million for the same periods last
year. Net gains realized on the sale of residential mortgages totaled $63 for
the third quarter and $176 year-to-date 2006, compared to $119 and $397 for the
same periods of 2005.

Nonresidential investment in the United States increased by a strong 8.6 percent
in the third quarter of 2006. Spending for equipment and software rose 6.4
percent, while structural investment increased by a significant 14.0 percent.
Despite the strong structural investment, banks reported a decline in commercial
real estate loans according to the October 2006 Senior Loan Officer Opinion
Survey issued by the Federal Reserve. Banks also indicated that demand for
commercial and industrial loans was unchanged from the previous report. Similar
to the previous report, banks reported an easing of lending standards in
response to elevated competition among institutions. Commercial and industrial
loans at all commercial banks increased at an annual rate of 15.7 percent in the
third quarter of 2006. Our commercial loans, including commercial mortgages and
lease financing, increased $4.9 million to $298.1 million at September 30, 2006,
from $293.2 million at June 30, 2006. The annualized increase of 6.6 percent
primarily resulted from an increase in commercial loans and commercial leases,
partially offset by a decline in commercial mortgages.

Despite higher gasoline prices, an 8.4 percent increase in spending on durable
goods resulted in an overall 3.1 percent rise in personal expenditures. Despite
the increase in spending, consumer debt contracted during the third quarter of
2006, as commercial banks experienced a 2.0 percent decline in their consumer
loan portfolios. Contrarily, our consumer loans increased $1.1 million or at an
annualized rate of 14.3 percent to $30.5 million at September 30, 2006, from the
previous quarter end. In addition, residential mortgage loans increased $3.6
million or at an annualized rate of 15.1 percent.


                                       16

<PAGE>

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

For the nine months ended September 30, 2006, loans averaged $423.2 million, an
increase of $26.6 million or 6.7 percent compared to $396.6 million for the same
period of 2005. Rising interest rates had a considerable impact on the loan
yields. The tax-equivalent yield on the loan portfolio rose 77 basis points to
6.97 percent for the nine months ended September 30, 2006, compared to 6.20
percent for the same period of 2005. In addition, the tax-equivalent yield on
the loan portfolio increased 21 basis points in the third quarter of 2006 in
comparison to the previous quarter. We anticipate that loan yields will continue
to rise over the remainder of 2006 as adjustable-rate loans reprice at higher
rates. However, a further economic slowdown may result in the FOMC lowering
interest rates. Loan yields may be negatively impacted should this occur.

The composition of the loan portfolio at September 30, 2006, and December 31,
2005, is summarized as follows:

DISTRIBUTION OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                        SEPTEMBER 30,        DECEMBER 31,
                                             2006                2005
                                      -----------------   -----------------
                                       AMOUNT       %      AMOUNT       %
                                      --------   ------   --------   ------
<S>                                   <C>         <C>     <C>         <C>
Commercial, financial and others...   $164,293    38.49%  $137,302    35.33%
Real estate:
   Construction....................      4,609     1.08      2,575     0.66
   Mortgage........................    226,080    52.96    217,827    56.06
Consumer, net......................     30,537     7.15     29,217     7.52
Lease financing, net...............      1,348     0.32      1,682     0.43
                                      --------   ------   --------   ------
   Loans, net of unearned income...    426,867   100.00%   388,603   100.00%
                                                 ======              ======
Less: allowance for loan losses....      4,453               4,128
                                      --------            --------
   Net loans.......................   $422,414            $384,475
                                      ========            ========
</TABLE>

In an attempt to limit IRR and liquidity strains, we continually examine the
maturity distribution and interest rate sensitivity of the loan portfolio. As
part of our asset/liability management strategy to reduce the amount of IRR in
the loan portfolio, we price our loan products to increase our holdings of
adjustable-rate loans and reduce the average term of fixed-rate loans.
Approximately 46.4 percent of the lending portfolio is expected to reprice
within the next 12 months.


                                       17

<PAGE>

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

The maturity information of the loan portfolio at September 30, 2006, is
summarized as follows:

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO

<TABLE>
<CAPTION>
                                                       AFTER ONE
                                            WITHIN    BUT WITHIN     AFTER
SEPTEMBER 30, 2006                         ONE YEAR   FIVE YEARS   FIVE YEARS     TOTAL
------------------                         --------   ----------   ----------   --------
<S>                                        <C>        <C>          <C>          <C>
Maturity schedule:
Commercial, financial and others........    $39,307    $ 44,022     $ 80,964    $164,293
Real estate:
   Construction.........................      4,609                                4,609
   Mortgage.............................     21,885      69,339      134,856     226,080
Consumer, net...........................      8,354      17,342        4,841      30,537
Lease financing, net....................        650         698                    1,348
                                            -------    --------     --------    --------
      Total.............................    $74,805    $131,401     $220,661    $426,867
                                            =======    ========     ========    ========
Repricing schedule:
Predetermined interest rates............    $50,127    $ 69,237     $ 75,908    $195,272
Floating- or adjustable-interest rates..     24,678      62,164      144,753     231,595
                                            -------    --------     --------    --------
      Total.............................    $74,805    $131,401     $220,661    $426,867
                                            =======    ========     ========    ========
</TABLE>

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

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


                                       18
<PAGE>

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

The contractual amounts of off-balance sheet commitments at September 30, 2006
and December 31, 2005, are summarized as follows:

DISTRIBUTION OF OFF-BALANCE SHEET COMMITMENTS

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30,   DECEMBER 31,
                                                                2006           2005
                                                           -------------   ------------
<S>                                                        <C>             <C>
Commitments to extend credit ...........................      $ 75,434        $64,816
Unused portions of home equity and credit card lines ...        15,606         14,576
Commercial letters of credit ...........................        21,467         18,565
                                                              --------        -------
   Total ...............................................      $112,507        $97,957
                                                              ========        =======
</TABLE>

These commitments are generally issued for one year or less and often expire
unused in whole or in part by the customer. We record an allowance for credit
losses, if deemed necessary, separately as a liability. No allowance was deemed
necessary at September 30, 2006 and December 31, 2005. We do not anticipate that
losses, if any, that may occur as a result of funding off balance sheet
commitments, would have a material adverse effect on our operating results or
financial position.

ASSET QUALITY:

National, Pennsylvania and market area unemployment rates at September 30, 2006
and 2005, are summarized as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,                                                        2006   2005
-------------                                                        ----   ----
<S>                                                                  <C>    <C>
United States ....................................................   4.6%   5.1%
Pennsylvania .....................................................   4.6    4.8
Lackawanna county ................................................   4.8    5.0
Monroe county ....................................................   4.8    5.2
Susquehanna county ...............................................   4.9    4.7
Wayne county .....................................................   4.3    4.6
Wyoming county ...................................................   5.2%   5.0%
</TABLE>

The employment conditions continued to improve for the Nation and the
Commonwealth of Pennsylvania from one year ago. Additional jobs created more
than supported an increase in the civilian labor force. Job gains in
service-producing industries, specifically professional and business services
and health care, continued to be the driving force behind the improved
employment climate. Employment conditions improved for the majority of the
counties in our local market area. We anticipate labor conditions to remain
favorable in our market area for the remainder of 2006. However, no assurance
can be given that these favorable employment conditions will continue. Our asset
quality could be adversely affected should employment conditions weaken.


