UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
                                      FORM 10-K


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

For the fiscal year ended DECEMBER 31, 1996
                          -----------------  
                                           OR  

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

For the transition period from             to                                 
                              -------------  -----------------------------------
Commission file number          0-17455   
                              -------------
                                  COMM BANCORP, INC.                         
--------------------------------------------------------------------------------
               (Exact name of registrant as specified in its charter)

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

521 MAIN STREET, FOREST CITY,  PA                            18421             
-----------------------------------------          -----------------------------
(Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code           (717) 785-3181    
                                                  ------------------------------
Securities registered pursuant to Section 12(b) of the Act:

Title of each class                                Name of each exchange on 
                                                   which registered

NONE                                                                        
-------------------------------------              -----------------------------

Securities registered pursuant to Section 12(g) of the Act:

                         COMMON STOCK, PAR VALUE $0.33 PER SHARE             
--------------------------------------------------------------------------------
                                      (Title of class)

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 check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not contained herein, and will not be contained, to the 
best of registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
  
The aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the closing sale price: $43,843,599 AT FEBRUARY 3, 1997.

Indicate the number of shares outstanding of the registrant's common stock, as 
of the latest practicable date: 2,200,080 AT FEBRUARY 3, 1997. 


                         DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Annual Report to Stockholders for the year ended
December 31, 1996, are incorporated by reference in Part II of this Annual 
Report.  Portions of the registrant's 1997 Proxy Statement, are incorporated by 
reference in Part III of this Annual Report.







                                  Page 1 of 167   
                              Exhibit Index on Page 36


                                 COMM BANCORP, INC.
                                   FORM 10-K INDEX


PART I                                                            PAGE

Item  1. Business.................................................  3  

Item  2. Properties............................................... 18 

Item  3. Legal Proceedings........................................ 19 

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


PART II

Item  5. Market for the Registrant's Common Equity and Related 
         Stockholder Matters...................................... 20 

Item  6. Selected Financial Data.................................. 20 

Item  7. Management's Discussion and Analysis of Financial 
         Condition and Results of Operations...................... 21 

Item  8. Financial Statements and Supplementary Data.............. 21 

Item  9. Changes in and Disagreements with Accountants on 
         Accounting and Financial Disclosure......................  *  


PART III

Item 10. Directors and Executive Officers of the Registrant....... 22 

Item 11. Executive Compensation................................... 25 

Item 12. Security Ownership of Certain Beneficial Owners and                  
Management............................................... 30 

Item 13. Certain Relationships and Related Transactions........... 32 


PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on 
         Form 8-K................................................. 32 

SIGNATURES........................................................ 34 

EXHIBIT INDEX..................................................... 36 

*Not Applicable


                                 COMM BANCORP, INC.
                                      FORM 10-K


PART I

ITEM 1.   BUSINESS

GENERAL

Comm Bancorp, Inc. ("Company") is a Pennsylvania business corporation, 
incorporated on May 20, 1983, and is a bank holding company, registered with and
supervised by the Board of Governors of the Federal Reserve System ("Federal 
Reserve Board").  The Company has one wholly-owned subsidiary, Community Bank 
and Trust Company ("Community Bank").  The deposits of Community Bank are 
insured by the Federal Deposit Insurance Corporation ("FDIC") under the Bank 
Insurance Fund ("BIF").  The Company's business has consisted of managing and 
supervising Community Bank and its principal source of income has been dividends
paid by Community Bank.  At December 31, 1996, the Company
had total consolidated assets, deposits and stockholders' equity of 
approximately $354.8 million, $320.5 million and $31.3 million, respectively. 
During 1996, the Company and Community Bank employed approximately 149 persons 
on a full-time equivalent basis.

Community Bank is a Pennsylvania state-chartered commercial bank and a member of
the Federal Reserve System.  As of December 31, 1996, Community Bank had ten 
branch locations, including its main office in Forest City, Susquehanna County,
Pennsylvania.  Community Bank's branch offices are located in the Pennsylvania
counties of Lackawanna, Susquehanna, Wayne and Wyoming.

SUPERVISION AND REGULATION - COMPANY

The Company is subject to the jurisdiction of the Securities and Exchange 
Commission ("SEC") for matters relating to the offering and sale of its 
securities.  The Company is currently subject to the SEC's rules and regulations
relating to periodic reporting, insider trading reports, and proxy solicitation 
materials in accordance with the Securities Exchange Act of 1934 ("Exchange 
Act").

The Company is also subject to the provisions of the Bank Holding Company Act of
1956 ("Bank Holding Company Act") as amended, and to supervision by the Federal 
Reserve Board.  The Bank Holding Company Act will require the Company to secure 
the prior approval of the Federal Reserve Board before it owns or controls, 
directly or indirectly, more than 5.0 percent of the voting shares or 
substantially all of the assets of any institution, including another bank.  

A bank holding company is prohibited from engaging in, or acquiring direct or
indirect control of, more than 5.0 percent of the voting shares of any company
engaged in non-banking activities unless the Federal Reserve Board, by order or
regulation, has found such activities to be so closely related to banking or 
managing or controlling banks as to be a proper incident thereto.  In making 
this determination, the Federal Reserve Board considers whether the performance 
of these activities by a bank holding company would offer benefits to the public
that outweigh possible adverse effects.

The Bank Holding Company Act also prohibits acquisition of control of a bank 
holding company, such as the Company, without prior notice to the Federal 
Reserve Board.  Control is defined for this purpose as the power, directly or 
indirectly, to influence the management or policies of a bank holding company or
to vote 25.0 percent, or 10.0 percent if no other person or persons acting in 
concert holds a greater percentage, of the common stock or more of the Company's
common stock. 

The Company is required to file an annual report with the Federal Reserve Board 
and any additional information that the Federal Reserve Board may require 
pursuant to the Bank Holding Company Act.  The Federal Reserve Board may also 
make examinations of the Company and Community Bank.  Subject to certain 
exceptions, a bank holding company and its subsidiaries are generally prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit or provision of credit or provision of any property or service.  The 
so-called "Anti-tie-in" provisions state generally that a bank may not extend 
credit, lease, sell property or furnish any
service to a customer on the condition that the customer provide additional 
credit or service to the bank, to its bank holding company, or to any other 
subsidiary of its bank holding company or on the condition that the customer not
obtain other credit or service from a competitor of the bank, its bank holding 
company, or any subsidiary of its bank holding company.  Subsidiary banks of a 
bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of 
credit to the bank holding company or any of its subsidiaries, on investments in
the stock or other securities of the bank holding company, and on taking of such
stock or securities as collateral for loans to any borrower.  

PERMITTED NONBANKING ACTIVITIES

The Federal Reserve Board permits bank holding companies to engage in 
non-banking activities so closely related to banking or managing or controlling 
banks as to be a proper incident thereto.  While the types of permissible 
activities are subject to change by the Federal Reserve Board, the principal 
nonbanking activities that presently may be conducted by a bank holding company 
without prior approval of the Federal Reserve Board are:

1.   Making, acquiring or servicing loans and other extensions of credit for its
own account or for the account of others, such as would be made by the following
types of companies:  consumer finance, credit card, mortgage, commercial 
finance, and factoring.

2.   Operating as an industrial bank, Morris Plan bank or industrial loan 
company in the manner authorized by state law so long as the institution does 
not accept demand
deposits or make commercial loans.

3.   Operating as a trust company in the manner authorized by federal or state 
law so
long as the institution does not make certain types of loans or investments or 
accept
deposits, except as may be permitted by the Federal Reserve Board.

4.   Subject to certain limitations, acting as an investment or financial 
advisor to
investment companies and other persons.  

5.   Leasing personal and real property or acting as agent, broker or advisor in
leasing property, provided that it is reasonably anticipated that the 
transaction
will compensate the lessor for not less than the lessor's full investment in the
property and provided further that the lessor may rely on estimated residual 
values of up to 100.0 percent of the acquisition cost of the leased property.

6.   Making equity and debt investments in corporations or projects designed
primarily to promote community welfare, such as the economic rehabilitation and
development of low-income areas by providing housing, services or jobs for 
residents.

7.   Providing to others financially-oriented data processing or bookkeeping
services.

8.   Subject to certain limitations: (a) acting as an insurance principal, agent
or broker in relation to insurance for itself and its subsidiaries or for 
insurance directly related to extensions of credit by the bank holding company 
system; (b) acting as agent or broker for insurance directly related to an 
extension of credit by
a finance company, that is a subsidiary; and (c) engaging in any insurance 
agency activity in a place where the bank holding company or a subsidiary of the
bank holding company has a lending office and that: (1) has a population not 
exceeding 5.0 thousand; and (2) has inadequate insurance agency facilities.

9.   Owning, controlling or operating a savings association, if the savings
association engages only in deposit-taking activities, lending and other 
activities permissible for bank holding companies.

10.  Providing courier services of a limited character.

11.  Subject to certain limitations, providing management consulting advice to
nonaffiliated banks and non-bank depository institutions.

12.  Selling money orders having a face value of $1.0 thousand or less, 
travelers' checks and United States savings bonds.

13.  Performing appraisals of real estate and personal property, including
securities.

14.  Subject to certain limitations, acting as intermediary for the financing of
commercial or industrial income-producing real estate by arranging for the 
transfer of the title, control and risk of such a real estate project to one or 
more investors.

15.  Subject to certain limitations, providing full-service brokerage and 
financial
advisory activities, and selling, solely as an agent or broker for customers, 
shares
of investment companies advised by an affiliate of the bank holding company or
providing investment advice to customers about the purchase and sale of shares 
of investment companies advised by an affiliate of the bank holding company.

16.  Underwriting and dealing in obligations of the United States, general
obligations of states and their political subdivisions, and other obligations 
such as
bankers' acceptances and certificates of deposit.

17.  Subject to certain limitations, providing by any means, general information
and statistical forecasting with respect to foreign exchange markets, advisory 
services
designed to assist customers in monitoring, evaluating and managing their 
foreign
exchange exposures, and certain transactional services with respect to foreign
exchange.

18.  Subject to certain limitations, acting as a futures commission merchant in 
the
execution and clearance on major commodity exchanges of futures contracts and 
options
on futures contracts for bullion, foreign exchange, government securities,
certificates of deposit and other money market instruments.

19.  Subject to certain limitations, providing commodity trading and futures
commission merchant advice, including counsel, publications, written analyses 
and reports.

20.  Providing consumer financial counseling that involves educational courses 
and
distribution of instructional materials to individuals on consumer-oriented 
financial
management matters, including debt consolidation, mortgage applications, 
bankruptcy,
budget management, real estate tax shelters, tax planning, retirement and estate
planning, insurance, and general investment management, so long as this activity
does not include the sale of specific products or investments.

21.  Providing tax planning and preparation advice such as strategies designed 
to minimize tax liabilities and includes, for individuals, analysis of the tax
implications of retirement plans, estate planning and family trusts.  For a
corporation, tax planning includes the analysis of the tax implications of 
mergers
and acquisitions, portfolio mix, specific investments, previous tax payments and
year-end tax planning.  Tax preparation involves the preparation of tax forms 
and
advice concerning liability, based on records and receipts supplied by the 
client.

22.  Providing check guaranty services to subscribing merchants.

23.  Subject to certain limitations, operating a collection agency.

24.  Operating a credit bureau that maintains files on the past credit history 
of
consumers and providing such information to a lender that is considering a 
borrower's
application for credit, provided that the credit bureau does not grant 
preferential
treatment to an affiliated bank in the bank holding company system.

PENNSYLVANIA BANKING LAW

Under the Pennsylvania Banking Code of 1965 ("Code"), as amended, the Company is
permitted to control an unlimited number of banks.  However, the Company would 
be
required, under the Bank Holding Company Act, to obtain the prior approval of 
the
Federal Reserve Board before it could acquire all or substantially all of the 
assets
of any bank, or acquire ownership or control of any voting shares of any bank 
other
than Community Bank, if, after such acquisition, it would own or control more 
than 5.0 percent of the voting shares of such bank.

INTERSTATE BANKING AND BRANCHING

The following discussion describes those provisions of the Riegle-Neal 
Interstate
Banking and Branching Efficiency Act of 1994 ("Interstate Banking Act") that 
would
pertain to the Company.  It is not an exhaustive description of all provisions 
of the Interstate Banking Act.

In general, the Federal Reserve Board may approve an application by the Company 
to
acquire control of, or acquire all or substantially all of the assets of, a bank
located outside of the Commonwealth of Pennsylvania without regard to whether 
such
acquisition is prohibited under the law of any state, but subject to certain 
state
law restrictions and requirements enumerated in the Interstate Banking Act.  The
Federal Reserve Board may approve such application if it finds, among other 
things,
that the Company is adequately capitalized and adequately managed.  Moreover, 
the
Federal Reserve Board may not approve such acquisition if the target bank has 
not
been in existence for the minimum period of time, if any, required by such 
target
bank's "home" state.  The Federal Reserve Board may, however, approve the 
acquisition
of the target bank that has been in existence for at least five years without 
regard
to any longer minimum period of time required under the law of the "home" state 
of the target bank.  

Furthermore, the Interstate Banking Act provides that, beginning June 1, 1997,
appropriate federal supervisory agencies may approve a merger of Community Bank 
with
another bank located in a different state or the establishment by Community Bank
of a
new branch office either by acquisition or de novo, unless the Commonwealth of
Pennsylvania enacts a law prior to June 1, 1997, allowing an interstate merger 
or
expressly prohibiting a merger with an out-of-state bank.  The Commonwealth of
Pennsylvania has enacted a law to "opt-in" early to these interstate mergers.

Moreover, the Interstate Banking Act provides that Community Bank may establish 
and
operate a de novo branch in any state that "opts-in" to de novo branching.  A 
"de
novo branch" is a branch office that is originally established as a branch and 
does
not become a branch as a result of an acquisition or merger.  The Commonwealth 
of
Pennsylvania has enacted a law to "opt-in" early to de novo interstate 
branching.

As of May 2, 1996, the State Bank Supervisors of the states of Alabama, 
Delaware,
Maryland, New Jersey, North Carolina, Pennsylvania and Virginia executed a
Cooperative Agreement that governs the manner in which state-chartered banks 
with
branches in multiple states will be supervised.  This Cooperative Agreement was
necessitated by the Interstate Banking Act and was drafted to create a level 
playing
field for state-chartered banks with respect to supervision and regulation of 
branch
offices in a multiple state setting.  Specifically, this agreement outlines 
general
principles for determining whether home or host state law applies, including the
following: (1) host state law applies to operational issues relating to a branch
located in a host state, including antitrust, community reinvestment, consumer
protection, usury and fair lending laws; (2) the state law of the home state 
will
apply to corporate structure issues, such as charter, bylaws, incorporation,
liquidation, stockholders and directors, capital and investments; and (3) bank 
powers
issues will be resolved with reference to both home and host state laws.  

LEGISLATION AND REGULATORY CHANGES

From time to time, legislation is enacted that has the effect of increasing the 
cost
of doing business, limiting or expanding permissible activities or affecting the
competitive balance between banks and other financial institutions.  Proposals 
to
change the laws and regulations governing the operations and taxation of banks, 
bank
holding companies and other financial institutions are frequently made in 
Congress
and before various bank regulatory agencies.  No prediction can be made as to 
the
likelihood of any major changes or the impact such changes might have on the 
Company
and Community Bank.  Certain changes of potential significance to the Company 
that
have been enacted or promulgated, as the case may be, by Congress or various
regulatory agencies, respectively, are discussed below.

FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989 ("FIRREA")

On August 9, 1989, major reform and financing legislation, i.e., FIRREA, was 
enacted
into law in order to restructure the regulation of the thrift industry, to 
address
the financial condition of the Federal Savings and Loan Insurance Corporation 
and to
enhance the supervisory and enforcement powers of the federal bank and thrift
regulatory agencies.  The Federal Reserve Board, as the primary federal 
regulator of
Community Bank, is responsible for the supervision of Community Bank.  The 
Federal
Reserve Board and FDIC have far greater flexibility to impose supervisory 
agreements
on an institution that fails to comply with its regulatory requirements, 
particularly
with respect to capital requirements.  Possible enforcement actions include the
imposition of a capital plan, termination of deposit insurance and removal or
temporary suspension of an officer, director or other institution-affiliated 
party.

Under FIRREA, civil penalties are classified into three levels, with amounts
increasing with the severity of the violation.  The first tier provides for 
civil
penalties of up to $5.0 thousand per day for any violation of law or regulation.
A civil penalty of up to $25.0 thousand per day may be assessed if more than a 
minimal
loss or a pattern of misconduct is involved.  Finally, a civil penalty of up to 
$1.0
million per day may be assessed for knowingly or recklessly causing a 
substantial
loss to an institution or taking action that results in a substantial pecuniary 
gain
or other benefit.  Criminal penalties are increased to $1.0 million per 
violation, up
to $5.0 million for continuing violations or for the actual amount of gain or 
loss. 
These monetary penalties may be combined with prison sentences of up to five 
years.

FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 ("FDICIA")

GENERAL 

The FDICIA reformed a variety of bank regulatory laws.  Certain of these 
provisions are discussed below.

EXAMINATIONS AND AUDITS  

Annual full-scope, on-site examinations are required for all FDIC-insured
institutions with assets of $500.0 million or more.  For bank holding companies 
with $500.0 million or more in assets, the independent accountants of such 
companies shall
attest to the accuracy of management's report.  Such accountants shall also 
monitor
management's compliance with governing laws and regulations.  Such companies are
also
required to select an independent audit committee, composed of outside directors
who
are independent of management, to review with management and the independent
accountants the reports that must be submitted to the appropriate bank 
regulatory
agencies.  If the independent accountants resign or are dismissed, written
notification must be given to the FDIC and to the appropriate federal and state 
bank
regulatory agencies.

PROMPT CORRECTIVE ACTION  

In order to reduce losses to the deposit insurance funds, the FDICIA established
a format to more closely monitor FDIC-insured institutions and to enable prompt
corrective action by the appropriate federal supervisory agency if an 
institution
begins to experience any difficulty.  The FDICIA established five capital 
categories. 
They are:  (I) well-capitalized; (II) adequately capitalized; (III) 
undercapitalized;
(IV) significantly undercapitalized; and (V) critically undercapitalized.  The
overall goal of these new capital measures is to impose more scrutiny and 
operational
restrictions on depository institutions as they descend the capital categories 
from well-capitalized to critically undercapitalized.

The FDIC, the Office of the Comptroller of the Currency, the Federal Reserve 
Board, 
and the Office of Thrift Supervision have jointly issued regulations relating 
to
these capital categories and prompt corrective action.  These capital measures 
for prompt corrective action are defined as follows:

A well-capitalized institution would be one that has a 10.0 percent or greater 
total
risk-based capital ratio, a 6.0 percent or greater Tier I risk-based capital 
ratio, a
5.0 percent or greater Tier I Leverage capital ratio, and is not subject to any
written order or final directive by its regulator to meet and maintain a 
specific capital level.

An adequately capitalized institution would be one that meets the required 
minimum
capital levels, but does not meet the definition of a well-capitalized 
institution. 
The existing capital rules generally require banks to maintain a Tier I Leverage
capital ratio of at least 4.0 percent and an 8.0 percent or greater total 
risk-based
capital ratio.  Since the risk-based standards also require at least half of the
total risk-based capital requirement to be in the form of Tier I capital, this 
also
will mean that an institution would need to maintain at least a 4.0 percent 
Tier I
risk-based capital ratio.  Thus, an institution would need to meet each of the
required minimum capital levels in order to be deemed adequately capitalized.

An undercapitalized institution would fail to meet one or more of the required
minimum capital levels for an adequately capitalized institution.  An
undercapitalized institution must file a capital restoration plan and is
automatically subject to restrictions on dividends, management fees and asset 
growth. 
In addition, the institution is prohibited from making acquisitions, opening new
branches or engaging in new lines of business without the prior approval of its
primary federal regulator.  A number of other discretionary restrictions may 
also be
imposed on a case-by-case basis, and more stringent restrictions that otherwise 
would
apply to significantly undercapitalized institutions may be imposed on an
undercapitalized institution that fails to file or implement an acceptable 
capital restoration plan.

A significantly undercapitalized institution would have a total risk-based 
capital
ratio of less than 6.0 percent, a Tier I risk-based capital ratio of less than 
3.0
percent or a Tier I Leverage capital ratio of less than 3.0 percent, as the case
may
be.  Institutions in this category would be subject to all the restrictions that
apply to undercapitalized institutions.  Certain other mandatory prohibitions 
also
would apply, such as restrictions against the payment of bonuses or raises to 
senior
executive officers without the prior approval of the institution's primary 
federal regulator.  A number of other restrictions may also be imposed.

A critically undercapitalized institution would be one with a tangible equity 
(Tier I
capital) ratio of 2.0 percent or less.  In addition to the same restrictions and
prohibitions that apply to undercapitalized and significantly undercapitalized
institutions, the FDIC's rule implementing this provision of the FDICIA also
addresses certain other provisions for which the FDIC has been accorded
responsibility as the insurer of depository institutions.

At a minimum, any institution that becomes critically undercapitalized is 
prohibited
from taking the following actions without the prior written approval of its 
primary
federal regulator:  engaging in any material transactions other than in the 
usual
course of business; extending credit for highly leveraged transactions; amending
its
charter or bylaws; making any material changes in accounting methods; engaging 
in
certain transactions with affiliates; paying excessive compensation or bonuses; 
and
paying interest on liabilities exceeding the prevailing rates in the 
institution's
market area.  In addition, a critically undercapitalized institution is 
prohibited
from paying interest or principal on its subordinated debt and is subject to 
being
placed in conservatorship or receivership if its tangible equity capital level 
is not increased within certain mandated time frames.

At any time, an institution's primary federal regulator may reclassify it into a
lower capital category.  All institutions are prohibited from declaring any
dividends, making any other capital distribution or paying a management fee if 
it
would result in downward movement into any of the three undercapitalized 
categories. 
The FDICIA provides an exception to this requirement for stock redemptions that 
do
not lower an institution's capital and would improve its financial condition, if
the
appropriate federal regulator has consulted with the FDIC and approved the
redemption.

The regulation requires institutions to notify the FDIC following any material 
event
that would cause such institution to be placed in a lower category.  
Additionally,
the FDIC monitors capital levels through call reports and examination reports.

DEPOSIT INSURANCE

As a result of the special assessment due on October 1, 1996, and required
by the Deposit Insurance Funds Act of 1996 ("Funds Act"), the Savings 
Association
Insurance Fund ("SAIF") was capitalized at the Designated Reserve Rate of 1.25
percent of estimated insured deposits on October 1, 1996.  The FDIC has, 
therefore,
lowered the rate on assessments paid to the SAIF.  Effective January 1, 1997, 
the
Funds Act separates the Financing Corporation ("FICO") assessment to service the
interest on its bond obligations from the SAIF and BIF deposit insurance 
assessments. 
The amount assessed on Community Bank by the FICO will be in addition to any 
amount
paid for deposit insurance.  FICO assessment rates for the first semi-annual 
period
of 1997 were set at 1.3 basis points annually for BIF-assessable deposits (which
are
the type of deposits held by Community Bank) and 6.48 basis points annually for 
SAIF-
assessable deposits.  The FICO rate on BIF-assessable deposits must be one-fifth
the
rate on SAIF-assessable deposits until the BIF and SAIF are merged, or until 
January 1, 2000, whichever occurs first.

REAL ESTATE LENDING STANDARDS

Pursuant to the FDICIA, the Federal Reserve Board and other federal banking 
agencies
adopted real estate lending guidelines that would set loan-to-value ("LTV") 
ratios
for different types of real estate loans.  An LTV ratio is generally defined as 
the
total loan amount divided by the appraised value of the property at the time the
loan
is originated or the purchase price, whichever is lower.  If the institution 
does not
hold a first lien position, the total loan amount would be combined with the 
amount
of all senior liens when calculating the ratio.  In addition to establishing the
LTV
ratios, the guidelines require all real estate loans to be based upon proper 
loan documentation and a recent appraisal of the property.



BANK ENTERPRISE ACT OF 1991

Within the overall FDICIA is a separate subtitle called the Bank Enterprise Act 
of
1991 ("Act").  The purpose of the Act is to encourage banking institutions to
establish "basic transaction services for consumers" or so-called "lifeline
depository accounts."  The FDIC assessment rate is reduced for all lifeline
depository accounts.  The Act establishes ten factors that are the minimum
requirements to qualify as a lifeline depository account.  Some of these factors
relate to minimum opening and balance amounts, minimum number of monthly 
withdrawals,
the absence of discriminatory practices against low-income individuals, and 
minimum
service charges and fees.  Moreover, the Housing and Community Development Act 
of
1972 requires that the FDIC's risk-based assessment system include provisions
regarding lifeline depository accounts.  Assessment rates applicable to lifeline
depository accounts are to be established by FDIC rule.

TRUTH IN SAVINGS ACT

FDICIA also contains the Truth in Savings Act ("TSA").  The Federal Reserve 
Board has
adopted Regulation DD under the TSA.  The purpose of the TSA is to require the 
clear
and uniform disclosure of the rates of interest that are payable on deposit 
accounts
by depository institutions and the fees that are assessable against deposit 
accounts,
so that consumers can make a meaningful comparison between the competing claims 
of
banks with regard to deposit accounts and products.  In addition to disclosures 
to be
provided when a customer establishes a deposit account, the TSA requires the
depository institution to include, in a clear and conspicuous manner, the 
following
information with each periodic statement: (I) the annual percentage yield; (II) 
the
amount of interest earned; (III) the amount of any fees and charges imposed; and
(IV)
the number of days in the reporting period.  The TSA allows for civil lawsuits 
to be
initiated by customers if the depository institution violates any provision or
regulation under the TSA.



















REGULATORY CAPITAL REQUIREMENTS

The following table presents the Company's consolidated capital ratios at
December 31, 1996:
<TABLE>
<CAPTION>

                                                                     (In Thousands)

<S>                                                                            <C>
Tier I capital................................................................ $ 28,692
Tier II capital............................................................... $  2,346
Total capital................................................................. $ 31,038 

Adjusted total average assets................................................. $345,738
Total adjusted risk-weighted assets(1)........................................ $186,070

Tier I risk-based capital ratio(2)............................................   15.42%
Required Tier I risk-based capital ratio......................................    4.00%
Excess Tier I risk-based capital ratio........................................   11.42%

Total risk-based capital ratio(3).............................................   16.68% 
Required total risk-based capital ratio.......................................    8.00%
Excess total risk-based capital ratio.........................................    8.68%

Tier I Leverage ratio(4)......................................................    8.30%
Required Tier I Leverage ratio................................................    4.00%
Excess Tier I Leverage ratio..................................................    4.30%

<FN>
(1)           Includes off-balance sheet items at credit-equivalent values less
intangible assets.
(2)           Tier I risk-based capital ratio is defined as the ratio of Tier I
capital to total adjusted
              risk-weighted assets.
(3)           Total risk-based capital ratio is defined as the ratio of Tier I 
and
Tier II capital to total
              adjusted risk-weighted assets.
(4)           Tier I Leverage ratio is defined as the ratio of Tier I capital to
adjusted total average
              assets.  
</TABLE>
The Company was required to implement, on January 1, 1994, Statement of 
Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in 
Debt
and Equity Securities."  For financial capital reporting purposes, SFAS No. 115
changed the composition of stockholders' equity in financial statements prepared
in
accordance with generally accepted accounting principles by including, as a 
separate
component of equity, the amount of net unrealized holding gains or losses on 
debt and
equity securities that are deemed to be available for sale.

Effective December 31, 1994, the Federal Reserve Board issued a final rule with
respect to the implementation of SFAS No. 115 for regulatory capital reporting
purposes.  Under this final rule, net unrealized holding losses on available for
sale
equity securities, but not debt securities, with readily determinable fair 
values
will be included when calculating consolidated Tier I capital.  All other 
unrealized
holding gains and losses on available for sale securities will be excluded from
consolidated Tier I capital.  

The Company's ability to maintain the required levels of capital is 
substantially
dependent upon the success of its capital and business plans, the impact of 
future
economic events on loan customers, the ability to manage its interest rate risk 
and
investment portfolio, and control its growth and other operating expenses.

EFFECT OF GOVERNMENT MONETARY POLICIES

The earnings of the Company are, and will be, affected by domestic economic
conditions and the monetary and fiscal policies of the United States government 
and
its agencies.  The monetary policies of the Federal Reserve Board have had, and 
will
likely continue to have, an important impact on the operating results of 
commercial
banks through their power to implement national monetary policy in order to curb
inflation or combat a recession, among other things.  The Federal Reserve Board 
has a
major effect upon the levels of bank loans, investments and deposits through its
open
market operations in United States government securities and through its 
regulations
of, among other things, the discount rate on borrowings of member banks and the
reserve requirements against member bank deposits.  It is not possible to 
predict the
nature and impact of future changes in monetary and fiscal policies.

HISTORY AND BUSINESS - COMMUNITY BANK

Community Bank's legal headquarters is located at 521 Main Street, Forest City,
Pennsylvania 18421.  As of December 31, 1996, Community Bank had total assets of
$350.6 million, total stockholders' equity of $28.0 million and total deposits 
of $320.5 million.

Community Bank is a community bank that seeks to provide personal attention and
professional financial assistance to its customers.  Community Bank is a locally
managed and oriented financial institution established to serve the needs of
individuals and small- and medium-sized businesses.  Community Bank's business
philosophy includes offering direct access to its President and other officers 
and
providing friendly, informed and courteous service, local and timely decision 
making,
flexible and reasonable operating procedures, and consistently-applied credit
policies.

Community Bank is a full-service commercial bank offering a range of commercial 
and
retail banking services to its customers.  These include personal and business
checking and savings accounts, certificates of deposit and mortgage, home equity
and
commercial loans.  In addition, Community Bank provides safe deposit boxes,
travelers' checks, wire transfers of funds and certain personal, corporate and
pension trust services.  Community Bank is a member of the MAC system and 
provides
customers with access to this automated teller machine network.  Community Bank 
also
makes credit cards available to its customers.  In addition, Community Bank has 
a trust department that provides traditional fiduciary services to its 
customers.

Community Bank solicits small- and medium-sized businesses located primarily 
within
its market area that typically borrow less than $100.0 thousand.  In the event 
that
certain loan requests exceed Community Bank's lending limit to any one customer,
Community Bank seeks to arrange such loans on a participation basis with other
financial institutions.

MARKET AREA

Community Bank's primary market area comprises Lackawanna, Susquehanna, Wayne 
and
Wyoming counties that are located in the Northeast corner of the Commonwealth of
Pennsylvania.  The largest municipality in this market area is the city of 
Scranton
with a population of approximately 82.0 thousand based upon 1990 census data.  
None
of Community Bank's branches are within the city of Scranton.  All of the 
branches
are located well outside of Scranton in rural or small-town settings.  See Item 
2 hereof for a description of the location of each branch office.

Community Bank competes with eighteen commercial banks, three thrift 
institutions and
twenty-two credit unions, many of which are substantially larger in terms of 
assets
and liabilities.  In addition, Community Bank has recently experienced increased
competition for deposits from mutual funds and security brokers.  Consumer, 
mortgage
and insurance companies actively compete for various types of loans.  Principal
methods of competing for banking and permitted non-banking services include 
price, nature of product, quality of service, and convenience of location.

SUPERVISION AND REGULATION - COMMUNITY BANK

The operations of Community Bank are subject to federal and state statutes 
applicable
to banks chartered under the banking laws of the United States, to members of 
the
Federal Reserve System, and to banks whose deposits are insured by the FDIC.  
Bank
operations are also subject to regulations of the Pennsylvania Department of 
Banking ("Department"), the Federal Reserve Board and the FDIC.

The primary federal supervisory authority that regularly examines Community Bank
is
the Federal Reserve Board.  The Federal Reserve Board has the authority under 
the
Financial Institutions Supervisory Act to prevent a state member bank from 
engaging in an unsafe or unsound practice in conducting its business.

Federal and state banking laws and regulations govern, among other things, the 
scope
of a bank's business; the investments a bank may make; the reserves against 
deposits
a bank must maintain; loans a bank makes and the collateral it takes; the 
activities
of a bank with respect to mergers and consolidations; and the establishment of
branches.  All banks in Pennsylvania are permitted to maintain branch offices in
any
county of the state.  Branches of state-chartered banks may be established only 
after
approval by the Department.  The Department is required to grant approval only 
if it
finds that there is a need for banking services or facilities such as are
contemplated by the proposed branch.  The Department may disapprove the 
application if the bank does not have the capital and surplus deemed necessary.

Multi-bank holding companies are permitted in Pennsylvania.  See sections 
entitled "Pennsylvania Banking Law" and "Interstate Banking and Branching."


A subsidiary bank of a bank holding company is subject to certain restrictions
imposed by the Federal Reserve Act on any extensions of credit to the bank 
holding
company or its subsidiaries, on investments in the stock or other securities of 
the
bank holding company or its subsidiaries, and on taking such stock or securities
as
collateral for loans.  The Federal Reserve Act and Federal Reserve Board 
regulations
also place certain limitations and reporting requirements on extensions of 
credit by
a bank to principal stockholders of its parent holding company, among others, 
and to
related interests of such principal stockholders.  In addition, such legislation
and
regulations may affect the terms upon which any person becoming a principal
stockholder of a holding company may obtain credit from banks with which the
subsidiary bank maintains a correspondent relationship.

From time to time, various types of federal and state legislation have been 
proposed
that could result in additional regulations of, and restrictions on, the 
business of
Community Bank.  It cannot be predicted whether any such legislation will be 
adopted
or how such legislation would affect the business of Community Bank.  As a
consequence of the extensive regulation of commercial banking activities in the
United States, Community Bank's business is particularly susceptible to being
affected by federal legislation and regulations that may increase the costs of 
doing business.  
Under the Federal Deposit Insurance Act, the Federal Reserve Board possesses the
power to prohibit institutions regulated by it, such as Community Bank, from 
engaging
in any activity that would be an unsafe and unsound banking practice and in 
violation
of the law.  Moreover, the Financial Institutions and Interest Rate Control Act 
of
1987 ("FIRA") generally expands the circumstances under which officers or 
directors
of a bank may be removed by the institution's federal regulator; restricts 
lending by
a bank to its executive officers, directors, principal stockholders or related
interests thereof; restricts management personnel of a bank from serving as 
directors
or holding other management positions with certain depository institutions whose
assets exceed a specified amount or that have an office within a specified 
geographic
area; and restricts management personnel from borrowing from another institution
that
has a correspondent relationship with their bank.  Additionally, FIRA requires 
that
no person may acquire control of a bank unless the appropriate federal regulator
has
been given sixty days prior written notice and within that time has not 
disapproved the acquisition or extended the period for disapproval.

Under the Bank Secrecy Act ("BSA"), Community Bank is required to report to the
Internal Revenue Service currency transactions of more than $10.0 thousand or
multiple transactions of which it is aware in any one day that aggregate in 
excess of
$10.0 thousand.  Civil and criminal penalties are provided under the BSA for 
failure
to file a required report, failure to supply information required by the BSA, or
filing a false or fraudulent report. 