                                       19

<PAGE>

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

Our asset quality continued to improve, as evidenced by a $396 or 10.6 percent
reduction in nonperforming assets to $3,339 at September 30, 2006, from $3,735
at the end of the previous quarter. Decreases in nonaccrual loans and foreclosed
assets was more than offset by an increase in accruing loans past due 90 days or
more. In comparison to year-end 2005, nonperforming assets declined $956 or 22.3
percent. As a percentage of loans, net of unearned income, nonperforming assets
equaled 0.78 percent at September 30, 2006, compared to 0.90 percent at June 30,
2006, and 1.11 percent at December 31, 2005.

Information concerning nonperforming assets at September 30, 2006, and December
31, 2005, 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,
                                                               2006           2005
                                                          -------------   ------------
<S>                                                       <C>             <C>
Nonaccrual loans:
Commercial, financial and others ......................       $1,348         $1,574
Real estate:
   Construction .......................................
   Mortgage ...........................................        1,211          1,714
Consumer, net .........................................           94             98
Lease financing, net ..................................
                                                              ------         ------
      Total nonaccrual loans ..........................        2,653          3,386
                                                              ------         ------

Accruing loans past due 90 days or more:
Commercial, financial and others ......................          351             62
Real estate:
   Construction .......................................
   Mortgage ...........................................          132            333
Consumer, net .........................................          120            118
Lease financing, net ..................................                          33
                                                              ------         ------
      Total accruing loans past due 90 days or more ...          603            546
                                                              ------         ------
      Total nonperforming loans .......................        3,256          3,932
                                                              ------         ------
Foreclosed assets .....................................           83            363
                                                              ------         ------
      Total nonperforming assets ......................       $3,339         $4,295
                                                              ======         ======

Ratios:
Nonperforming loans as a percentage of loans, net .....         0.76%          1.01%
Nonperforming assets as a percentage of loans, net ....         0.78%          1.11%
</TABLE>


                                       20

<PAGE>

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

Loans on nonaccrual status, which rose in the second quarter, decreased $353 to
$2,653 at September 30, 2006. Nonaccruing commercial loans, mortgage loans and
consumer loans all declined in comparison to the previous quarter end. We
experienced a slight increase of $32 in loans past due 90 days of more and still
accruing from June 30, 2006. With regard to foreclosed assets, eight loans
totaling $313 were transferred to foreclosed assets year-to-date 2006. Thirteen
properties with an aggregate carrying value of $547 were sold for $596,
resulting in a net realized gain of $49. The carrying value of one property was
written down $46 during the nine months ended September 30, 2006.

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

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


                                       21

<PAGE>

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

Information concerning impaired loans at September 30, 2006, and December 31,
2005, is summarized as follows. The table includes credits classified for
regulatory purposes and all material credits that cause management to have
serious doubts as to the borrower's ability to comply with present loan
repayment terms.

DISTRIBUTION OF IMPAIRED LOANS

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30,   DECEMBER 31,
                                                          2006            2005
                                                     -------------   ------------
<S>                                                  <C>             <C>
Nonaccrual loans:
Commercial, financial and others .................       $1,348         $1,574
Real estate:
   Construction ..................................
   Mortgage ......................................        1,211          1,714
Consumer, net ....................................           94             98
Lease financing, net .............................
                                                         ------         ------
      Total nonaccrual loans .....................        2,653          3,386
                                                         ------         ------

Accruing loans:
Commercial, financial and others .................        1,305            638
Real estate:
   Construction ..................................
   Mortgage ......................................        5,395          1,622
Consumer, net ....................................           47             61
Lease financing, net .............................
                                                         ------         ------
      Total accruing loans .......................        6,747          2,321
                                                         ------         ------
      Total impaired loans .......................       $9,400         $5,707
                                                         ======         ======

Ratio:
Impaired loans as a percentage of loans, net .....         2.20%          1.47%
</TABLE>

Impaired loans increased $3,693 or 64.7 percent to $9,400 at September 30, 2006,
from $5,707 at year-end 2005. The majority of the increase resulted from the
addition of two accruing commercial mortgage loans to separate borrowers, which
have been internally classified as substandard by our loan review department due
to deficiencies in their interim financial information. Both loans continue to
perform according to the contractual terms of their respective loan agreements.
However, the lack of current financial information has caused uncertainty in
determining whether we will be able to collect all amounts due in accordance
with contractual terms of the loan agreements. These credits will continue to be
closely monitored by our loan review department. In comparison to the previous
quarter-end, impaired loans decreased $238 primarily from principal prepayments
received.


                                       22
<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, 2006 and December 31, 2005, is summarized as follows:

<TABLE>
<CAPTION>
                                SEPTEMBER 30,   DECEMBER 31,
                                    2006            2005
                                -------------   ------------
<S>                             <C>             <C>
Impaired loans:
With a related allowance ....       $8,584         $3,844
With no related allowance ...          816          1,863
                                    ------         ------
   Total ....................       $9,400         $5,707
                                    ======         ======
</TABLE>

The analysis of changes affecting the allowance for loan losses related to
impaired loans for the nine months ended September 30, 2006, is summarized as
follows:

<TABLE>
<CAPTION>
                                SEPTEMBER 30,
                                    2006
                                -------------
<S>                             <C>
Balance at January 1 ........       $2,206
Provision for loan losses ...          470
Loans charged-off ...........          260
Loans recovered .............
                                    ------
Balance at period-end .......       $2,416
                                    ======
</TABLE>

Interest income on impaired loans that would have been recognized had the loans
been current and the terms of the loans not been modified, the aggregate amount
of interest income recognized and the amount recognized using the cash-basis
method and the average recorded investment in impaired loans for the three-month
and nine-month periods ended September 30, 2006 and 2005 are summarized as
follows:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED   NINE MONTHS ENDED
                                                         SEPTEMBER 30,        SEPTEMBER 30,
                                                      ------------------   -----------------
                                                         2006     2005       2006     2005
                                                        ------   ------     ------   ------
<S>                                                   <C>        <C>       <C>       <C>
Gross interest due under terms ....................     $  187   $  103     $  441   $  321
Interest income recognized ........................        218       76        460      243
                                                        ------   ------     ------   ------
Interest income not recognized ....................     $  (31)  $   27     $  (19)  $   78
                                                        ======   ======     ======   ======
Interest income recognized (cash-basis) ...........     $  218   $   76     $  460   $  243
Average recorded investment in impaired loans .....     $9,501   $5,918     $7,552   $6,298
</TABLE>

Cash received on impaired loans applied as a reduction of principal totaled
$1,218 and $677 for the nine and three months ended September 30, 2006. For the
respective periods of 2005 cash receipts on impaired loans totaled $5,093 and
$208. There were no commitments to extend additional funds to such parties at
September 30, 2006.