The Garn-St. Germain Depository Institutions Act of 1982 ("1982 Act"), removes
certain restrictions on the lending powers and liberalizes the depository 
abilities
of Community Bank.  The 1982 Act also amends FIRA (see above) by eliminating 
certain
statutory limits on lending by a bank to its executive officers, directors, 
principal
stockholders or related interests thereof, and by relaxing certain reporting
requirements.  However, the 1982 Act strengthened FIRA provisions respecting
management interlocks and correspondent bank relationships by management 
personnel.

COMMUNITY REINVESTMENT ACT

The Community Reinvestment Act of 1977 ("CRA"), as amended, and the regulations
promulgated to implement the CRA, are designed to create a system for bank 
regulatory
agencies to evaluate a depository institution's record in meeting the credit 
needs of
its community.  Until May 1995, a depository institution was evaluated for CRA
compliance based upon twelve  assessment factors.

The CRA regulations were completely revised as of May 4, 1995, to establish new
performance-based standards for use in examining a depository institution's
compliance with the CRA.  The revised CRA regulations establish new tests for
evaluating both small and large depository institutions' investments in the
community.  A small bank is defined as a depository institution that has total 
assets
of less than $250.0 million and is independent or is an affiliate of a holding
company with less than $1.0 billion in assets.  Pursuant to the revised CRA
regulations, a depository institution that qualifies as a small bank will be 
examined
under a streamlined procedure that emphasizes lending activities.  The 
streamlined
examination procedures for a small bank became effective on January 1, 1996.

A large depository institution is one that does not meet the small bank 
definition
above.  A large depository institution can be evaluated under one of two tests:
(1) a three-part test evaluating the institution's lending, service and 
investment
performance; or (2) a "strategic plan" designed by the institution with 
community
involvement and approved by the appropriate federal bank regulator.  A large
depository institution must choose one of these options prior to July 1997, but 
may
opt to be examined under one of these two options prior to that time.  Effective
January 1, 1996, a large depository institution that opts to be examined 
pursuant to
a strategic plan may submit its strategic plan to the bank regulators for 
approval. 
In addition, the revised CRA regulations include separate rules regarding the 
manner
in which "wholesale banks" and "limited purpose banks" will be evaluated for
compliance.

The new CRA regulations will be phased in over a two-year period, beginning 
July 1,
1995, with a final effective date of July 1, 1997.  Until the applicable test is
phased-in, institutions may be examined under the prior CRA regulations.

On December 27, 1995, the federal banking regulators issued a joint final rule
containing technical amendments to the revised CRA regulations.  Specifically, 
the
recent technical amendments clarify the various effective dates in the revised 
CRA
regulations, correct certain cross references and state that once an institution
becomes subject to the requirements of the revised CRA regulations, it must 
comply
with all aspects of the revised CRA regulations, regardless of the effective 
date of
certain provisions.  Similarly, once an institution is subject to the revised 
CRA
regulations, the prior CRA regulations do not apply to that institution.

For the purposes of the revised CRA regulations, Community Bank is a small 
depository
institution, based upon financial information as of December 31, 1996.  In the
future, Community Bank will be evaluated for CRA compliance using the 
streamlined
procedures for a small bank.  Under the twelve assessment factors contained in 
the
prior CRA regulations, Community Bank received an "outstanding" rating in 1995.
Community Bank expects to receive a rating under the revised CRA regulations 
that is consistent with its 1995 rating.

CONCENTRATION

The Company and Community Bank are not dependent for deposits nor exposed by 
loan
concentrations to a single customer or to a small group of customers, the loss 
of any
one or more of which would have a material adverse effect on the financial 
position of the Company or Community Bank.

ITEM 2.       PROPERTIES

The Company owns no property other than through Community Bank as follows:

                                   Type of     Approximate 
Property      Location             Ownership   Square Footage  Use
--------      --------              ---------   --------------  ---
   1          521 Main Street      Owned                7,100  Banking services.
              Forest City, PA               

   2          528 Main Street      Leased              4,250   Administrative
              Forest City, PA                                  offices.

   3          347 Main Street      Owned               5,500   Banking services.
              Simpson, PA

   4          37 Dundaff Street    Owned               4,300   Banking services.
              Carbondale, PA

   5          Route 370            Leased                900   Banking services.
              Lakewood, PA

   6          57 Main Street       Owned               6,000   Banking services.
              Nicholson, PA

   7          Route 6              Owned               3,500   Banking services.
              Tunkhannock, PA

   8          Route 106            Owned               1,300   Banking services.
              Clifford, PA

   9          61 Church Street     Owned               3,500   Banking services.
              Montrose, PA

  10          Route 29             Leased              2,175   Banking services.
              Eaton Township, PA

  11          Route 307            Leased              1,250   Banking services.
              Lake Winola, PA


The administrative offices' property lease expires in 1997 and contains an 
option
that allows for an unlimited number of additional terms of six months each.  The
Lakewood property lease expires in 2001 and contains an option to renew the 
lease for
an additional term of five years.  The Route 29 Eaton Township and Lake Winola
property leases expire in 2009.  For information with respect to obligations for
lease rentals, refer to Note 6 of the Notes to Consolidated Financial Statements
in
the Company's Annual Report to Stockholders filed at Exhibit 13 hereto and
incorporated in its entirety by reference.

It is management's opinion that the facilities currently utilized are suitable 
and adequate for current and immediate future purposes.

ITEM 3.       LEGAL PROCEEDINGS

GENERAL

The nature of the Company's and Community Bank's business generates a certain 
amount
of litigation involving matters arising in the ordinary course of business.  
However,
in the opinion of management of the Company and Community Bank, there are no
proceedings pending to which the Company and Community Bank are a party or to 
which
their property is subject, which if determined adversely, would be material in
relation to the Company's and Community Bank's undivided profits or financial
position, nor are there any proceedings pending other than ordinary routine
litigation incident to the business of the Company and Community Bank.  In 
addition,
no material proceedings are pending or are known to be threatened or 
contemplated
against the Company and Community Bank by government authorities or others.

ENVIRONMENTAL ISSUES

There are several federal and state statutes that govern the obligations of 
financial
institutions with respect to environmental issues.  Besides being responsible 
for its
own conduct under such statutes, a bank may also be held liable under certain
circumstances for actions of borrowers or other third parties on properties that
collateralize loans held by the bank.  Such potential liability may far exceed 
the
original amount of the loan made by the bank.  Currently, Community Bank is not 
a party to any pending legal proceedings under any environmental statute nor is
Community Bank aware of any circumstances that may give rise to liability of
Community Bank under any such statute.

PART II

ITEM 5.       MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS

The Company had 744 stockholders of record and 2,200,080 shares of common stock,
par
value of $0.33 per share, the only authorized class of common stock ("Common 
Stock")
outstanding as of February 3, 1997.  The Company's Common Stock began trading on
the
National Association of Securities Dealers Automated Quotation ("NASDAQ") 
National
Market Tier of The NASDAQ Stock Market under the Symbol "CCBP" on June 17, 1996.
Prior to June 17, 1996, the Company's Common Stock was quoted on the 
over-the-counter
Electronic Bulletin Board Interdealer System.  The following table sets forth 
during
the periods indicated: (1) the high and low closing sale prices for a share of 
the Company's Common Stock, and (2) dividends on a share of the Common Stock. 
Retroactive effect is given in sale prices and dividend information for a 
three-for-one stock split effectuated April 1, 1996.

<TABLE>
<CAPTION>
                                                                            Dividends
                                                      High            Low    Declared 
                                                   -------        -------   ---------
<S>                                                <C>            <C>          <C>
1995:
First quarter..................................... $13 3/8        $13 3/8      ----
Second quarter....................................  13 3/8         13 3/8      ----
Third quarter.....................................  13 3/8         13 3/8      $.08
Fourth quarter.................................... $14            $13 3/8      $.13

1996:
First quarter..................................... $14            $14          $.05
Second quarter....................................  23 3/4         14           .06
Third quarter.....................................  25 1/2         21 1/2       .06
Fourth quarter.................................... $27 1/2        $25          $.11
</TABLE>
The Company has paid cash dividends since 1983.  It is the present intention of 
the
Company's Board of Directors to continue the dividend payment policy, although 
the
payment of future dividends must necessarily depend upon earnings, financial
position, appropriate restrictions under applicable law, and other factors 
relevant
at the time the Board of Directors considers any declaration of dividends.  Cash
available for the payment of dividends must initially come from dividends paid 
by
Community Bank to the Company.  Therefore, the restrictions on Community Bank's
dividend payments are directly applicable to the Company.  For information with
respect to dividend restrictions of the Company and Community Bank, refer to 
Note 15
of the Notes to Consolidated Financial Statements in the Company's Annual Report
to
Stockholders filed at Exhibit 13 hereto and incorporated in its entirety by
reference.

ITEM 6.        SELECTED FINANCIAL DATA

The information called for by this item is filed at Exhibit 13 hereto and is
incorporated in its entirety by reference under this Item 6.

ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
               OPERATIONS

The information called for by this item is filed at Exhibit 13 hereto and is
incorporated in its entirety by reference under this Item 7.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements and notes thereto are filed at
Exhibit 13 hereto and are incorporated in their entirety by reference under this
Item 8.

The Company's supplementary data is filed at Exhibit 13 hereto and is 
incorporated in its entirety by reference under this Item 8.




































PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Each director of the Company is elected for a one-year term and until his 
successor
is duly elected and qualified.  Current directors were elected at the 1996 
Annual
Meeting of Stockholders, which was held on June 7, 1996.  The following table
contains certain information with respect to the directors and executive 
officers of the Company:
<TABLE>
<CAPTION>

                                     PRINCIPAL OCCUPATION                      
                                     FOR PAST FIVE YEARS    
                         AGE AS OF   AND POSITION HELD                DIRECTOR OF
                        FEBRUARY 3,  WITH THE COMPANY AND             COMPANY/COMMUNITY
NAME                       1997      COMMUNITY BANK                   BANK SINCE      
----                    ----------   ---------------------            -----------------
<S>                           <C>    <C>                              <C>
David L. Baker                51     President and Chief              1988/1993 
                                     Executive Officer ("CEO") 
                                     of the Company and 
                                     Community Bank (as of 
                                     April 26, 1995); Senior 
                                     Vice President of 
                                     Community Bank (as of 
                                     January 20, 1993); 
                                     President of the First 
                                     National Bank of 
                                     Nicholson ("FNB Nicholson") 
                                     (1987-1993) prior to its 
                                     merger with Community Bank

Donald R. Edwards, Sr.(1)     53     Owner, Mountain View Inn         1988/1993

William F. Farber, Sr.        59     President, Farber's              1983/1970
                                     Restaurants; Chairman of the 
                                     Boards of Directors of the 
                                     Company and Community Bank

Judd B. Fitze                 44     Partner, Farr, Davis & Fitze     1995/1993
                                     (attorney-at-law)

John P. Kameen                55     Publisher, Forest City News;     1983/1979
                                     Secretary of the Company

William B. Lopatofsky         65     Owner, Northeast Distributors    1983/1982
                                     and Equipment

J. Robert McDonnell           61     Owner, McDonnell's Restaurant;   1983/1979
                                     Vice President of the Company

Joseph P. Moore, Jr.          70     Retired President, Moore         1988/1992
                                     Motors Inc. (automobile 
                                     dealership); President,
                                     Elk Mountain Ski Resort, Inc.

Eric Stephens(1)              45     Auto Dealer, H.L. Stephens       1988/1993
                                     and Son (automobile dealership)

<FN>
(1)         Eric Stephens is married to the niece of Donald R. Edwards, Sr.
</TABLE>




PRINCIPAL OFFICERS OF THE COMPANY

The following table sets forth selected information about the principal officers
of
the Company, each of whom is elected by the Board of Directors and each of whom 
holds office at the discretion of the Board of Directors:
<TABLE>
<CAPTION>

                                      COMPANY 
                            HELD      EMPLOYEE     NUMBER OF SHARES       AGE AS OF
NAME AND POSITION           SINCE       SINCE     BENEFICIALLY OWNED   FEBRUARY 3, 1997
-----------------           -----     --------    ------------------   ----------------
<S>                         <C>         <C>            <C>                    <C>
David L. Baker              1995        1992           11,304(2)              51
President and CEO

William F. Farber, Sr.      1983         (1)          188,820                 59
Chairman of the Board

John P. Kameen              1996         (1)           20,280(3)              55
Secretary

J. Robert McDonnell         1983         (1)           32,544(4)              61
Vice President

Scott A. Seasock            1989        1989            3,005(5)              39
Senior Vice President and
Chief Financial Officer 
("CFO")

Thomas E. Sheridan          1989        1985            5,844(6)              40
Senior Vice President and
Chief Operations Officer
("COO")

<FN>
(1)            Messrs. Farber, Kameen and McDonnell are not employees of the Company.
(2)            Includes 5,040 shares held individually; 4,800 shares held jointly
with his spouse;  732 shares
               held under his IRA; and 732 shares held under his spouse's IRA.
(3)            Includes 17,280 shares held jointly with his spouse; and 3,000 shares
held jointly with other
               individuals.
(4)            Held jointly with his spouse.
(5)            Includes 825 shares held jointly with his spouse; 1,520 shares held
jointly with his spouse and
               sons; and 660 shares held under his IRA.
(6)            Includes 1,764 shares held jointly with his spouse; and 4,080 shares
held jointly with his
               father.
</TABLE>



















PRINCIPAL OFFICERS OF COMMUNITY BANK

The following table sets forth selected information about the principal officers
 of
Community Bank, each of whom is elected by the Board of Directors of Community 
Bank
and each of whom holds office at the discretion of Community Bank's Board of
Directors:
<TABLE>
<CAPTION>

                                        COMMUNITY
                                          BANK
                               HELD     EMPLOYEE    NUMBER OF SHARES    AGE AS OF
NAME AND POSITION              SINCE      SINCE    BENEFICIALLY OWNED  FEBRUARY 3, 1997
-----------------              -----    ---------  ------------------  ----------------
<S>                            <C>        <C>          <C>                    <C>
David L. Baker                 1995       1993(1)      11,304(3)              51      
President and CEO

Thomas M. Chesnick             1989       1952         28,200(4)              62
Vice President, Cashier and 
Assistant Secretary

Scott A. Seasock               1993       1993(2)       3,005(5)              39
Senior Vice President and 
CFO

Thomas E. Sheridan             1989       1985          5,844(6)              40
Senior Vice President and 
COO

<FN>
(1)            Prior to the merger of FNB Nicholson with Community Bank, Mr. Baker
was employed by FNB
               Nicholson from 1987 to 1993 as the President.
(2)            Prior to the merger of FNB Nicholson with Community Bank, Mr. Seasock
was employed by FNB
               Nicholson from 1987 to 1993 as Senior Vice President and CFO.
(3)            See footnote (2) under the above caption entitled "Principal Officers
of the Company."
(4)            Includes 17,820 shares held jointly with his spouse; and 10,380 shares
held jointly with various
               relatives.
(5)            See footnote (5) under the above caption entitled "Principal Officers
of the Company."
(6)            See footnote (6) under the above caption entitled "Principal Officers
of the Company."
</TABLE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act, as amended, requires the Company's officers 
and
directors, and persons who own more than 10.0 percent of the registered class of
the
Company's equity securities, to file reports of ownership and changes in 
ownership
with the SEC.  Officers, directors and persons who own more than 10.0 percent of
the
Company's stock are required by the SEC regulation to furnish the Company with 
copies of all Section 16(a) forms they file.  

Except as follows, based solely on its review of the copies of such forms 
received by
it, or written representations from certain reporting persons that no Form 5 was
required for any of those persons, the Company believes that during the period
January 1, 1996, through December 31, 1996, its officers and directors were in
compliance with all filing requirements applicable to them.

On November 14, 1996, Judd B. Fitze, a director of the Company, purchased 300 
shares
of the Common Stock at a price of $27.25 per share or $8,175 in the aggregate.  
Mr. Fitze failed to report the purchase on Form 5 in a timely manner.  Such Form
5 was
required to be filed on or before February 14, 1997.  Mr. Fitze filed his Form 5
with the SEC for such purchase on March 6, 1997.

ITEM 11.  EXECUTIVE COMPENSATION

Shown below is information concerning the annual compensation for services in 
all
capacities to the Company and Community Bank for the fiscal years ended 
December 31,
1996 and 1995, to the President and CEO of the Company and Community Bank.  No 
other
officers' total annual salary and bonus exceeded $100.0 thousand during the 
fiscal years reported:
<TABLE>
<CAPTION>

                             SUMMARY COMPENSATION TABLE
                                                                   LONG-TERM COMPENSATION
                                 ANNUAL COMPENSATION                  AWARDS          PAYOUTS                  
                                                  Other
Name and                                          Annual       Restricted                        All Other
Principal                                         Compensa-      Stock      Options/   LTIP      Compensa-
Position            Year    Salary($)    Bonus($) tion($)       Award(s)    SARs      Payouts    tion($)
----------------------------------------------------------------------------------------------------------
<S>                 <C>      <C>          <C>      <C>            <C>        <C>        <C>      <C>
David L. Baker      1996     101,029      10,000   2,992(2)       -0-        -0-        -0-      27,958(3) 
President and       1995      84,666       6,000   1,379(2)       -0-        -0-        -0-         -0-
CEO (1)         

<FN>
(1)       Mr. Baker was named President and CEO of the Company and Community Bank
effective April 26, 1995.  Prior to such time, Mr. Baker was a Senior Vice President of
Community Bank.
(2)       Represents the contribution Community Bank made on behalf of Mr. Baker
pursuant to the
          profit sharing plan.  Aggregate perquisites and other personal benefits
were less than
          10.0 percent of the salary and bonus reported, and therefore, need not be
presented.
(3)       Represents the payout from the discontinuance of the Company's deferred
compensation
          plan for certain senior management employees.
</TABLE>

PENSION PLAN

Community Bank has a profit sharing plan ("Plan"), which covers all employees 
who
have completed 1.0 thousand hours of service, attained twenty-one years of age 
and
have been employed by Community Bank for at least one year.  The entry date of 
an
employee into the Plan is January 1 of the year following the satisfaction of 
the
eligibility requirements.  Normal retirement age is sixty-five.  The normal
retirement benefit is the accumulated account balance of annual contributions,
investment income and forfeitures.  The annual contribution is determined by the
Board of Directors each year.  Contributions are allocated to each participant 
based
on a pro-rata share of compensation covered under the Plan.  Investment income 
is
allocated to each participant based on a pro-rata share of the account balances
accumulated at the beginning of the year.  Forfeitures are allocated to each
participant based on a pro-rata share of compensation covered under the Plan.  
If a
participant separates from service prior to retirement, the participant will be
entitled to a portion of the profit sharing account based on years of service
according to the following schedule:

                   Years of Service              Vested Interest
                   ----------------              ---------------
                     Less than 1                        0%
                          1                            10
                          2                            20
                          3                            30
                          4                            40
                          5                            60
                          6                            80
                      7 or more                       100%

A participant is always 100.0 percent vested in pension plan transferred 
balances.

During 1996, $66,615 was allocated among the participants' accounts of the Plan.
The
amount contributed by Community Bank in 1996 to the Plan for Mr. Baker, the 
President
and CEO of the Company and Community Bank was $2,992.  Mr. Baker had ten (10) 
years of credited service under the Plan.

COMPENSATION OF DIRECTORS

During 1996, Mr. Baker, an officer of the Company and Community Bank, sat on the
Company's and Community Bank's Board of Directors and various committees of 
Community
Bank.  Mr. Baker received no fees for his services on such committees.  Mr. 
Baker
received no fees for his services on the Company's or Community Bank's Board of
Directors.

All members of the Company's Board of Directors, including Mr. Farber, the 
Chairman
of the Company, received a fee of $400 per quarter for the first half of 1996. 
Effective July 1, 1996, directors received a fee of $500 per month.  Aggregate 
fees
paid by the Company in 1996 totaled $30,400.  Except for Mr. Farber, members of
Community Bank's Board of Directors received a fee of $800 per month for the 
first
half of 1996.  Effective July 1, 1996, the directors received $1,000 per month. 
Mr. Farber, as the Chairman of Community Bank, received a fee of $2,800 per 
month for the
first half of 1996.  Effective July 1, 1996, Mr. Farber received $3,000 per 
month. 
Aggregate directors' fees paid by Community Bank in 1996 were $175,200.  

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Board of Directors of the Company is responsible for the governance of the
Company and its subsidiary, Community Bank.  In fulfilling its fiduciary duties,
the
Board of Directors acts in the best interests of the Company's stockholders,
customers and the communities served by the Company and Community Bank.  To
accomplish the strategic goals and objectives of the Company, the Board of 
Directors
engages competent persons who undertake to accomplish these objectives with 
integrity
and in a cost-effective manner.  The compensation of these individuals is part 
of the
Board of Directors' fulfillment of its duties to accomplish the Company's 
strategic
mission.  Community Bank provides compensation to the employees of the Company 
and Community Bank.

The fundamental philosophy of the Company's and Community Bank's compensation 
program
is to offer competitive compensation opportunities for all employees based on 
each
individual's contribution and personal performance.  The compensation program is
administered by the Executive Compensation Committee ("Committee") comprised of 
two
outside directors and three members of the Company's Board of Directors listed 
in the
section "Principal Officers," thereto.  The objective of the Committee is to
establish a fair compensation policy to govern executive officers' base salaries
and
incentive plans to attract and motivate competent, dedicated and ambitious 
managers
whose efforts will enhance the products and services of the Company, the results
of
which will be improved profitability, increased dividends to our stockholders 
and subsequent appreciation in the market value of our stock.

The compensation of the Company's and Community Bank's top executives is 
reviewed and
approved annually by the Board of Directors.  The top executives whose 
compensation
is determined by the Committee include the CEO and all other executive 
management. 
As guidance for review in determining base salaries, the Committee uses 
information
composed from a Pennsylvania bank peer group.  This bank peer group is different
than
the peer group utilized for the performance chart.  Pennsylvania peer group 
banks
have been utilized because of common industry issues and competition for the 
same executive talent group.

CEO COMPENSATION

The Board of Directors has determined that the President and CEO's 1996 
compensation of $111,029 was appropriate in light of the Company's 1996 
performance
accomplishments.  There is no direct correlation, however, between the President
and
CEO's compensation and the Company's performance, nor is there any weight given 
by
the Committee to any specific individual criteria.  Such 1996 compensation was 
based
on the Committee's subjective determination after review of all information that
it deemed relevant.

EXECUTIVE OFFICERS

Compensation for the Company's and Community Bank's executive officers is 
determined
by the Committee based on its subjective analysis of the individual's 
contribution to
the Company's strategic goals and objectives.  In determining whether strategic 
goals
have been achieved, the Board of Directors considers, among numerous other 
factors,
the following:  the Company's performance as measured by earnings, revenues, 
return
on assets, return on equity, market share, total assets and nonperforming loans.
Although the performance and increases in compensation are measured in light of 
these
factors, there is no direct correlation between any specific criterion and the
employees compensation, nor is there any specific weight provided to any such
criteria in the Committee's analysis.  The determination by the Committee is
subjective after review of all information, including the above, it deems 
relevant.

Total compensation opportunities available to the employees of the Company and
Community Bank are influenced by general labor market conditions, the specific
responsibilities of the individual and the individual's contributions to the
Company's success.  Individuals are reviewed annually on a calendar year basis. 
The
Company strives to offer compensation that is competitive with that offered by
employers of comparable size in the banking industry.  Through these 
compensation
policies, the Company strives to meet its strategic goals and objectives to its
constituents and provide compensation that is fair and meaningful to its 
employees.

                  Submitted by the Executive Compensation Committee
                  -------------------------------------------------
                               William F. Farber, Sr.
                                    Judd B. Fitze
                                   John P. Kameen
                                 J. Robert McDonnell
                                Joseph P. Moore, Jr.

































STOCK PERFORMANCE GRAPH AND TABLE

Set forth below is a line graph comparing the cumulative total stockholder 
return on
the Company's Common Stock, based on the market price change and assuming
reinvestment of dividends, with the cumulative total return of the NASDAQ Stock
Market (US Companies) Index and the NASDAQ Bank Stocks (SIC 6000-6099 US 
Companies)
Index during the five-year period ended December 31, 1996.  The stockholder 
return
shown on the graph and table below is not necessarily indicative of future
performance.  The Company's Common Stock began trading on the NASDAQ National 
Market
Tier of the NASDAQ Stock Market under the Symbol "CCBP" on June 17, 1996.





























<TABLE>
<CAPTION>



                                                          1991     1992     1993    1994     1995     1996
                                                         -----    -----    -----   -----    -----    -----
         <S>                                             <C>      <C>      <C>     <C>      <C>      <C>
         Comm Bancorp, Inc.............................. 100.0    102.5    132.1   179.0    190.9    362.5

         Total Returns Index for                       
         NASDAQ Stock Market
         (US Companies)................................. 100.0    116.4    133.6   130.6    184.7    227.2

         Total Returns Index for         
         NASDAQ Bank Stocks         
         (SIC 6000-6099 US Companies)................... 100.0    153.3    202.0   204.7    313.4    406.3

<FN>
NOTES:

A. The lines represent monthly index levels derived from compounded daily returns
that include all dividends.
B. The indexes are reweighed daily, using the market capitalization on the previous
trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the
preceding trading day is      used.
D. The index level for all series was set to $100.0 on 12/31/91.

</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL OWNERS

The following table sets forth information, as of February 3, 1997, related to 
each
person who owns of record or who is known by the Board of Directors to be the
beneficial owner of more than 5.0 percent of the outstanding Common Stock.  
Included
are the name, address, number of shares beneficially owned by such person, and 
the percentage of the outstanding Common Stock so owned.
<TABLE>
<CAPTION>

                                                             PERCENT OF OUTSTANDING
                                  SHARES BENEFICIALLY             COMMON STOCK
NAME AND ADDRESS                        OWNED(1)               BENEFICIALLY OWNED  
----------------                  -------------------        ----------------------
<S>                                    <C>                            <C>          
Joseph P. Moore, Jr.                   218,760(2)                     9.94%
400 Williamson Road   
Gladwyne, PA  19035   

William F. Farber, Sr.                 188,820                        8.58%
Crystal Lake Road
R.R. 1, Box 1281
Carbondale, PA  18407

Gerald B. Franceski                    129,700(3)                     5.90%
Lewis Lake, P.O. Box 88
Union Dale, PA  18470

Robert T. Seamans                      128,305(4)                     5.83%
P.O. Box 462
Factoryville, PA  18419

<FN>
(1)            The shares "beneficially owned" by an individual are determined in
accordance with the
               definitions of "beneficial ownership" set forth in the General Rules
and Regulations of the SEC. 
               Included may be shares owned by or for the individual's spouse and
minor children and any other
               relative who has the same home, as well as shares to which the
individual has or shares voting
               or investment power or has the right to acquire beneficial ownership
within sixty (60) days
               after February 3, 1997.  Beneficial ownership may be disclaimed as to
certain of the shares.
(2)            Includes 30,240 shares held individually; 6,300 shares held in the
Moore Motors, Inc. Profit
               Sharing Plan, an automobile dealership of which he was President; and
182,220 shares held by
               Moore & Company, which are held in trust for his various relatives.
(3)            Includes 99,700 shares held jointly with his spouse; and 30,000 shares
held jointly in various
               combinations with relatives.
(4)            Includes 126,470 shares held individually; and 1,835 shares held
individually by his spouse.

</TABLE>









BENEFICIAL OWNERSHIP BY EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth as of February 3, 1997, the amount and percentage
of
the Common Stock beneficially owned by each director and all officers and 
directors of the Company as a group.
<TABLE>
<CAPTION>

 NAME OF INDIVIDUAL                      AMOUNT AND NATURE OF                 PERCENT
OR IDENTITY OF GROUP                 BENEFICIAL OWNERSHIP(1)(2)(3)          OF CLASS(4)
--------------------                 -----------------------------          -----------
<S>                                            <C>                             <C>      
David L. Baker                                 11,304(5)                       ----
Donald R. Edwards, Sr.                         51,816(6)                       2.36%
William F. Farber, Sr.                        188,820                          8.58%
Judd B. Fitze                                  11,500(7)                       ----   
John P. Kameen                                 20,280(8)                       ----   
William B. Lopatofsky                          25,410(9)                       1.16%
J. Robert McDonnell                            32,544(10)                      1.48%
Joseph P. Moore, Jr.                          218,760(11)                      9.94%
Scott A. Seasock                                3,005(12)                      ----
Thomas E. Sheridan                              5,844(13)                      ----
Eric Stephens                                   6,960(14)                      ----

All Executive Officers and Directors
 of the Company as a Group
 (9 Directors, 6 Officers,
 11 Persons in Total)                         576,243                         26.19%

<FN>
(1)            Does not include any Common Stock held in fiduciary accounts under the
control of the Trust
               Department of Community Bank.
(2)            See footnote (1) under the above caption entitled "Principal Owners."
(3)            Information furnished by the Executive Officers, Directors and the
Company.
(4)            Less than 1.0 percent unless otherwise indicated.
(5)            See footnote (2) under the above caption entitled "Principal Officers
of the Company."
(6)            Includes 500 shares held individually; 100 shares held individually by
his spouse; 50,700 shares
               held jointly with his spouse; 300 shares held jointly by his spouse
and daughter; 108 shares
               held under his IRA; and 108 shares held under his spouse's IRA.
(7)            Includes 9,000 shares held jointly with his spouse; and 2,500 shares
held under his IRA.
(8)            See footnote (3) under the above caption entitled "Principal Officers
of the Company."
(9)            Held jointly with his spouse.
(10)           See footnote (4) under the above caption entitled "Principal Officers
of the Company."
(11)           See footnote (2) under the above caption entitled "Principal Owners."
(12)           See footnote (5) under the above caption entitled "Principal Officers
of the Company."
(13)           See footnote (6) under the above caption entitled "Principal Officers
of the Company."
(14)           Includes 5,340 shares held individually; 900 shares held individually
by his spouse; and 720
               shares held individually by his children.
</TABLE>






ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as described in the paragraphs below, there have been no material 
transactions
between the Company and Community Bank, nor any material transactions proposed, 
with
any director or executive officer of the Company and Community Bank, or any 
associate
of the foregoing persons.  The Company and Community Bank have had financial
transactions in the ordinary course of business with directors and officers of 
the
Company and Community Bank.  The Company and Community Bank intend to continue 
to
have banking and financial transactions in the ordinary course of business with
directors and officers of the Company and Community Bank and their associates on
substantially the same terms, including interest rates and collateral, as those
prevailing from time to time for comparable transactions with other persons.  
Total
loans outstanding from Community Bank as of December 31, 1996, to the Company's 
and
Community Bank's executive officers and directors as a group, members of their
immediate families, and companies in which they had an ownership interest of 
10.0 percent or more was $5,005,964, or approximately 16.0 percent of the total 
equity
capital of the Company.  Loans to such persons were made in the ordinary course 
of
business and were made on substantially the same terms, including interest rates
and
collateral, as those prevailing at the time for comparable transactions with 
other
persons, and did not involve more than the normal risk of collectibility or 
present other unfavorable features.

Community Bank leased its Carbondale branch office from William F. Farber, Sr., 
the
Chairman of the Boards of Directors of the Company and Community Bank.  The 
lease,
which commenced in October 1988, was scheduled to expire in 1998 and contained 
an
option that allowed Community Bank to purchase the property at fair market value
or
renew the lease for two additional terms of five years each.  In 1996, lease 
payments
to Mr. Farber were $6,020 per month or $72,240 annually.  During the first 
quarter of
1997, Community Bank purchased such property for the sum of $600 thousand.  
Community
Bank received a certified appraisal prior to this transaction from a qualified
commercial realtor stating that the fair market value of such property exceeded 
$600 thousand.

PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)            1. The Company's consolidated financial statements and notes 
thereto as well as
the applicable reports of the independent certified public accountants are filed
at
Exhibit 13 hereto and are incorporated in their entirety by reference under this
Item 14(a)1.

2.             All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.




3.             The exhibits required by Item 601 of Regulation S-K are included 
under Item 14(c) hereto.

(b)            Reports on Form 8-K

The Company filed no current reports on Form 8-K during the quarter ended
December 31, 1996.

(c)            Exhibits required by Item 601 of Regulation S-K:

Exhibit Number Referred to
Item 601 of Regulation S-K                     Description of Exhibit
--------------------------                     ----------------------
            2                                          None.
            3                                          None.
            4                                          None.
            9                                          None.
           10                                          None. 
           11                                          None.
           12                                          None.
           13                                 Portions of the Annual Report to  
                                              Stockholders for Fiscal Year Ended
                                              December 31, 1996.
           16                                          None.
           18                                          None.
           21                          List of Subsidiaries of the Company.
           22                                          None.
           23                                          None.
           24                                          None.
           27                                          None.
           28                                          None.
           99                                          None.




SIGNATURES

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.

COMM BANCORP, INC.
(Registrant)

BY:/s/ David L. Baker                                March 10, 1997
   David L. Baker, President and
   Chief Executive Officer
   (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has
been signed below by the following persons on behalf of the Registrant and in 
the capacities and on the dates indicated.

Signature and Capacity                                    Date

/s/ David L. Baker                                   March 10, 1997
David L. Baker, President and
Chief Executive Officer/Director
(Principal Executive Officer)

/s/ Donald R. Edwards, Sr.                           March 10, 1997
Donald R. Edwards, Sr., Director

/s/ John B. Errico                                   March 10, 1997
Comptroller 
(Principal Accounting Officer)  

/s/ William F. Farber, Sr.                           March 10, 1997
William F. Farber, Sr., 
Chairman of the Board/Director                                

/s/ Judd B. Fitze                                    March 10, 1997
Judd B. Fitze, Director

/s/ John P. Kameen                                   March 10, 1997
John P. Kameen, Director

/s/ William B. Lopatofsky                            March 10, 1997
William B. Lopatofsky, Director

/s/ J. Robert McDonnell                              March 10, 1997
J. Robert McDonnell, 
Vice President/Director

/s/ Joseph P. Moore, Jr.                             March 10, 1997
Joseph P. Moore, Jr., Director

/s/ Scott A. Seasock                                 March 10, 1997      
Scott A. Seasock, Chief Financial 
Officer (Principal Financial Officer)

/s/ Eric Stephens                                    March 10, 1997
Eric Stephens, Director



                                    EXHIBIT INDEX


Item Number              Description                            Page
----------               -----------                            ----
    13                   Portions of the Annual Report to 
                         Stockholders for the
                         Fiscal Year Ended December 31, 1996      37

    21                   List of Subsidiaries of the Company     167













                               


























COMM BANCORP, INC.
CONTENTS                                                               
 
     INTRODUCTION                                MANAGEMENT'S DISCUSSION AND 
                                                 ANALYSIS 1995 VERSUS 1994
  39  Consolidated Financial Highlights                  
                                            137  Overview          
                      
  40  Dedication                            138  Operating Environment    
   
  41  President's Message to Stockholders                
                                            139  Review of Financial Position   
  43  New Developments                                                       
                                            155  Review of Financial Performance
  46  Consolidated Selected Financial Data                   
                                                            
                                                             
                                                 DIRECTORS AND OFFICERS 
     MANAGEMENT'S DISCUSSION AND ANALYSIS     
                                            160  Board of Directors and 
                                                 Corporate Officers   
  47  Forward-Looking Discussion                           
                                            161  Advisory Boards
  48  Operating Environment                                              
         
                                            162  Officers                 
  53  Review of Financial Position                               
                                            163  Glossary of Terms        

  90  Review of Financial Performance                   
                                            166  Stockholder Information
  
                                                        
     CONSOLIDATED FINANCIAL STATEMENTS
                                                                 
 101  Independent Auditors' Report  
                                                                 
 102  Consolidated Statements of Income                          
                                                                 
 103  Consolidated Balance Sheets                                 
                                                                 
 104  Consolidated Statements of Changes in 
      Stockholders' Equity 
                                                                 
 105  Consolidated Statements of Cash Flows                      
                 

                                                
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                 
 106  Summary of significant accounting policies                 
                                                                 
 115  Cash and cash equivalents                                  
                                                                 
 116  Investment securities                                      
                                                                 
 121  Loans, nonperforming assets and allowance for loan losses
                                                                 
 123  Commitments, concentrations and contingent 
      liabilities   

 125  Premises and equipment, net                                
                                                                 
 125  Other assets                                               
                                                                 
 126  Deposits                                                   
                                                                 
 126  Short-term borrowings                                       
                                                                 
 128  Long-term debt                                             
                                                                 
 129  Employee benefit plans                                      
                                                                 
 129  Fair value of financial instruments                        
                                                                 
 129  Income taxes                                               
                                                                 
 131  Parent Company financial statements                        
                                                                
 132  Regulatory matters                        

 136  Summary of quarterly financial information (unaudited)


COMM BANCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS                                        
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                        1996      1995      1994
--------------------------------------------------------------------------------------
<S>                                                       <C>       <C>       <C>
FINANCIAL POSITION:
Assets................................................... $354,812  $350,948  $362,463
Investment securities....................................  101,994   108,706   152,566
Net loans................................................  231,859   209,932   190,909
Deposits.................................................  320,456   317,099   316,169
Stockholders' equity..................................... $ 31,256  $ 27,895  $ 22,689

FINANCIAL PERFORMANCE:
Interest income.......................................... $ 25,059  $ 26,467  $ 24,991
Interest expense.........................................   13,550    14,994    12,942
Net interest income......................................   11,509    11,473    12,049
Net income...............................................    4,200       200     3,325
Cash dividends declared.................................. $    623  $    462  $    455

FINANCIAL RATIOS:
Return on average total assets...........................     1.21%     0.06%     0.95%
Return on average stockholders' equity...................    14.57      0.77     14.26
Tier I capital ratio.....................................    15.42     14.23     13.82
Total capital ratio......................................    16.68     15.49     15.68
Leverage ratio...........................................     8.30      6.95      7.13
Allowance for loan losses to loans, net..................     1.67%     1.83%     1.84%

PER SHARE DATA:
Net income............................................... $   1.91  $   0.09  $   1.51
Cash dividends declared..................................     0.28      0.21      0.21
Stockholders' equity..................................... $  14.21  $  12.68  $  10.31

</TABLE>









          Comm Bancorp, Inc. is a bank holding company
          incorporated under the laws of Pennsylvania. 
          Headquartered in Forest City, Pennsylvania, Comm
          Bancorp, Inc. serves four counties through ten
          community banking offices.  Each office interdependent
          with the community offers a comprehensive array of
          financial products and services to individuals,
          businesses, not-for-profit organizations, and
          government entities.
          





COMM BANCORP, INC.
DEDICATION                                                               

                                  JOSEPH P. KOCHMER
                                     (1941-1996)


           "The best portion of a good man's life is his little, nameless,
                       unremembered acts of kindness and love"
                                                        --Wordsworth

Joseph P. Kochmer was born in Scranton on January 1, 1941.  For thirty-seven 
years he was the owner and operator of Kochmer Quarries located in Clifford.  
He served as a member of the Community Bank & Trust Company Clifford Office 
Advisory Board for over ten years.

Someone once said, "The only place where success comes before work is in the
dictionary."  It surely applied to Joe Kochmer.  Mr. Kochmer was very active
throughout the Clifford area.  His civic affiliations included memberships in 
the Clifford Volunteer Fire Company, the Harford Masonic Lodge 445, the 
Community Rod and Gun Club and the Twilight Golf League at Crystal Lake.  
He was also a member of the Clifford Baptist Church where he served as a member 
of its Board of Trustees.  Joe was also a former school director of the Mountain
View School District.

Joe's commitment to his community was evident during his many years of service 
to the Clifford Volunteer Fire Company.  He could be found cooking hot dogs and 
hamburgers at "Joe's Stand" during the annual firemen's picnic, as well as 
donning his apron at their annual chicken barbecue.

One of Joe's greatest loves was that of nature.  His membership in the Community
Rod and Gun Club was very special to him.  Joe, along with other members of the 
club, would spend many hours nurturing and raising trout, which they released 
each spring into local streams.  Anyone could see the pride and excitement in 
his eyes when he spoke about the fish nursery.

Mr. Kochmer was a loving, family man who came from modest means and worked very 
hard to build his business while raising his family.  Joe was married to the 
former Rachel Machell.  They were the parents of four children and had five 
grandchildren.  Their children include a daughter, Machelle Owens, and three 
sons, Joseph Paul Jr., Robert and Scott.  He is also survived by two brothers, 
Edward and Andrew, and seven sisters, Louise Dutka, Catherine Fron, Marie 
Aikens, Elizabeth Super, Virginia Hendricks, Josephine Barone and Anna Mae 
Sacco.

Joe will be sadly missed by all who knew him and especially by his friends at
Community Bank & Trust Company.  He was a fine gentleman who was always willing 
to roll up his sleeves and lend a helping hand.

To him we dedicate this annual report.










COMM BANCORP, INC.
PRESIDENT'S MESSAGE TO STOCKHOLDERS                                      

Dear Stockholders:

While preparing this 1996 Annual Report, we paused to reflect on areas that were
of significant importance to you as a stockholder, the customers we serve, and 
the Company.  Our largest investment was in new technology.  We installed and 
implemented a new process called Check Imaging.  This project has been completed
and was extremely well received by our customers.  Other operating upgrades 
included software updates to our mainframe computer.  These upgrades allow us to
continue providing our customers the best and most efficient system on the 
market.

We achieved record earnings in 1996.  Net income increased to $4.2 million or 
$1.91 per share.  Factors that contributed to this dramatic increase included 
increased loan volume, reduced overhead costs, and the strengthened position of 
our investment portfolio.  These changes resulted in an attainment of a 1.21 
percent return on average assets and a 14.57 percent return on average 
stockholders' equity.

Total assets increased from $350.9 million at year end 1995 to $354.8 million at
year-end 1996.  Total loans increased $41.0 million, adjusted for loans to other
financial institutions, during 1996.  Deposits showed a slight increase from 
$317.1 million to $320.5 million at December 31, 1995 and 1996, respectively.  
For 1996, total stockholders equity increased approximately $3.4 million from 
$27.9 million to $31.3 million.

In addition to the financial accomplishments, we also moved forward in other
pertinent areas, including the effectuation of a three-for-one stock split and 
the establishment of a listing on the NASDAQ National Market Tier of the NASDAQ 
Stock Market.  Through these actions, your ownership has been favorably affected
as evidenced by an increase in the market price per share from $14.00 on 
April 1, 1996, to a high of $27.50 during the fourth quarter.

During the third and fourth quarters of 1996 ,the employee profit sharing and 
payroll deferral saving plans were reorganized.  After extensive research it was
decided to offer employees a self-directed 401-K plan whereby they can 
personally select from several different vehicles to invest their pension 
benefits and payroll deferrals.  This differs from the previous plan, which was 
primarily invested in fixed income securities.  The plan took effect in January 
1997.

We will be initiating an extensive customer service and product development 
training program for all employees in 1997.  This program will assist our 
employees to better recognize our customers' needs by giving the employees the 
tools to fully meet those needs.




COMM BANCORP, INC.
PRESIDENT'S MESSAGE TO STOCKHOLDERS (CONTINUED)                          

The Board of Directors, executive officers, and staff wish to thank you for your
continued support as we reaffirm our tradition of quality service while 
enhancing stockholder's value.


Sincerely,


/s/ David L. Baker      
David L. Baker
President and
Chief Executive Officer







COMM BANCORP, INC.
NEW DEVELOPMENTS                                                         

Long recognized and appreciated for providing excellent personal attention, as 
well as a strong history of community involvement, Community Bank and Trust 
Company has been directing its efforts toward building a notable reputation for 
advanced technology and convenient services.  This past year we have worked 
diligently to continue that tradition.  Because our customers remain the most 
important part of our business.

Banking is a business shaped by confidence.  Community Bank and Trust's banking
history, as well as our experienced and knowledgeable financial administrators,
customer service representatives, and executive officers have made that 
confidence part of our name.  Through the years we have expanded our product 
lines and service offerings, while keeping in step with new technology to make 
banking as convenient as possible for our customers.

Our newest service addition - CHECK IMAGING - is one more reason our customers 
can remain confident and trust in our reputation.  As part of this 
state-of-the-art technology, checking account customers receive a digital image 
of their checks in place of a cumbersome stack of canceled checks.  Initiated 
this past fall, many Community Bank and Trust patrons have already found this 
new service to be extremely valuable.

Check Imaging brings new meaning to the convenience of streamlining monthly 
finances and provides many benefits to the customer.  The imaged statement, 
which contains a printed image of each check, makes it easier for personal and 
commercial account customers to organize and balance checking and payroll 
accounts.  Moreover, Community Bank and Trust will begin offering this imaging 
product via CD-ROM to commercial clients in 1997.

By reviewing checks at a glance, Check Imaging helps the client confirm every 
check written from an account, simplifies recordkeeping and reference, and helps
realize savings in both time and money.

These clear pictures, four to thirty-six per standard letter-size sheet of 
paper, are legally accepted copies of actual checks.  Imaged checks are accepted
by the IRS, the Commonwealth of Pennsylvania, and the Federal Reserve System, 
among others, as proof of payment.

Customers have the option of receiving imaged checks in the order of date paid, 
check number, or dollar amount.  Although customers receive only images of the 
front of the canceled checks, the back sides are also captured and available 
from the bank on request.  Original checks are stored in the bank vault for six 
months then destroyed. 

Research and retrieval of check images is faster and less expensive than the
conventional method of searching for account information on microfilm.  The new
system allows the bank to retrieve copies of canceled checks and deposit tickets
within minutes; provides image copy quality that is sharper than microfilm; and
permits statements to be printed and delivered to customers within a shorter
timeframe.

COMM BANCORP, INC.
NEW DEVELOPMENTS (CONTINUED)                                              

As a way of introducing the ease of the new system to its customers, Community 
Bank and Trust Company furnished each account holder with a free, convenient 
financial organizer notebook in which to store imaged statements.

Check Imaging unquestionably fulfills our mission of providing innovative, 
state-of-the-art technology while continuing to provide high quality, personal 
service.  As imaging technology is being introduced in many financial 
institutions nationwide, including the Federal Reserve System, we're proud to be
among the very first to offer this progressive system to our customers.  With 
convenient services such as Check Imaging, it's easy to see why so many people 
have made Community Bank and Trust Company their neighborhood bank.





































COMM BANCORP, INC.
NEW DEVELOPMENTS (CONTINUED)                                              

                          COMMUNITY BANK AND TRUST COMPANY
                                   HELPS CREATE A
                              NEW GENERATION OF SAVERS

Today, America is facing its strongest economic competition from abroad.  One 
reason for this challenge is that many countries have higher productivity growth
rates than America.  However, they have yet to achieve our level of 
productivity, which is still the envy of the world. Productivity determines a 
nation's quality of life through opportunities for educational excellence, 
stimulating well-paying jobs, and an ever-higher standard of living for all its 
citizens.  Because there is a direct relationship between growth of a country's 
productivity and its savings, we must increase our national savings in order to 
increase productivity.

The "SAVE FOR AMERICA" campaign, endorsed by the U.S. Department of Education, 
has been designed to raise the personal savings rate in our country and create a
new generation of savers.  This voluntary program gives students from 
kindergarten through sixth grade the opportunity to open and maintain a savings 
account while at school, allowing them to take a step toward adult 
responsibility.  Students learn the principles of saving, how to manage money, 
and the importance of investing money for a return.  The program involves the 
use of computers, which allows participating students to develop computer 
banking skills they will need for the next century.  Students also learn the 
continued relevance of math skills in daily life.

Wise money management is a skill we all need to develop. That is why Community 
Bank and Trust has formed a unique partnership with a local school district to 
bring elementary students the "SAVE FOR AMERICA" program.  Community Bank and 
Trust offered twenty-nine schools and Parent-Teacher Organizations ("PTOs") 
throughout our quad-county market area the opportunity to participate in this 
worthwhile educational program.

Blue Ridge Elementary of New Milford became the first school to join the 
program.  Their PTO volunteers were trained by bank personnel to operate the 
computer software, as they would be responsible for running the program each 
week.  The volunteers act as the "Banker" and record all deposits on the 
school's computer.

Students are awarded an incentive for each deposit and are encouraged to keep 
saving for their future.  Deposits are transferred to Community Bank and Trust's
mainframe computer and posted to individual accounts from a computer disk.  
Students have the opportunity to make subsequent deposits each Wednesday at the 
school or at any branch office of the bank.



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

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                        1996       1995       1994       1993      1992 
-------------------------------------------------------------------------------------------------------------
<S>                                                       <C>        <C>        <C>      <C>         <C>      
CONDENSED STATEMENTS OF FINANCIAL PERFORMANCE:
Interest income.......................................... $ 25,059   $ 26,467   $ 24,991   $ 24,094   $ 24,022
Interest expense.........................................   13,550     14,994     12,942     12,000     13,514
                                                          --------   --------   --------   --------   --------
  Net interest income....................................   11,509     11,473     12,049     12,094     10,508
Provision for loan losses................................      300        435        800      1,080      1,285
                                                          --------     ------   --------   --------   --------
  Net interest income after provision for loan losses....   11,209     11,038     11,249     11,014      9,223
Noninterest income.......................................    1,387     (3,196)     1,005      2,571      1,961
Noninterest expense......................................    7,383      8,194      7,949      7,852      7,252
                                                          --------   --------   --------   --------   --------
  Income before income taxes.............................    5,213       (352)     4,305      5,733      3,932
Provision for income taxes...............................    1,013       (552)       980      1,583      1,137
                                                          --------   --------   --------   --------   --------
  Net income............................................. $  4,200   $    200   $  3,325   $  4,150   $  2,795 
                                                          ========   ========   ========   ========   ========


CONDENSED STATEMENTS OF FINANCIAL POSITION:
Investment securities.................................... $105,294   $123,896   $152,656   $149,672   $129,480
Net loans................................................  231,859    209,932    190,909    173,313    160,146
Other assets.............................................   17,659     17,120     18,898     16,022     19,654
                                                          --------   --------   --------   --------   --------
  Total assets........................................... $354,812   $350,948   $362,463   $339,007   $309,280
                                                          ========   ========   ========   ========   ========

Deposits................................................. $320,456   $317,099   $316,169   $297,235  $280,826
Short-term borrowings....................................                         15,956      9,141     2,000 
Long-term debt...........................................       46      3,048      5,050      5,800     3,200
Other liabilities........................................    3,054      2,906      2,599      2,324     2,454
Stockholders' equity.....................................   31,256     27,895     22,689     24,507    20,800
                                                          --------   --------   --------   --------  -------- 
  Total liabilities and stockholders' equity............. $354,812   $350,948   $362,463   $339,007  $309,280
                                                          ========   ========   ========   ========  ========


PER SHARE DATA:
Net income............................................... $   1.91   $   0.09   $   1.51    $  1.89  $   1.27
Cash dividends declared..................................     0.28       0.21       0.21       0.20      0.20
Stockholders' equity..................................... $  14.21   $  12.68   $  10.31    $ 11.14  $   9.45
Cash dividends declared as a percentage of net income....    14.83%    231.00%    13.68%      10.70%    15.31%
Average common shares.................................... 2,200,080  2,200,080 2,200,071   2,199,894 2,199,093


SELECTED RATIOS (BASED ON AVERAGE BALANCES):
Net income as a percentage of total assets...............     1.21%      0.06%     0.95%       1.30%     0.96%
Net income as a percentage of stockholders' equity.......    14.57       0.77     14.26       17.91     14.00
Stockholders' equity as a percentage of total assets.....     8.30       7.25      6.65        7.26      6.68
Tier I capital as a percentage of adjusted total assets..     8.30       6.95      7.13        6.84      6.11
Net interest income as a percentage of earning assets....     3.79       3.48      3.68        4.09      3.95
Loans, net as a percentage of deposits...................    69.83%     62.81%    61.01%      60.84%    59.15%


SELECTED RATIOS AND DATA (BASED ON PERIOD END BALANCES):
Tier I capital as a percentage of risk-adjusted assets...    15.42%     14.23%    13.82%      13.52%    12.38%
Total capital as a percentage of risk-adjusted assets....    16.68      15.49     15.68       15.49     14.12
Allowance for loan losses as a percentage of loans, net..     1.67%      1.83%     1.84%       1.80%     1.54%
Full-time equivalent employees...........................      149        147       153         137       136
Locations................................................       10         10        10          10        10

</TABLE>













Note: Per share information reflects the retroactive effects of a 3-for-1 stock 
split effective April 1996 and a 4-for-1 stock split effective February 1994.  
Average balance was calculated using average daily balances and
includes nonaccrual loans.  Tax equivalent adjustment was
calculated using the prevailing statutory rate of 34.0 percent.







Management's Discussion and Analysis appearing on the following pages should be 
read in conjunction with the Consolidated Financial Statements beginning on page
101 and Management's Discussion and Analysis 1995 versus 1994 beginning on page 
137.

FORWARD-LOOKING DISCUSSION:

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

Banking is affected, directly and indirectly, by local, domestic and 
international economic and political conditions, and by government monetary and 
fiscal policies. 
Conditions such as inflation, recession, unemployment, volatile interest rates, 
tight
money supply, real estate values, international conflicts, and other factors 
beyond
the control of Comm Bancorp, Inc. and its subsidiary, Community Bank and Trust
Company, (collectively, the "Company") may adversely affect its future results 
of
operations.  Management, consisting of the Board of Directors and executive 
officers,
does not expect any particular factor to affect the Company's results of 
operations. 
A downward trend in several areas, including real estate, construction and 
consumer
spending, could have an adverse impact on the Company's ability to maintain or
increase profitability.  Therefore, there is no assurance that the Company will
continue its current rates of income and growth.

The Company's earnings depend largely upon net interest income, which is 
primarily
influenced by the relationship between its cost of funds, deposits and 
borrowings,
and the yield on its interest-earning assets, loans and investments.  This
relationship, known as the net interest spread, is subject to fluctuation 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 its interest 
rate
risk management strategy, management seeks to control its exposure to interest 
rate
changes by managing the maturity and repricing characteristics of 
interest-earning assets and interest-bearing liabilities.

In originating loans, the likelihood exists that some credit losses will occur.
This
risk of loss varies with, among other things, general economic conditions, loan 
type,
creditworthiness and debt servicing capacity of the borrower over the term of 
the
loan and, in the case of a collateralized loan, the value and marketability of 
the
collateral securing the loan.  Management maintains an allowance for loan losses
based on, among other things, historical loan loss experience, known inherent 
risks
in the loan portfolio, adverse situations that may affect a borrower's ability 
to
repay, the estimated value of any underlying collateral, and an evaluation of 
current
economic conditions.  Management currently believes that the allowance for loan
losses is adequate, but there can be no assurance that nonperforming loans will 
not increase in the future.

To a certain extent, the success of the Company is dependent upon the general
economic conditions in the geographic market served by the Company.  Although 
the
Company expects that economic conditions will remain favorable in its market 
area, no
assurance can be given that such conditions will continue.  Adverse changes in
economic conditions in the geographic market  area served by the Company would 
likely
impair the Company's loan collections and could otherwise have a materially 
adverse
effect on the consolidated results of operations and financial position of the
Company.

The banking industry is highly competitive, with rapid changes in product 
delivery
systems and in consolidation of service providers.  The Company has many larger
competitors in terms of asset size.  These competitors also have substantially
greater technical, marketing and financial resources.  Because of their size, 
many of
these competitors offer products and services the Company does not offer.  The
Company is constantly striving to meet the convenience and needs of its 
customers and
to enlarge its customer base.  No assurance can be given that these efforts will
be successful in maintaining and expanding the Company's customer base.

OPERATING ENVIRONMENT:

The United States economy turned in a remarkably favorable performance in 1996, 
the
best among all advanced industrial countries in the world.  Although the growth 
in
gross domestic product, the total output of goods and services, was modest at 
2.5
percent as compared to gains registered in some earlier years of the postwar 
period,
it was accompanied by low unemployment, inflation and interest rates.  The 
national
unemployment rate continued its five-year decline to 5.3 percent in 1996, the 
lowest rate since 1973.  Such rate was 5.6 percent in 1995.  

The continued tightness in the labor markets would ordinarily cause inflationary
tendencies in the form of higher-priced goods and services.  However, a number 
of
factors including job security concerns, higher worker productivity, and 
lower-wage
employment of displaced employees helped to deter inflation.  Employment costs
represent two-thirds of the total costs of all goods and services.  Most 
workers,
especially those unionized, have recently witnessed layoffs and as a result, are
using their bargaining powers to ensure job security rather than wage increases.
In
addition, productivity gains through technological advances have offset any wage
increases that might cause increased delivery costs.  Moreover, many workers
displaced from manufacturing plant closures are accepting lower- paying 
employment in the growing service sector.  


Employee wages and benefits rose a moderate 2.9 percent during 1996.  As a 
result,
the consumer and producer price indexes, measurements of inflation, rose 3.3 
percent
and 2.8 percent, respectively, during 1996.  Such moderate increases led the 
Federal
Reserve Open Market Committee ("FOMC") to take no monetary policy action 
throughout
most of 1996.  The FOMC's last interest rate adjustment was on January 31, 1996,
when
it reduced the federal funds target rate, the overnight loan rate between banks,
to
5.25 percent from 5.50 percent, and the discount rate for loans to financial
institutions to 5.00 percent from 5.25 percent.  This action was taken to ensure
the
resumption of moderate economic growth after the marked economic slowdown and
business inventory buildup during the fourth quarter of 1995.

Intermediate- and long-term interest rates grew moderately in 1996, despite the
stability in near-term rates, as economic growth had become more vigorous than
anticipated.  The adverse effects of such increases were more than offset by the
combination of relative price stability and the easing of lending terms at 
banks. 
The combination of these positive influences with a level of consumer confidence
not
surpassed in seven years, resulted in higher levels of disposable income and led
to
improvements in consumer and business spending.  Such economic conditions were
especially meaningful to the national financial sector as they increased loan 
and
deposit volumes.  Throughout the United States, aggregate consumer and 
commercial
loans increased 20.6 percent and 4.4 percent, respectively, while savings 
increased
5.4 percent.   In addition, there was a significant increase in residential 
mortgage
lending in response to record levels of existing home sales and housing starts.

Forecasts for economic activity in 1997 include continued growth and expansion 
of job
opportunities if no serious imbalances arise.  The only perceived threat to the
expansion's continuation comes from resource constraints that could cause a
recurrence of inflation.  The economy is expected to grow by 2.5 percent with
inflation forecasted at 3.0 percent.  Output growth of this magnitude is 
expected to
result in little change in the unemployment rate, which is projected to be 5.5
percent.  Continued strong economic conditions should increase wealth for 
businesses
and individuals.  Financial institutions would benefit from such pattern through
increases in loan demand and funding sources.  Profitability should rise 
uniformly as
a result of increased volumes, lower delinquencies and stability of funds costs.

The output of the economy in Northeastern Pennsylvania was slower than the level
experienced nationally based on smaller income gains and higher unemployment.  
The
average hourly earnings of a manufacturing worker in the United States increased
43
cents or 3.7 percent during 1996 as compared to 8 cents or 0.7 percent for a 
worker
in the Company's quad-county market area.  In addition, the market area served 
by the
Company reported higher unemployment figures than the nation and the 
Commonwealth of
Pennsylvania.  The unemployment rates for the United States and Pennsylvania 
were 5.3
percent and 4.4 percent, respectively, for December 1996.  Lackawanna, 
Susquehanna,
Wayne and Wyoming counties reported unemployment rates for the comparable period
of
5.4 percent, 6.6 percent, 8.4 percent and 7.9 percent, respectively.  Moreover, 
the
civilian labor force, defined as the total number of individuals employed and 
those
actively seeking employment, increased by 2.0 percent for the nation and 3.1 
percent
for the Commonwealth during 1996.  Such gains are a significant factor in 
increasing
economic output due to the limitations in resources based on the low 
unemployment
statistics.  Contrary to such gains, Northeastern Pennsylvania reported a 
decline of 5.8 percent in the number of civilian workers.

Factors that can hamper a region's economic growth include high business costs, 
low
employee quality, and an aging infrastructure.  Although the Company's market 
area is
not the most advantageous in the nation, it has achieved significant goals in
business operating costs due to improvements in technological efficiencies.  The
quality of the work force and market area's proximity to major markets, such as 
New
York and Philadelphia, are significant influences for businesses seeking to 
locate in
the area.  The Lackawanna Valley Industrial Highway Project, begun in 1994, has 
and
will continue to improve the infrastructure for a majority of the counties 
served by
the Company.  The improved accessibility should have a positive effect on 
economic
development and business activity.  As a result of such improvements, management
expects the local economy to grow at a pace similar to the rates anticipated for
the nation.

The strong performance of the economy in 1996, characterized by improved growth,
low
unemployment and minimal inflation, was paramount to the banking industry 
enjoying
yet another stellar year.  Representative of this success was the nation's top 
50
commercial banks posting profits of $36.2 billion for 1996, a 12.8 percent 
increase
over the 1995 level.  The results of 1996 are especially impressive given the 
fact
that they followed another significant increase of 9.0 percent in 1995.  
Regional
community banks experienced similar success as median earnings per share 
increased
15.0 percent in 1996.  Strong revenue growth and improved operating efficiencies
were
the primary reasons for the banking industry's success during 1996.  Increased 
levels
of interest and noninterest income combined for the growth of revenue.  
Specifically,
interest income increases were attributed to the strength in loan demand and 
banks
capturing new customers from the fallout of consolidations occurring in the 
market. 
Many financial institutions increased their loan portfolio yields through the
securitization of consumer and mortgage portfolios and redirection of the 
proceeds to
commercial loans that typically yield much higher rates than retail loans.  
Another
major influence contributing to the 1996 record revenue levels was the rise in
service charges.  On April 1, 1996, national electronic payment networks that 
link
Automated Teller Machines ("ATMs") began allowing banks and other ATM operators 
to
charge access fees to individuals using machines not owned by their bank.  Such
change played a significant role in the banking industry recording a 13.8 
percent
increase in noninterest income.  In addition to the revenue improvements, 
financial
institutions increased net income through operating efficiencies.  Many banks 
have
increased their investments in cost-effective delivery systems and made 
technological
changes to improve back-office operations.  Supermarket branches, telephone 
banking,
personal computer banking and ATMs are among many of the recent enhancements 
made for
delivering products and services to customers.  The aggregate investment of the
banking industry for upgrading existing systems amounted to $19.0 billion during
1996.  In addition, some financial institutions are outsourcing more services or
forming joint ventures to share technology and processing costs.

Asset quality for national and regional commercial banks did not demonstrate a
significant deterioration during 1996.  The only noticeable asset quality
deterioration was either borrower-specific or a result of uncontrolled growth 
and did
not represent weakness in overall loan portfolios.  Although many banks invested
heavily in commercial loans, most were secured wholly or partially by real 
estate. 
Such credits pose no immediate threat based on the stability in real estate 
values.   

During 1996, the merger and acquisition activities of financial institutions 
were
subdued as compared to the previous year.  The number of mergers and 
acquisitions
announced in 1996 was less than in the prior two years but average deal values
continued to rise.  For northeast commercial banks, the aggregate number and 
amount
of mergers and acquisitions fell from 29, accounting for $36.5 billion in 1995, 
to 17
accounting for $1.3 billion in 1996.  The value of such deals increased from 
15.8
times annual earnings or 2.0 times book value in 1995 to 18.2 times annual 
earnings
or 2.2 times book value in 1996.  Management expects such activities to occur 
more
frequently in 1997 as the Interstate Banking Bill goes into effect in the summer
and
middle-sized institutions attempt to better position themselves by building
strategically relevant geographic franchises.

Another significant occurrence in banking during 1996 was the long-awaited 
beginning
of consolidation within the financial services industry.  The first significant 
event
was the announcement that the independent insurance lobby dropped its 
long-standing
opposition to allowing banks to affiliate with insurance companies, thus 
removing one
of the biggest hurdles to Glass-Steagall Act reform.  Subsequent to year-end 
1996,
the Chairman of the House Banking Committee introduced a bill, the "Financial
Services Competitive Act of 1997," that would eliminate barriers between 
commercial
banking, investment banking and insurance companies.  Such bill, if it becomes 
law,
will allow commercial banks to reduce risk through diversification, enhance
efficiencies by improving the delivery system of financial services, increase
opportunities for sources of capital, and add to their overall profitability.


During 1996, the major emphasis of regulatory change for the banking industry
centered around risk as regulatory agencies issued a number of documents 
addressing
the subject.  On May 24, 1996, the Board of Governors of the Federal Reserve 
System
("Federal Reserve Board") issued Supervisory Release ("SR") 96-14, "Risk-Focused
Safety and Soundness Examinations and Inspections," to summarize and place in 
context
changes made in the examination process and to suggest areas where further 
changes
may occur.  The SR presents the various techniques adopted in recent years to 
sharpen
the focus on risk in Federal Reserve Board examinations of state member banks, 
bank
holding companies, and U.S. branches of foreign banking organizations.  
According to
the Federal Reserve Board, the following risk types are to be evaluated at
examinations and inspections:  (I) credit risk arising from the potential that a
borrower or counterparty will fail to perform on an obligation; (II) market risk
to a
financial institution's condition resulting from adverse changes in interest 
rates,
foreign exchange rates, or equity prices; (III) funding liquidity risk where an
institution is unable to meet obligations due to an inability to liquidate 
assets or
obtain adequate funding; (IV) market liquidity risk where an institution cannot
easily offset exposures without significantly lowering market prices due to
inadequate market depth or market disruptions; (V) operational risk coming from
inadequate information systems, internal control breaches, fraud, or unforeseen
catastrophes that may result in unexpected losses; (VI) legal risk from 
potential
unenforceable contracts, lawsuits, or adverse judgments that may negatively 
affect
operations; and (VII) reputational risk from negative publicity related to an
institution's business practices, true or not, that can lead to a reduced 
customer
base, costly litigation, or revenue reductions.  More comprehensive examinations
and
inspections that minimize supervisory burdens by better focusing transaction 
testing activities result from using a risk-focused approach.

On December 19, 1996, the Federal Financial Institutions Examinations Council
("FFIEC") revised its Uniform Financial Institutions Rating System ("UFIRS") to
address changes in the financial services industry and supervisory policies and
procedures since the system's inception in 1979.  Such system took effect on 
January
1, 1997.  The UFIRS, commonly referred to as the CAMEL rating system, is an 
internal
rating system used by federal and state supervisory agencies to evaluate the
soundness of financial institutions on a uniform basis.  Under the previous 
CAMEL
rating system there were five components considered when assessing an 
institution's
soundness: capital adequacy, asset quality, management and administration, 
earnings,
and liquidity.  The revised system, now known as CAMELS, added an "S" component 
to
address market-risk sensitivity.  The new component stresses better management 
in
foreign exchange exposure, trading risk, and interest rate risk.  The Company's
exposure to interest rate fluctuation is the only component that will be of
significance to its compliance.  Examiners will look for reliable tools that 
measure
an institution's earnings and economic value changes with respect to interest 
rate
changes.  The new system also reformats and clarifies component rating 
descriptions
and definitions, as well as the composite ratings definition, while placing
additional emphasis on all rating components, particularly management and
administration.  CAMELS ratings range from one to five with one being the 
strongest
and five being the weakest.  A financial institution's CAMELS rating has a 
direct
effect on its deposit insurance rates and allowable activities.  The revisions 
to the
system are not expected to have a significant effect on conducting examinations 
nor
are they expected to add to the regulatory burden of examined institutions as 
the
revisions reflect factors that were previously considered by examiners but were 
never really explicitly addressed.  

The banking industry is expected to have another good year in 1997 as profit 
margins
are expected to be supplemented by strong loan growth, stable net interest 
margins,
increased fee income and improved operating efficiencies.  Key ingredients for 
banks
in securing and maintaining market share will be employees, branches and the
efficient delivery of products purchased from others.

REVIEW OF FINANCIAL POSITION:

During 1996, management focused most of its efforts on implementing its 
strategic
plan to transform the Company into a "traditional community bank."  This type of
bank
ensures safety to depositors while providing a reasonable rate of return to
stockholders by limiting the risk exposure of its assets.  Prior to the 
development
of such plan, the Company emphasized a significantly higher degree of 
involvement
with investment activities.  In implementing such plan, management focused on 
the
reallocation of its resources from the reconstitution of the Company's 
investment
portfolio into funding loan demand.  Another key area of concentration was in
lowering the Company's cost of funds.  As a result of these efforts, the Company
did not experience significant growth during 1996.

The Company's total assets grew $3.9 million or 1.1 percent from $350.9 million 
at
December 31, 1995, to $354.8 million at December 31, 1996.  The average total 
asset
growth of the peer group of 35 banks located in Northeastern Pennsylvania was 
9.8
percent in 1996.  The Company's total assets averaged $359.2 million in 1995 as
compared to $347.3 million in 1996, an $11.9 million decrease.  Such reduction 
was
primarily attributable to the retirement of borrowed funds with proceeds from 
the
sale of certain criticized investment securities during the second and third 
quarters
of 1995.  The composition of the Company's balance sheet changed dramatically as
evidenced by a shift in the ratios of average investments and federal funds sold
and
average loans to average earning assets from 43.1 percent and 56.9 percent,
respectively, in 1995 to 34.6 percent and 65.4 percent, respectively, in 1996.

Investment securities declined from $108.7 million to $102.0 million at 
December 31,
1995 and 1996, respectively.  Such reduction was a result of the Company 
utilizing
the proceeds from repayments on investments to fund loan demand not fulfilled 
through
gains in core deposits.  Funds expended on securities during 1996 were invested 
in
either short-term U.S. Treasury or U.S. Government agency securities or 
intermediate-
term obligations of states and municipalities.  The short-term investments were
acquired to fund future loan demand and the tax-exempt municipal securities were
acquired to reduce the Company's tax burden.

Total loans, net of unearned income, increased $22.0 million or 10.3 percent 
during
1996.  The Company had aggregate loans of $19.0 million to certain large
Pennsylvania-based commercial banks at December 31, 1995.  The repayments from 
these
temporary loans were reinvested into longer-term commitments with local 
commercial
and retail customers.  Adjusting for such temporary credit extensions, the loan
portfolio growth was significant at $41.0 million or 21.0 percent during 1996.  
Such
growth, the greatest in the Company's history, was primarily attributable to the
introduction of the "Loan Sale" marketing program.  Such program included 
aggressive
product pricing and increased advertising expenditures.  Aggregate loans of 
$83.3
million having a weighted-average yield of 8.0 percent were originated during 
1996. 
The yield on these new loans was lower than the yield on existing loans as a 
result
of aggressive product pricing.  Accordingly, the effect of such volume 
improvements
did not have as significant an effect on the Company's results of operations as 
it
would have had if the rates on such loans were consistent with existing loans.  
The
average loan growth for the peer group approximated 11.0 percent during 1996.