                                       23

<PAGE>

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

The allocation of the allowance for loan losses at September 30, 2006 and
December 31, 2005, is summarized as follows:

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                              SEPTEMBER 30,       DECEMBER 31,
                                                  2006                2005
                                           -----------------   -----------------
                                                    CATEGORY            CATEGORY
                                                      AS A                AS A
                                                      % OF                % OF
                                           AMOUNT     LOANS    AMOUNT     LOANS
                                           ------   --------   ------   --------
<S>                                        <C>      <C>        <C>      <C>
Allocated allowance:
Specific:
Commercial, financial and others .......   $1,264      0.62%   $1,549      0.57%
Real estate:
   Construction ........................
   Mortgage ............................    1,034      1.55       532      0.86
Consumer, net ..........................      118      0.03       125      0.04
Lease financing, net ...................
                                           ------      ----    ------      ----
      Total specific ...................    2,416      2.20     2,206      1.47
                                           ------      ----    ------      ----
Formula:
Commercial, financial and others .......      158     37.87       121     34.76
Real estate: ...........................
   Construction ........................               1.08                0.66
   Mortgage ............................      499     51.41       472     55.20
Consumer, net...........................      333      7.12       360      7.48
Lease financing, net....................        2      0.32         2      0.43
                                           ------    ------    ------    ------
      Total formula.....................      992     97.80       955     98.53
                                           ------    ------    ------    ------
      Total allocated allowance.........    3,408    100.00%    3,161    100.00%
                                                     ======              ======
Unallocated allowance...................    1,045                 967
                                           ------              ------
       Total allowance for loan losses...  $4,453              $4,128
                                           ======              ======
</TABLE>

The allocated allowance for loan losses account increased $247 to $3,408 at
September 30, 2006, from $3,161 at December 31, 2005. The increase resulted from
a $210 addition to the specific portion of the allowance for impairment of loans
individually evaluated under SFAS No. 114, coupled with a $37 increase in the
formula portion of the allowance for loans collectively evaluated for impairment
under SFAS No. 5. The increase in the specific portion primarily resulted from
the addition of the two previously mentioned commercial mortgage loans to
impaired status. Both credits, although still accruing loans, have recorded
investments in excess of their respective fair values.


                                       24

<PAGE>

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

The unallocated portion of the allowance for loan losses equaled $1,045 at the
end of the third quarter of 2006 compared to $967 at year-end 2005. The
unallocated portion of the allowance for loan losses account was deemed
appropriate due to the overall increase in impaired loans, coupled with a slight
downturn in the economic conditions in our market area.

A reconciliation of the allowance for loan losses and illustration of
charge-offs and recoveries by major loan category for the nine months ended
September 30, 2006, is summarized as follows:

RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,
                                                                             2006
                                                                         -------------
<S>                                                                      <C>
Allowance for loan losses at beginning of period......................      $4,128
Loans charged-off:
Commercial, financial and others......................................         106
Real estate:
   Construction.......................................................
   Mortgage...........................................................         131
Consumer, net.........................................................         216
Lease financing, net..................................................
                                                                            ------
      Total...........................................................        453
                                                                            ------
Loans recovered:
Commercial, financial and others......................................           6
Real estate:
   Construction.......................................................
   Mortgage...........................................................           2
Consumer, net.........................................................          95
Lease financing, net..................................................
                                                                            ------
      Total...........................................................        103
                                                                            ------
Net loans charged-off.................................................         350
                                                                            ------
Provision charged to operating expense................................         675
                                                                            ------
Allowance for loan losses at end of period............................      $4,453
                                                                            ======
Ratios:
Net loans charged-off as a percentage of average loans outstanding....        0.11%
Allowance for loan losses as a percentage of period end loans.........        1.04%
</TABLE>

The allowance for loan losses increased $325 to $4,453 at September 30, 2006,
from $4,128 at the end of 2005. For the nine months ended September 30, 2006, a
$675 provision for loan losses exceeded net charge-offs of $350. As a percentage
of loans, net of unearned income, the allowance equaled 1.04 percent at the end
of the third quarter of 2006 and 1.06 percent at year-end 2005. The allowance
account covered 133.3 percent of nonperforming assets at September 30, 2006 and
96.1 percent at December 31, 2005.


                                       25
<PAGE>

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

Past due loans not satisfied through repossession, foreclosure or related
actions, are evaluated individually to determine if all or part of the
outstanding balance should be charged against the allowance for loan losses
account. Any subsequent recoveries are credited to the allowance account. For
the nine months ended September 30, net charge-offs were $350 or 0.11 percent of
average loans outstanding in 2006, a $61 decrease compared to $411 or 0.14
percent of average loans outstanding in 2005.

DEPOSITS:

Despite a 6.3 percent increase in disposable personal income, consumers again
chose to spend more than they saved. As a result, the savings rate remained
negative for the sixth consecutive quarter. The negative savings rate caused a
slowdown in retail deposit gathering in the banking industry. Core deposit
growth experienced the greatest impact, as retail deposits other than time
deposits posted the smallest quarterly increase in three years. As a result,
banks had to rely on noncore funds and nondeposit liabilities for their funding
needs. These types of funds are volatile in nature and carry a greater degree of
interest rate risk.

The negative savings rate impacted deposit gathering within our market area by
creating intense price competition. We did not aggressively compete for new
deposits in 2006 but attempted to retain our current customer base. Our deposits
were also affected by cyclical deposit trends of certain larger business,
not-for-profit and municipal customers. Total deposits rose $9.0 million to
$492.8 million at September 30, 2006, from $483.8 million at June 30, 2006. The
majority of the growth was concentrated in money market and NOW accounts, which
posted a combined increase of $18.1 million. This increase was due primarily to
cyclical deposit trends, specifically an influx of tax monies from local area
school districts. Partially offsetting this increase were decreases in savings
accounts of $7.9 million and noninterest-bearing deposits of $1.4 million.


                                       26

<PAGE>

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

The average amount of, and the rate paid on, the major classifications of
deposits for the nine months ended September 30, 2006 and 2005, are summarized
as follows:

DEPOSIT DISTRIBUTION

<TABLE>
<CAPTION>
                                     SEPTEMBER 30,        SEPTEMBER 30,
                                         2006                 2005
                                  ------------------   ------------------
                                   AVERAGE   AVERAGE    AVERAGE   AVERAGE
                                   BALANCE     RATE     BALANCE     RATE
                                  --------   -------   --------   -------
<S>                               <C>        <C>       <C>        <C>
Interest-bearing:
Money market accounts..........   $ 30,091     2.44%   $ 22,266     1.36%
NOW accounts...................     59,172     2.28      52,889     1.56
Savings accounts...............    111,997     1.32     121,536     0.88
Time deposits less than $100...    187,658     3.98     179,427     3.62
Time deposits $100 or more.....     23,823     4.29      29,600     3.45
                                  --------             --------
  Total interest-bearing.......    412,741     2.92%    405,718     2.39%
Noninterest-bearing............     70,981               71,190
                                  --------             --------
  Total deposits...............   $483,722             $476,908
                                  ========             ========
</TABLE>

Total deposits averaged $483.7 million for the nine months ended September 30,
2006, an increase of $6.8 million or 1.4 percent compared to $476.9 for the same
period of 2005. Noninterest-bearing deposits remained relatively constant,
declining $0.2 million, while interest-bearing accounts increased $7.0 million.
NOW accounts, money market accounts and time deposits less than $100 averaged
higher, while average savings accounts and large denomination time deposits
declined. The rise in short-term interest rates resulted in a 53 basis point
increase in the cost of deposits to 2.92 percent for the nine months ended
September 30, 2006, from 2.39 percent for the same period of 2005. The cost
associated with all major deposit categories were impacted. Further FOMC actions
during the remainder of 2006 are uncertain and will depend on incoming economic
data and inflation. Our cost of funds may be affected by further rate increases
and continued strong competition for deposits within our market area.

Volatile deposits, time deposits in denominations of $100 or more, equaled $26.3
million at September 30, 2006, a $2.7 million increase from $23.6 million at
December 31, 2005. These deposits averaged $23.8 million for the nine months
ended September 30, 2006, compared to $29.6 million for the same nine months of
last year. As previously mentioned, these types of deposits are more sensitive
to changes in short-term interest rates. As a result the cost of these deposits
rose 84 basis points to 4.29 percent in 2006, compared to 3.45 percent in 2005.


                                       27

<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, 2006, and December
31, 2005, are summarized as follows:

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE

<TABLE>
<CAPTION>
                                               SEPTEMBER 30,   DECEMBER 31,
                                                    2006           2005
                                               -------------   ------------
<S>                                            <C>             <C>
Within three months.........................      $ 7,243         $ 3,964
After three months but within six months....        1,365           2,547
After six months but within twelve months...        8,065           4,238
After twelve months.........................        9,657          12,830
                                                  -------         -------
  Total.....................................      $26,330         $23,579
                                                  =======         =======
</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 exchange risk or
commodity price risk. Our exposure to IRR can be explained as the potential for
change in our reported earnings and/or the market value of our net worth.
Variations in interest rates affect earnings by changing net interest income and
the level of other interest-sensitive income and operating expenses. Interest
rate changes also affect the underlying economic value of our assets,
liabilities and off-balance sheet items. These changes arise because the present
value of future cash flows, and often the cash flows themselves, change with
interest rates. The effects of the changes in these present values reflect the
change in our underlying economic value and provide a basis for the expected
change in future earnings related to interest rates. IRR is inherent in the role
of banks as financial intermediaries. However, a bank with a high degree of IRR
may experience lower earnings, impaired liquidity and capital positions, and
most likely, a greater risk of insolvency. Therefore, banks must carefully
evaluate IRR to promote safety and soundness in their activities.

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


                                       28

<PAGE>

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

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

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


                                       29
<PAGE>

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

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

INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
                                                    DUE AFTER      DUE AFTER
                                                   THREE MONTHS     ONE YEAR
                                    DUE WITHIN      BUT WITHIN     BUT WITHIN    DUE AFTER
SEPTEMBER 30, 2006                 THREE MONTHS   TWELVE MONTHS    FIVE YEARS   FIVE YEARS     TOTAL
------------------                 ------------   -------------   -----------   ----------   --------
<S>                                <C>            <C>             <C>           <C>          <C>
Rate-sensitive assets:
Investment securities...........     $  9,911       $ 27,302       $ 15,818      $ 27,779    $ 80,810
Loans held for sale, net........        1,849                                                   1,849
Loans, net of unearned income...      136,492         61,400        151,825        77,150     426,867
Federal funds sold..............        8,450                                                   8,450
                                     --------       --------       --------      --------    --------
   Total........................     $156,702       $ 88,702       $167,643      $104,929    $517,976
                                     ========       ========       ========      ========    ========

Rate-sensitive liabilities:
Money market accounts...........     $ 24,068       $  7,672                                 $ 31,740
NOW accounts....................       53,547         14,180                                   67,727
Savings accounts................       12,230                      $ 91,450                   103,680
Time deposits less than $100....       27,146         75,215         72,072      $ 15,192     189,625
Time deposits $100 or more......        7,242          9,431          6,879         2,778      26,330
                                     --------       --------       --------      --------    --------
   Total........................     $124,233       $106,498       $170,401      $ 17,970    $419,102
                                     ========       ========       ========      ========    ========

Rate sensitivity gap:
   Period.......................     $ 32,469       $(17,796)      $ (2,758)     $ 86,959
   Cumulative...................     $ 32,469       $ 14,673       $ 11,915      $ 98,874    $ 98,874

RSA/RSL ratio:
   Period.......................         1.26           0.83           0.98          5.84
   Cumulative...................         1.26           1.06           1.03          1.24       1.24
</TABLE>

Our cumulative one-year RSA/RSL ratio equaled 1.06 at September 30, 2006,
compared to 1.35 at the end of the previous quarter. As previously mentioned,
these ratios indicate that if interest rates increase our earnings would likely
be favorably impacted. Given the current rate environment, ALCO continued to
focus its efforts on making certain the gap position between RSA and RSL
remained positive. Specifically, we predominantly offered commercial loans with
adjustable-rate terms that either reprice immediately or within one year. RSL
were more difficult to manage given the current rate environment, which had been
characterized by a relatively flat yield curve and for the most part, by rising
short-term rates. During the third quarter, the FOMC made no changes to
short-term interest rates due to a moderation in economic growth. The FOMC also
indicated that further actions would depend largely on incoming economic data.
This new stance created even more difficulty in managing IRR. We


                                       30

<PAGE>

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

continued to not aggressively compete for all deposit maturities but rather
strategically used promotional-term, short-term, non-renewable certificates of
deposit. In the event interest rates decrease, these certificates would reprice
at a lower rate within a twelve-month period. Our current gap position indicates
a ratio of nearly one-to-one, or the equal amount of RSA and RSL would reprice
at the same pace. These forward-looking statements are qualified in the
aforementioned section entitled "Forward-Looking Discussion" in this
Management's Discussion and Analysis. ALCO is diligent in monitoring changes in
monetary policy and interest rates and adjusts its management of interest
sensitive assets and liabilities accordingly.

The decrease in our RSA/RSL ratio from the end of the second quarter of 2006
resulted from a $36.7 million increase in RSL repricing within the next 12
months coupled with a $15.9 million decrease in RSA repricing within the same
timeframe. The increase in RSL maturing or repricing within 12 months resulted
from cyclical changes in the deposit accounts of local area school districts and
the promotional offering of short-term certificates of deposit. Money market and
NOW accounts maturing or repricing within 12 months increased $18.1 million. As
previously mentioned, this resulted from an influx of tax monies in the third
quarter. Municipal and School District money market and NOW accounts carry
interest rates that reprice monthly based on changes in the three-month U.S.
Treasury. Total time deposits maturing or repricing within a twelve-month
horizon increased $17.9 million as customers took advantage of short-term
promotional rates. The decrease in RSA was, for the most part, caused by a $21.6
million decrease in loans maturing or repricing within 12 months. Partially
offsetting this decrease, were increases of $3.8 million in investment
securities and $2.4 million in federal funds sold maturing or repricing within
the same time period.

We also experienced a decrease in our three-month ratio to 1.26 at September 30,
2006, from 1.67 at the end of the previous quarter. The decrease resulted from a
$27.2 million increase in the amount of RSL coupled with a $5.2 million
reduction in RSA maturing or repricing within three months. The change resulted
primarily for the same reasons as did the change in the 12-month ratio.

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


                                       31

<PAGE>

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

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.

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

LIQUIDITY:

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

     -    Funding new and existing loan commitments;

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

     -    Repayment of borrowings as they mature;

     -    Payment of lease obligations; and

     -    Payment of operating expenses.

Our contractual obligations did not change significantly from the amounts
reported in our Annual Report on Form 10-K for the period ended December 31,
2005. We believe our liquidity position will be adequate to support our
contractual obligations as they come due.