Despite the marked increase in loan volume, the Company's asset quality improved
compared to year-end 1995 as represented by a reduction in the ratios of
nonperforming loans and nonperforming assets as a percentage of loans, net of
unearned income.  Such ratios were 1.44 percent and 1.62 percent, respectively, 
at
December 31, 1996, compared to 1.75 percent and 1.96 percent, respectively, at
December 31, 1995.  The Company's allowance for loan losses as a percentage of 
loans,
net, declined from 1.83 percent at December 31, 1995, to 1.67 percent at 
December 31, 1996.  Such reduction was attributed to the increased loan volume.

Total deposits increased $3.4 million from $317.1 million at December 31, 1995, 
to
$320.5 million at December 31, 1996.  The slight increase of 1.1 percent 
resulted
from the Company's improved liquidity position and less aggressive pricing 
behavior
due to its higher cost of funds compared to the peer group.  Management 
successfully
reduced the Company's cost of funds from 4.86 percent in 1995 to 4.69 percent in
1996
despite a rise in general market rates.  The peer group reported deposit growth 
of
7.9 percent in 1996 and an increase in their cost of funds from 4.58 percent in 
1995 to 4.69 percent in 1996.


The Company experienced a slight decline in its interest sensitivity and 
liquidity
positions from year-end 1995 to year-end 1996.  Interest sensitivity, as 
measured by
the ratio of cumulative one-year, rate-sensitive assets ("RSA") to 
rate-sensitive
liabilities ("RSL"), declined from 0.93 to 0.73 at December 31, 1995 and 1996,
respectively.  Both ratios exceeded the acceptable guidelines set forth in the
Company's Asset/Liability Management Policy.  In addition, the Company reported 
a decline in its liquidity position as evidenced by a reduction in the ratio of
temporary investments to volatile liabilities.  Such ratio was 118.9 percent at
December 31, 1995, and 54.0 percent at December 31, 1996.  The change in the 
interest
sensitivity and liquidity positions was primarily due to management's 
reallocation of resources from short-term investments to loans.

Stockholders' equity improved from $27.9 million at December 31, 1995, to $31.3
million at December 31, 1996, a $3.4 million increase.  Such increase primarily 
came
from strong earnings of $4.2 million, partially offset by dividends of $623 and 
a
reduction in the net unrealized holding gain of $216.  The key regulatory ratio,
defined as Tier I capital as a percentage of total average assets less goodwill,
increased from 7.0 percent to 8.3 percent at the comparable year-ends of 1995 
and 1996, respectively.  The Company exceeded all relevant regulatory capital
measurements at December 31, 1996, and was considered well capitalized.

Management accomplished a number of significant nonfinancial goals during 1996. 
Such
undertakings included the effectuation of a three-for-one stock split, approval 
of
the Company's common stock listing on the National Association of Securities 
Dealers
Automated Quotation ("NASDAQ") National Market System ("NMS"), and 
implementation of
a document imaging system.  The three-for-one stock split, declared during the 
first
quarter of 1996, became effective April 1, 1996.  Such split fulfilled the 
minimum
share requirement for NASDAQ NMS listing and should foster additional liquidity 
in the Company's common stock.

On June, 17, 1996, the Company began listing on the NASDAQ NMS, the upper-tier 
of the
NASDAQ stock market, as CommBcp under the Symbol "CCBP."  The NASDAQ stock 
market is
a highly-regulated electronic securities market comprised of competing Market 
Makers
whose trading is supported by a communications network linking them to quotation
dissemination, trade reporting and order execution systems.  This market also
provides specialized automation services for screen-based negotiations of
transactions, on-line comparison of transactions, and a range of informational
services tailored to the needs of the securities industry, investors and 
issuers. 
The listing of a company's stock on the NASDAQ stock market typically increases
public interest through publishing bid and ask prices on a consistent basis.  
The
actions taken in 1996 with respect to the Company's common stock had a favorable
effect on stockholders' total return.  Share price appreciation plus reinvested
dividends, commonly referred to as total return, was 89.9 percent for 1996 as
compared to 6.7 percent for 1995.

During the third quarter of 1996, management reinforced its commitment to 
progress by
making the Company the first financial institution in its market area to 
introduce a
document imaging system.  This technology has not only enhanced the 
effectiveness and
efficiency in serving customers but reduced operating costs thus improving
profitability.  Plans have already been formulated to expand utilization of 
imaging
technology into other customer service areas beginning in 1997.  In addition,
management introduced a comprehensive customer service training program for all
employees subsequent to year-end 1996 that will provide existing customers with
service improvements and develop new customer relationships.  With respect to 
matters
affecting stockholders, the Board of Directors voted on February 19, 1997, in 
favor
of establishing a Dividend Reinvestment Plan ("DRP"), scheduled to commence 
during
the second quarter of 1997.  In addition to creating service efficiencies and
effectiveness, developing and improving product lines, and enhancing 
stockholders'
value, management's plans for 1997 include, among others, an ongoing 
comprehensive assessment of existing and new market area expansions.

INVESTMENT PORTFOLIO:

The Company's investment portfolio performed well considering the moderately 
rising
interest rate environment of 1996.  The year began with bullish bond market
sentiment, yet the intermediate-range U.S. Treasury yield curve ended 1996 up
approximately 80 basis points.  The long bond ended the year up nearly 70 basis
points to yield 6.64 percent, while the short end of the curve also rose, albeit
to a lesser degree.

The bond market ended a volatile year with mediocre performance as evidenced by 
the
Lehman Brothers Aggregate Bond Index, which posted a 4.16 percent total return, 
down
from a solid 18.47 percent performance in 1995.  The Company's investment 
portfolio
is primarily a bond portfolio consisting of government securities, obligations 
of
states and municipalities, and mortgage backed securities with an effective 
duration
slightly greater than two years.  Due to its short duration and a rising 
interest
rate environment, the Company's bond portfolio outpaced the general market in 
1996 by
generating a total return of 5.03 percent, unadjusted for taxes. Such return on 
a tax equivalent basis approximated 5.80 percent.

The rising yield curve scenario of 1996 was neither constant nor gradual 
throughout
the year.  Bond yields actually fell for two months then rose swiftly through 
the
summer only to be deflated by a fall market rally, ending the year up slightly. 
As
aforementioned, the FOMC cut the overnight discount rate from 5.25 percent to 
5.00
percent on January 31, 1996, and held the rate at that level throughout the 
year. 
However market volatility ensued, as Wall Street and nervous investors attempted
to
gauge the FOMC's next move.  Such volatility represents risk to the Company's
investment portfolio.

As aforementioned, regulators have recently placed increased emphasis on the 
quality
of risk management practices within financial institutions.  Accordingly, 
management
monitors and limits various risk elements inherent in the Company's investment
portfolio, particularly market or interest rate risk; credit risk; liquidity 
risk;
reinvestment risk; and "timing" or call risk.  The Company's Investment Policy
specifies approved investments and sets limits to risk exposure on both 
individual
securities and the overall portfolio.  Management utilizes quantitative 
techniques,
subjective analysis, regulatory guidance, and its Investment Policy in 
evaluating and limiting risk exposure.

Market or interest rate risk, relates to the inverse relationship between bond 
prices
and market yields.  Such risk is defined as the risk that increases in general 
market
rates will result in market value losses.  Market risk represents the greatest 
risk
to bond investors.  Management quantifies and limits such exposure through 
"stress
test" modeling and by limiting the duration of individual securities and the
portfolio as a whole.  Stress test modeling involves measuring the change in 
value of
an investment given an immediate and parallel shift in the yield curve or 
"shock." 
As suggested by the model, management would expect the investment portfolio to
decline in value by approximately 6.1 percent given a rising rate shock of 300 
basis
points.  Management deems this level of risk to be acceptable considering the
Company's capital position and overall financial well-being.

Market risk had a slightly adverse effect on the Company's investment portfolio
during 1996.  As a result of the surprisingly strong economic expansion and the
ensuing increase in interest rates, the net unrealized holding gain on 
investment
securities declined from $780, net of deferred income taxes of $401, to $564, 
net of
deferred income taxes of $291, from December 31, 1995, to December 31, 1996.  
The
unrealized holding gain was 0.85 percent of amortized cost at December 31, 1996,
which exceeded the average gain of 0.51 percent reported by the peer group.  

According to the stress test model, the majority of such market risk resides in 
the
Company's state and municipal securities portfolio.  The excess of fair value 
over
amortized cost for such portfolio declined $292, slightly less than 1.0 percent 
of
its value, during 1996.  This market risk results from the longer effective 
duration
of approximately 4.0 years in the state and municipal securities portfolio as
compared to approximately 0.8 years in the remainder of the portfolio at 
year-end
1996.  Duration measures the percentage change in price per 100 basis point 
change in
yield levels, assuming an immediate and parallel shift in the yield curve.  The 
tax-exempt feature of such investments serves to reduce their effective duration
and
susceptibility to fair value depreciation relative to taxable securities.  The
weighted-average life of the state and municipal securities portfolio was 8.1 
years at December 31, 1996.  

As a result of the state and municipal securities portfolio's susceptibility to
changes in interest rates, management, in conjunction with an external 
investment
advisory group, intends to implement a "trigger" strategy in 1997 for such
investments.  The portfolio will be monitored for significant value 
deteriorations
resulting from increases in general market rates with appropriate action taken 
upon the occurrence of some predefined threshold level of deterioration.

Credit risk, referring to the probability that an issuer is unable to meet 
principal
and interest payments on a timely basis, was mitigated through the portfolio's
composition.  U.S. Treasury and U.S. Government agencies, including mortgage 
backed
securities, accounted for 60.1 percent of aggregate investments at 
December 31, 1996. 
The majority of the remaining portion of the portfolio consists primarily of 
insured
general obligations of states and municipalities that received  a rating of 
"AAA"
from Moody's or Standard and Poor's rating services.  Management considers 
repayment
sources, municipal bond insurance, credit quality, and changes in credit ratings
when dealing in the municipal bond sector.

Liquidity risk refers to the ease at which a security can be converted to cash 
at or
near its true value.  The spread between the bid price and the ask price quoted 
by a
dealer serves as a proxy for such risk.  Management considers its liquidity risk
exposure to be low based on the high concentration of U.S. Treasury and related
securities, which tend to offer the greatest liquidity relative to other 
investment
vehicles. Management pays particular attention to the bid/ask spread on its 
holdings
of mortgage backed securities as such securities tend to be less liquid than 
U.S. Treasury securities. 

Reinvestment risk concerns reinvested cash flows or the "interest on interest"
component of investment returns.  As market rates fall, the coupon payments of a
bond
will be reinvested at lower rates thus reducing total returns.  Given the 
overall
structure of the Company's balance sheet, where liabilities tend to reprice 
quicker
than assets, reinvestment risk, or a decline in interest rates, is generally not
as
great a concern as market risk.  Based on the interest sensitivity of the 
Company's
overall balance sheet, management feels that the reinvestment risk inherent in 
the
investment portfolio will not adversely affect the Company's financial 
performance.

Many bonds contain a provision that grants the issuer an option to call the 
issue, or
part of the issue, before the maturity date.  Other securities, such as mortgage
backed bonds, may prepay earlier or extend longer than expected.  Such options 
allow
the issuer the flexibility to refinance if market rates fall substantially below
The
investment's coupon rate.  Call, prepayment and extension risks are essentially 
all
timing risk.  Timing risk refers to the uncertainty of the timing of cash flows 
for a
given investment or portfolio of investments.  Timing risk exists in the 
Company's
holdings of U.S. Government agencies, obligations of states and municipalities, 
and
mortgage backed securities.  Call provisions present three disadvantages from 
the
Company's perspective: (I) the cash flow pattern of the investment is uncertain;
(II)
the issuer may call the bond when rates fall, thus increasing the Company's 
exposure
to reinvestment risk; and (III) the capital appreciation of the bond will be
truncated since a callable bond's price will not rise much above the price at 
which the issuer can call the bond.

The Company limits its cash flow timing risk through policy limitations on the
allowable amount of holdings with such risk.  Moreover, the Company utilizes 
modeling
techniques to monitor its timing risk exposure.  One such model utilizes median
dealer prepayment assumptions on mortgage backed securities to project future
principal and interest cash flow streams under multiple interest rate scenarios.
The
model measures both prepayment and extension risk.  Based on interest rate
projections of plus or minus 300 basis points at December 31, 1996, the Company
expects to receive a minimum of $829 or a maximum of $2.7 million in mortgage 
related security principal repayments throughout the coming year.  

Other sources of risk include regulatory and legal, yield curve, inflation, 
event,
sector and volatility.  Most of these risks are substantially mitigated through 
the
techniques discussed above.  For example, management feels that its interest 
rate
modeling techniques largely reduce inflation risk.  Other risks, such as 
regulatory
and legal risk, are considered by management in a more subjective manner and one
addressed in Investment Committee or Asset/Liability Management Committee 
("ALCO")
meetings.  Additionally, the Company's Investment Policy promotes safety and
soundness in the investment portfolio through the establishment of strict 
limitations
on the quality, quantity and maximum maturity of each type of security.  
Moreover,
various operational procedures enhance controls and assure adherence to the
Investment Policy.  

Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for 
Certain
Investments in Debt and Equity Securities," requires investments to be 
classified and
accounted for as either held to maturity, available for sale, or trading account
securities based on management's intent at the time of acquisition.  Management 
is
required to reassess the appropriateness of such classifications at each 
reporting date.

The Company classified debt securities as held to maturity when management had 
the
positive intent and ability to hold such securities to maturity.  Held to 
maturity
securities were stated at cost, adjusted for amortization of premium and 
accretion of
discount.  All investment securities were designated as available for sale at
December 31, 1996, giving management the option to use such securities to 
implement
asset/liability strategies in response to changes in interest rates, prepayment 
risk,
liquidity requirements, or other circumstances identified by management.  
Securities
that are bought and principally held for the purpose of selling them in the 
near-
term, in order to generate profits from market appreciation, should be 
classified as
trading account securities.  The Company discontinued its trading activities 
prior to
the fourth quarter of 1994, thus eliminating its trading account classification.

The appropriateness of the Company's accounting classifications for investment
securities became more significant as a result of the Auditing Standards Board
issuance of Statement on Auditing Standards ("SAS") No. 81, "Auditing 
Investments,"
during December 1996.  SAS No. 81 requires external auditors to ascertain 
whether a
company has adopted accounting policies that conform with generally accepted
accounting principles.  Furthermore, the auditors must evaluate whether 
management
has appropriately classified investment securities in accordance with its stated
intent.  The auditors will be required to examine evidence such as written and
approved records of investment strategies and investment activities, 
instructions to
portfolio managers, and minutes of meetings of the Board of Directors or the
Investment Committee.  The effective date of SAS No. 81 is for audits of 
financial
statements for periods ending on or after December 15, 1997, with earlier 
application permitted.

The following table sets forth the carrying values of the major classifications 
of
securities as they relate to the total investment portfolio over the past five 
years:

DISTRIBUTION OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>

                                       1996             1995             1994             1993             1992        
                                 ----------------- ---------------- --------------- -------------- -------------------              
DECEMBER 31                        AMOUNT    %      AMOUNT    %      AMOUNT    %     AMOUNT    %      AMOUNT    %   
----------------------------------------------------------------------------------------------------------------------
<S>                              <C>     <C>     <C>      <C>      <C>      <C>     <C>     <C>     <C>      <C>           
Held to maturity:   
U.S. Treasury securities........                                   $ 12,042   7.89% $13,027   8.96% $ 27,956  25.28%
U.S. Government agencies........                                     36,993  24.25   29,306  20.16     3,730   3.37
State and municipals............                                     20,616  13.51   20,000  13.75    13,065  11.82
Mortgage backed securities......                                     38,015  24.92   28,042  19.29    21,339  19.30
Other securities................                                                      1,305   0.90     3,125   2.83
                                 -------- ------  -------  ------  -------- ------  ------- ------  -------- ------  
  Total held to maturity........                                    107,666  70.57   91,680  63.06    69,215  62.60 
                                --------- ------  -------  ------  -------- ------  ------- ------  -------- ------  

Available for sale:
U.S. Treasury securities........ $ 35,619  34.92% $ 43,751  40.25%    3,366   2.21    2,995   2.06
U.S. Government agencies........   18,606  18.24    26,213  24.11     7,283   4.77    5,959   4.10
State and municipals............   38,295  37.55    30,512  28.07
Mortgage backed securities......    7,058   6.92     6,154   5.66    29,444  19.30   41,854  28.78    41,357  37.40
Other securities................    2,416   2.37     2,076   1.91     4,807   3.15    2,912   2.00                 
                                 -------- ------  -------- ------  -------- ------  ------- ------  -------- ------
  Total available for sale......  101,994 100.00   108,706 100.00    44,900  29.43   53,720  36.94    41,357  37.40
                                 -------- ------  -------- ------  -------- ------  ------- -------
    Total....................... $101,994 100.00% $108,706 100.00% $152,566 100.00%$145,400 100.00% $110,572 100.00%
                                 ======== ======  ======== ======  ======== ====== ======== ======  ======== ======   
</TABLE>
The investment portfolio was less prominent with respect to the Company's 
financial
position in 1996.  Average investments declined from 37.4 percent of average 
assets
in 1995, to 31.7 percent in 1996.  Such reduction was in response to management
transforming the Company's balance sheet to a more traditional community bank
structure, favoring loans over investments.  In comparison, the peer group held 
33.6
percent of its average assets in investment securities.  During 1994, the 
Company's investment portfolio comprised 44.8 percent of average assets.  

As a result of the reconstitution of the Company's investment portfolio in the 
second
and third quarters of 1995, management has not reestablished a held to maturity
classification.  The transfer of held to maturity securities to available for 
sale
called into question or "tainted" management's intent.  In accordance with the
Financial Accounting Standard Board's ("FASB") Special Report, "A Guide to
Implementation on Statement No. 115 on Accounting for Certain Investments in 
Debt and
Equity Securities," after securities are reclassified to available for sale in
response to a "taint", an enterprise is prohibited from classifying debt 
securities
as held to maturity until such time when management could reestablish 
credibility of
its classification policies.  Management believes it can credibly assess its 
intent
and ability to classify purchases as held to maturity and to transfer securities
into
a held to maturity portfolio.  It believes circumstances surrounding the 1995
transfer to be a one-time event as they resulted from the prior investment 
practices and actions that significantly exposed the Company to interest rate 
risk. 
Specifically, the prior investment practices and actions included those that are
referred to as unsuitable pursuant to the Federal Reserve Board's Supervisory 
Policy
Statement on Securities Activities effective February 10, 1992, and revised 
April 15,
1994, and the Federal Reserve Board's Supervisory Policy Statement on Structured
Notes effective September 21, 1995.  The Company's Investment Policy, as 
approved by
the Board of Directors on August 30, 1995, specifically prohibits any such
activities, including option and derivative transactions, in the future.

The Company continues to classify its entire investment portfolio as available 
for
sale.  Such classification affords the Company greater flexibility in its
asset/liability management strategies.  Additionally, such classification 
simplifies
the decision-making process by aligning accounting methods with the 
asset/liability
risk management objective of protecting the Company's economic net worth.  A 
trend
toward available for sale classification is also evident in the peer group, as 
90.3
percent of securities were classified as available for sale at December 31, 
1996, an
increase from 87.7 percent at December 31, 1995.  Management does not anticipate
classifying any of its investments as held to maturity in the near term.

Proceeds from the sale of securities amounted to $1.5 million and $87.1 million 
in
1996 and 1995, respectively.  The restructuring of the investment portfolio 
accounted
for such proceeds in 1995.  The 1996 investment sales consisted of four 
variable-
rate, collateralized mortgage obligations ("CMOs").  Such decision by the 
Investment
Committee resulted from their reassessment of these investments' appropriateness
with
respect to their structure, composition and characteristics in line with future
investment goals.  The Company recognized net losses of $58 and $4,393 in 1996 
and 1995 respectively, related to such sales.  


Repayments from investment securities totaled $25.2 million in 1996 and $4.9 
million
in 1995.  The level of repayments increased as a function of management's
establishment of a short-term "liquidity ladder" with the proceeds from the
investment portfolio's reconstitution.  Management has constructed a short-term
laddered U.S. Treasury securities portfolio that assists the Company in meeting 
its
liquidity needs by structuring principal maturities at regular intervals.  A 
large
portion of such proceeds was directed toward funding loan growth with the excess
reinvested in short-term securities to satisfy future credit demand.  For each 
of the
next 21 months, at least $500 is scheduled to mature from this portfolio.  
Investment
purchases amounted to $20.2 million and $44.2 million in 1996 and 1995, 
respectively. 
Invested proceeds were placed in short-term U.S. Treasury and U.S. Government 
agency
securities and intermediate-term obligations of states and municipalities, in
conformity with a "barbell" investment strategy.  Short-term investments will 
provide
liquidity, assuring necessary funding for future loan demand, whereas purchases 
of
tax-exempt municipal obligations will lower the Company's effective tax rate.  
The
Company expects investment maturities of $25.5 million and $29.7 million in the 
next
two years.  Management expects to continue following such a barbell investment
strategy through redirecting excess funds not utilized in lending to investments
in
short-term U.S. Government securities and intermediate-term, state and municipal
obligations. 

The tax equivalent yield on the investment portfolio in 1996 was relatively 
unchanged
from the 6.4 percent level of 1995.  U.S. Treasury securities and state and 
municipal
bonds comprised 72.5 percent of the investment portfolio at December 31, 1996, 
versus
68.3 percent at December 31, 1995.  As aforementioned, the credit risk inherent 
in
the investment portfolio is limited.  Except for U.S. Treasury securities and 
U.S.
Government agencies, there were no securities of any individual issuer that 
exceeded
10.0 percent of the Company's stockholders' equity at December 31, 1996 or 1995.
All
of the investment securities in the Company's portfolio are considered 
"investment
grade," receiving a rating of "Baa" or higher from Moody's or "BBB" or higher 
from
Standard and Poor's rating services, except for $2,416 of tax-exempt obligations
of
local municipalities, at December 31, 1996.  Investment securities with an 
amortized
cost of $35,099 and $33,997 at December 31, 1996 and 1995, respectively, were 
pledged
to secure deposits, to qualify for fiduciary powers, and for other purposes 
required
or permitted by law.  The fair value of such securities was $34,968 and $34,050 
at December 31, 1996 and 1995, respectively.

The following table sets forth the maturity distribution of the amortized cost, 
fair
value and weighted-average tax equivalent yield of the available for sale 
portfolio
at December 31, 1996.  The weighted-average yield based on amortized cost has 
been
computed for state and municipals on a tax equivalent basis using the statutory 
tax
rate of 34.0 percent. The distributions are based on contractual maturity with 
the
exception of mortgage backed securities, CMOs and equity securities.  Mortgage 
backed
securities and CMOs have been presented based upon estimated cash flows, 
assuming no
change in the current interest rate environment.  Equity securities with no 
stated
contractual maturities are included in the after ten years maturity 
distribution. 
Expected maturities will differ from contracted maturities because borrowers 
have the
right to call or prepay obligations with or without call or prepayment 
penalties.

<TABLE>
<CAPTION>


MATURITY DISTRIBUTION OF AVAILABLE FOR SALE PORTFOLIO

                                                AFTER ONE       AFTER FIVE
                                  WITHIN        BUT WITHIN      BUT WITHIN        AFTER
                                 ONE YEAR       FIVE YEARS      TEN YEARS       TEN YEARS          TOTAL      
                              -------------------------------------------------------------------------------
DECEMBER 31, 1996             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. Treasury securities.... $15,034   5.62% $20,643   5.71%                                 $ 35,677   5.67%
U.S. Government agencies....   8,390   4.64   10,446   4.80                                    18,836   4.73 
State and municipals........   1,130   5.36    3,903   6.51   $6,150   8.50% $26,509   7.96%   37,692   7.82
Mortgage backed securities..     923   6.76    5,841   6.35      286   6.26                     7,050   6.40
Equity securities...........                                                   1,884   5.78     1,884   5.78
                             -------         -------          ------         -------         -------- 
  Total..................... $25,477   5.33% $40,833   5.65%  $6,436   8.40% $28,393   7.82% $101,139   6.35%
                             =======         =======          ======         =======         ========            

Fair value:
U.S. Treasury securities.... $15,020         $20,599                                         $ 35,619
U.S. Government agencies....   8,324          10,282                                           18,606
State and municipals........   1,131           3,918          $6,404         $26,842           38,295
Mortgage backed securities..     929           5,891             238                            7,058
Equity securities...........                                                   2,416            2,416
                             -------         -------          ------         -------         -------- 
  Total..................... $25,404         $40,690          $6,642         $29,258         $101,994
                             =======         =======          ======         =======         ========
</TABLE>

As a result of successfully implementing the reconstitution plan during 1995, 
the
Company's investment portfolio contained no high-risk CMOs, as defined in the 
Federal
Reserve Board's Supervisory Policy Statement on Securities Activities at 
December 31,
1996 or 1995.  Such securities are structured mortgage backed securities that at
the
time of purchase, or at a subsequent testing date, meet any of the average life 
or
interest sensitivity tests.  A security is classified as a high-risk mortgage
security if it meets any of the following tests: the mortgage product has an 
expected
weighted-average life of greater than ten years; the expected weighted-average 
life
of the product extends by more than four years or shortens by more than six 
years,
assuming interest rate shocks of plus or minus 300 basis points; or the 
estimated
change in price of the product is more than 17.0 percent given similar rate 
shocks. 
The test applies to the Company's CMOs while non-CMO products, such as pooled
mortgage backed securities, are excluded.  None of such Federal Reserve Board 
defined
high-risk securities met the criteria for high-risk, nonequity CMOs as defined 
in
Issue 2 of FASB's Emerging Issues Task Force ("EITF") Issue No. 89-4, 
"Accounting for
a Purchased Investment in a Collateralized Mortgage Obligation Instrument or in 
a Mortgage Backed Interest-Only Certificate."  EITF Issue No. 89-4 defines 
high-risk,
nonequity CMOs as those that have the potential for loss of a significant 
portion of
their original investments due to changes in interest rates, prepayment rate of 
the
assets of the CMO structure, or earnings from temporary reinvestment of cash
collected by the CMO structure but not yet distributed to the holders of its
obligations.    The Company held $4.4 million of CMOs at December 31, 1996.  
None of
such securities failed any of the high-risk tests at December 31, 1996.  
Moreover, 
the possibility of any such security failing any of the high-risk tests at some
future date is unlikely.  For example, the longest weighted-average life of any 
CMO
product held by the Company was three years at December 31, 1996.  Additionally,
the
greatest percentage change in weighted-average life was 1.2 percent, given a 
rate
shock in either direction.  Finally, the most volatile CMO held by the Company
exhibited a percentage price change of no more than 7.3 percent in the stress 
test.

The Company sold the majority of its holdings of structured notes during the 
1995
sale of certain available for sale securities.  As a result, the carrying value 
of
structured notes totaled $2.9 million at December 31, 1996 and 1995.  After 
receiving
a consensus opinion from external investment management consultants and review 
by
regulatory agencies, management decided to continue to hold three structured 
notes
having maturities of less than three years at December 31, 1995.  Specifically, 
such
securities include a dual-index floater, a delevered floater, and a multi-step 
bond. 
Each has a carrying value of approximately $1.0 million.  For information with
respect to accounting considerations and treatment of such instruments, refer to
Note 3 of the Notes to Consolidated Financial Statements.

The Company has had no dealings in derivative financial instruments since it
discontinued its writing of covered option contracts on U.S. Treasury securities
during the fourth quarter of 1994.  Such instruments were the Company's only
involvement in derivatives according to SFAS No. 119, which excludes mortgage 
backed
securities from its definition.  The Company's 1995 Investment Policy, as 
amended,
prohibits transactions involving high-risk CMOs, structured notes and derivative
instruments.  

LOAN PORTFOLIO:

Except for major money center financial institutions that have a higher 
percentage of
their loan portfolios invested in commercial activities, loans to finance 
one-to-four
family residential properties account for the predominant portion of lending
activities for most banks.  The housing market and economic conditions affecting
it
are especially significant to the Company's current and future financial 
viability as
residential mortgage lending accounts for approximately two-thirds of its 
aggregate lending activities.

For 1996, national residential investment spending rose 4.0 percent, reversing a
decline from the previous year.  This growth was aided by favorable weather
conditions, affordable interest rates and improved national economic growth.  
Housing
provided a key source of the nation's economic strength in 1996.  For the year, 
new
homes sold totaled 758 thousand, the largest number since 1978, with the 
northeast
region of the country experiencing the greatest increase at 36.4 percent.  Sales
of
previously-owned homes also rose sharply to over 4.1 million, breaking an 
eighteen-
year record.  In addition, housing starts for 1996 moved in a favorable 
direction
rising by 8.9 percent for the year nationally and 11.2 percent in the Northeast.
Starts for new homes and apartments increased from 1.35 million units in 1995 to
1.47
million units in 1996.  Of these new starts, 1.16 million were for new 
single-family
dwellings, marking a 7.8 percent increase over the 1995 figure.  The median 
selling
prices on new and existing homes rose in 1996 compared to 1995 from $133.9 and
$112.9, respectively, to $145.0 and $118.0, respectively.  

Interest rates on thirty-year mortgages also showed a steady increase throughout
1996
as they went from 7.0 percent in January to 7.6 percent in December.  Despite 
these
increases, housing purchases remained very affordable due to the improving 
economic
conditions prevalent throughout 1996.  Low mortgage rates, strong job growth, 
and
high consumer confidence are all reasons to believe there will be continued 
strength
in housing expenditures.  Housing plays a key role in the national economy as it
influences employment, manufacturing of building materials, and sales of 
products used to equip and furnish homes.

Economic conditions in the Company's market area were also favorable for 
mortgage
lending.  In the Company's quad-county market area, average annual property 
taxes amount to approximately one-half of the average experienced nationally. 
Additionally, Northeastern Pennsylvania is rated as the second most affordable 
area
to live in the Commonwealth with its metropolitan area also ranked second among 
areas
of similar populations across the nation.  Finally, according to a nationwide 
price
comparison survey the Company's market area is ranked nineteenth in the United 
States
in terms of affordable housing.  For the area, an average corporate transfer 
home,
defined as a single-family home with four bedrooms, a family room, two and 
one-half
bathrooms, a two-car garage, and 2,200 square feet, sold for an average of $130.
On a national level this average was $206.

Business lending in the United States also enjoyed the benefits of a strong 
economy
in 1996.  Encouraged by the prospects of sustained economic expansion and low
inflation, banks displayed a large appetite for business obligations and 
appeared
willing to ease compensation requirements for the risk entailed.  This easing of
standards led to a 4.5 percent increase in commercial and industrial loans
outstanding as they rose from $536.0 trillion at year-end 1995 to $560.0 
trillion at year-end 1996.  

With respect to the Company's commercial loan practices, it was ranked second by
the
U.S. Small Business Administration's Office of Advocacy among Pennsylvania banks
with
assets between $300.0 million and $500.0 million for its "small business 
friendly"
lending activities.  Five criteria are used in ranking banks.  They include:  
(I) the
ratio of small business loans of less than $250 to assets; (II) the ratio of 
small
business loans to total business loans; (III) the ratio of small business loans 
to
total deposits; (IV) the total dollar amount of business loans; and (V) the 
total number of business loans outstanding.

Contrary to the easing of standards for business lending, national conditions 
for
consumer lending tightened.  Such tightening came in response to banks reacting 
to
the rising volume of credit card delinquencies and charge-offs experienced 
throughout
the year.  Despite such action by financial institutions, outstanding consumer 
loans
rose to $1.23 trillion at year-end 1996 from $1.02 trillion for the same period 
of
1995.  Such increase resulted from consumers using lower-costing home equity 
loans in place of higher-costing installment products.

Loans, net of unearned income, were $235.8 million at December 31, 1996, an 
increase
of $22.0 million, or 10.3 percent, over the volume reported at December 31, 
1995. 
Such increase, adjusted for short-term credit extensions to other financial
institutions, would have approximated $41.0 million in 1996.  The Company had
aggregate commercial loans of $19.0 million to certain large Pennsylvania-based
commercial banks at December 31, 1995.  The Company had no such loans at 
year-end
1996.  The increase in aggregate loan demand, after considering such adjustment,
can
be primarily explained by a rise in the volume of loans to finance one-to-four 
family
residential properties of $27.6 million and those to finance commercial and
industrial enterprises of $9.2 million.  Loans, net of unearned income, as a
percentage of total earning assets were 69.1 percent and 63.3 percent at 
December 31,
1996 and 1995, respectively.  Such material increase resulted from a combination
of
favorable borrowing conditions for consumers and management placing stronger 
emphasis
on fulfilling its strategic goal.  During 1996, the peer group's average loans
accounted for 64.0 percent of average assets as compared to the Company's ratio 
of
63.0 percent.  Management expects loan demand to mirror that of 1996 based on 
its
renewed emphasis on making loans a more prominent component of the Company's 
asset
mix.  However, demand could suffer if interest rates climb or local employment
conditions deteriorate.

The Company's volume of loans with predetermined interest rates increased $16.0
million and represented 79.9 percent of the portfolio while those bearing 
floating or
adjustable interest rates rose $6.0 million and represented 20.1 percent of the
portfolio at December 31, 1996.  Customers, in protecting against a rise in 
interest
rates, opted for fixed-rate products as opposed to variable-rate products.  The 
tax
equivalent yield on the loan portfolio declined from 8.8 percent in 1995 to 8.6
percent in 1996.  Such decrease primarily came during the second and third 
quarters
of 1996 when management's aggressive product pricing through its "Loan Sale"
marketing efforts reduced rates to their lowest point for 1996 thus initiating
increased loan demand and leading existing customers to refinance.  Rates 
increased
for the final quarter of 1996 as the Company became less aggressive in its 
product
pricing, which led to loan yields that approached 1995 levels.  For the year, 
the
Company's volume of refinanced residential mortgages increased significantly 
from
$9.5 million in 1995 to $23.1 million in 1996 as customers with existing loans 
took
advantage of the Company's favorable interest rate offerings.  Management 
expects
loan yields to remain level or rise slightly during 1997 as a result of 
intensified pressure in competing for deposits.

The composition of the loan portfolio changed during 1996 primarily due to the
favorable conditions for mortgage lending and the removal of short-term credit
extensions made to commercial banks.  Commercial loans declined $9.8 million 
during
1996 and represented 13.5 percent of loans, net of unearned income.  Excluding 
the
effects of the $19.0 million in repayments received from commercial bank loans, 
such
segment of the loan portfolio would have experienced an increase of $9.2 million
during 1996.  The Company experienced a $1.9 million rise in consumer loans from
$19.3 million at December 31, 1995, to $21.2 million at December 31, 1996.  
Although
the Company reported a 10.0 percent increase in consumer credit, it lagged the 
20.6
percent increase witnessed by commercial banks throughout the nation.  The 
favorable
mortgage lending conditions for 1996 resulted in loans to finance real estate 
taking
a more prominent position in the Company's loan mix at approximately 77.5 
percent of total loans outstanding from approximately 71.5 percent a year 
earlier.  