We employ a number of analytical techniques in assessing the adequacy of our
liquidity position. One such technique is the use of ratio analysis related to
our reliance on noncore funds to fund our investments and loans maturing after
September 30, 2006. Our noncore funds consist of time deposits in denominations
of $100 or more. These funds are not considered to be a strong source of
liquidity since they are very interest rate sensitive and are considered to be
highly volatile. At September 30, 2006, our net noncore funding dependence
ratio, the difference between noncore funds and short-term investments to
long-term assets, was negative 4.2 percent. Similarly, our net short-term
noncore funding dependence ratio, noncore funds maturing within one-year, less
short-term investments to long-term assets equaled negative 6.3 percent at the
end of the third quarter of 2006. Negative ratios indicated that at September
30, 2006, we


                                       32

<PAGE>

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

had no reliance on noncore sources to fund our long-term assets. In addition,
our liquidity position improved from the end of the previous quarter. At June
30, 2006, our net noncore and short-term noncore funding dependence ratios
equaled negative 2.5 percent and negative 6.0 percent. We believe that by
maintaining adequate volumes of short-term investments and implementing
competitive pricing strategies on deposits, we can ensure adequate liquidity to
support future growth.

The Consolidated Statements of Cash Flows present the changes in cash and cash
equivalents from operating, investing and financing activities. Cash and cash
equivalents, consisting of cash on hand, cash items in the process of
collection, noninterest-bearing deposits with other banks, balances with the
Federal Reserve Bank of Philadelphia and the Federal Home Loan Bank of
Pittsburgh ("FHLB-Pgh"), and federal funds sold, decreased $9.2 million during
the nine months ended September 30, 2006. In comparison, cash and cash
equivalents increased $23.7 million for the same period last year. Investing
activities used $15.2 million in net cash, while operating and financing
activities resulted in net cash inflows of $5.8 million and $0.2 million, during
the nine months ended September 30, 2006. For the same period of 2005,
financing, investing and operating activities provided net cash of $10.1
million, $9.9 million and $3.7 million.

As previously mentioned, operating activities provided net cash of $5.8 million
for the nine months ended September 30, 2006, compared to $3.7 million for the
same period last year. Net income, adjusted for the effects of noncash
transactions such as depreciation and the provision for loan losses, and net
changes in current assets, is the primary source of funds from operations.

Investing activities primarily involve transactions related to our investment
securities and lending activities. Greater loan demand resulted in an increase
of $30.4 million in net cash used in lending activities to $39.1 million in 2006
from $8.7 million in 2005. Partially offsetting the reduction in cash from
lending activities, was proceeds from repayments of our investment securities,
net of purchases, of $24.2 million.

Deposit gathering is our predominant financing activity. Cyclical deposit
trends, increased competition and disintermediation all affected our deposit
gathering comparing the first nine months of 2006 and 2005. Deposit gathering
provided $1.4 million in net cash in 2006, compared to $11.6 million in 2005.
For the nine months ended September 30, 2006, money market, NOW, savings and
noninterest-bearing accounts decreased $5.5 million. The majority of the
decrease was due to disintermediation, as savings accounts migrated to
short-term, high-yielding time deposit. As a result, time deposits rose $6.9
million.


                                       33

<PAGE>

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

CAPITAL ADEQUACY:

Stockholders' equity totaled $53.3 million or $28.74 per shares at September 30,
2006, an increase of $1.8 million compared to $51.5 million or $27.80 per share
at June 30, 2006, and $3.6 million from $49.7 million or $26.86 per share at
December 31, 2005. Net income of $4.8 million was the predominant factor leading
to the capital improvement. Also affecting stockholders' equity were net cash
dividends declared, common stock repurchases and an increase in accumulated
other comprehensive income resulting from market value fluctuation of the
investment portfolio.

Dividends declared totaled $1,390 for the nine months ended September 30, 2006.
On a per share basis, year-to-date dividends declared equaled $0.75 in 2006, an
increase of 8.7 percent compared to $0.69 in 2005. The dividend payout ratio was
29.3 percent and 33.1 percent for the nine months ended September 30, 2006 and
2005. 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 conditions, capital and growth objectives,
appropriate dividend restrictions and other relevant factors. Stockholders may
automatically reinvest their dividends in shares of our common stock through our
dividend reinvestment plan. During the nine months ended September 30, 2006,
5,383 shares were issued under this plan. Common stock repurchased during the
nine months ended September 30, 2006, totaled 2,400 shares at an average price
per share of $41.64.

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, 2006 and 2005. 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


                                       34

<PAGE>

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

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.

Our and Community Bank's capital ratios at September 30, 2006 and 2005, as well
as the required minimum ratios for capital adequacy purposes and to be well
capitalized under the prompt corrective action provisions as defined by the
Federal Deposit Insurance Corporation Improvement Act of 1991 are summarized as
follows:

REGULATORY CAPITAL

<TABLE>
<CAPTION>
                                                                                      MINIMUM TO BE WELL
                                                                                       CAPITALIZED UNDER
                                                                MINIMUM FOR CAPITAL    PROMPT CORRECTIVE
                                                  ACTUAL         ADEQUACY PURPOSES     ACTION PROVISIONS
                                          -------------------   -------------------   ------------------
SEPTEMBER 30,                               2006       2005       2006      2005        2006      2005
-------------                             --------   --------    -------   -------    -------   -------
<S>                                       <C>        <C>        <C>        <C>        <C>       <C>
Basis for ratios:
Tier I capital to risk-weighted assets:
   Consolidated........................   $ 51,797   $ 47,644    $17,584   $16,296
   Community Bank......................     49,865     45,552     17,556    16,270    $26,335   $24,405

Total capital to risk-weighted assets:
   Consolidated........................     56,250     51,711     35,169    32,591
   Community Bank......................     54,318     49,619     35,113    32,540     43,891    40,675

Tier I capital to total average assets
   less goodwill:
   Consolidated........................     51,797     47,644     21,648    21,283
   Community Bank......................     49,865     45,552    $21,611   $21,254    $27,014   $26,568

Risk-weighted assets:
   Consolidated........................    423,738    396,723
   Community Bank......................    423,040    396,083

Risk-weighted off-balance sheet items:
   Consolidated........................     15,869     10,669
   Community Bank......................     15,869     10,669

Average assets for Leverage ratio:
   Consolidated........................    541,211    532,076
   Community Bank......................   $540,272   $531,357

Ratios:
Tier I capital as a percentage of risk-
   weighted assets and off-balance
   sheet items:
   Consolidated........................       11.8%      11.7%       4.0%      4.0%
   Community Bank......................       11.4       11.2        4.0       4.0        6.0%      6.0%

Total of Tier I and Tier II capital as
   a percentage of risk-weighted
   assets and off-balance sheet items:
   Consolidated........................       12.8       12.7        8.0       8.0
   Community Bank......................       12.4       12.2        8.0       8.0       10.0      10.0

Tier I capital as a percentage of
   total average assets less intangible
   assets:
   Consolidated........................        9.6        9.0        4.0       4.0
   Community Bank......................        9.2%       8.6%       4.0%      4.0%       5.0%      5.0%
</TABLE>


                                       35
<PAGE>

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

Our risk-based capital ratios improved at September 30, 2006, compared to one
year ago. In addition we and Community Bank have consistently maintained
regulatory capital ratios well above the minimum levels of 4.0 percent and 8.0
percent required for adequately capitalized institutions. Regulatory agencies
define institutions, not under a written directive to maintain certain capital
levels, as well capitalized if they exceed the following:

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

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

     -    A Leverage ratio of at least 5.0 percent.

Based on the most recent notification from the Federal Deposit Insurance
Corporation ("FDIC"), Community Bank was categorized as well capitalized under
the regulatory framework for prompt corrective action at September 30, 2006.
There are no conditions or events since this notification that we believe have
changed Community Bank's category.

REVIEW OF FINANCIAL PERFORMANCE:

Net income for the third quarter of 2006 increased $245 or 17.8 percent to
$1,625 or $0.87 per share compared to $1,380 or $0.74 per share for the same
quarter of 2005. Year-to-date earnings totaled $4,750 or $2.56 per share in
2006, an increase of $870 or 22.4 percent from $3,880 or $2.08 per share in
2005. Strong net interest income growth continued to be the primary factor
leading to the earnings improvement. For the three months and nine months ended
September 30, 2006, return on average assets equaled 1.20 percent and 1.17
percent, compared to 1.02 percent and 0.97 percent for the same periods of 2005.
Return on average equity was 12.24 percent for the third quarter and 12.33
percent year-to-date 2006. For 2005, return on average equity was 11.10 percent
for the third quarter and 10.69 percent year-to-date.

NET INTEREST INCOME:

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


                                       36

<PAGE>

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

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

     -    Changes in general market rates; and

     -    The level of nonperforming assets.

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


                                       37

<PAGE>

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

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

NET INTEREST INCOME CHANGES DUE TO RATE AND VOLUME

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED          NINE MONTHS ENDED
                                        SEPTEMBER 30,              SEPTEMBER 30,
                                        2006 VS. 2005              2006 VS. 2005
                                     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 ....................   $1,324   $  761   $ 563    $3,326   $2,035   $1,291
   Tax-exempt .................       24       45     (21)      325      307       18
Investments:
   Taxable ....................        1      144    (143)       91      445     (354)
   Tax-exempt .................      (42)       1     (43)      (67)     (13)     (54)
Federal funds sold ............       (8)      55     (63)       51       74      (23)
                                  ------   ------   -----    ------   ------   ------
      Total interest income ...    1,299    1,006     293     3,726    2,848      878
                                  ------   ------   -----    ------   ------   ------
Interest expense:
Money market accounts .........       83       70      13       323      224       99
NOW accounts ..................      141      123      18       390      310       80
Savings accounts ..............       85      116     (31)      307      374      (67)
Time deposits less than $100 ..      302      235      67       721      491      230
Time deposits $100 or more ....       64       67      (3)        2      167     (165)
Short-term borrowings .........                                  38       66      (28)
                                  ------   ------   -----    ------   ------   ------
      Total interest expense ..      675      611      64     1,781    1,632      149
                                  ------   ------   -----    ------   ------   ------
      Net interest income .....   $  624   $  395   $ 229    $1,945   $1,216   $  729
                                  ======   ======   =====    ======   ======   ======
</TABLE>

For the nine months ended September 30, tax-equivalent net interest income rose
$1,945 or 13.4 percent to $16,457 in 2006 from $14,512 in 2005. A positive rate
variance was the primary factor leading to the improvement. Net interest income
was also affected by a positive volume variance as average earning assets
increased at a faster pace than interest-bearing liabilities.

Changes in the yield on earning assets and costs of funds resulted in additional
net interest income of $1,216 for the first nine months of 2006. The
tax-equivalent yield on earning assets increased 85 basis points to 6.63 percent
for the nine months ended September 30, 2006, from 5.78


                                       38

<PAGE>

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

percent for the same nine months of 2005. This increase resulted in additional
interest revenue of $2,848. Specifically, loan yields continued to be impacted
by increases to the prime rate in the first nine months of 2006, as a
significant portion of our loan portfolio carries adjustable rates. As a result,
the tax-equivalent yield on the loan portfolio increased 77 basis points to 6.97
percent in 2006 from 6.20 percent in 2005. The increase in loan yields caused a
corresponding increase in tax-equivalent interest revenue of $2,342, or 82.2
percent of the total increase in revenue due to rate. Partially mitigating the
increase in yield was a 54 basis point rise in our cost of funds to 2.94 percent
in 2006 from 2.40 percent in 2005. The increase in funding costs resulted in
additional interest expense of $1,632. We experienced an increase in funding
costs for all the major deposit categories. Rates paid for interest-bearing
transaction accounts rose in response to increases in the three-month U.S.
Treasury rate. Specifically, the rates paid for money market, NOW and savings
accounts rose 108 basis points, 72 basis points and 44 basis points as certain
large-balance, commercial accounts are tied to this rate. The increase in the
rates paid for interest-bearing transaction accounts combined resulted in a $908
increase to interest expense. With regard to time deposits, although we did not
aggressively compete for these types of deposits, we did offer preferential
rates for special-term, non-renewable certificates in an effort to retain our
customer base. The rates paid for time deposits less than $100 rose 36 basis
points, while the rate for large denomination time deposits increased 84 basis
points and together resulted in addition interest expense of $658.

Changes in the volumes of earning assets and liabilities contributed to a $729
increase in net interest income. Average earning assets grew $10.2 million to
$516.5 million for the nine months ended September 30, 2006, from $506.3 million
for the same period months of 2005 and accounted for an $878 increase in
interest revenue. The loan portfolio averaged $26.6 million higher comparing
2006 and 2005, which resulted in additional interest revenue of $1,309.
Partially offsetting this increase was a decrease in average investments and
federal funds sold of $16.4 million, which caused a reduction in interest
revenue of $432. With regard to interest-bearing liabilities, growth in money
market accounts, NOW accounts and time deposits less than $100 was partially
offset by decreases in savings accounts, large denomination time deposits and
short-term borrowings. Money market and NOW accounts grew $7.8 million and $6.3
million and together resulted in additional interest expense of $179. Savings
accounts averaged $9.5 million lower comparing the nine months ended September
30, 2006 and 2005. The reduction, for the most part, resulted from customers
moving funds into time deposits less than $100 to take advantage of short-term
promotional rates. These time deposits averaged $8.2 million higher. The
reduction in savings accounts resulted in a decrease to interest expense of $67,
which was more than offset by $230 in additional expense from growth in time
deposits less than $100. Large denomination time deposits and short-term
borrowings averaged $5.8 million


                                       39

<PAGE>

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

and $1.2 million lower, resulting in decreases to interest expense of $165 and
$28. Overall, the net increase in the volume of interest bearing liabilities
caused an increase in interest expense of $149.

For the quarter ended September 30, 2006, tax-equivalent net interest income
improved $624 in comparison to the same three months of last year. Similar to
the results for nine months, the increase was due to a rate variance of $395,
coupled with a positive volume variance of $229. The tax-equivalent yield on
earning assets rose 93 basis points comparing the third quarters of 2006 and
2005, which resulted in additional interest revenue of $1,006. Partially
offsetting the increase in revenue was greater interest expense of $611 due to a
65 basis point increase in our cost of funds. With regard to volume changes, for
the three months ended September 30, 2006, average earning assets grew $6.2
million, while interest-bearing liabilities increased $1.4 million. The growth
in earning assets primarily resulted from growth in average loans of $31.6
million partially offset by a reduction in investments and federal funds sold of
$25.4 million. The increase in average interest-bearing liabilities resulted
from growth of $3.2 million and $3.7 million in money market and NOW accounts
and $7.1 million in time deposits less than $100, partially offset by reductions
of $12.3 million in savings accounts and $0.3 million in large denomination time
deposits. These changes resulted in an increase in interest expense of $64.