Based on the Company's asset/liability simulation model, management feels 
confident
that it can facilitate loan demand through payments and prepayments on 
investments
and loans, and increases in core deposits.  Management expects to receive
approximately $50.8 million from repayments on loans and investment securities 
during
1997.  In the event an unforeseen increase in loan demand arises during 1997,
management could facilitate such demand by aggressively competing for deposits 
or
utilizing various credit products available through the Federal Home Loan Bank 
of Pittsburgh ("FHLB-Pgh").

At December 31, 1996, the Company had no concentrations of loans exceeding 10.0
percent of total loans, excluding locational concentrations, to individual or
multiple borrowers engaged in similar activities that would cause them to be
similarly affected by changes in economic or other conditions.  The Company 
limits
its exposure to concentrations of credit risk by the nature of its lending 
activities
as approximately 61.9 percent of total loans outstanding are secured by 
residential
properties.  The average mortgage outstanding on a residential property was 
$36.2 at
December 31, 1996.  The Company maintains a policy restricting the loan-to-value
ratio at 80.0 percent.  The loan portfolio does not consist of any form of 
credit
involving highly-leveraged transactions, defined as financing transactions that
involve the buyout, acquisition or recapitalization of an existing business and
include credits extended to highly-leveraged industries.


In the normal course of business, the Company is a party to financial 
instruments
with off-balance sheet risk to meet the financing needs of its customers.  Such
instruments involve, to varying degrees, elements of credit and interest rate 
risk in
excess of the amount recognized in the financial statements.  Management does 
not
anticipate that losses, if any, which may occur as a result of funding 
off-balance
sheet commitments would have a material adverse effect on the Company's results 
of operations or financial position.

The Company's involvement in, and exposure to, credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit, unused portions of home equity and credit card lines, and 
commercial
letters of credit is represented by the contractual notional amounts of those
instruments.  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 the Company to support customers in the purchase of 
commercial
goods.  Such letters of credit are automatically renewable upon their 
anniversary date unless cancelled prior to such date at the option of the 
Company.

The Company employs the same credit policies and requirements in making 
off-balance
sheet credit commitments as it does for on-balance sheet instruments.  Provision
for
loan losses, if any, is included in the Company's allowance for loan losses.  No
provision was deemed necessary at December 31, 1996 or 1995.  Such commitments 
are
generally issued for one year or less and often expire unused in whole or part 
by the
customer.  The amount of collateral obtained is based on management's credit
evaluation of the customer.  Collateral held varies but may include property, 
plant
and equipment, primary residential properties, and to a lesser extent, income-
producing properties.  The Company's exposure to such commitments was $10.9 
million at December 31, 1996, and $9.6 million at December 31, 1995.

The following table sets forth the composition of the loan portfolio at year-end
for the past five years:
<TABLE>
<CAPTION>

DISTRIBUTION OF LOAN PORTFOLIO

                                         1996             1995             1994             1993             1992       
                                   ------------------------------------------------------------------------------------
DECEMBER 31                          AMOUNT    %      AMOUNT    %      AMOUNT    %      AMOUNT    %      AMOUNT     %   
-----------------------------------------------------------------------------------------------------------------------
<S>                                <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>       <C>              
Commercial, financial and others.. $ 31,744  13.46% $ 41,593  19.45% $ 29,419  15.13% $ 22,633  12.82% $ 21,754   13.38%
Real estate:
  Construction....................    3,698   1.57     1,014   0.47     2,771   1.42     5,079   2.88     4,980    3.06
  Mortgage........................  179,134  75.97   151,926  71.05   138,379  71.15   125,848  71.31   112,544   69.20
Consumer, net.....................   21,227   9.00    19,302   9.03    23,916  12.30    22,922  12.99    23,365   14.36
                                   -------- ------  -------- ------  -------- ------  -------- ------  --------  ------
  Loans, net of unearned income...  235,803 100.00%  213,835 100.00%  194,485 100.00%  176,482 100.00%  162,643  100.00%
                                            ======           ======           ======           ======            ====== 
Less: allowance for loan losses...    3,944            3,903            3,576            3,169            2,497  
                                   --------         --------         --------         --------         --------     
    Net loans..................... $231,859         $209,932         $190,909         $173,313         $160,146
                                   ========         ========         ========         ========         ========            
</TABLE>


Management continually examines the maturity distribution and interest rate 
sensitivity of the loan portfolio in an attempt to limit interest rate risk and
liquidity strains.  Approximately 34.6 percent of the lending portfolio will 
reprice
within the next 12 months as management attempts to reduce the average term of 
fixed-
rate loans and increase its holdings of variable-rate loans in order to limit 
future
interest rate risk.  The 34.6 percent falls below the 41.1 percent at 
December 31,
1995, but is an improvement over the 33.9 percent recorded at September 30, 
1996.  In
terms of volume, variable-rate loans have increased $5.9 million, or 14.3 
percent,
from $41.4 million at December 31, 1995, to $47.3 million at December 31, 1996.

The following table sets forth the maturity and repricing information of the 
loan portfolio by major category at December 31, 1996:
<TABLE>
<CAPTION>

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO

                                                                        AFTER ONE
                                                            WITHIN      BUT WITHIN       AFTER     
DECEMBER 31, 1996                                          ONE YEAR     FIVE YEARS     FIVE YEARS       TOTAL
-------------------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>           <C>         <C>      
Maturity schedule:
Commercial, financial and others........................... $13,586        $ 9,428       $  8,730    $ 31,744
Real estate:
  Construction.............................................   3,698                                     3,698
  Mortgage.................................................   5,295         21,713        152,126     179,134 
Consumer, net..............................................   2,720         11,788          6,719      21,227
                                                            -------        -------       --------    --------
    Total.................................................. $25,299        $42,929       $167,575    $235,803
                                                            =======        =======       ========    ========

Repricing schedule:
Predetermined interest rates............................... $34,201        $64,486       $ 89,781    $188,468
Floating or adjustable interest rates......................  47,335                                    47,335
                                                            -------        -------       --------    --------    
    Total.................................................. $81,536        $64,486       $ 89,781    $235,803
                                                            =======        =======       ========    ======== 
</TABLE>

The Company does not sell, provide servicing for others, or securitize mortgage
loans.  Accordingly, SFAS No. 122, "Accounting for Mortgage Servicing Rights,"
adopted by the Company on January 1, 1996, had no effect on operating results or
financial position.

ASSET QUALITY:

Bankruptcies, delinquencies and bank charge-offs increased during 1996, however
overall asset quality did not experience a significant deterioration.  Banks and
credit card companies wrote-off bad debt at record paces despite consumer 
confidence
reaching its highest level in seven years.  This confidence has led to consumers
taking on debt at a frenzied pace.  National charge-off levels rose to near the
levels experienced during the last recession in 1990 and 1991.  Such levels 
caught
banks off guard as some deterioration in the consumer loan portfolio was 
expected but
not to the extent that it occurred.  The unexpectedly high levels were 
attributable
to an increase in personal bankruptcies of 30.0 percent in 1996.  In 
Pennsylvania,
personal bankruptcies rose 62.0 percent above the 1995 level, ranking second 
only to
Florida in percent increase.  This increase stemmed in part from bankruptcy code
changes that went into effect at the beginning of the year.   

Credit card delinquencies also experienced a sharp rise as credit card issuers 
were
overzealous and indiscriminatory in pursuing customers during the first half of 
1996. 
Such practices played a major role in credit card late payments during the first
quarter of 1996 reaching their highest levels since 1981 and reaching a 
historical
high of 3.7 percent.  Banks responded to deteriorating consumer loan portfolios 
by
tightening lending standards and terms on consumer loans, particularly credit 
card
loans, during the second half of 1996.  Conversely, banks eased terms and 
conditions
on home equity loans.   Most banks have been increasing reserves and limiting 
new
credit card issuances, however a severe recession could lead to widespread
delinquencies.  

As aforementioned, unemployment rates in the Company's market area remain well 
above
the levels reported for the United States and Pennsylvania.  The main reason 
that
unemployment in the Company's market area is higher than that of Pennsylvania 
may lie
in the composition of the local labor force. Blue collar workers comprise 34.0
percent of the laborers in the Company's market area as compared to only 29.0 
percent
for the Commonwealth.  Job openings for blue collar workers accounted for just 
23.0
percent of the total, thus limiting opportunities for employment in the 
Company's
market area.  Despite the inflated unemployment levels as compared to the nation
and
the Commonwealth, asset quality has improved in the Company's market area.  Such
improvement is evidenced by declines in the peer group's ratios of nonaccrual 
loans
as a percentage of gross loans and nonperforming loans as a percentage of gross
loans.  At December 31, 1996, the peer group's ratios were 0.54 percent and 1.34
percent, respectively, compared to 1.37 percent and 1.71 percent, respectively, 
at
December 31, 1995.  Management is aware that should local economic conditions
deteriorate in 1997, asset quality may suffer.  As a result, management will 
place additional emphasis on monitoring asset quality during 1997.

The Company attempts to manage credit risk through diversification of the loan
portfolio and application of policies and procedures designed to foster sound 
lending
practices.  Such policies include certain standards that assist lenders in 
making
judgments related to the character, capacity, capital structure and collateral 
of the
borrower.  In addition, the lender is to ascertain whether the borrower will be 
able
to repay the credit based on prevailing and expected business conditions.  
Although
supervised by a central loan committee, each community office is responsible for
credit administration of its loan portfolio, including analyzing credit 
applications
and making lending approvals within specified limits, in order to minimize 
credit
risk.  The lending authority of all credit officers is established by the Board 
of
Directors and is reviewed at least annually.  Credits beyond the scope of the
community office lending officer are forwarded to a centralized lending 
committee. 
Such committee, comprised of senior lending management and board members, 
attempts to
assure the quality of the loan portfolio through careful analysis of credit
applications, adherence to credit policies, and examination of outstanding loans
and
delinquencies.  These procedures aid in the early detection and timely follow-up
of
problem loans.  Credits in excess of $500 are subject to approval by the Board 
of Directors.

In addition, the Company minimizes credit risk by annually conducting an 
internal
loan review and contracting with an external loan review company to 
independently
perform such function.  Such independent loan review aids management in 
identifying
deteriorating financial conditions of borrowers, allowing them to assist 
customers in
remedying these situations.  The results of an independent loan review conducted
by
an external loan reviewer at June 30, 1996, indicated no material difference 
from the assets identified through the Company's loan review program.

In accordance with guidance set forth in SFAS No. 114, "Accounting by Creditors 
for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment
of a
Loan - Income Recognition and Disclosures,"  a loan is considered impaired when,
based on current information and events, it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. Impairment is measured based on the present value of expected future 
cash
flows discounted at a loan's effective interest rate or, as a practical 
expedient, at
the loan's observable market price, or the fair value of the collateral if the 
loan
is collateral-dependent.  When the measure of an impaired loan is less than the
recorded investment in the loan, the impairment is recognized by adjusting the
allowance for loan losses with a corresponding charge to the provision for loan
losses.

Nonperforming assets consist of nonperforming loans and foreclosed assets. 
Accruing
loans past due 90 days or more and loans impaired under SFAS Nos. 114 and 118
comprise nonperforming loans.  Impaired loans consist of nonaccrual and 
restructured
loans.  A loan is classified as nonaccrual when it is determined that the 
collection
of all or a portion of interest or principal is doubtful or when a default of
interest or principal has existed for 90 days or more, unless such loan is well
secured and in the process of collection.  When a loan is placed on nonaccrual,
interest accruals discontinue and uncollected accrued interest is reversed 
against
income in the current period.  Interest collections after a loan has been placed
on
nonaccrual status are credited to income when received unless the collectibility
of
principal is in doubt, causing all collections to be applied as principal 
reductions. 
A nonaccrual loan is not returned to performing status until such loan is 
current as
to principal and interest and has performed within the contractual terms for a
minimum of six months.  Restructured loans are loans with original terms, 
interest
rate, or both,  that have been modified as a result of a deterioration in the
borrower's financial condition.  Interest income on restructured loans is 
recognized
as earned, using the interest method.  The Company had the same one restructured
loan during 1996 and 1995.

Foreclosed assets are comprised of properties acquired through foreclosure
proceedings or acceptance of a deed-in-lieu of foreclosure and loans classified 
as
in-substance foreclosures.  A loan is classified as in-substance foreclosure 
when the
Company has taken possession of the collateral regardless of whether formal
foreclosure proceedings take place.  Foreclosed assets are recorded at the lower
of
the related loan balance or 80.0 percent of its appraised fair value at the time
of
acquisition.  Any excess of the loan balance over the recorded value is charged 
to
the allowance for loan losses.  Subsequent declines in the recorded value of the
property prior to its disposal and costs to maintain the assets are included in 
other
expense.  In addition, any gain or loss realized upon disposal is included in 
other
income or expense.  The historical average holding period for such properties is
less than 12 months.

The following table sets forth information concerning nonperforming assets for 
the
last five years.  The table includes credits classified for regulatory purposes 
and
all material credits that cause management to have serious doubts as to the
borrowers' ability to comply with present loan repayment terms:
<TABLE>
<CAPTION>

DISTRIBUTION OF NONPERFORMING ASSETS

DECEMBER 31                                                         1996     1995     1994     1993     1992
------------------------------------------------------------------------------------------------------------
<S>                                                               <C>      <C>      <C>      <C>      <C>  
Nonaccrual loans:
Commercial, financial and others................................. $  251   $  167   $   45   $  137   $  227
Real estate:
  Construction................................................... 
  Mortgage.......................................................  1,018    1,164    1,352    1,497    1,067
Consumer, net....................................................                                40         
                                                                  ------   ------   ------   ------   ------
    Total nonaccrual loans.......................................  1,269    1,331    1,397    1,674    1,294
                                                                  ------   ------   ------   ------   ------
Restructured loans...............................................    225      262      236      275         
                                                                  ------   ------   ------   ------   ------
    Total impaired loans.........................................  1,494    1,593    1,633    1,949    1,294
                                                                  ------   ------   ------   ------   ------

Accruing loans past due 90 days or more:
Commercial, financial and others.................................    359      181       33       62      462
Real estate:
  Construction...................................................
  Mortgage.......................................................  1,247    1,633    1,194    1,130    2,375
Consumer, net....................................................    291      336      197      374      285
                                                                  ------   ------   ------   ------   ------
    Total accruing loans past due 90 days or more................  1,897    2,150    1,424    1,566    3,122
                                                                  ------   ------   ------   ------   ------   
    Total nonperforming loans....................................  3,391    3,743    3,057    3,515    4,416
                                                                  ------   ------   ------   ------   ------
Foreclosed assets................................................    420      441      226      248      244
                                                                  ------   ------   ------   ------   ------
    Total nonperforming assets................................... $3,811   $4,184   $3,283   $3,763   $4,660
                                                                  ======   ======   ======   ======   ====== 

Ratios:
Impaired loans as a percentage of loans, net.....................   0.63%    0.74%    0.84%    1.10%    0.80%
Nonperforming loans as a percentage of loans, net................   1.44     1.75     1.57     1.99     2.72 
Nonperforming assets as a percentage of loans, net...............   1.62%    1.96%    1.69%    2.13%    2.87%

</TABLE>
Nonperforming assets, consisting of nonperforming loans and foreclosed assets,
totaled $3.8 million at December 31, 1996, compared to $4.2 million at 
December 31,
1995.  The Company experienced a net decrease of $21 in foreclosed assets during
1996, as transfers of six loans totaling $223 were offset by the sale of six
properties totaling $279, including net gains on such dispositions of $35.  Also
included in other real estate was a property originally purchased by the Company
to
be utilized as a site for a new branch office.  During 1995, management 
reevaluated
its intent for such property and transferred it to other real estate at $220, 
which
equals 80.0 percent of its appraised value, with the difference being recorded 
in
other losses.  Subsequent to year-end 1996, such property was sold with a gain 
of $50
being recognized.  The carrying values of all properties included in other real
estate were less than 80.0 percent of their collateral values at December 31, 
1996.

Nonperforming loans, consisting of accruing loans past due 90 days or more and
impaired loans, declined $352 during 1996 from $3,743 to $3,391.  The reduction 
in
nonperforming loans was due to the $253 decline in accruing loans past due 90 
days or
more with a $99 reduction in impaired loans.  The $99 change in impaired loans
included gross loans placed into such category of $428 and gross loans removed 
as a
result of charge-offs, transfers to other real estate, and principal repayments
totaling $33, $123 and $371, respectively.  Accruing loans past due 90 days or 
more
declined from $2,150 at December 31, 1995, to $1,897 at December 31, 1996.  Of 
the
loans past due 90 days or more, approximately 65.7 percent of these credits are
secured by real estate.  The Company's historical loss experience on real estate
loans is extremely low.  However, as a preventative measure, management began
emphasizing improved internal procedures with respect to delinquent credits 
during
the first quarter of 1996.  Such procedures focus on early detection and timely
follow-up of past due loans in order to identify potential problem loans and 
correct
them prior to deterioration.  The Company experienced improvement in all its 
asset
quality ratios in 1996.  The impaired loans as a percentage of loans, net, and
nonperforming assets as a percentage of loans, net, ratios were 0.63 percent and
1.62
percent, respectively, at December 31, 1996.  The comparable ratios were 0.74 
percent
and 1.96 percent, respectively, at December 31, 1995.  Such ratios, however, 
remained
less favorable than the peer group's ratios of 0.54 percent and 1.34 percent,
respectively, at December 31, 1996.  The improvements are by-products of the
Company's stringent controls regarding credit extensions as well as timely 
detection and follow-up on problem loans.    

The average recorded investment in impaired loans was $1,528 in 1996 and $1,621 
in
1995.  The recorded investment in impaired loans was $1,494 and $1,593 at 
December
31, 1996 and 1995, respectively.  Included in these amounts were $1,269 and 
$1,331,
respectively, for which there was a related allowance for loan losses of $650 
and
$614, respectively.  The recorded investment for which there was no related 
allowance
for loan losses, was $225 and $262 at December 31, 1996 and 1995, respectively. 
In
1996, activity in the allowance for loan losses account related to impaired 
loans
included a provision charged to operations of $3, losses charged to the 
allowance of
$92 and recoveries of amounts charged-off of $125.  The activity during 1995 in 
the
allowance for loan losses account related to impaired loans included a provision
charged to operations of $4, losses charged to the allowance of $69 and 
recoveries of
amounts charged-off of $191.  Interest income related to impaired loans would 
have
been $113 and $66 in 1996 and 1995, respectively, had such loans been current 
and the
terms of the loans not been modified.  Interest income that would have been
recognized on the restructured loan included in such amounts was $12 and $9 in 
1996
and 1995, respectively.  Interest recognized on impaired loans amounted to $30 
in
1996 and $92 in 1995.  Included in these amounts was interest recognized on a 
cash
basis of $30 and $87, respectively.  The restructured loan accounted for $7 in 
1996
and $5 in 1995 of interest recognized on impaired loans.  Cash received on 
impaired
loans applied as a reduction of principal totaled $398 and $595 in 1996 and 
1995,
respectively.  There were no commitments to extend additional funds to such 
parties at December 31, 1996 and 1995.

Classified assets are those assets cited by bank examiners, or by the bank's 
internal
rating system, as being at risk to a greater degree than is considered 
desirable. 
Regulators separate classified assets into three major categories based on 
degree of
risk: substandard, doubtful and loss.  Accordingly, as part of their routine 
annual
examination process, regulators classified assets of the Company at 
September 30,
1996.  The result of such review indicated an improvement of 31.7 percent in the
ratio of classified assets as a percentage of Tier I capital from the 
October 31, 1995, examination.

The allowance for loan losses account is established through charges to earnings
in
the form of a provision for loan losses.  Loans, or portions of loans, 
determined to
be uncollectible are charged against the allowance account and subsequent 
recoveries,
if any, are credited to the account.  The allowance is maintained at a level 
believed
adequate by management to absorb estimated potential credit losses.  While 
historical
loss experience provides a reasonable starting point in assessing the adequacy 
of the
allowance account, management also considers a number of relevant factors likely
to
cause estimated credit losses associated with the Company's current portfolio to
differ from historical loss experience.  Such factors include changes in lending
policies and procedures, economic conditions, nature and volume of the 
portfolio,
loan review system, volumes of past due and classified loans, concentrations,
borrowers' financial status, collateral value and other factors deemed relevant 
by
management.  In addition to management's assessment, various regulatory 
agencies, as
an integral part of their routine annual examination process, review the 
Company's
allowance for loan losses.  Such agencies may require the Company to recognize
additions to the allowance, beyond normal monthly provisions, based on their
judgments concerning information available to them at the time of their 
examination. 
No such charge was deemed necessary upon conclusion of the 1996 examination, as
regulators considered the Company's allowance for loan losses account adequate 
based
on risk characteristics and size of the loan portfolio.  Upon its review of the 
1996
regulatory report, management was not aware of any significant recommendation 
with
respect to the loan portfolio that would materially affect future liquidity or
capital resources.

Management utilizes the federal banking regulatory agencies' Interagency Policy
Statement on the Allowance for Loan and Lease Losses in assessing the adequacy 
of its
allowance for loan losses account.  The policy statement provides guidance on 
the
nature and purpose of the allowance, related responsibilities of management and
examiners, loan review systems, and international transfer risk matters.  The 
Company
implemented the analytical tool for assessing the reasonableness of the 
allowance for
loan losses account included in such policy statement during the first quarter 
of
1994.  The tool involves a comparison of the reported loss allowance against the
sum
of specified percentages, based on industry averages, applied to certain loan
classifications.  The Company was considered adequately reserved at December 31,
1996, based on the results of this regulatory calculation.  Management, however,
will
continue to perform a thorough analysis of the Company's loan portfolio as such
calculation does not take into account differences between institutions, their
portfolios, underwriting and collection policies, and credit-rating policies.

In general, the allowance for loan losses is available to absorb losses 
throughout
the loan portfolio, although in some instances allocation is made for specific 
loans
or groups of loans.  Accordingly, the following table attempts to allocate this
reserve among the major categories. However, it should not be interpreted as an
indication that charge-offs in 
future periods will occur in these amounts or proportions, or that the 
allocation indicates future charge-off trends:
<TABLE>
<CAPTION>

DISTRIBUTION OF ALLOWANCE FOR LOAN LOSSES

                                      1996             1995             1994             1993             1992      
                                  -------------  ---------------   --------------   --------------   --------------
                                       CATEGORY         CATEGORY         CATEGORY         CATEGORY         CATEGORY
                                           AS A             AS A             AS A             AS A             AS A
                                           % OF             % OF             % OF             % OF             % OF
DECEMBER 31                       AMOUNT  LOANS   AMOUNT   LOANS   AMOUNT   LOANS   AMOUNT   LOANS   AMOUNT   LOANS
--------------------------------------------------------------------------------------------------------------------
<S>                               <C>    <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>
Commercial, financial and others. $1,396  13.46%  $1,358   19.45%  $1,188   15.13%  $  944   12.82%  $  722   13.38%
Real estate:
  Construction...................          1.57             0.47             1.42             2.88             3.06    
  Mortgage.......................  1,326  75.97    1,333   71.05    1,251   71.15    1,135   71.31      815   69.20
Consumer, net....................  1,222   9.00    1,212    9.03    1,137   12.30    1,090   12.99      960   14.36
                                  ------ ------   ------  ------   ------  ------   ------  ------   ------  ------   
    Total........................ $3,944 100.00%  $3,903  100.00%  $3,576  100.00%  $3,169  100.00%  $2,497  100.00%
                                  ====== ======   ======  ======   ======  ======   ======  ======   ======  ====== 
</TABLE>
The following table sets forth a reconciliation of the allowance for loan losses
and
illustrates the charge-offs and recoveries by major loan category for the past 
five years:

<TABLE>
<CAPTION>
RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES

DECEMBER 31                                                         1996     1995     1994     1993     1992
------------------------------------------------------------------------------------------------------------
<S>                                                               <C>      <C>      <C>      <C>      <C>      
Allowance for loan losses at beginning of period................. $3,903   $3,576   $3,169   $2,497   $1,576
Loans charged-off:    
Commercial, financial and others.................................    523      136      243      177       93
Real estate:
  Construction...................................................    
  Mortgage.......................................................     88      171      176      263      233
Consumer, net....................................................    115       86      131      140      178
                                                                  ------   ------   ------   ------   ------
    Total........................................................    726      393      550      580      504
                                                                  ------   ------   ------   ------   ------     

Loans recovered:                                   
Commercial, financial and others.................................    284       80        7       42       52
Real estate:
  Construction...................................................
  Mortgage.......................................................    130      144       64       69       44
Consumer, net....................................................     53       61       86       61       44
                                                                  ------   ------   ------   ------   ------   
    Total........................................................    467      285      157      172      140
                                                                  ------   ------   ------   ------   ------    
Net loans charged-off............................................    259      108      393      408      364
                                                                  ------   ------   ------   ------   ------
Provision for loan losses........................................    300      435      800    1,080    1,285
                                                                  ------   ------   ------   ------   ------
Allowance for loan losses at end of period....................... $3,944   $3,903   $3,576   $3,169   $2,497
                                                                  ======   ======   ======   ======   ======    

Ratios:
Net loans charged-off as a percentage of average loans           
 outstanding.....................................................   0.12%    0.05%    0.21%    0.23%    0.22%
Allowance for loan losses as a percentage of period end loans....   1.67%    1.83%    1.84%    1.80%    1.54%
</TABLE>

The allowance for loan losses, against which loans are charged-off, was $3.9 
million
at December 31, 1996, representing 1.67 percent of loans, net.  The allowance 
was
also $3.9 million in 1995 but represented 1.83 percent of loans, net.  The 
reduction
in the Company's ratio was primarily a function of its strong loan demand.  
However,
such ratio continued to exceed both the peer group and regulatory guidelines.  
The
peer group reported ratios of 1.38 percent and 1.43 percent at December 31, 1996
and 1995, respectively.  

As a percentage of nonperforming loans, the allowance account covered 116.3 
percent
and 104.3 percent at year-end 1996 and 1995, respectively.  Relative to all
nonperforming assets, the allowance covered 103.5 percent at December 31, 1996, 
and
93.3 percent at December 31, 1995.  Despite the decrease in nonperforming assets
and
delinquent credits, management remained cautious and continued to add provisions
to
its allowance. Management expects to maintain the provision at 1996 levels given
the
significant increase in loans and would make a corresponding increase if asset
quality deteriorates.

Past due loans that have not been satisfied through repossession, foreclosure or
related actions, are evaluated on an individual basis to determine if all or 
part of
the outstanding balance should be charged against the allowance for loan losses.
Subsequent recoveries, if any, are credited to the allowance account.  Net 
charge-offs were $259 or 0.12 percent of average loans outstanding in 1996 
compared to $108
or 0.05 percent in 1995.  The nation's top 50 banks reported net charge-offs to
average loan ratios of 0.63 percent and 0.53 percent, respectively, while the 
peer
group reported net charge-offs as a percentage of average loans outstanding of 
0.18
percent and 0.20 percent in 1996 and 1995, respectively.  Historically, the 
Company
has exceeded the delinquency levels of its peers, however such levels do not 
appear
to equate the realization of losses, as the Company's net charge-off ratios are
consistently below the peer group ratios.  Management expects net charge-offs to
decrease in 1997 if local unemployment continues its downward trend and the 
local economy gains strength.

DEPOSITS:

During 1996, the nation witnessed the continuance of strengthened personal 
savings
patterns.  Personal savings rates, a measure of savings as a percentage of 
disposable
after-tax income, rose to 5.4 percent in 1996 compared to 4.4 percent in 1995.  
The
national unemployment rate fell to 5.3 percent by year-end 1996 from 5.6 percent
for
the same period of 1995 while hourly wages increased 3.8 percent, marking the
greatest increase since 1990.  For the year, personal income rose 5.8 percent 
above
1995 levels.  This newfound consumer wealth led to a 4.6 percent annual spending
growth rate in 1996, however such rate has fallen steadily since 1993.  The 
excess
funds did not, however, filter into bank deposit accounts.  The "baby boomer"
generation became acutely aware of a need to save for the long term as they 
approach
retirement age.  This is evidenced by the growing volumes of 401(k) plans and 
mutual
funds in 1996.  Consumers also looked toward the stock market in 1996 as the Dow
Jones approached 7,000.  Mutual funds that invest in stocks received more money 
in
1996 than ever before, reaping $221.9 billion as compared to $128.0 billion in 
1995. 
By year-end 1996, mutual funds of all types recorded $3.5 trillion in assets.  
This
did not mean that baby boomers were saving more money, but rather were shifting 
funds
from certificates of deposit and personal savings accounts as yields on 
traditional
bank deposits paled in comparison to those of equity investments.  Such
disintermediation of funds from banks may lead to higher interest rates being 
paid on
deposit accounts as they fight to retain and acquire deposits to fund asset 
growth. 
In turn, this can lead to higher loan rates offered to customers.  A major 
influence
to aid bank deposit growth would be an economic downturn in the stock market.  
Should
there be a fallout in the market, consumers would search for safer investment
products while receiving a stable return, thus leading to an increase in the 
volume of certificates of deposit products.

Effective for taxable years beginning after December 31, 1996, the Job Act will 
go
into effect.  Under the Job Act, deductible IRA contributions, subject to 
adjusted
gross income limits, of up to $2 will be permitted for each spouse if the 
combined
compensation of both spouses is at least equal to the amount contributed.  Prior
to
the implementation of the Job Act, the maximum limit on combined contributions 
was
$2.25.  Another potential source of deposits for the Company is the percentage 
of the
population aged 65 and older.  In Pennsylvania, 15.7 percent of the population 
is
aged 65 and older, compared to 12.6 percent for the nation as a whole.  For the
Company's market area, such figure is approximately 20.7 percent.  Accordingly, 
the
older population is expected to be a solid source of future deposits as it 
controls
more wealth and buys more deposit products than the younger generation.  
Management
expects savings levels to rise in 1997 as customers take advantage of the newly
implemented Job Act and build reserves in response to unwariness about 
employment security.

Besides the intense competition from mutual funds, the Company also received 
strong
competition for deposits from local bank and thrift institutions.  For example, 
the
average rate paid on a thirty-month certificate of deposit for the Company's 
peer
group exceeded 5.3 percent for 1996.  Comparatively, the average rate on 
thirty-month
certificates paid by commercial banks in the United States was 5.1 percent in 
1996.

A final potential factor that may influence the ability of banks to gather 
deposits
is the recent legal argument presented by credit unions.  The commercial banking
industry and advocates of credit unions have been in a conflict for several 
months
concerning the group that credit unions are allowed to pursue.  The conflict 
centers
around the expansion of membership services by credit unions to multi-member 
groups. 
Potentially, Pennsylvania may be most affected by the decision as there are 889
credit unions, more than any other state.  

The following table sets forth the average amount of, and the rate paid on, the 
major classifications of deposits for the past five years:
<TABLE>
<CAPTION>

DEPOSIT DISTRIBUTION

                                1996              1995              1994              1993              1992      
                            ---------------------------------------------------------------------------------------
                            AVERAGE AVERAGE   AVERAGE AVERAGE   AVERAGE AVERAGE   AVERAGE AVERAGE   AVERAGE AVERAGE 
YEAR ENDED DECEMBER 31      BALANCE    RATE   BALANCE    RATE   BALANCE    RATE   BALANCE    RATE   BALANCE    RATE  
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>   <C>         <C>   <C>         <C>  <C>          <C>   <C>         <C>   
Interest-bearing:          
Money market accounts..... $ 18,144    2.92% $ 21,869    3.47% $ 23,955    3.31% $ 22,267    3.26% $ 22,819    3.84%
NOW accounts..............   16,661    2.02    15,550    1.96    15,151    1.96    14,406    2.35    13,742    3.36
Savings accounts..........   67,144    3.00    71,911    3.25    83,142    3.13    73,400    3.34    56,288    4.21
Time less than $100.......  157,271    5.67   155,183    5.75   139,641    4.94   131,572    5.26   130,753    6.19
Time $100 or more.........   27,755    5.93    29,336    6.04    25,995    5.97    25,960    5.02    25,956    6.11
                           --------          --------          --------          --------          --------
  Total interest-bearing..  286,975    4.69%  293,849    4.80%  287,884    4.22%  267,605    4.39%  249,558    5.36%
Noninterest-bearing.......   26,329            24,090            21,849            19,657            18,657  
                           --------          --------          --------          --------          --------
  Total deposits.......... $313,304          $317,939          $309,733          $287,262          $268,215   
                           ========          ========          ========          ========          ========
</TABLE>

Deposit volumes rose a modest 1.1 percent from $317.1 million at December 31, 
1995,
to $320.5 million at December 31, 1996, as competition for deposit products
intensified.  Total deposits averaged $313.3 million in 1996 as compared to 
$317.9
million in 1995, a decrease of 1.4 percent.  The average deposit growth 
experienced
by Northeastern Pennsylvania banks was 7.9 percent for the comparable period.  
The
Company experienced a decline in deposits during the first quarter of 1996 as
modified pricing strategies in light of improved liquidity conditions coupled 
with
cyclical trends due to customers foregoing savings to pay for holiday spending, 
led
to a $9.1 million downturn in volumes.  The majority of the Company's deposit 
growth
occurred during the second and fourth quarters of 1996 as deposits grew at 
annualized
rates of 9.8 percent and 7.2 percent, respectively.  Most of the second quarter
growth was attributable to increases in commercial money market accounts and 
interest
checking accounts of $4.7 million and $2.1 million, respectively.  The growth in
the
fourth quarter was primarily attributable to an increase in commercial time 
deposits. 
Deposits from area school districts comprised the major portion of the fourth 
quarter growth.  

The deposit composition changed, as evidenced by a decline in the average volume
of
transaction accounts as a percentage of average total deposits from 42.0 percent
to
40.9 percent in 1995 and 1996, respectively.  Such change was a function of
depositors sacrificing accessibility by transferring funds from lower-yielding
transaction accounts to higher-yielding time deposits.  Although beneficial in
funding loan demand, the growth of retail certificates of deposit will further 
the
Company's reliance on higher-costing funding sources.  For the Company, time 
deposits
cost 5.71 percent, which was 289 basis points above the Company's 
weighted-average
cost of money market, NOW and savings accounts.  Average time deposits accounted
for
53.3 percent of average assets during 1996 as compared to 43.3 percent for the 
peer
group.  The Company experienced an upward shift in its average core deposits to
average total deposits from 90.8 percent in 1995, to 91.1 percent in 1996.  The
Company's cost of funds declined from 4.9 percent in 1995 to 4.7 percent in 1996
as
compared to an increase in the peer group's cost from 4.6 percent to 4.7 
percent,
respectively.  The primary reason for such decline was the average rate on 
retail
certificates of deposit decreasing from 5.8 percent during the first quarter of 
1996
to 5.7 percent during the fourth quarter.  Management expects an increase in the
Company's cost of funds during 1997 based on increased competition from local
financial institutions and nonbank deposit gatherers.