Maintenance of an adequate net interest margin is one of our primary concerns.
Our net interest margin improved significantly by 43 basis points to 4.26
percent for the nine months ended September 30, 2006 from 3.83 percent for the
same period of 2005. In addition, the net interest margin, which has steadily
risen over the six preceding quarters, rose 10 basis points to 4.38 percent for
the third quarter of 2006, from 4.28 percent in the second quarter. Future
predictions regarding changes in interest rates has become even more uncertain.
The FOMC has changed its policy stance and indicated that further movements in
monetary policy would be dependent upon future economic strength. Assurance
cannot be given that net interest income will not be adversely affected by
changes in general market rates or increased competition. We believe following
prudent pricing practices coupled with careful investing, will keep our net
interest margin favorable.

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, 2006 and 2005, are summarized as follows. Earning assets averages
include nonaccrual loans. Investment averages include available-for-sale
securities at amortized cost. Income on investment securities and loans are
adjusted to a tax-equivalent basis using the statutory tax rate of 34.0 percent.


                                       40
<PAGE>

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

SUMMARY OF NET INTEREST INCOME

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30, 2006               SEPTEMBER 30, 2005
                                                     ------------------------------   ------------------------------
                                                                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........................................   $382,895    $20,190     7.05%    $356,739    $16,864     6.32%
   Tax-exempt.....................................     40,296      1,861     6.17       39,826      1,536     5.16
Investments:
   Taxable........................................     57,186      1,646     3.85       71,712      1,555     2.90
   Tax-exempt.....................................     30,724      1,703     7.41       31,706      1,770     7.46
Federal funds sold................................      5,404        209     5.15        6,280        158     3.36
                                                     --------    -------              --------    -------
      Total earning assets........................    516,505     25,609     6.63%     506,263     21,883     5.78%
Less: allowance for loan losses...................      4,300                            4,000
Other assets......................................     29,424                           30,302
                                                     --------                         --------
      Total assets................................   $541,629                         $532,565
                                                     ========                         ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts.............................   $ 30,091        549     2.44%    $ 22,266        226     1.36%
NOW accounts......................................     59,172      1,008     2.28       52,889        618     1.56
Savings accounts..................................    111,997      1,106     1.32      121,536        799     0.88
Time deposits less than $100......................    187,658      5,580     3.98      179,427      4,859     3.62
Time deposits $100 or more........................     23,823        765     4.29       29,600        763     3.45
Short-term borrowings.............................      4,017        144     4.79        5,203        106     2.72
                                                     --------    -------              --------    -------
      Total interest-bearing liabilities..........    416,758      9,152     2.94%     410,921      7,371     2.40%
Noninterest-bearing deposits......................     70,981                           71,190
Other liabilities.................................      2,403                            1,906
Stockholders' equity..............................     51,487                           48,548
                                                     --------                         --------
      Total liabilities and stockholders' equity..   $541,629                         $532,565
                                                     ========    -------              ========    -------
      Net interest/income spread..................               $16,457     3.69%                $14,512     3.38%
                                                                 =======                          =======
      Net interest margin.........................                           4.26%                            3.83%
Tax equivalent adjustments:
Loans.............................................               $   633                          $   522
Investments.......................................                   579                              602
                                                                 -------                          -------
      Total adjustments...........................               $ 1,212                          $ 1,124
                                                                 =======                          =======
</TABLE>

Note: Average balances were calculated using average daily balances. Average
     balances for loans include nonaccrual loans. Available-for-sale securities,
     included in investment securities, are stated at amortized cost with the
     related average unrealized holding gains of $1,153 and $2,089 for the nine
     months ended September 30, 2006 and 2005 included in other assets.
     Tax-equivalent adjustments were calculated using the prevailing statutory
     tax rate of 34.0 percent.

PROVISION FOR LOAN LOSSES:

We evaluate the adequacy of the allowance for loan losses account on a quarterly
basis utilizing our systematic analysis in accordance with procedural
discipline. We take into consideration certain factors such as composition of
the loan portfolio, volumes of nonperforming loans, volumes of net charge-offs,
prevailing economic conditions and other relevant factors when determining the
adequacy of the allowance for loan losses account. We make monthly provisions to
the allowance for loan losses account in order to maintain the allowance at the
appropriate level indicated by our evaluations. Based on our most current
evaluation, we


                                       41

<PAGE>

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

believe that the allowance is adequate to absorb any known and inherent losses
in the portfolio. The provision for loan losses was $270 for the third quarter
of 2006 and $675 year-to-date. For the comparable periods of 2005, the provision
for loan losses was $161 and $619.

NONINTEREST INCOME:

For the nine months ended September 30, noninterest revenue totaled $2,569 in
2006, compared to $3,043 in 2005. Included in noninterest revenue in 2005 was a
$235 net gain on the sale of our merchant services portfolio. Service charges,
fees and commissions decreased $18, while the slowdown in the housing market,
significantly reduced the level of activity in our secondary mortgage banking
department. As a result, net gains on the sale of residential mortgages declined
$221 or 55.7 percent. For the third quarter, noninterest revenue decreased $7 to
$858 in 2006, compared to $865 in 2005. The reduction was due primarily to the a
reduction in gains on the sale of residential mortgages.

NONINTEREST EXPENSE:

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


                                       42

<PAGE>

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

Major components of noninterest expense for the three months and nine months
ended September 30, 2006 and 2005, are summarized as follows:

NONINTEREST EXPENSES

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED   NINE MONTHS ENDED
                                                  SEPTEMBER 30,       SEPTEMBER 30,
                                               ------------------   -----------------
                                                  2006     2005       2006      2005
                                                 ------   ------    -------   -------
<S>                                            <C>        <C>       <C>       <C>
SALARIES AND EMPLOYEE BENEFITS EXPENSE:
Salaries and payroll taxes .................     $1,524   $1,444    $ 4,497   $ 4,398
Employee benefits ..........................        379      334      1,114     1,018
                                                 ------   ------    -------   -------
   Salaries and employee benefits expense ..      1,903    1,778      5,611     5,416
                                                 ------   ------    -------   -------
NET OCCUPANCY AND EQUIPMENT EXPENSE:
Net occupancy expense ......................        267      297        881       910
Equipment expense ..........................        304      291        891       900
                                                 ------   ------    -------   -------
   Net occupancy and equipment expense .....        571      588      1,772     1,810
                                                 ------   ------    -------   -------
OTHER EXPENSES:
Marketing expense ..........................        180      155        445       457
Other taxes ................................         92       88        346       330
Stationery and supplies ....................         81       84        246       265
Contractual services .......................        472      495      1,312     1,415
Insurance including FDIC assessment ........         78       64        214       206
Other ......................................        370      368      1,076     1,141
                                                 ------   ------    -------   -------
   Other expenses ..........................      1,273    1,254      3,639     3,814
                                                 ------   ------    -------   -------
      Total noninterest expense ............     $3,747   $3,620    $11,022   $11,040
                                                 ======   ======    =======   =======
</TABLE>

Noninterest expense for the nine months ended September 30, 2006, amounted to
$11,022, a slight decrease of $18 from $11,040 for the same nine months of 2005.
A 4.6 percent reduction in other expenses, coupled with a 2.1 percent decrease
in occupancy costs, factored into the expense curtailment. Partially offsetting
these declines was a 3.6 percent increase in personnel costs. We experienced
improved efficiency as a result of the reduction in operating expenses. We
measure our efficiency using two key industry ratios, the operating efficiency
ratio and the overhead ratio, to measure our productivity. The operating
efficiency ratio is defined as noninterest expense as a percentage of net
interest income and noninterest income, and the overhead ratio is calculated by
dividing noninterest expense by average total assets. Both ratios indicated an
improvement in our year-to-date productivity. Our operating efficiency ratio
improved to 61.9 percent for the nine months ended September 30, 2006, from 67.2
percent for the same nine months of last year. Similarly, our overhead ratio
improved to 2.7 percent from 2.8 percent comparing the nine months ended
September 30, 2006 and 2005. For the third quarter, noninterest expense
increased $127 or 3.5 percent in comparison to the same quarter of last year.