An integral component in the Company achieving lower funds cost is building its 
base
of noninterest-bearing deposits.  In 1996, the Company's noninterest-bearing 
deposits
grew $1.0 million from $25.4 million at December 31, 1995, to $26.4 million at
December 31, 1996.  Average volumes of noninterest-bearing deposits also 
increased
from $24.1 million to $26.3 million in 1995 and 1996, respectively, and 
comprised 7.6 percent of total average assets for 1996, compared to 6.7 percent 
for 1995.

Volatile deposits, time deposits in denominations of $100 or more, increased 
from
$29.7 million at December 31, 1995, to $35.9 million at December 31, 1996.  As
aforementioned, such increase was due to local school districts transferring 
funds
from transaction accounts into time deposits.  Despite this increase, the 
Company was
less reliant on such funding as compared to the peer group in 1996.  Average 
volatile
deposits, as a percentage of average assets, was 8.0 percent in 1996 as compared
to
9.1 percent for the peer group.  The average cost of such funds fell 11 basis 
points
during 1996.  Such decline resulted from management being less aggressive in
competing for this type of deposit product due to the stabilized liquidity 
position of the Company.

The following table sets forth maturities of time deposits of $100 or more for 
the past five years:
<TABLE>
<CAPTION>

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE


DECEMBER 31                                                         1996     1995     1994     1993     1992
------------------------------------------------------------------------------------------------------------
<S>                                                              <C>      <C>      <C>      <C>      <C>
Within three months............................................. $ 8,598  $ 6,466  $ 7,861  $ 5,817  $ 4,529
After three months but within six months........................   9,958    6,646    4,200    5,447    6,133
After six months but within twelve months.......................  11,262    8,590   10,740    5,957    5,242
After twelve months.............................................   6,047    7,982    7,410    7,060    8,179
                                                                 -------  -------  -------  -------  ------- 
  Total......................................................... $35,865  $29,684  $30,211  $24,281  $24,083
                                                                 =======  =======  =======  =======  =======
</TABLE>


The Company's improved liquidity position effectively eliminated its reliance on
borrowings to fund assets.  At December 31, 1996, aggregate borrowings were $46,
as
compared to $3,048 for the same period of 1995.  The Company reduced its 
long-term
debt in 1996 as it repaid a 4.3 percent fixed-rate advance from the FHLB-Pgh 
upon its
maturity.  The remaining $46 represents a 7.5 percent fixed-rate, amortizing 
advance
from the FHLB-Pgh Community Investment Program that is subject to a prepayment 
fee in
the event the advance is repaid prior to maturity.  The Company's total 
borrowings
averaged $2.2 million with a weighted-average rate of 4.4 percent in 1996 as 
compared to $14.7 million at 6.2 percent in 1995.  

At December 31, 1996 and 1995, the Company had no short-term borrowings 
outstanding. 
Short-term borrowings available to the Company consist of a line of credit and 
fixed-
rate advances with the FHLB-Pgh secured under terms of a blanket collateral 
agreement
by a pledge of FHLB-Pgh stock and certain other qualifying collateral, such as
investment and mortgage backed securities and mortgage loans.  Such line has a
maximum borrowing capacity equal to 10.0 percent of total assets and accrues 
interest
daily based on the federal funds rate.  The line is renewable on the first day 
of
each calendar year and carries no associated commitment fees.  The FHLB-Pgh has 
the
right to reduce or terminate the line at any time without prior notice and the
Company may repay such line at any time without incurring prepayment penalties. 
Short-term, fixed-rate advances are issued with maturities less than one year 
based
on the FHLB-Pgh's current cost of funds rate.  Such advances are limited to the
Company's maximum borrowing capacity based on a percentage of qualifying 
collateral
assets.  There are no commitment fees and the advance may be prepaid at the 
option of
the Company upon payment of a prepayment fee.  The prepayment fee applicable to 
FHLB-
Pgh advances is equal to the present value of the difference between cash flows
generated at the advance rate from the date of the prepayment until the original
maturity date, and the cash flows that would result from the interest rate 
posted by
the FHLB-Pgh on the date of prepayment for an advance of comparable maturity.  
The
Company has not entered into repurchase agreements with others during 1996 and 
1995. 
Repurchase agreements consist of transactions whereby an institution sells 
securities
and agrees to repurchase the identical, or substantially the same, securities at
a specified date for a specified price.  

The average daily balance and weighted-average rate on aggregate short-term
borrowings was $51 at 5.9 percent in 1996 and $9.9 million at 6.8 percent in 
1995. 
The maximum amount of all short-term borrowings outstanding at any month-end was
$2.8
million and $28.0 million during 1996 and 1995, respectively.  Short-term 
borrowings
during 1996 consisted entirely of the FHLB-Pgh line of credit.  During 1995, the
FHLB-Pgh line of credit included in total short-term borrowings had an average 
daily
balance of $3.6 million and weighted-average rate of 6.2 percent.  The maximum 
amount of such loan outstanding at any month-end was $17.6 million during 1995.

INTEREST RATE SENSITIVITY:

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
















The following table sets forth the Company's interest rate sensitivity gap 
position. 
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.
<TABLE>
<CAPTION>

INTEREST RATE SENSITIVITY

                                                  DUE AFTER           DUE AFTER
                                                  THREE MONTHS        ONE YEAR
                                DUE WITHIN        BUT WITHIN          BUT WITHIN       DUE AFTER
DECEMBER 31, 1996               THREE MONTHS      TWELVE MONTHS       FIVE YEARS       FIVE YEARS       TOTAL
-------------------------------------------------------------------------------------------------------------
<S>                                  <C>               <C>              <C>             <C>          <C>     
Rate sensitive assets:
Investment securities............... $19,882           $ 10,897         $ 36,386        $  34,829    $101,994
Loans, net of unearned income.......  51,370             30,166           64,486           89,781     235,803
Federal funds sold..................   3,300                                                            3,300
                                     -------           --------         --------        ---------    --------
  Total............................. $74,552           $ 41,063         $100,872        $ 124,610    $341,097
                                     =======           ========         ========        =========    ========

Rate sensitive liabilities:
Money market accounts...............                   $ 16,168                                      $ 16,168
NOW accounts........................                     17,915                                        17,915
Savings accounts....................                                    $ 66,037                       66,037
Time deposits less than $100........ $22,018             71,454           64,545        $      30     158,047
Time deposits $100 or more..........   8,598             21,220            6,047                       35,865
Long-term debt......................                          2               44                           46
                                     -------           --------         --------        ---------    --------
  Total............................. $30,616           $126,759         $136,673        $      30    $294,078   
                                     =======           ========         ========        =========    ========

Rate sensitivity gap:
  Period............................ $43,936           $(85,696)        $(35,801)       $ 124,580     
  Cumulative........................ $43,936           $(41,760)        $(77,561)       $  47,019    $ 47,019

RSA/RSL ratio:
  Period............................    2.44               0.32             0.74         4,153.67        
  Cumulative........................    2.44               0.73             0.74             1.16        1.16 
</TABLE>

At December 31, 1996, the Company had a ratio of cumulative one-year, RSA/RSL of
0.73.  Such ratio falls below the 0.93 at December 31, 1995. Based upon the
guidelines set forth in the Company's Asset/Liability Management Policy, 
however,
this ratio falls within the 0.7 and 1.3 deemed by management to be acceptable.  
The
decline was attributable to the Company's reinvestment of maturing, short-term 
credit
extensions to other financial institutions into residential mortgages.  
Additionally,
the Company received $25.2 million in securities repayments during 1996. Of 
these
repayments, $3.0 million was used to retire long-term borrowings of the 
subsidiary
that matured September 9, 1996.  The remaining funds were used to purchase $2.9
million in mortgage backed securities, $8.6 million in intermediate-term state 
and
municipal securities, $8.6 million in U.S. Treasury securities, and $100 in 
equity
securities.  Excess funds not utilized for security purchases were used to fund 
loan
demand.  Commercial time deposits also contributed to the decline in the 
cumulative
one-year gap as they increased $8.1 million to $29.8 million at 
December 31, 1996,
from $21.7 million at December 31, 1995.  Such increase resulted from customers
choosing liquidity over return when investing in commercial time deposits.  The
Company also experienced a sharp decline in its three-month ratio.  Such ratio 
fell
from 3.09 at December 31, 1995, to 2.44 at December 31, 1996.  This decline can 
be
explained by the same reasons given for the reduction in the cumulative one-year
ratio.  The Company was liability rate sensitive for the cumulative one-year 
period
based on the results of the December 31, 1996, static gap report.  This means 
that an
increase in general market rates should have an adverse impact on net interest
income.  Conversely, a decline in market rates should have a favorable effect on
net
interest income.  However, these forward-looking statements are qualified by the
aforementioned section entitled "Forward-Looking Discussion" in this 
Management's Discussion and Analysis. 

Static gap analytics does not fully illustrate the impact of interest rate 
changes on
future earnings.  First, market rate changes will 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 the Company adjusts its rate sensitivity
throughout the year.  Finally, assumptions must be made in constructing such a 
table. 
For example, the conservative nature of the Company's Asset/Liability Management
Policy assigns money market and NOW accounts to the due after three but within 
12
months repricing interval.  In reality, these items may reprice less frequently 
and in different magnitudes than changes in general interest rate levels.

As a result of the static gap report's failure to address the dynamic changes in
the
balance sheet composition or prevailing interest rates, the Company enhances its
asset/liability management by using a simulation model.  Such model creates pro 
forma
net interest income scenarios under various interest rate shocks.  Model results
from
December 31, 1996, indicate similar results to those indicated by the static gap
model.  A decline in net interest income of 3.9 percent is expected should there
be a
parallel and instantaneous rise in interest rates of 100 basis points.  
Conversely, a
similar decline in interest rates would result in a 3.9 percent increase in net
interest income.

Inflation impacts financial institutions differently than it does commercial and
industrial companies that have significant investments in fixed assets and
inventories.  Most of the Company's assets are monetary in nature and change
correspondingly with variations in the inflation rate.  It is difficult to 
precisely
measure the impact of inflation on the Company, however management believes that
its exposure to inflation can be mitigated through asset/liability management.

LIQUIDITY:

Liquidity is defined as a company's ability to generate cash at a reasonable 
cost in
order to satisfy present and future commitments to borrowers as well as to meet 
the
demands of depositors and debtholders.  Principal sources of liquidity are found
in
core deposits and loan and investment payments and prepayments.  Management 
considers
the Company's available for sale portfolio a secondary source of liquidity.  As 
a
final source of liquidity, the Company has the ability to exercise existing 
credit
arrangements.  As specified in the Company's Asset/Liability Management Policy, 
such
borrowings will only be used on a contingency basis.  The reliance on these
borrowings to fund temporary deficiencies is limited to a maximum of five 
consecutive
business days before management is required to take appropriate action to remedy
the
shortfall through normal operations.  The Company manages liquidity daily, 
enabling
management to effectively monitor changes in liquidity and to react accordingly 
to
market conditions.  Management believes that liquidity is sufficient to meet 
presentand future financial obligations and commitments on a timely basis.  
There are no
known trends, demands, commitments, events or uncertainties that have resulted 
or are reasonably likely to result in material changes in the Company's 
liquidity.

Management annually develops a liquidity plan for the Company.  The  mission of 
such
plan is to ensure the Company has the ability to generate cash at a reasonable 
cost
in order to satisfy commitments to borrowers as well as to meet the demands of
depositors and debtholders.  The Company's liquidity plan consists of an 
assessment
of its current liquidity position and includes determining appropriate standards
for
the volume, mix, price and maturity of loans, investments and deposits.  In 
addition,
management ascertains the appropriate level of short-term assets required to 
fund
normal day-to-day operations and to ensure the Company's ability to meet 
off-balance
sheet commitments and unanticipated deposit withdrawals.  The plan includes 
controls
and monitoring procedures for evaluating the Company's daily liquidity position.
Finally, the plan introduces strategies to assure future liquidity.  Such 
strategies,
which the Company considers proprietary in nature, include the maintenance of a
minimum net federal funds sold cushion, a capital contingency strategy, and 
enhanced
strategies on loan and deposit pricing.  Based on the 1996 liquidity plan, the
Company's ratio of core deposits to total assets is expected to rise from 80.2
percent at December 31, 1996, to 83.8 percent at December 31, 1997.

Although the Company believes its liquidity position remains adequate to meet 
present
and future financial obligations and commitments, it has become less favorable
compared to last year.  Two primary examples of such unfavorable change are the 
ratio
of temporary investments to volatile liabilities and the volatile liabilities 
less
temporary investments to total assets less temporary investments ratios.  At 
December
31, 1996, these ratios were 54.0 percent and 4.9 percent, respectively.  This 
showed
a regression from the ratios of 118.9 percent and negative 1.8 percent, 
respectively,
recorded at December 31, 1995, however they are vastly improved from the 8.7 
percent
and 11.8 percent, respectively, recorded at December 31, 1994.   These ratios 
also
fell below the 91.8 percent and 0.8 percent, respectively, recorded by the peer 
group
at year-end 1996.  By assuring that the Company's investment portfolio contains 
an
adequate amount of short-term investments and by aggressively competing for core
deposits,  management feels it can maintain stability in these ratios for future
periods.  The maintenance of a high level of core deposits is a major component 
in
keeping a strong liquidity position.  Core deposits are important as they 
represent a
stable and relatively low-costing source of funds.  At December 31, 1996, core
deposits funded 80.2 percent of the Company's total assets. 

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 FHLB-Pgh, and federal funds sold, decreased $11.0 million in
1996.  Net cash provided by operating activities totaled $5.4 million and 
primarily resulted from the Company's $4.2 million in net income.

The Company's net cash used in investing activities of $16.1 million was the 
major
reason for the net decrease in cash and cash equivalents.  The primary 
components of
the outflow from investing activities were loan disbursements and investment
purchases, partially offset by inflows from  repayments on short-term loans to 
other
banking institutions and investments.  For 1996, the Company's net loan 
disbursements
amounted to $22.2 million.  Aggregate loan demand of $41.2 million was partially
funded by $19.0 million in net repayments on short-term credit extensions to
financial institutions.  The Company also purchased $20.2 million in securities
during 1996.  Such purchases were funded with the $25.2 million received in
repayments on securities with the excess of the proceeds being used to retire 
$3.0 million in long-term borrowings as well as to fund loan demand.    

Net cash used in financing activities totaled $320 in 1996.  The decline 
primarily
resulted from the Company's repayment on September 9, 1996, of a $3.0 million 
fixed-
rate advance with the FHLB-Pgh.  The three-year loan bore interest at 4.3 
percent. 
Partially offsetting this decrease was a $3.4 million increase in deposits.    

CAPITAL ADEQUACY:

Stockholders' equity improved $3.4 million during 1996 principally due to the
Company's $4.2 million in net income, partially offset by $623 in dividends and 
a
change in the net unrealized holding adjustment of $216.  The Company reported a
net
unrealized holding gain of $564 at December 31, 1996, as compared to $780 at 
December
31, 1995.  Despite the decline from a year ago, such gain improved $400 from
September 30, 1996.  In addition, the change in the fair market value of the
Company's investment portfolio was significantly less severe than that of its 
peers. 
The Company's exposure to interest rate risk has been better protected through
improvements in the quality, composition and structure of the investment 
portfolio. 
Such improved risk position makes the Company less susceptible to market 
depreciation
on available for sale securities resulting from rising interest rates.

The Company declared a dividend of $242 or $0.11 per share for the fourth 
quarter of
1996.  For the year-ended December 31, 1996, the Company declared dividends of 
$623
or $0.28 per share as compared to $462 or $0.21 per share for the same period of
1995.  As a percentage of net income, cash dividends declared in 1996 equalled 
14.8
percent.  Presently, the Company's Board of Directors expects dividends to be 
paid in
the future.  However, factors such as operating results, financial and economic
decisions, capital needs, growth objectives, appropriate dividend restrictions
related to the Company, and other relevant factors may impact these decisions.  
The
Company's ability to pay dividends to its stockholders is limited by its ability
to
obtain funds from its subsidiary as specified by federal and state regulations. 
Accordingly, the subsidiary without prior approval of bank regulators, may 
declare
dividends to the Company in 1997 totaling $3.2 million plus net profits earned 
by the
subsidiary for the period from January 1, 1997, through the date of declaration,
less dividends previously paid in 1997.  

Other significant events in 1996 affecting the Company's capital included the
effectuation of a three-for-one stock split and the listing of the Company's 
common
stock on a national stock market.  The April 1, 1996, stock split fulfilled the
minimum share listing requirement for the NASDAQ NMS.  The liquidity of the 
Company's
common stock improved as a result of its trading on the NASDAQ National Market 
Tier of the NASDAQ Stock Market under the Symbol "CCBP" on June 17, 1996.  

During the second quarter of 1997, the Company will initiate a DRP.  This plan 
will
benefit the Company and its stockholders as it will provide a low-cost method 
for
raising capital, allow younger, smaller stockholders to participate in the 
growth of
the Company, avoid commissions to brokers and allow higher dividends to be paid 
as
such dividends are being partially retained.  The Company's DRP will include the
following:  (I) shares purchased under the DRP will be from original issuances; 
(II)
no optional cash payments; (III) eligibility for all registered and street name
participants; (IV) no minimum or maximum number of shares participant 
restrictions;
and (V) availability of full or partial dividend reinvestment.  The plan will be
administered by a national transfer agent.  By introducing a DRP, the Company 
expects
to generate more interest in its stock, which could benefit its market value.  

Management attempts to assure capital adequacy by monitoring the current and
projected positions of the Company to support future growth, while providing
stockholders with an attractive long-term appreciation of their investments.  
The
recent history of bank failures resulted in regulatory agencies adopting minimum
capital adequacy requirements that include mandatory and discretionary 
supervisory
actions for noncompliance.  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.  In addition, banks must maintain a Leverage ratio, 
defined as
Tier I capital to total average assets less goodwill, of 3.0 percent.  Such 
minimum
ratio is applicable only to those 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.  At 
December
31, 1996 and 1995, the Company's minimum ratios of Tier I capital to adjusted 
total
average assets were 4.0 percent and 5.0 percent, respectively.  In the event an
institution is deemed to be undercapitalized by such 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 institutions
that
reach the significantly or critically undercapitalized levels, including 
restrictions
on interest payable on accounts, dismissal of management and appointment of a
receiver.  For well-capitalized institutions, banking law provides authority for
regulatory intervention where the institution is deemed to be engaging in unsafe
and
unsound practices or receives a less than satisfactory examination report rating
for asset quality, management, earnings, liquidity or market-risk sensitivity.

Under SFAS No. 115, banks not subject to a supervisory directive will exclude
unrealized holding gains and losses, net of income taxes, on available for sale 
debt
securities when calculating Tier I capital.  However, net unrealized holding 
losses
on available for sale marketable equity securities will continue to be deducted 
from
Tier I capital.  Such regulatory accounting rule does not affect reporting for
financial statement purposes.  Accordingly for financial accounting 
presentations,
banks will continue to report available for sale debt and equity securities at 
fair
value, with unrealized holding gains and losses, net of income taxes, excluded 
from earnings and reported in a separate component of stockholders' equity.

The following table presents the Company's capital ratios at December 31, 1996 
and
1995, as well as the required minimum ratios for capital adequacy purposes and 
to be "well capitalized" under the prompt corrective action provisions:
<TABLE>
<CAPTION>

RISK-ADJUSTED CAPITAL
                                                                                          MINIMUM TO BE WELL  
                                                                                          CAPITALIZED UNDER
                                                                 MINIMUM FOR CAPITAL      PROMPT CORRECTIVE
                                                  ACTUAL          ADEQUACY PURPOSES       ACTION PROVISIONS  
                                          ------------------------------------------------------------------
DECEMBER 31                                   1996      1995       1996         1995         1996       1995
------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>         <C>          <C>          <C>        <C>     
Tier I capital to risk-adjusted assets... $ 28,692  $ 24,845    $ 7,443      $ 6,983      $11,164    $10,475
Total capital to risk-adjusted assets....   31,038    27,048     14,886       13,966       18,607     17,458
Tier I capital to total average assets
 less goodwill...........................   28,692    24,845    $13,830      $17,871      $17,287    $17,871

Risk-adjusted assets.....................  180,809   170,089
Risk-adjusted off-balance sheet items....    5,261     4,489
Average assets for Leverage ratio........ $345,738  $357,410

Tier I capital as a percentage of risk-
 adjusted assets and off-balance sheet 
 items...................................    15.4%     14.2%       4.0%         4.0%         6.0%       6.0%

Total of Tier I and Tier II capital as a
 percentage of risk-adjusted assets and 
 off-balance sheet items.................    16.7      15.5        8.0          8.0         10.0       10.0 

Tier I capital as a percentage of total 
 average assets less goodwill............     8.3%      7.0%       4.0%         5.0%         5.0%       5.0%
</TABLE>

The Company exceeded all relevant regulatory capital measurements at 
December 31,
1996, and was considered "well capitalized."  Regulatory agencies define 
institutions
not under a written directive to maintain certain capital levels as "well
capitalized" if they exceed the following:  a Tier I risk-based ratio of at 
least 6.0
percent, a total risk-based ratio of at least 10.0 percent, and a Leverage 
ratio,
defined as Tier I capital to total average assets less goodwill, of at least 5.0
percent.  The Company showed marked improvement in its capital level as 
evidenced by
its improved Leverage ratio.  Such ratio was 8.3 percent at December 31, 1996,
compared to 7.0 percent at December 31, 1995.

The significance of maintaining a "well capitalized" regulatory classification 
became
increasingly important as a result of the deregulation provisions in the Bank
Insurance Fund ("BIF")/Savings Association Insurance Fund ("SAIF") legislation
enacted September 30, 1996.  The Federal Reserve Board's adoption of regulations
under such legislation made it easier for bank holding companies having such
classification to engage in certain nonbanking activities.  Under the new rules,
bank
holding companies are:  (I) allowed to begin offering securities sales, trust
services, leasing, loan servicing, management consulting, data processing, and
futures commission merchant activities without prior regulatory approval; (II) 
no
longer subject to application requirements to acquire businesses that already 
offer
the aforementioned services; and (III) able to enter an activity other than 
those
services listed above.  The only requirement set forth in the rule is that the 
bank
holding company notify the regulators of its intent within a certain time frame.

As part of the Company's overall strategic plan, management developed a capital 
plan
during 1996.  The plan addressed:  (I) the current and expected capital 
requirements
of the Company, including the maintenance of capital ratios well in excess of 
minimum
regulatory guidelines; (II) the market value of the Company's securities and 
the
resulting effect on the Company's capital; (III) any planned growth in the 
Company's
assets; (IV) the Company's anticipated level of net earnings, taking into 
account the
Company's projected asset/liability position and exposure to changes in market
interest rates; and (V) the source and timing of additional funds to fulfill 
future
capital requirements.  The submitted plan covered the period from July 1, 1996, 
to
June 30, 1999, taking into account the market value of the Company's securities 
and
the resulting effect on its capital position under four different interest rate
scenarios.  Also included in the plan were contingency strategies that could be
followed in the event the Company's ratios did fall below regulatory guidelines.
Such strategies, which the Company considers proprietary in nature, include 
capital generation techniques.

The Federal Reserve Board issued a final rule revising risk-based capital 
standards
to implement section 305 of the Federal Deposit Insurance Corporation 
Improvement Act
of 1991 regarding interest rate risk ("IRR").  Such ruling went into effect on
September 1, 1995.  This allows regulatory agencies to consider the potential
negative effects that changes in interest rates may have on the economic value 
of a
company's capital when determining its economic needs.  This amendment created a
standardized supervisory measurement system model that will measure the risk of 
banks
not exempt from reporting additional information on their IRR exposure.  In 
addition, banks are encouraged to report the results of their internal IRR 
systems.

The regulatory agencies will consider both a rising and falling rate scenario 
based
on a 200 basis point parallel change in market interest rates for all maturities
when
measuring a bank's IRR exposure level for adequacy.  Such scenarios may be 
modified
based on current and historical interest rate levels and volatilities as well as
other relevant market and supervisory considerations.  For model purposes, banks
need
to report assets, liabilities and off-balance sheet item maturities for various 
time
intervals.  The appropriate time interval is determined by using guidelines set 
forth
by the regulatory agencies.  Once the bank's assets, liabilities and off-balance
sheet items have been classified into the appropriate time intervals, they are
multiplied by IRR risk weights.  The result is the bank's IRR exposure.  The 
risk
weights are designed to approximate the percentage change in the value of the
reported position that would result from a 200 basis point instantaneous and 
uniform
movement in market interest rates.  Banks having fixed-rate residential 
mortgages
exceeding 20.0 percent of total assets or adjustable-rate residential mortgage
holdings exceeding 10.0 percent of total assets must provide additional 
disclosures to the agencies.

Upon review of the supervisory model and the bank's internal model, examiners 
will
determine the amount of capital needed to be held by the bank should such bank 
have
high levels of measured exposure or weak management systems.  This determination
as
well as the examiners' overall IRR conclusions will be discussed with management
at
the end of the bank's examination.  During interim periods, the agencies will 
use the
model to monitor a bank's IRR exposure changes, making decisions as to 
supervisory
actions when warranted.  Based on the results of the Company's internal IRR 
system,
it is management's opinion that the Company was adequately capitalized at 
December 31, 1996.

REVIEW OF FINANCIAL PERFORMANCE:

The Company earned the highest net income in its existence totaling $4,200 or 
$1.91
per share in 1996.  This achievement becomes more impressive considering that 
such
earnings level was solely attributable to income from normal operations.  The
Company's previous high earnings of $4,150 or $1.89 per share recorded in 1993
included $1,558 of nonrecurring net investment securities gains and trading 
account
profits.  Net income, excluding the effects of such nonrecurring gains and 
losses,
would have totaled $3,431 or $1.56 per share in 1993, as compared to $4,238 or 
$1.93
per share in 1996.  Additionally, the 1996 net income significantly surpasses 
the
comparable 1995 level, adjusted for the effects of net investment securities 
losses of $4,393 from the reconstitution of the investment portfolio.

The Company's return on assets and return on equity ratios were 1.21 percent and
14.57 percent, respectively, in 1996.  For the Company's peer group, such ratios
were
1.31 percent and 12.96 percent, respectively.  The Company's record earnings for
1996
were primarily attributable to higher net interest income and noninterest income
combined with improved noninterest expense levels.  Net interest income on a tax
equivalent basis increased $476 from $12,215 in 1995 to $12,691 in 1996.  This
increase was primarily due to an increase in loan volumes and the Company's
controlling of funds cost.  Since the second quarter of 1995 when the Company
instituted its plan to become a more traditional banking institution, it has 
been
successful in improving the Company's financial position as loans comprised 69.1
percent of earning assets at December 31, 1996, as compared to 57.4 percent at 
June
30, 1995.  The Company was also successful in reducing its cost of funds from 
4.86
percent in 1995 to 4.69 percent in 1996.  Improvements in liquidity allowed the
Company to be more stringent in controlling funds cost.  The Company's cost of 
funds
increased from 4.71 percent during the first quarter of 1995 to 4.88 percent 
during
the fourth quarter. Compared to the same periods of 1996, these costs were 4.74
percent and 4.69 percent, respectively.  This was no small achievement as 
general
market rates on U.S. Treasury securities went up during 1996.  Yields on one- 
and
five-year U.S. Treasury instruments averaged 5.12 percent and 5.58 percent,
respectively, in the first quarter of 1996 and 5.48 percent and 6.10 percent,
respectively, in the fourth quarter of 1996.

For the year-ended December 31, 1996, the Company's provision for loan losses
declined $135 to $300.  Such decline came as the Company chose to reduce its
provision from $70 per month to $25 per month at the beginning of the second 
quarter
of 1995.  This decision came in response to the Company reaching a loan loss 
reserve
level believed by management to be adequate to absorb future charge-offs.  

The Company also had a dramatic rise in noninterest income in 1996 as compared 
to
1995.  The majority of such increase was attributable to a reduction in 
securities
losses from $4,393 for the year-ended December 31, 1995, to $58 for the same 
period
of 1996.  The loss in 1995 came primarily during the second and third quarters 
as a
result of management's decision to reconstitute the investment portfolio in 
working toward its goal of becoming a more traditional community bank.

Noninterest expense for the Company showed a marked improvement over 1995 
levels. 
Such expenses declined $811 from $8,194 for the year-ended December 31, 1995, to
$7,383 for the same period of 1996.  The Company took better control of other
expenses in 1996 and benefitted from its improved financial position by earning 
lower
Federal Deposit Insurance Corporation ("FDIC") insurance rates and reducing 
legal and
administrative costs associated with the Memorandum of Understanding that was 
removed on February 16, 1996.  

On March 3, 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 
No.
128, "Earnings per Share."  The objective of the SFAS is to issue a standard on
earnings per share that will simplify generally accepted accounting principles 
in the
United States and, at the same time, will be compatible with international 
standards. 
According to the Statement, the presentation of primary Earnings Per Share 
("EPS")
currently required by Accounting Principles Board ("APB") Opinion No. 15, 
"Earnings
per Share," would no longer be required.  Basic EPS, which represents income
available to common stockholders divided by the weighted-average number of 
common
shares outstanding during the period, effectively replaces primary EPS.  Diluted
EPS,
previously referred to as fully-diluted EPS, would be calculated in a similar 
manner
as that prescribed by APB Opinion No. 15.  SFAS No. 128 will be effective for
financial statements for fiscal years ending after December 15, 1997.  The 
Company's
adoption of such Statement in 1997 is not expected to have a material effect on
operating results or financial position.

On June 20, 1996, the FASB issued an Exposure Draft of a proposed SFAS, 
"Reporting
Comprehensive Income."  The proposed Statement, expected to be adopted as a 
final
SFAS during the second quarter of 1997, would be effective for fiscal years 
beginning
after December 15, 1996, with earlier application permitted.  Such Statement 
would
establish standards for reporting and displaying of comprehensive income and its
components in a full set of general-purpose financial statements and does not 
address
matters of recognition and measurement.  Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and 
other
events and circumstances from nonowner sources.  It includes all changes in 
equity
during a period except those resulting from investments by owners and 
distributions
to owners.  The purpose of reporting comprehensive income is to report a measure
of
overall enterprise performance by displaying all changes in equity of an 
enterprise
that result from recognized transactions and other economic events of the period
other than transactions with owners in their capacity as owners.  Such Statement
will
affect an enterprise's display of earnings per share on the face of the 
Statement of
Financial Performance by requiring single or dual presentation of comprehensive
income per share based on its capital structure.  Aside from a change in
presentation, the issuance of the final SFAS is not expected to have an effect 
on the Company's operating results or financial position.

NET INTEREST INCOME:

The Company derives its largest source of operating income from net interest 
income. 
Net interest income is defined as the amount by which interest and fees on loans
and
other investments exceeds interest expense incurred on deposits and other 
funding
sources used to support such assets.  Net interest margin is the percentage of 
net
interest income on a tax equivalent basis to average earning assets.  Changes in
volumes and rates of earning assets and liabilities, in response to changes in
general market rates, are the primary factors affecting net interest income. 
Additional factors influencing the level of net interest income include the
composition of earning assets and interest-bearing liabilities and the level of
nonperforming assets.

Net interest income on a tax equivalent basis rose to $12,691 in 1996, an 
increase of
$476 or 3.9 percent, compared to 1995.  Such increase was due almost entirely to
the
Company's improved net interest margin.  The Company's 1996 net interest margin 
was
3.79 percent.  This marked a 31 basis point increase over the 3.48 percent 
margin
recorded in 1995.  The combination of an improved yield on earning assets and a 
lower
cost associated with interest-bearing deposits accounted for the improvement.  
In
1996, the Company experienced an increase of 10 basis points in its yield on 
earning
assets as such rate was 7.85 percent for the year-ended December 31, 1996, as
compared to 7.75 percent for the year-ended December 31, 1995.  Additionally, 
the
Company's cost of funds declined 17 basis points to 4.69 percent for the 
year-ended
December 31, 1996, from 4.86 percent for the same period of 1995.  These changes
accounted for the $462 positive rate variance recorded for 1996.   Such 
favorable
results were by-products of implementing transitional asset/liability 
strategies. 
The Company also reaped the rewards of its improved liquidity position in 1996 
as it
was not pressured into aggressively competing for funds nor was it reliant on 
high-
cost borrowings to fund loan demand.  Management expects an increase in the 
Company's
net interest margin based on the higher average volume of loans.  However, such
increase may be partially offset by increases in funds cost as a result of more
intense competition and increases in general market rates.  In addition, 
management
is aware, that higher levels of impaired loans may result if local unemployment
conditions deteriorate thus diluting such positive influence.

Reductions in the volumes of interest-bearing liabilities in excess of average
earning assets resulted in a positive influence of $14 on net interest income.  
Total
average earning assets decreased $16.7 million to $334.5 million in 1996 while
average interest-bearing liabilities decreased $19.4 million to $289.1 million 
in
1996.  The Company experienced an 18.1 percent decrease in its volume of average
investments from $134.5 million to $110.2 million in 1995 and 1996, 
respectively. 
This reduction was a direct result of management changing its earning asset
preference.  Such decrease was responsible for $1,535 of the reduction in 
interest
income as a result of volume changes.  Partially offsetting this decline was a 
9.6
percent increase in average loan volumes to $218.8 million in 1996 from $199.7
million in 1995.  This accounted for a $1,249 positive influence on income due 
to
volume changes.  The other major contributor to the unfavorable volume variance 
in
interest income was the reduced average volume of federal funds sold in 1996.  
Such
decline accounted for a $689 reduction in interest income.  Average federal 
funds
sold decreased $11.5 million during 1996 as management used proceeds from the 
sales
of securities to fund the increased loan demand and to retire a long-term note 
held
with the FHLB-Pgh.  The favorable volume variance of $998 in interest expense 
offset
the unfavorable volume variance of $984 in interest income.  Lower average 
volumes of
short-term borrowings were the primary contributor to such variance.  Average 
short-
term borrowing volumes fell from $9.9 million in 1995 to $51 in 1996 as the 
Company,
through its success in reconstituting the investment portfolio, eliminated its 
need for borrowings to fund asset growth.  

Management analyzes interest income and interest expense by segregating rate and
volume components of earning assets and interest-bearing  liabilities.  The 
following
table demonstrates 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.  Earning assets 
averages
include nonaccrual loans.  Investment averages include available for sale 
securities
at amortized cost.  Investment securities and loans are adjusted to a tax 
equivalent
basis using a 34.0 percent tax rate.  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.

<TABLE>
<CAPTION>
NET INTEREST INCOME CHANGES DUE TO RATE AND VOLUME

                                                          1996 VS. 1995                 1995 VS. 1994       
                                                  ----------------------------   ---------------------------
                                                       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......................................... $ 1,206    $ (19)   $ 1,225   $ 1,477   $  638    $   839
  Tax-exempt......................................     106       82         24        92       16         76 
Investments:
  Taxable.........................................  (2,767)     (35)    (2,732)   (1,037)     305     (1,342)
  Tax-exempt......................................   1,187      (10)     1,197         1      (14)        15
Interest-bearing deposits with banks..............      (9)                 (9)       (8)      (1)        (7)
Federal funds sold................................    (691)      (2)      (689)      982        5        977 
                                                   -------    -----    -------   -------   ------    -------
    Total interest income.........................    (968)      16       (984)    1,507      949        558
                                                   -------    -----    -------   -------   ------    -------


Interest expense:
Money market accounts.............................    (229)    (110)      (119)      (34)      37        (71)
NOW accounts......................................      32        9         23         8                   8
Savings accounts..................................    (320)    (172)      (148)     (266)      97       (363)
Time deposits less than $100......................       2      (62)        64     2,018    1,202        816
Time deposits $100 or more........................    (124)     (31)       (93)      218       18        200 
Short-term borrowings.............................    (674)     (60)      (614)      132      198        (66)
Long-term debt....................................    (131)     (20)      (111)      (24)      (8)       (16)
                                                   -------    -----    -------   -------   ------    -------   
    Total interest expense........................  (1,444)    (446)      (998)    2,052    1,544        508
                                                   -------    -----    -------   -------   ------    -------      
    Net interest income........................... $   476    $ 462    $    14   $  (545)  $ (595)   $    50
                                                   =======    =====    =======   =======   ======    =======    
</TABLE>























<TABLE>
<CAPTION>

SUMMARY OF NET INTEREST INCOME

                                                           1996                            1995               
                                               ----------------------------    ----------------------------      
                                                         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..................................... $213,071   $18,444      8.66%   $195,047   $17,238      8.84%
  Tax-exempt..................................    5,724       470      8.21       4,649       364      7.83
Investments:
  Taxable.....................................   74,233     4,022      5.42     113,675     6,789      5.97
  Tax-exempt..................................   35,923     3,005      8.37      20,775     1,818      8.75
Interest-bearing deposits with banks..........                                       90         9     10.00
Federal funds sold............................    5,508       300      5.45      16,980       991      5.84   
                                               --------   -------              --------   -------
    Total earning assets......................  334,459    26,241      7.85%    351,216    27,209      7.75%
Less: allowance for loan losses...............    4,014                           3,816
Other assets..................................   16,834                          11,770  
                                               --------                        -------- 
    Total assets.............................. $347,279                        $359,170
                                               ========                        ========



LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts......................... $ 18,144       529      2.92%   $ 21,869       758      3.47%
NOW accounts..................................   16,661       337      2.02      15,550       305      1.96
Savings accounts..............................   67,144     2,016      3.00      71,911     2,336      3.25
Time deposits less than $100..................  157,271     8,925      5.67     155,183     8,923      5.75
Time deposits $100 or more....................   27,755     1,647      5.93      29,336     1,771      6.04
Short-term borrowings.........................       51         3      5.88       9,935       677      6.82
Long-term debt................................    2,122        93      4.38       4,715       224      4.75
                                               --------   -------              --------   ------- 
    Total interest-bearing liabilities........  289,148    13,550      4.69%    308,499    14,994      4.86% 
Noninterest-bearing deposits..................   26,329                          24,090 
Other liabilities.............................    2,968                             547
Stockholders' equity..........................   28,834                          26,034          
                                               --------   -------              --------   -------
    Total liabilities and stockholders' equity $347,279    13,550              $359,170    14,994
                                               ========   -------              ========   -------
    Net interest/income spread................            $12,691      3.16%              $12,215      2.89%
                                                          =======                         =======
    Net interest margin.......................                         3.79%                           3.48%
Tax equivalent adjustments:
Loans.........................................            $   160                         $   124
Investments...................................              1,022                             618
                                                          -------                         -------
    Total adjustments.........................            $ 1,182                         $   742
                                                          =======                         =======






















Note:        Average balance was calculated using average daily balances and includes
nonaccrual loans.  Available for sale securities, included in
             investment securities, are stated at amortized cost with the related
unrealized holding gain of $337 in 1996 and unrealized holding loss
             of $1,272 and $4,217 in 1995 and 1994, respectively, included in other
assets.  Tax equivalent adjustment was calculated using the
             prevailing statutory rate of 34.0 percent. 

<CAPTION>
SUMMARY OF NET INTEREST INCOME (CONTINUED)


                                                           1994                            1993               
                                              -----------------------------    ----------------------------      
                                                         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..................................... $185,318   $15,761      8.50%   $172,416   $15,748      9.13% 
  Tax-exempt..................................    3,657       272      7.44       2,343       226      9.65
Investments:
  Taxable.....................................  136,386     7,826      5.74     113,380     6,962      6.14 
  Tax-exempt..................................   20,609     1,817      8.82      16,841     1,588      9.43
Interest-bearing deposits with banks..........      190        18      9.47       2,255        79      3.50
Federal funds sold............................      194         8      4.12       3,281       108      3.29   
                                               --------   -------              --------   -------
    Total earning assets......................  346,354    25,702      7.42%    310,516    24,711      7.96%
Less: allowance for loan losses...............    3,540                           2,886
Other assets..................................    7,586                          11,784  
                                               --------                        --------   
    Total assets.............................. $350,400                        $319,414
                                               ========                        ========



LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts......................... $ 23,955       792      3.31%   $ 22,267       726      3.26%
NOW accounts..................................   15,151       297      1.96      14,406       338      2.35
Savings accounts..............................   83,142     2,602      3.13      73,400     2,450      3.34
Time deposits less than $100..................  139,641     6,905      4.94     131,572     6,925      5.26
Time deposits $100 or more....................   25,995     1,553      5.97      25,960     1,304      5.02
Short-term borrowings.........................   11,186       545      4.87       1,005        33      3.28
Long-term debt................................    5,050       248      4.91       3,866       224      5.79
                                               --------   -------              --------   -------
    Total interest-bearing liabilities........  304,120    12,942      4.26%    272,476    12,000      4.40% 
Noninterest-bearing deposits..................   21,849                          19,657
Other liabilities.............................    1,120                           4,104
Stockholders' equity..........................   23,311                          23,177          
                                               --------   -------              --------   -------
    Total liabilities and stockholders' equity $350,400    12,942              $319,414    12,000
                                               ========   -------              ========   -------          
    Net interest/income spread................            $12,760      3.16%              $12,711      3.56%
                                                          =======                         =======
    Net interest margin.......................                         3.68%                           4.09%
Tax equivalent adjustments:
Loans.........................................            $    93                         $    77
Investments...................................                618                             540
                                                          -------                         -------
    Total adjustments.........................            $   711                         $   617
                                                          =======                         =======














<CAPTION>





SUMMARY OF NET INTEREST INCOME (CONTINUED)


                                                           1992                  
                                              -----------------------------
                                                         INTEREST  AVERAGE     
                                                AVERAGE  INCOME/   INTEREST    
                                                BALANCE  EXPENSE     RATE      
                                               --------  --------  --------
<S>                                            <C>       <C>          <C>
ASSETS:                                         
Earning assets:
Loans:
 Taxable...................................... $157,674   $15,573      9.88%   
  Tax-exempt..................................    5,169       456      8.82   
Investments:
  Taxable.....................................   96,964     7,181      7.41   
  Tax-exempt..................................   10,581     1,021      9.65   
Interest-bearing deposits with banks..........      694        39      5.62   
Federal funds sold............................    7,936       254      3.20    
                                               --------   -------               
    Total earning assets......................  279,018    24,524      8.79%  
Less: allowance for loan losses...............    2,114                           
Other assets..................................   15,399                         
                                               --------
    Total assets.............................. $292,303                       
                                               ========



LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts......................... $ 22,819       876      3.84%   
NOW accounts..................................   13,742       462      3.36    
Savings accounts..............................   56,288     2,369      4.21    
Time deposits less than $100..................  130,753     8,088      6.19    
Time deposits $100 or more....................   25,956     1,586      6.11    
Short-term borrowings.........................      797        24      3.00    
Long-term debt................................    1,817       109      6.00    
                                               --------   -------
    Total interest-bearing liabilities........  252,172    13,514      5.36%   
Noninterest-bearing deposits..................   18,657                       
Other liabilities.............................    1,513                       
Stockholders' equity..........................   19,961                       
                                               --------   -------
    Total liabilities and stockholders' equity $292,303    13,514             
                                               ========   -------
    Net interest/income spread................            $11,010      3.43%  
                                                          =======
    Net interest margin.......................                         3.95%  
Tax equivalent adjustments:
Loans.........................................            $   155             
Investments...................................                347             
                                                          -------
    Total adjustments.........................            $   502             
                                                          =======
</TABLE>


























PROVISION FOR LOAN LOSSES:

Provision for loan losses for the nation's top 50 banks increased 34.6 percent 
in
1996 to $10.5 billion.  Such increase came in response to a rise in net 
charge-offs
for the year of 29.1 percent to $11.1 billion, which pushed net charge-offs as a
percentage of average loans outstanding for such institutions to 0.63 percent in
1996
from 0.54 percent in 1995.  Bankruptcies, delinquencies and charge-offs 
primarily
from revolving consumer credit increased in 1996.  Even after taking higher
provisions, net charge-offs still outdistanced the provision for the year by 
$600.0
million, resulting in a 1.0 percent reduction in the allowance for loan losses
account.  Charge-off ratios may continue to climb in 1997 as credit card 
charge-offs
continue to increase and recoveries decline. This occurrence, coupled with a 
quicker
pace of loan growth, may prompt the banking industry to take greater loan loss
provisions in 1997.

The Company makes provisions for loan losses through evaluating the adequacy of 
its
allowance for loan losses account.  In making its decision management considers 
such
factors as previous loan experience, overall loan portfolio characteristics,
prevailing economic conditions and other relevant factors.  Based on its most 
current
valuation, management believes that the allowance is adequate to absorb any 
known and inherent losses in the portfolio.

Contrary to the stance taken by the banking industry, the Company reduced its
provision for loan losses by $135 to $300 in 1996 from the $435 taken in 1995. 
Management believes that maintaining a standard monthly charge to operations in 
the
form of a provision is warranted, despite maintaining an adequate allowance 
account,
as nonperforming asset levels have risen and loan demand has increased.  If the
strong loan demand of 1996 continues or nonperforming asset levels deteriorate,
management will consider adjusting the monthly provision amount for 1997.

NONINTEREST INCOME:

The Company reported noninterest income of $1,387 for the year-ended 
December 31,
1996, as compared to a loss of $3,196 for the same period of 1995.  The $4,583
turnaround primarily resulted from reporting net losses on investment securities
of
$58 in 1996 compared to net losses of $4,393 in 1995.  Such losses in 1995 were 
the
result of completing the reconstitution of the investment portfolio during the 
second
and third quarters.  The net investment securities losses of $58 for 1996 
resulted
from the disposition of four variable-rate CMOs with a carrying value of $1,487.
Such dispositions resulted from a decision by the Investment Committee based on 
a reassessment of their appropriateness with respect to structure, composition 
and characteristics in line with investment goals.  


Service charges, fees and commissions increased $248 or 20.7 percent from $1,197
for
the year-ended December 31, 1995, to $1,445 for the same period of 1996.  The 
primary
reason for such increase stemmed from management's decision, effective 
April 1, 1996,
to adjust general service charges on deposit accounts.  Management expects
noninterest income to increase based upon increased opportunities from service
charges and commissions on nonbank activities upon legislative changes.

NONINTEREST EXPENSE:

Generally, noninterest expense includes the costs of providing salaries and 
necessary
employee benefits, maintaining facilities and general operating costs such as
insurances, supplies, advertising, data processing, taxes and other related 
expenses. 
Several of these costs and expenses are variable while others are fixed.  
Management
uses budgets and other related strategies in an effort to control variable 
expenses.

Noninterest expense totaled $7,383 in 1996, a decrease of $811, or 9.9 percent,
compared to 1995.  The Company had a net overhead expense to average assets 
ratio of
1.7 percent, an improvement over the 1.9 percent recorded in 1995.  In relation 
to
the peer group ratio of 2.7 percent, the Company continues to demonstrate a 
greater
efficiency level.  Productivity is also measured by the operating efficiency 
ratio. 
Such ratio is defined as noninterest expense, excluding other real estate 
expense, as
a percentage of net interest income and noninterest income less nonrecurring 
gains
and losses.  The Company's operating efficiency ratio showed an improvement from
64.1
percent at December 31, 1995, to 56.4 percent at December 31, 1996.  Reduced 
levels
of noninterest expense coupled with the increase in net interest income and 
service
charges, fees and commissions were responsible for the positive change in such 
ratio.

The Company's salaries and benefits expense composed 51.6 percent of noninterest
expense and totaled $3,808 in 1996, a $220 or a 5.5 percent decrease compared to
1995.  The majority of such decrease was attributable to the Company's Board of
Directors exercising its termination option of the former President and Chief
Executive Officer's written employment agreement during the second quarter of 
1995. 
The cost of exercising such agreement approximated $207.  The Company had a 
defined
compensation plan for certain senior management employees that it discontinued 
during
the third quarter of 1996.  Costs for such plan were recognized monthly in 
salaries
and benefits expense on an accrual basis.  The Company had no recognition of 
gain or loss from the discontinuance of such plan.

Net occupancy and equipment expense aggregated $1,213 for the year-ended 
December 31,
1996, similar to the amount recorded for the same period last year.  Such 
expenses,
as well as other noninterest expenses, are expected to increase slightly for 
1997 as
the Company introduced a document imaging system during the fourth quarter of 
1996. 
The system will eliminate the requirement of returning cancelled checks to 
customers
by replacing them with computer-generated facsimiles.  Such technology will 
enhance
the Company's effectiveness and efficiency in serving customers and will reduce
ongoing operating costs.  The Company has no pending material commitment for 
capital expenditures other than those incurred in the normal course of business.

Other expenses totaled $2,362 in 1996, a decrease of $582 or 19.8 percent 
compared to
the $2,944 recorded in 1995.  Such decline was due in large part to a reduction 
in
FDIC premiums paid by the Company in 1996.  Under the new structure approved by 
the
FDIC Board of Directors on November 14, 1995, and put into effect on 
January 1, 1996,
the Company was assessed the $2 minimum annual FDIC insurance payment for 1996 
based
on its current risk characteristic.  As a product of maintaining this rating, 
the
Company's FDIC insurance expense decreased $369 for 1996 from $417 in 1995 to 
$48 in 1996.    

At the end of the third quarter of 1996, the President signed into law the 
Deposit
Insurance Funds Act of 1996.  This law included the FDIC approval of a one-time
special assessment that SAIF members were required to pay to recapitalize the 
fund. 
The assessment brought the SAIF to a level of $1.25 for every one hundred 
dollars in
insured deposits.  This one-time assessment had no effect on the Company's
noninterest expenses as it had no such deposits.  Also under the new law, 
effective
January 1, 1997, SAIF members will recapitalize the thrift insurance fund 
through the
assessment, and the measure anticipates that the insurance funds will eventually
be
merged.  As a final component of this new law, BIF-insured institutions will be
responsible for part of the $780.0 million annual Finance Corporation ("FICO")
interest payments.  For the three-year period from January 1, 1997, through 
December
31, 1999, the BIF assessment rate for FICO will be one-fifth of the SAIF rate.  
The
assessment rate for the first semiannual period of 1997 was set at 1.30 basis 
points
annually for BIF-assessable deposits and 6.48 basis points annually for SAIF-
assessable deposits.  The rates may be adjusted quarterly to reflect changes in 
the
assessment bases for the BIF and the SAIF.  By law, the FICO rate on 
BIF-assessable
deposits must be one-fifth the rate on SAIF-assessable deposits until the merger
of
the two funds occurs or until January 1, 2000, whichever occurs first.  The 
Company
estimates an increase of $39 in FDIC insurance premiums for 1997 based on the
provisions of this law.









The following table sets forth the major components of noninterest expense for 
the past five years:
<TABLE>
<CAPTION>

NONINTEREST EXPENSE

YEAR ENDED DECEMBER 31                                               1996     1995     1994     1993     1992
-------------------------------------------------------------------------------------------------------------
<S>                                                                <C>      <C>      <C>      <C>      <C>
Salaries and employee benefits expense:
Salaries and payroll taxes........................................ $3,251   $3,429   $3,022   $2,585   $2,432  
Employee benefits.................................................    557      599      760      746      614
                                                                   ------   ------   ------   ------   ------
  Salaries and employee benefits expense..........................  3,808    4,028    3,782    3,331    3,046
                                                                   ------   ------   ------   ------   ------

Net occupancy and equipment expense:
Net occupancy expense.............................................    602      684      784      680      579
Equipment expense.................................................    611      538      465      654      781
                                                                   ------   ------   ------   ------   ------
  Net occupancy and equipment expense.............................  1,213    1,222    1,249    1,334    1,360
                                                                   ------   ------   ------   ------   ------

Other expenses:
Marketing expense.................................................    242      281      201      211      177 
Other taxes.......................................................    218      200      191      127      199
Stationery and supplies...........................................    226      250      262      338      337
Contractual services..............................................    871      879      727      597      682
Insurance including FDIC assessment...............................     84      480      717      807      630
Other.............................................................    721      854      820    1,107      821    
                                                                   ------   ------   ------   ------   ------
  Other expenses..................................................  2,362    2,944    2,918    3,187    2,846 
                                                                   ------   ------   ------   ------   ------
    Total noninterest expense..................................... $7,383   $8,194   $7,949   $7,852   $7,252
                                                                   ======   ======   ======   ======   ======

</TABLE>

INCOME TAXES:

The Company reported tax expense of $1,013 in 1996 compared to a tax benefit of 
$552
in 1995.  The effective tax rate for 1996 at 19.4 percent was the lowest rate
recorded for any year with taxable income.  Such rate was significantly better 
than
the effective tax rate of the peer group at 25.0 percent during the comparable
period.  Management increased emphasis on acquiring tax-exempt loans and 
investments
and utilized investment tax credits to effectuate the favorable tax rate.  The 
tax
benefit reported in 1995 was 156.8 percent of the loss before tax and above the
marginal tax rate due to the effect of tax-exempt income.  The Company was able 
to
utilize the tax benefit because of taxable income in previous years and 
expectations
of the future realization of the benefit.  Management expects the Company's 
effective
tax rate for 1997 to remain near the 1996 level for the same reasons given for 
the
previous year.  The Company's investment in a limited partnership interest in a
residential housing program designed for the elderly and for low- to 
moderate-income
families provided it with tax credits of $160 in 1996.  The aggregate amount of 
tax
credits available from such project that will be recognized over ten years 
ending 2003 is $895.

The Company has determined that it is not required to establish a valuation 
reserve
for the deferred tax assets since it is more likely than not that the net 
deferred
tax assets could be principally realized through carryback to taxable income in 
prior
years and by future reversals of existing taxable temporary differences or, to a
lesser extent, through future taxable income.  The Company reviews the tax 
criteria related to the recognition of deferred tax assets on a quarterly basis.



COMM BANCORP, INC.
INDEPENDENT AUDITORS' REPORT                                             



Board of Directors
 and Stockholders
Comm Bancorp, Inc.
Forest City, Pennsylvania


We have audited the accompanying consolidated balance sheets of Comm Bancorp, 
Inc.
and subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the
years in the three-year period ended December 31, 1996.  These consolidated 
financial
statements are the responsibility of the Company's management.  Our 
responsibility is
to express an opinion on these consolidated financial statements based on our 
audits.

We conducted our audits in accordance with generally accepted auditing 
standards. 
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material 
misstatement. 
An audit includes examining, on a test basis, evidence supporting the amounts 
and
disclosures in the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as
evaluating the overall financial statement presentation.  We believe that our 
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Comm Bancorp, Inc. 
and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and
their cash flows for each of the years in the three-year period ended 
December 31, 1996, in conformity with generally accepted accounting principles.




February 6, 1997


/s/Kronick Kalada Berdy & Co.  
KRONICK KALADA BERDY & CO., P.C.
Kingston, Pennsylvania

<TABLE>
<CAPTION>

COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
           
Year Ended December 31                                                            1996       1995       1994
------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>          <C>        <C>
INTEREST INCOME:
Interest and fees on loans:
  Taxable................................................................... $  18,444    $17,238    $15,761
  Tax-exempt................................................................       310        240        179 
Interest on investment securities held to maturity:                                   
  Taxable...................................................................                3,830      4,134
  Tax-exempt................................................................                  895      1,199
Interest and dividends on investment securities available for sale:               
  Taxable...................................................................     3,914      2,839      3,518
  Tax-exempt................................................................     1,983        305         
  Dividends.................................................................       108        120         79
Interest on trading account securities......................................                              95
Interest on deposits with banks.............................................                    9         18
Interest on federal funds sold..............................................       300        991          8
                                                                             ---------    -------    -------  
    Total interest income...................................................    25,059     26,467     24,991
                                                                             ---------    -------    -------
 
INTEREST EXPENSE:
Interest on deposits........................................................    13,454     14,093     12,149
Interest on short-term borrowings...........................................         3        677        545
Interest on long-term debt..................................................        93        224        248
                                                                             ---------    -------    -------
    Total interest expense..................................................    13,550     14,994     12,942
                                                                             ---------    -------    -------
    Net interest income.....................................................    11,509     11,473     12,049
Provision for loan losses...................................................       300        435        800
                                                                             ---------    -------    -------
    Net interest income after provision for loan losses.....................    11,209     11,038     11,249
                                                                             ---------    -------    -------

NONINTEREST INCOME:
Service charges, fees and commissions.......................................     1,445      1,197      1,166
Net investment securities gains (losses)....................................       (58)    (4,393)       495 
Trading account losses......................................................                            (656) 
                                                                             ---------    -------    -------
    Total noninterest income (losses).......................................     1,387     (3,196)     1,005
                                                                             ---------    -------    -------

NONINTEREST EXPENSE:
Salaries and employee benefits expense......................................     3,808      4,028      3,782
Net occupancy and equipment expense.........................................     1,213      1,222      1,249
Other expenses..............................................................     2,362      2,944      2,918
                                                                             ---------    -------    -------
    Total noninterest expense...............................................     7,383      8,194      7,949
                                                                             ---------    -------    -------
Income (loss) before income taxes...........................................     5,213       (352)     4,305
Provision for income tax expense (benefit)..................................     1,013       (552)       980
                                                                             ---------    -------    -------
    Net income.............................................................. $   4,200    $   200    $ 3,325
                                                                             =========    =======    =======



PER SHARE DATA:
Net income.................................................................. $    1.91    $  0.09    $  1.51
Cash dividends declared..................................................... $    0.28    $  0.21    $  0.21
Average common shares....................................................... 2,200,080  2,200,080  2,200,071

</TABLE>










See notes to consolidated financial statements.

<TABLE>
<CAPTION>
COMM BANCORP, INC. 
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                             
DECEMBER 31                                                                               1996          1995
------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>           <C>
ASSETS:
Cash and due from banks.............................................................. $  7,732      $  6,890
Interest-bearing deposits with banks.................................................                     90
Federal funds sold...................................................................    3,300        15,100
Investment securities available for sale.............................................  101,994       108,706
Loans, net of unearned income........................................................  235,803       213,835
  Less: allowance for loan losses....................................................    3,944         3,903
                                                                                      --------      --------
Net loans............................................................................  231,859       209,932
Premises and equipment, net..........................................................    3,092         3,070
Accrued interest receivable..........................................................    2,671         2,872
Other assets.........................................................................    4,164         4,288
                                                                                      --------      --------
    Total assets..................................................................... $354,812      $350,948  
                                                                                      ========      ========
 
LIABILITIES:
Deposits:
  Noninterest-bearing................................................................ $ 26,424      $ 25,423
  Interest-bearing...................................................................  294,032       291,676
                                                                                      --------      --------
    Total deposits...................................................................  320,456       317,099
Long-term debt.......................................................................       46         3,048
Accrued interest payable.............................................................    1,758         1,761
Other liabilities....................................................................    1,296         1,145
                                                                                      --------      --------
    Total liabilities................................................................  323,556       323,053
                                                                                      --------      --------
 

STOCKHOLDERS' EQUITY:
Common stock, par value $0.33, authorized 12,000,000 shares, issued and outstanding 
 2,200,080 shares....................................................................      726           733
Capital surplus......................................................................    6,317         6,310
Retained earnings....................................................................   23,649        20,072
Net unrealized gain on available for sale securities.................................      564           780  
                                                                                      --------      --------
    Total stockholders' equity.......................................................   31,256        27,895
                                                                                      --------      --------
    Total liabilities and stockholders' equity....................................... $354,812      $350,948
                                                                                      ========      ========
</TABLE>




See notes to consolidated financial statements.
<TABLE>
<CAPTION>
COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                      
         
                                                                                NET UNREALIZED         TOTAL
                                                      COMMON  CAPITAL  RETAINED GAIN (LOSS) ON  STOCKHOLDERS'
FOR THE THREE YEARS ENDED DECEMBER 31, 1996            STOCK  SURPLUS  EARNINGS     SECURITIES        EQUITY
-------------------------------------------------------------------------------------------------------------
<S>                                                     <C>    <C>      <C>            <C>           <C> 
BALANCE, DECEMBER 31, 1993............................. $733   $6,310   $17,464                      $24,507
Net income............................................                   3,325                        3,325
Dividends declared: $0.21 per share....................                    (455)                        (455)
Net unrealized loss on securities......................                                $(4,688)       (4,688)
                                                        ----   ------   -------        -------       -------
BALANCE, DECEMBER 31, 1994.............................  733    6,310    20,334         (4,688)       22,689
Net income.............................................                     200                          200  
Dividends declared: $0.21 per share....................                    (462)                        (462)
Net unrealized gain on securities:
Securities transferred to available for sale...........                                  1,249         1,249
Other..................................................                                  4,219         4,219 
                                                        ----   ------   -------        -------       -------
BALANCE, DECEMBER 31, 1995.............................  733    6,310    20,072            780        27,895
Net income.............................................                   4,200                        4,200
Dividends declared: $0.28 per share....................                    (623)                        (623)
Net unrealized loss on securities......................                                   (216)         (216) 
Three-for-one stock split..............................   (7)       7                                       
                                                        ----   ------   -------        -------       -------
BALANCE, DECEMBER 31, 1996............................. $726   $6,317   $23,649        $   564       $31,256
                                                        ====   ======   =======        =======       =======
</TABLE>







































See notes to consolidated financial statements.
<TABLE>
<CAPTION>
 COMM BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31                                                             1996       1995      1994  
------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>        <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $  4,200   $    200  $  3,325
Adjustments:                                                                            
  Provision for loan losses...................................................      300        435       800
  Depreciation and amortization...............................................      714        645       667
  Amortization of loan fees...................................................     (215)      (179)     (173)
  Deferred income tax benefit.................................................      (66)      (140)     (193)
  (Gains) losses on sale of investment securities available for sale..........       58      4,393      (495)
  Gains on sale of loans......................................................                 (72)       
  Gains on sale of other real estate..........................................      (35)       (36)       (9)
  Changes in:
    Trading account securities................................................                           287 
    Interest receivable.......................................................      201       (236)     (322)
    Other assets..............................................................       61       (783)     (173)
    Interest payable..........................................................       (3)       205       316 
    Other liabilities.........................................................      203         95       (48)
                                                                               --------   --------  -------- 
      Net cash provided by operating activities...............................    5,418      4,527     3,982
                                                                               --------   --------  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities..........................    1,472     87,103    13,618
Proceeds from repayments of investment securities:
  Held to maturity............................................................               2,970    13,833
  Available for sale..........................................................   25,183      1,887     1,532
Purchases of investment securities:
  Held to maturity............................................................                (179)   (9,597)
  Available for sale..........................................................  (20,237)   (44,028)  (29,284)
Proceeds from sale of loans...................................................               5,591         
Proceeds from sale of other real estate.......................................      279        457       291
Net increases in lending activities...........................................  (22,235)   (25,434)  (18,483)
Purchases of premises and equipment...........................................     (518)      (204)     (860)
                                                                               --------   --------  --------
      Net cash provided by (used in) investing activities.....................  (16,056)    28,163   (28,950)
                                                                               --------   --------  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
  Money market, NOW, savings and noninterest-bearing accounts.................   (1,842)   (13,946)    4,560
  Time deposits...............................................................    5,199     14,877    14,374 
  Short-term borrowings.......................................................             (15,956)    6,815
Proceeds from the issuance of long-term debt..................................                            50
Payments on long-term debt....................................................   (3,002)    (2,002)     (800)
Cash dividends paid...........................................................     (675)      (456)     (448)
                                                                               --------   --------  --------
      Net cash provided by (used in) financing activities.....................     (320)   (17,483)   24,551
                                                                               --------   --------  --------
      Net increase (decrease) in cash and cash equivalents....................  (10,958)    15,207      (417)
      Cash and cash equivalents at beginning of year..........................   21,990      6,783     7,200
                                                                               --------   --------  --------
      Cash and cash equivalents at end of year................................ $ 11,032   $ 21,990  $  6,783 
                                                                               ========   ========  ========

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
  Interest.................................................................... $ 13,553   $ 14,789  $ 12,626
  Income taxes................................................................    1,315        114     1,511
Noncash items:
  Transfers of: 
    Loans to other real estate................................................      223        636       260
    Investments from held to maturity to available for sale...................             105,799         
    Investments from available for sale to held to maturity...................                        17,470
    Investments from trading account to held to maturity or available for sale                         3,676
  Change in net unrealized losses (gains) on available for sale securities.... $    216   $ (5,468) $  4,688


</TABLE>

See notes to consolidated financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of operations:

Comm Bancorp, Inc., a bank holding company incorporated under the laws of
Pennsylvania, has one wholly-owned subsidiary, Community Bank and Trust Company
("Community Bank"), through which it provides a full range of banking and 
related
financial services to individuals and commercial customers within four counties 
of
Pennsylvania.  Susquehanna and Wyoming counties account for the predominant 
portion
of Comm Bancorp's business activities, with Lackawanna and Wayne counties
contributing to a lesser degree.  The primary product of the subsidiary is the
extension of credit to finance one-to-four family residential properties.  Other
products include loans to customers who are small- and middle-market businesses 
and
middle-income individuals.  The subsidiary funds its loans by offering time, 
savings,
money market and demand deposit accounts to commercial enterprises and 
individuals.

Comm Bancorp, Inc. and Community Bank (collectively, the "Company") are subject 
to
regulations of certain federal and state agencies and accordingly, undergo 
periodic examinations from such regulatory agencies.

Basis of presentation:

The consolidated financial statements of the Company have been prepared in 
conformity
with generally accepted accounting principles, Regulation S-X, Item 302 of 
Regulation
S-K, and reporting practices applied in the banking industry.  The Company also
presents herein condensed parent company only financial information regarding 
Comm
Bancorp, Inc. (the "Parent Company"). All significant intercompany accounts and
transactions have been eliminated in the consolidated financial statements.  
Prior
period amounts are reclassified when necessary to conform with the current 
year's presentation.

Use of estimates:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of 
contingent
assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting periods.  Actual
results could differ from those estimates.  Significant estimates that are
particularly susceptible to material change in the next year relate to the 
allowance
for loan losses, foreclosed assets, and certain intangible assets, such as 
goodwill
and the assumptions used to determine fair value.  It is at least reasonably 
possible that these estimates will change within the next year.


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

The allowance is maintained at a level believed adequate by management to absorb
estimated potential credit losses.  While historical loss experience
provides a reasonable starting point in assessing the adequacy of the allowance
account, management also considers a number of relevant factors that are likely 
to
cause estimated credit losses associated with the Company's current portfolio to
differ from historical loss experience.  Such factors include changes in lending
policies and procedures, economic conditions, nature and volume of the 
portfolio,
loan review system, volumes of past due and impaired loans, concentrations,
borrowers' financial status, collateral value, and other factors deemed relevant
by
management.  This evaluation is inherently subjective as it requires material
estimates, including the amounts and timing of future cash flows expected to be
received on impaired loans, that may be susceptible to significant change.  The
Company employs the December 21, 1993, federal banking regulatory agencies'
Interagency Policy Statement on the Allowance for Loans and Lease Losses as the
primary analytical tool in assessing the adequacy of the allowance account. 
Additionally, regulatory agencies, as an integral part of their examination 
process,
periodically review the Company's allowance for loan losses and foreclosed real
estate.  Such agencies may require the Company to recognize additions to the
allowance based on information available to them at the time of their 
examination. 
Management is unaware of any such requirements based on the results of the 
Company's latest regulatory examination at September 30, 1996.

The valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans is written-down to the lower of the related loan balance 
or
eighty percent of fair market value based upon estimates derived through 
independent
appraisals.  However, realization of sales proceeds may ultimately be higher or 
lower than those estimates.

Substantially all outstanding goodwill resulted from the 1993 acquisition of The
First National Bank of Nicholson.  However if the future benefits  are not 
derived,
estimated amortization may increase and/or a charge for impairment may be 
recognized.

Investment securities: 

Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for 
Certain
Investments in Debt and Equity Securities," requires investments to be 
classified and
accounted for as either held to maturity, available for sale, or trading account
securities based on management's intent at the time of acquisition.  Management 
is
required to reassess the appropriateness of such classifications at each 
reporting date.



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

The Company classifies debt securities as held to maturity when management has 
the
positive intent and ability to hold such securities to maturity. Held to 
maturity
securities are stated at cost, adjusted for amortization of premium and 
accretion of discount.

Investment securities are designated as available for sale when they are to be 
held
for indefinite periods of time as management intends to use such securities to
implement asset/liability strategies or to sell them in response to changes in
interest rates or resultant prepayment risk, liquidity requirements, or other
circumstances identified by management.  Available for sale securities are 
reported
at fair value, with unrealized gains and losses, net of income taxes, excluded 
from
earnings and reported in a separate component of stockholders' equity. All 
marketable
equity securities are accounted for at fair value.  Restricted investment 
securities
of the Federal Home Loan Bank ("FHLB-Pgh") and Federal Reserve Bank ("FRB") are
carried at cost.  Estimated fair values for investment securities are based on 
quoted market prices from a national electronic pricing service.  

Management periodically evaluates each investment security to determine whether 
a
decline in fair value below the amortized cost basis is other than temporary.  
If a
decline is judged to be other than temporary, the cost basis of the individual
security is written-down to fair value with the amount of the write-down 
included in
earnings.  Realized gains and losses are computed using the specific 
identification
method and are included in noninterest income.  Premiums are amortized and 
discounts
are accreted using the interest method over the contractual lives of investment
securities, except for mortgage backed securities, where amortization and
accretion are based on principal repayments.

Securities that are bought and held principally for the purpose of selling them 
in
the near term, in order to generate profits from market appreciation, are 
classified
as trading account securities.  Trading account securities are carried at market
value.  Interest on trading account securities is included in interest income. 
Profits or losses on trading account securities are included in noninterest 
income. 
The Company discontinued its trading activities prior to the fourth quarter of 
1994, thus eliminating its trading account classification.

Transfers of securities between categories are recorded at fair value at the 
date of
the transfer, with the accounting treatment of unrealized gains or losses 
determined by the category into which the security is transferred.




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Loans: 

Loans are stated at principal amounts outstanding, net of unearned interest and 
net unamortized loan fees.  Interest income is accrued on the principal 
amount outstanding, except for discounted loans, with interest recognized over 
the
respective loan terms utilizing the effective interest method.  Loan origination
fees, net of certain direct loan origination costs, are deferred and recognized 
over the contractual life of the related loan as an adjustment of yield.  

The Company does not sell, provide servicing for others, or securitize mortgage
loans. Accordingly, SFAS No. 122, "Accounting for Mortgage Servicing Rights," 
adopted
by the Company on January 1, 1996, had no effect on operating results or 
financial position.