                                       43

<PAGE>

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

Salaries and employee benefits expense, which comprise the majority of
noninterest expense, totaled $5,611 or 50.9 percent of noninterest expense for
the nine months ended September 30, 2006, compared to $5,416 or 49.1 percent of
noninterest expense for the same period last year. The $195 or 3.6 percent
increase resulted from annual merit increases, the addition of two new
commercial loan officers and higher health care costs and employee benefits. For
the third quarter of 2006, employee-related expenses totaled $1,903, an increase
of $125 compared to the third quarter of 2005.

Occupancy and equipment expense were relatively contained as we experienced a
slight decline of $38 or 2.1 percent comparing the nine months ended September
30, 2006 and 2005. For the third quarter, net occupancy and equipment expenses
decreased $17 or 2.9 percent to $571 in 2006 from $588 in 2005.

Other expenses decreased $175 or 4.6 percent to $3,639 for the nine months ended
September 30, 2006, from $3,814 for the same period last year. Lower marketing
and legal expenses were the main factors leading to the decline. For the quarter
ended September 30, other expenses totaled $1,273 in 2006 and $1,254 in 2005.

Our deposits are insured by the FDIC and are subject to deposit assessments to
maintain the Deposit Insurance Fund ("DIF") administered by the FDIC. The DIF
was established on February 8, 2006, when President Bush signed into law the
"Federal Deposit Insurance Reform Act of 2005." Effective March 31, 2006, this
Act merged the Bank Insurance Fund and Savings Association Insurance Fund into
the DIF. The Board of Directors of the FDIC may set and must maintain a
Designated Reserve Ratio ("DRR") within an established range of 1.15 percent to
1.50 percent of insured deposits. The DIF is maintained through quarterly
assessments of insured depository institutions. The FDIC places each insured
bank into one of nine risk categories based on the bank's capitalization and
supervisory evaluation provided to the FDIC by the bank's primary federal
regulator. An insured bank's assessment rate is then determined by the risk
category into which it is classified. Recently, the FDIC decided to retain the
existing DIF assessment schedules of $0.00 per 100 dollars of deposits for banks
classified in the highest capital and supervisory evaluation category and $0.27
per 100 dollars of deposits for banks classified in the lowest category. We were
classified in the highest capital and supervisory evaluation category at
September 30, 2006, and are exempt from paying a DIF assessment for the
remainder of 2006.


                                       44

<PAGE>

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

There is a separate levy assessed on all FDIC-insured institutions to cover the
cost of Finance Corporation ("FICO") funding. The FDIC established the annual
FICO assessment rates effective for the fourth quarter of 2006 at $0.0124 per
100 dollars of DIF-assessable deposits. Our assessments totaled $49 for both the
nine months ended September 30, 2006 and 2005.

INCOME TAXES:

For the nine months ended September 30, income tax expense totaled $1,367 in
2006, an increase of $475 or 53.3 percent from $892 in 2005. Our effective tax
rate increased from 18.7 percent in 2005 to 22.3 percent in 2006. We utilize
tax-exempt loans and investments in order to mitigate our tax burden.
Year-to-date tax-exempt interest income, as a percentage of total interest
income, equaled 9.6 percent for 2006, compared to 10.5 percent for the same
period of 2005.

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


                                       45

<PAGE>

COMM BANCORP, INC.
CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:

As of September 30, 2006, the end of the period covered by this Quarterly Report
on Form 10-Q, our Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), evaluated the effectiveness of our disclosure controls and procedures
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act"). Based upon that evaluation, the CEO and CFO concluded
that as of the period covered by this Quarterly Report on Form 10-Q, we
maintained effective disclosure controls and procedures.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the
fiscal quarter ended September 30, 2006, that materially affected, or is
reasonably likely to materially effect, our internal control over financial
reporting.


                                       46

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     NONE

ITEM 1A.RISK FACTORS

There were no material changes during the three months ended June 30, 2006, to
the risk factors disclosed in Part I, Item 1A. "Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2005.

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

The following table presents information with respect to purchases made by or on
behalf of us or any "affiliated purchaser," as defined in the Exchange Act Rule
10b-18(a)(3), of our common stock during each of the nine months ended September
30, 2006:

<TABLE>
<CAPTION>
                                                          Total Number of        Maximum Number
                                                          Shares Purchased    of Shares that may
                            Total Number     Average    as Part of Publicly    yet be Purchased
                              of Shares    Price Paid     Announced Plans       Under the Plans
Month Ending                Purchased(1)    Per Share       or Programs          or Programs
------------                ------------   ----------   -------------------   ------------------
<S>                         <C>            <C>          <C>                   <C>
January 31, 2006.........                                                           47,214
February 28, 2006........                                                           47,214
March 31, 2006...........                                                           47,214
April 30, 2006...........         500        $43.16              500                46,714
May 31, 2006.............                                                           46,714
June 30, 2006............                                                           46,714
July 31, 2006............                                                           46,714
August 31, 2006..........         300         42.18              300                46,414
September 30, 2006.......       1,600         41.06            1,600                44,814
                                -----        ------            -----
   Total.................       2,400        $41.64            2,400
                                =====        ======            =====
</TABLE>

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     NONE

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

     NONE

ITEM 5. OTHER INFORMATION

     NONE


                                       47

<PAGE>

COMM BANCORP, INC.
OTHER INFORMATION (CONTINUED)

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     31(i)   CEO and CFO certifications pursuant to Section 302 Of the
             Sarbanes-Oxley Act of 2002.

     32      CEO and CFO certifications pursuant to Section 906 Of the
             Sarbanes-Oxley Act of 2002.


                                       48

<PAGE>

                               COMM BANCORP, INC.
                                    FORM 10-Q

                                 SIGNATURE PAGE

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

                                        Registrant, Comm Bancorp, Inc.


Date: November 14, 2006                 /s/ William F. Farber, Sr.
                                        ----------------------------------------
                                        William F. Farber, Sr.
                                        President and Chief Executive Officer
                                        Chairman of the Board/Director
                                        (Principal Executive Officer)


Date: November 14, 2006                 /s/ Scott A. Seasock
                                        ----------------------------------------
                                        Scott A. Seasock
                                        Executive Vice President and
                                        Chief Financial Officer
                                        (Principal Financial Officer)


Date: November 14, 2006                 /s/ Stephanie A. Westington, CPA
                                        ----------------------------------------
                                        Stephanie A. Westington, CPA
                                        Vice President of Finance
                                        (Principal Accounting Officer)


                                       49

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
ITEM NUMBER   DESCRIPTION                                                 PAGE
-----------   -----------                                                 ----
<S>           <C>                                                         <C>
   31(i)      CEO and CFO Certifications Pursuant to Section 302 of the     51
              Sarbanes-Oxley Act of 2002

   32         CEO and CFO Certifications Pursuant to Section 906 of the     55
              Sarbanes-Oxley Act Of 2002
</TABLE>


                                       50