Nonperforming assets:

In accordance with the guidance set forth in SFAS No. 114, "Accounting by 
Creditors
for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for 
Impairment
of a Loan - Income Recognition and Disclosures,"  a loan is considered impaired 
when,
based on current information and events, it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. Impairment is measured based on the present value of expected future 
cash
flows discounted at a loan's effective interest rate or, as a practical 
expedient, at
the loan's observable market price or the fair value of the collateral if the 
loan is
collateral-dependent.  When the measure of an impaired loan is less than the 
recorded
investment in the loan, the impairment is recognized by adjusting the allowance 
for
loan losses with a corresponding charge to the provision for loan losses.

Nonperforming assets consist of nonperforming loans and foreclosed assets. 
Accruing
loans past due 90 days or more and loans impaired under SFAS Nos. 114 and 118
comprise nonperforming loans.  Impaired loans consist of nonaccrual and 
restructured
loans.  A loan is classified as nonaccrual when it is determined that the 
collection
of all or a portion of interest or principal is doubtful or when a default of
interest or principal has existed for 90 days or more, unless such loan is well
secured and in the process of collection.  When a loan is placed on nonaccrual,
interest accruals discontinue and uncollected accrued interest is reversed 
against
income in the current period.  Interest collections after a loan has been placed
on
nonaccrual status are credited to income when received unless the collectibility
of
principal is in doubt, causing all collections to be applied as principal 
reductions. 
A nonaccrual loan is not returned to performing status until such loan is 
current as
to principal and interest and has performed with the contractual terms for a 
minimum of six months.  
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Restructured loans are loans with original terms, interest rate, or both, that 
have
been modified as a result of a deterioration in the borrower's financial 
condition. 
Interest income on restructured loans is recognized as earned, using the 
interest
method.  The Company had the same one restructured loan during 1996 and 1995.

Foreclosed assets are comprised of properties acquired through foreclosure
proceedings or acceptance of a deed-in-lieu of foreclosure and loans classified 
as
in-substance foreclosures.  The Company includes such properties in other 
assets.  A
loan is classified as in-substance foreclosure when the Company has taken 
possession
of the collateral regardless of whether formal foreclosure proceedings take 
place. 
Foreclosed assets are recorded at the lower of the related loan balance or 80.0
percent of its appraised fair value at the time of acquisition.  Any excess of 
the
loan balance over the recorded value is charged to the allowance for loan 
losses. 
Subsequent declines in the recorded value of the property prior to its disposal 
and
costs to maintain the assets are included in other expense.  In addition, any 
gain or
loss realized upon disposal is included in other income or expense.  The 
historical average holding period for such properties is less than twelve 
months.

Allowance for loan losses:

The allowance for loan losses account is established through charges to earnings
in
the form of a provision for loan losses.  Loans, or portions of loans, 
determined to
be uncollectible are charged against the allowance account and subsequent 
recoveries,
if any, are credited to the account.  Nonaccrual, restructured and large 
delinquent
commercial and real estate loans are reviewed monthly to determine if carrying 
value
reductions are warranted.  Consumer loans are considered losses when they are 
120 days 
past due, except loans that are expected to be recovered through insurance or
collateral disposition proceeds.  Under SFAS No. 114, the allowance for loan 
losses
related to impaired loans is based on discounted cash flows using the loan's 
initial
effective interest rate or the fair value of the collateral for certain 
collateral-dependent loans.

Off-balance sheet financial instruments:

In the ordinary course of business, the Company has entered into off-balance 
sheet
financial instruments consisting of commitments to extend credit, commitments 
under
home equity and credit card arrangements, and commercial letters of credit.  
Such
financial instruments are recorded in the financial statements when they are
exercised.




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Premises and equipment, net:

Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is charged to noninterest expense over the estimated useful lives 
of the
assets and is computed by using the straight-line method.  Useful lives of up to
45 years for premises and up to 12 years for equipment are utilized.  Leasehold
improvements are amortized on a straight-line basis over the terms of the leases
or
the estimated useful lives of the improvements, whichever is shorter.  Land is
carried at cost.  Expenditures for maintenance and repairs are expensed as 
incurred. 
The costs of significant replacements, renewals and betterments are capitalized.
When assets are retired or otherwise disposed of, the cost and related 
accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in noninterest income or noninterest expense.

Long-lived and intangible assets:

SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived
Assets to be Disposed of," establishes accounting standards for the impairment 
of
long-lived assets, certain identifiable intangibles and goodwill related to 
those
assets to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of.  SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed 
for
impairment whenever events or changes in circumstances indicate that the 
carrying
amount of an asset may not be recovered.  The excess cost over the net assets
acquired accounted for as a purchase, goodwill, is included in other assets and
amortized on a straight-line basis over 15 years.  The Company's adoption of 
SFAS No.
121 on January 1, 1996, had no material effect on operating results or financial
position.

Employee benefit plans:

The Company has a defined contribution plan covering all employees who have 
completed
1,000 hours of service, attained 21 years of age and have been employed by the
Company for at least one year.  Contributions to the plan are determined by the 
Board
of Directors and are based on a prescribed percentage of the annual compensation
of
all participants.  Pension costs are accrued monthly to salaries and benefits 
expense with the plan being funded annually.

In addition, the Company had a defined compensation plan for certain senior
management employees that it discontinued during the third quarter of 1996.  
Costs
for such plan were recognized monthly in salaries and benefits expense on an 
accrual
basis.  The Company had no recognition of gain or loss from the discontinuance 
of such plan in 1996.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Trust assets:

Assets held in a fiduciary or agency capacity for customers are not included in 
the
accompanying consolidated balance sheets, since such assets are not assets of 
the
Company.  Trust income is recorded on a cash basis, which is not materially 
different than if reported on an accrual basis.

Fair value of financial instruments:

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or not
such
instruments are recognized on the balance sheet, for which it is practicable to
estimate that value.   In cases where quoted market prices are not available, 
fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including 
the
discount rate and estimates of future cash flows.  In that regard, the derived 
fair
value estimates cannot be substantiated by comparison to independent markets.  
In
many cases, these values cannot be realized in immediate settlement of the
instrument.  

Fair value estimates are based on existing financial instruments without 
attempting
to estimate the value of anticipated future business and the value of assets and
liabilities that are not considered financial.  Accordingly, such assets and
liabilities are excluded from disclosure requirements.  For example, no benefit 
is
recorded for the value of low cost funding subsequentially discussed.  In 
addition,
the subsidiary's trust department contributes fee income annually.  Trust assets
or
liabilities are not considered financial instruments for this disclosure, and 
their
values have not been incorporated into the fair value estimates.  Other 
significant
items that are not considered financial instruments include deferred tax assets,
premises and equipment, foreclosed assets and certain intangibles.  Accordingly,
the
net aggregate fair value amounts presented do not represent the underlying value
of
the Company.  At December 31, 1996 and 1995, approximately 98.0 percent of the
Company's assets and 99.6 percent of its liabilities were considered financial
instruments as defined in SFAS No. 107.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and cash equivalents:
The carrying values of cash, noninterest-bearing balances due from banks, and 
federal funds sold as reported on the balance sheet approximate fair value.


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Interest-bearing deposits with banks:
The carrying value of interest-bearing deposits with banks as reported on the 
balance sheet approximates fair value.

Investment securities:
The fair value of investment securities is based on quoted market prices.  The
carrying values of restricted equity securities approximate fair values.

Loans:
For variable rate loans that reprice frequently and with no significant credit 
risk,
fair values are based on carrying values.  The fair values of all other loans 
are
estimated using discounted cash flow analysis, using interest rates currently 
offered
for loans with similar terms to borrowers of similar credit risk.  Fair values 
for
impaired loans are estimated using discounted cash flow analyses determined by 
the loan review function or underlying collateral values, where applicable.

Accrued interest receivable:
The carrying value of accrued interest receivable as reported on the balance 
sheet approximates fair value.

Deposits without stated maturities:
The fair value of demand deposits, savings accounts and certain money market 
accounts
as required by SFAS No. 107 is the amount payable on demand at the reporting 
date. 
The fair value estimates do not include the benefit that results from such 
low-cost
funding provided by the deposit liabilities compared to the cost of borrowing 
funds in the market.

Deposits with stated maturities:
The carrying value of variable rate, fixed-term time deposits approximates their
fair
value at the reporting date.  The present value of future cash flows for 
fixed-rate
time deposits is used to estimate fair value.  The discount rates used are the
current rates offered for time deposits with similar maturities.

Long-term debt:
The fair value of the fixed-rate, long-term debt is estimated based on rates
currently available to the Company for debt with similar terms.

Accrued interest payable:
The carrying value of accrued interest payable as reported on the balance sheet
approximates fair value.




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Commitments:
The majority of the Company's commitments to extend credit, unused portions of 
home
equity and credit card lines, and letters of credit carry current market 
interest
rates if converted to loans.  Because such commitments are generally 
unassignable by
either the Company or the borrower, they only have value to the Company and the
borrower.  The estimated fair value approximates the recorded deferred fee 
amounts and is included in net loans.

Statements of cash flows:

The statements of cash flows are presented using the indirect method.  For the
purpose of cash flow, cash and cash equivalents include cash on hand, cash items
in
the process of collection, noninterest-bearing deposits with other banks, 
balances
with the FRB and FHLB-Pgh, and federal funds sold.  Federal funds sold are 
highly liquid investments sold for one-day periods.

Charitable contributions:

SFAS No. 116, "Accounting for Contributions Received and Contributions Made,"
requires that the entire amount of contributions in the form of unconditional
promises to pay must be accrued and reflected as contribution expense in the 
year of
the pledge.  The measurement of the accrual required is based on the present 
value of
future cash flows using the current market discount rate.  The Company had no 
such
commitments prior to 1996.  Charitable pledges payable at December 31, 1996,
calculated as required under SFAS No. 116, amounted to $13.

Advertising costs:

The Company expenses advertising costs as incurred.  Advertising costs totaled 
$240, $280 and $201 in 1996, 1995 and 1994, respectively.

Income taxes:

The Company recognizes the current and deferred tax consequences of all 
transactions
that have been recognized in the financial statements using the provisions of 
the
enacted tax laws.  Deferred tax assets and liabilities are recognized for the
estimated future tax effects of temporary differences by applying enacted 
statutory
tax rates to differences between the financial statement carrying amounts and 
the tax
bases of existing assets and liabilities.  The amount of deferred tax assets is
reduced, if necessary, to the amount that, based on available evidence, will 
more
likely than not be realized.  As changes in tax laws or rates are enacted, 
deferred
tax assets and liabilities are adjusted through the provision for income taxes.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

The Parent Company and its subsidiary file a consolidated federal income tax 
return. 
The subsidiary provides for income taxes on a separate return basis, and remits 
to the Parent Company amounts determined to be currently payable.

Earnings per common share:

Earnings per common share is based on the weighted-average number of common 
shares
outstanding during the period.  Retroactive effect is given in the financial
statements for a three-for-one stock split effectuated April 1, 1996, which 
changed the par value from $1.00 per share to $0.33 per share.

On March 3, 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 
No.
128, "Earnings per Share."  The objective of the SFAS is to issue a standard on
earnings per share that will simplify generally accepted accounting principles 
in the
United States and, at the same time, will be compatible with international 
standards. 
According to the Statement, the presentation of primary Earnings Per Share 
("EPS")
currently required by Accounting Principles Board ("APB") Opinion No. 15, 
"Earnings
per Share," would no longer be required.  Basic EPS, which represents income
available to common stockholders divided by the weighted-average number of 
common
shares outstanding during the period, effectively replaces primary EPS.  Diluted
EPS,
previously referred to as fully-diluted EPS, would be calculated in a similar 
manner
as that prescribed by APB Opinion No. 15.  SFAS No. 128 will be effective for
financial statements for fiscal years ending after December 15, 1997.  The 
Company's
adoption of such Statement in 1997 is not expected to have a material effect on
operating results or financial position.

2. CASH AND CASH EQUIVALENTS:

The Federal Reserve Act, as amended by the Monetary Control Act of 1980, 
requires
that reserve balances on certain deposits of depository institutions be 
maintained at
the FRB.  The reserve balances were $1,194 and $1,057 at December 31, 1996 and 
1995,
respectively.  Such reserve balances averaged $1,159 in 1996 and $1,079 in 1995.
In
addition, compensating balances are maintained with various correspondent banks,
most
of which are not required, but  are  used  to  offset  specific  charges  for 
check
clearing and other services.  The Company maintained compensating balances with 
these
banks of $2,308 and $2,890 at December 31, 1996 and 1995, respectively.  
Compensating
balances for correspondent banks averaged $3,750 in 1996 and $3,124 in 1995.

3. INVESTMENT SECURITIES:

SFAS No. 115 requires an enterprise to reassess the appropriateness of its 
accounting
and reporting classifications of debt and equity securities at each reporting 
date. 
Accordingly, management transferred its entire held to maturity classification 
to
available for sale at September 30, 1995. Such decision was made after reviewing
a
comprehensive analysis of the risk profile of its held to maturity 
classification and
based on asset/liability management considerations.  The transfer occurred for a
reason other than those that would not call into question the Company's intent 
to
hold other debt securities to maturity.  The securities transferred had an 
amortized
cost of $105,799 and a fair value of $103,906 at the date of the transfer.  The
Company recognized unrealized holding losses of $1,249, net of applicable income
taxes of $644, in a separate component of stockholders' equity as a result of 
such
transfer.  In conjunction with its review of the analysis, management made the
decision to sell certain available for sale securities at a loss after 
September 30,
1995, some of which were transferred from the held to maturity portfolio.  The
resulting loss of $2,500 on the sale was recognized in earnings in the third 
quarter
of 1995, the period in which the decision to sell was made.  The portion of such
loss
attributable to the securities transferred from the held to maturity portfolio 
was
$1,825.  Prior to the aforementioned transfer, the Company did not sell or 
transfer any securities from its held to maturity classification.

Pursuant to SFAS No. 115, sales or transfers from the held to maturity 
classification
for reasons other than those specified, call into question or taint an 
enterprise's
intent to hold other debt securities to maturity.  An enterprise would be 
subject to
this tainting until such time when circumstances have changed so that management
can
assert with a greater degree of credibility that it now has the intent and 
ability to
either classify security purchases as held to maturity or to transfer any 
securities
into the held to maturity classification.  The Company's transfer of held to 
maturity
securities in 1995 occurred prior to the October 18, 1995, issuance of the FASB
Special Report, "A Guide to Implementation of Statement No. 115 on Accounting 
for
Certain Investments in Debt and Equity Securities."  Concurrent with the initial
adoption of the guidance set forth in the Special Report, the FASB temporarily
suspended the rule prohibiting sales or transfers from the held to maturity
classification allowing enterprises a one-time opportunity during the fourth 
quarter
of 1995 to reassess the appropriateness of the classifications of all securities
without calling into question the intent of the enterprise.  For enterprises 
that
previously sold or transferred held to maturity securities for reasons that call
into
question their intent to hold other debt securities to maturity in the future, 
this
one-time reassessment did not remove any existing limitations on an enterprise's
use
of the held to maturity classification.  Accordingly, the Company did not 
reestablish a held to maturity classification for purchases or transfers during 
1996.
3. INVESTMENT SECURITIES (CONTINUED):

Management believes it can credibly assess its intent and ability to classify
purchases as held to maturity and to transfer existing securities into the held 
to
maturity portfolio.  It believes circumstances surrounding the 1995 transfer to 
be a
one-time event as they resulted from the prior investment practices and actions 
that
placed a significant exposure to interest rate risk on the Company.  
Specifically,
the prior investment practices and actions included those that are referred to 
as
unsuitable pursuant to the Board of Governors of the Federal Reserve System's
("Federal Reserve Board's") Supervisory Policy Statement on Securities 
Activities
effective February 10, 1992, and revised April 15, 1994, and the Federal Reserve
Board's Supervisory Policy Statement on Structured Notes effective September 21,
1995.  The Company's investment policy, as approved by the Board of Directors on
August 30, 1995, specifically prohibits any such activities, including option 
and derivative transactions, from occurring in the future.

The following tables set forth the amortized cost and fair value of securities
classified as available for sale at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

                                            AMORTIZED  UNREALIZED  UNREALIZED      FAIR
DECEMBER 31, 1996                                COST       GAINS      LOSSES     VALUE
---------------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>   <C>     
U.S. Treasury securities.................... $ 35,677      $   44        $102  $ 35,619
U.S. Government agencies....................   18,836           1         231    18,606 
State and municipals........................   37,692         696          93    38,295 
Mortgage backed securities..................    7,050          32          24     7,058 
Equity securities...........................    1,884         532                 2,416
                                             --------      ------        ----  --------
  Total..................................... $101,139      $1,305        $450  $101,994
                                             ========      ======        ====  ========
<CAPTION>
             
                                            AMORTIZED  UNREALIZED  UNREALIZED      FAIR
DECEMBER 31, 1995                                COST       GAINS      LOSSES     VALUE
---------------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>   <C>        
U.S. Treasury securities.................... $ 43,494      $  267        $ 10  $ 43,751
U.S. Government agencies....................   26,516          21         324    26,213 
State and municipals........................   29,617         954          59    30,512
Mortgage backed securities..................    6,124          53          23     6,154 
Equity securities...........................    1,774         302                 2,076
                                             --------      ------        ----  --------
  Total..................................... $107,525      $1,597        $416  $108,706             
                                             ========      ======        ====  ========
</TABLE>
        
Proceeds from the sales of available for sale securities amounted to $1,472, 
$87,103
and $13,618 in 1996, 1995 and 1994, respectively.  The Company realized gross 
gains
from securities sales of $8 in 1996, $320 in 1995 and $549 in 1994.  Gross 
losses on
securities sales of $66, $4,713 and $54 were realized in 1996, 1995 and 1994,
respectively.  Income tax benefits related to net realized investment securities
losses of $58 in 1996 and $4,393 in 1995 were $20 and $1,494, respectively.  The
Company incurred income tax expenses of $168 on $495 of net investment 
securities
gains in 1994.  The net unrealized holding gain, included as a separate 
component of
stockholders' equity, amounted to $564, net of income taxes of $291, at 
December 31, 1996.  Such gain represents a change in the net 

3. INVESTMENT SECURITIES (CONTINUED):

unrealized adjustment of $216, net of income tax benefits of $110, from 
December 31,
1995.  The net unrealized holding gain totaled $780, net of income taxes of 
$401, at December 31, 1995.  

The Company held collateralized mortgage obligations ("CMOs") during 1995 and 
1994
deemed to be high-risk as defined in the Federal Reserve Board's Supervisory 
Policy
Statement on Securities Activities.  High-risk CMOs are defined as any mortgage
backed security that at the time of purchase, or at a subsequent testing date, 
meets
any of the average life or interest sensitivity tests.  The Company held no such
securities at December 31, 1996 and 1995, as all securities determined to be
high-risk CMOs and those that had the potential to become high-risk were 
disposed of
during 1995.  Proceeds from the sale of high-risk CMOs amounted to $27,674 in 
1995
and $8,611 in 1994.  Gross gains on such sales of $66 and $338 were realized in 
1995
and 1994, respectively.  Gross losses of $1,621 were realized on the sale of 
Federal
Reserve Board defined high-risk CMOs in 1995.  None of such Federal Reserve 
Board
defined high-risk securities met the criteria for high-risk, nonequity CMOs as
defined in Issue 2 of FASB's Emerging Issues Task Force ("EITF") Issue No. 89-4,
"Accounting for a Purchased Investment 
in a Collateralized Mortgage Obligation Instrument or in a Mortgage-Backed
Interest-Only Certificate."  EITF Issue No. 89-4 defines high-risk, nonequity 
CMOs as
those that have the potential for loss of a significant portion of their 
original
investments due to changes in interest rates, prepayment rate of the assets of 
the
CMO structure, or earnings from temporary reinvestment of cash collected by the 
CMO
structure but not yet distributed to the holders of its obligations.  
Accordingly
management, after considering whether such securities satisfied any of the three
subtests outlined above, did not discount these CMOs to the present value of
estimated future cash flows at a risk-free rate to determine whether or not an 
other
than temporary impairment existed.  Management applied the guidance to each type
of
CMO instrument, including those with unusual or unique terms or features, in
formulating its conclusion that such securities did not meet the EITF 89-4 
definition of a high-risk, nonequity CMO.                                   

At its November 14, 1996, meeting, the FASB EITF reached a consensus on Issue 
No. 96-
12, "Recognition of Interest Income and Balance Sheet Classification of 
Structured
Notes," requiring investors to use the retrospective interest method for 
recognizing
income on structured notes that are classified as available for sale or held to
maturity securities and that meet one or more of three specified conditions.  
Such
conditions relate to the risk of the contractual principal amount or the 
original
investment amount of the note, the variability of the note's return on 
investment,
and the basis of the note's contractual maturity.  Such EITF provides guidance 
for
purposes of determining the effective yield at which income will be recognized 
under
the retrospective interest method for qualifying structured notes.  Furthermore,
the EITF requires an enterprise  
3. INVESTMENT SECURITIES (CONTINUED):

to determine whether an individual structured note security has experienced a 
decline
in value below amortized costs that is other than temporary requiring a 
write-down of
amortized cost, with the amount of the write-down included in earnings.

The Company sold the majority of its holdings of structured notes during the 
1995
sale of certain available for sale securities.  As a result, the carrying value 
of
structured notes totaled $2.9 million at December 31, 1996 and 1995.  After 
receiving
a consensus opinion from external investment management consultants and review 
by
regulatory agencies, management decided to continue to hold three structured 
notes
having maturities of less than three years at December 31, 1995.  Specifically, 
such
securities include a dual-index floater, a delevered floater, and a multi-step 
bond. 
Each has a carrying value of approximately $1.0 million.  The delevered floater 
and
multi-step bond are not within the scope of EITF Issue No. 96-12 as their coupon
rates move in the same direction as market-based interest rates.  However, the 
coupon
rate on the dual-index floater is determined by the spread between two different
indices that will not necessarily move in the general direction of a specific
interest rate or index causing such instrument to be within the scope of EITF 
Issue
No. 96-12.  Management considered the guidance in accounting for the interest 
income
of such security and determined it was not significantly different than the 
method used.

Investment securities with an amortized cost of $35,099 and $33,997 at 
December 31,
1996 and 1995, respectively, were pledged to secure deposits, to qualify for
fiduciary powers, and for other purposes required or permitted by law.  The fair
value of such securities was $34,968 and $34,050 at December 31, 1996 and 1995,
respectively.

The following table sets forth the maturity distribution of the amortized cost, 
fair
value and weighted-average tax equivalent yield of the available for sale 
portfolio
at December 31, 1996.  The weighted-average yield based on amortized cost has 
been
computed for state and municipals on a tax equivalent basis using the statutory 
tax
rate of 34.0 percent. The distributions are based on contractual maturity with 
the
exception of mortgage backed securities, CMOs and equity securities.  Mortgage 
backed
securities and CMOs have been presented based upon estimated cash flows, 
assuming no
change in the current interest rate environment.  Equity securities with no 
stated
contractual maturities are included in the after ten years maturity 
distribution. 
Expected maturities will differ from contracted maturities because borrowers 
have the
right to call or prepay obligations with or without call or prepayment 
penalties.




3. INVESTMENT SECURITIES (CONTINUED):
<TABLE>
<CAPTION>

                                                AFTER ONE       AFTER FIVE
                                  WITHIN        BUT WITHIN      BUT WITHIN        AFTER
                                 ONE YEAR       FIVE YEARS      TEN YEARS       TEN YEARS         TOTAL      
DECEMBER 31, 1996             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. Treasury securities.... $15,034   5.62% $20,643   5.71%                                 $ 35,677   5.67%
U.S. Government agencies....   8,390   4.64   10,446   4.80                                    18,836   4.73 
State and municipals........   1,130   5.36    3,903   6.51   $6,150   8.50% $26,509   7.96%   37,692   7.82
Mortgage backed securities..     923   6.76    5,841   6.35      286   6.26                     7,050   6.40
Equity securities...........                                                   1,884   5.78     1,884   5.78
                             -------         -------          ------         -------         --------
  Total..................... $25,477   5.33% $40,833   5.65%  $6,436   8.40% $28,393   7.82% $101,139   6.35%
                             =======         =======          ======         =======         ========

Fair value:
U.S. Treasury securities.... $15,020         $20,599                                         $ 35,619
U.S. Government agencies....   8,324          10,282                                           18,606
State and municipals........   1,131           3,918          $6,404         $26,842           38,295
Mortgage backed securities..     929           5,891             238                            7,058
Equity securities...........                                                   2,416            2,416
                             -------         -------          ------         -------         --------
  Total..................... $25,404         $40,690          $6,642         $29,258         $101,994
                             =======         =======          ======         =======         ========
</TABLE>

SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value 
of
Financial Instruments," established disclosures concerning derivatives and other
financial instruments.  Derivatives are instruments 
used to construct a transaction derived from and reflecting the underlying value
of
assets, other instruments or various indices.  The main purpose of derivatives 
is to
transfer price risk associated with the fluctuations in asset values as opposed 
to
borrowing or lending funds.  Because SFAS No. 119 excludes mortgage backed 
securities
from its definition of derivative financial instruments, the Company's 
involvement
was limited to its writing of covered option contracts on U.S. Treasury 
securities,
which were subsequently exercised or expired.  Such options were used to limit 
the
Company's exposure to market fluctuations on investment securities and were not 
used
for trading purposes.  The writing of an option effectively limits the Company's
ability to hold the underlying security beyond the short-term, which 
necessitates the
transfer of such assets to the trading account classification.  The Company
recognized gross gains of $24 and gross losses of $110 in 1994 as a result of
transferring securities from the available for sale classification into the 
trading
account.  The Company did not recognize any such gains or losses in 1996 and 
1995 as
a result of the discontinuance of writing option contracts prior to the fourth
quarter of 1994.  Furthermore, the revised investment policy adopted in 1995
prohibits future option and trading activities.

Except for U.S. Treasury securities and U.S. Government agencies, there were no
securities of any individual issuer that exceeded 10.0 percent of the Company's
stockholders' equity at December 31, 1996 and 1995. All of 
the investment securities in the Company's portfolio are considered "investment
grade," receiving a rating of "Baa" or higher from Moody's or "BBB" or higher 
from
Standard and Poor's rating services, except for $2,416 of tax-exempt obligations
of local municipalities, at December 31, 1996.


4. LOANS, NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES:

The following table sets forth the composition of the loan portfolio, net of 
unearned
interest of $2,318 and $2,682 and net unamortized loan fees of $925 and $801 at
December 31, 1996 and 1995, respectively:
<TABLE>
<CAPTION>

DECEMBER 31                                                            1996        1995
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
Commercial, financial and other................................... $ 31,744    $ 41,593
Real estate:
  Construction....................................................    3,698       1,014
  Mortgage........................................................  179,134     151,926
Consumer, net.....................................................   21,227      19,302   
                                                                   --------    --------
    Total......................................................... $235,803    $213,835 
                                                                   ========    ========
</TABLE>

Loans with fixed interest rates totaled $188,468 and $172,480, while loans with
variable interest rates totaled $47,335 and $41,355 at December 31, 1996 and 
1995, respectively.

The following table sets forth maturity information of the loan portfolio by 
major category at December 31, 1996:
<TABLE>
<CAPTION>

                                                  AFTER ONE
                                      WITHIN      BUT WITHIN       AFTER     
DECEMBER 31, 1996                    ONE YEAR     FIVE YEARS     FIVE YEARS       TOTAL
---------------------------------------------------------------------------------------
<S>                                   <C>            <C>           <C>         <C>
Maturity schedule:
Commercial, financial and other...... $13,586        $ 9,428       $  8,730    $ 31,744
Real estate: 
  Construction.......................   3,698                                     3,698
  Mortgage...........................   5,295         21,713        152,126     179,134
Consumer, net........................   2,720         11,788          6,719      21,227 
                                      -------        -------       --------    --------
    Total............................ $25,299        $42,929       $167,575    $235,803
                                      =======        =======       ========    ========
</TABLE>

Loans outstanding to directors, executive officers, principal stockholders, or 
to any
of their associates, that are made in the ordinary course of business and on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with others, totaled $5,006 
at
December 31, 1996, and $3,157 at December 31, 1995.  Originations totaled $4,037
while repayments totaled $2,188 for such loans during 1996.  At 
December 31, 1996 and
1995, none of such loans were classified as nonaccrual, past due, restructured 
or potential problem loans.

At December 31, 1996, the Company had no concentrations of loans exceeding 10.0
percent of total loans, excluding locational concentrations, to individual or
multiple borrowers engaged in similar activities that would cause them to be
similarly affected by changes in economic or other conditions.  During 1995, the
Company sold student loans with a carrying value of $5,519 to its servicing 
agent. 
The Company recognized a gain of $72 on such sale.  The Company did not sell 
loans in 1996 and had no loans for sale at December 31, 1996 and 1995.

4. LOANS, NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED):

The following table sets forth information concerning nonperforming assets at
December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                            1996        1995
---------------------------------------------------------------------------------------
<S>                                                                  <C>         <C>
Nonaccrual loans:
Commercial, financial and others.................................... $  251      $  167
Real estate:
  Construction...................................................... 
  Mortgage..........................................................  1,018       1,164
Consumer, net.......................................................                  
                                                                    -------      ------
    Total nonaccrual loans..........................................  1,269       1,331
                                                                    -------      ------
Restructured loans..................................................    225         262
                                                                    -------      ------
    Total impaired loans............................................  1,494       1,593
                                                                    -------      ------

Accruing loans past due 90 days or more:
Commercial, financial and others....................................    359         181
Real estate: 
  Construction......................................................
  Mortgage..........................................................  1,247       1,633
Consumer, net.......................................................    291         336
                                                                     ------      ------
    Total accruing loans past due 90 days or more...................  1,897       2,150
                                                                     ------      ------
    Total nonperforming loans.......................................  3,391       3,743
                                                                     ------      ------
Foreclosed assets...................................................    420         441
                                                                     ------      ------
    Total nonperforming assets...................................... $3,811      $4,184
                                                                     ======      ======
</TABLE>

The average recorded investment in impaired loans was $1,528 in 1996 and $1,621 
in
1995.  The recorded investment in impaired loans was $1,494 and $1,593 at 
December
31, 1996 and 1995, respectively.  Included in these amounts were $1,269 and 
$1,331,
respectively, for which there was a related allowance for loan losses of $650 
and
$614, respectively.  The recorded investment for which there was no related 
allowance
for loan losses, was $225 and $262 at December 31, 1996 and 1995, respectively. 
In
1996, activity in the allowance for loan losses account related to impaired 
loans
included a provision charged to operations of $3, losses charged to the 
allowance of
$92 and recoveries of amounts charged-off of $125.  The activity in 1995 in the
allowance for loan losses account related to impaired loans included a provision
charged to operations of $4, losses charged to the allowance of $69 and 
recoveries of
amounts charged-off of $191.  Interest income related to impaired loans would 
have
been $113, $66 and $136 in 1996, 1995 and 1994, respectively, had such loans 
been
current and the terms of the loans not been modified.  Interest income that 
would
have been recognized on the restructured loan included in such amounts was $12 
and $9
in 1996 and 1995, respectively.  Interest recognized on impaired loans amounted 
to
$30 in 1996, $92 in 1995 and $45 in 1994.  Included in these amounts was 
interest
recognized on a cash basis of $30, $87 and $40, respectively.  The restructured 
loan
accounted for $7 in 1996 and $5 in 1995 of interest recognized on impaired 
loans. 
Such impaired loan was included in nonaccrual loans in 1994.  Accordingly, 
interest
income that would have been recognized and amounts recognized were recorded as 
part of 

4. LOANS, NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED):

the nonaccrual amounts.  Cash received on impaired loans applied as a reduction 
of
principal totaled $398, $595 and $183 in 1996, 1995 and 1994, respectively.  
There
were no commitments to extend additional funds to such parties at 
December 31, 1996 and 1995.

The following table sets forth an analysis of changes affecting the allowance 
for loan losses account for the three years ended December 31, 1996:
<TABLE>
<CAPTION>

                                                                  1996    1995    1994
--------------------------------------------------------------------------------------
<S>                                                             <C>     <C>     <C>
Balance, January 1............................................. $3,903  $3,576  $3,169
Provision for loan losses......................................    300     435    800
Loans charged-off..............................................   (726)   (393)   (550)
Loans recovered................................................    467     285     157
                                                                ------  ------  ------
Balance, December 31........................................... $3,944  $3,903  $3,576
                                                                ======  ======  ======
</TABLE>

The Company generally lends within its quad-county trade area of Lackawanna,
Susquehanna, Wayne and Wyoming.  To a great extent, the Company makes loans that
are
collateralized at least in part by real estate.  Therefore, changes in the 
general
economy, local economy, or on real estate values could have an effect on the
Company's lending activities.

5. COMMITMENTS, CONCENTRATIONS AND CONTINGENT LIABILITIES:

In the normal course of business, the Company is a party to financial 
instruments
with off-balance sheet risk to meet the financing needs of its customers.  Such
instruments involve, to varying degrees, elements of credit and interest rate 
risk in
excess of the amount recognized in the financial statements.  Management does 
not
anticipate that losses, if any, which may occur as a result of funding 
off-balance
sheet commitments would have a material adverse effect on the Company's results 
of operations or financial position.

The following table identifies the contractual amounts of off-balance sheet
commitments at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1996    1995
---------------------------------------------------------------------------------------
<S>                                                                     <C>      <C>
Commitments to extend credit........................................... $ 8,919  $7,191
Unused portions of home equity and credit card lines...................   1,349   1,382
Commercial letters of credit...........................................     635   1,009
                                                                        -------  ------
  Total................................................................ $10,903  $9,582
                                                                        =======  ======

</TABLE>
The Company's involvement in, and exposure to, credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit, unused portions of home equity and credit card lines and 
commercial
letters of credit is represented by the contractual notional amounts of those
instruments.  Commitments to extend 

5. COMMITMENTS, CONCENTRATIONS AND CONTINGENT LIABILITIES (CONTINUED):

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 the Company to support
customers in the purchase of 
commercial goods.  Such letters of credit are automatically renewable upon their
anniversary date unless cancelled prior to such date at the option of the 
Company.

The Company employs the same credit policies and requirements in making 
off-balance
sheet credit commitments as it does for on-balance sheet instruments.  Provision
for
losses, if any, is included in the Company's allowance for loan losses.  No 
provision
was deemed necessary at December 31, 1996 and 1995.  Such commitments are 
generally
issued for one year or less and often expire unused in whole or in part by the
customer.  

The Company provides deposit and loan products and other financial services to
consumer and corporate customers in its quad-county market area of Lackawanna,
Susquehanna, Wayne and Wyoming.  There are no significant concentrations of 
credit
risk from any individual counterparty or groups of counterparties, except for
locational concentrations.  The concentrations of the credit portfolio by loan 
type
are set forth in Note 4.  The Company requires collateral on all real estate 
exposure
and most other loans, including off-balance sheet commitments upon extension of
credit, and maintains loan-to-value ratios of no greater than 80.0 percent, 
except in
the case of loans secured by deposits or U.S. Government securities.  The amount
of
collateral obtained is based on management's credit evaluation of the customer.
Collateral held varies but may include property, plant and equipment, primary
residential properties, and to a lesser extent, income-producing properties. 
Although the credit portfolio is diversified, the Company and its borrowers are
dependent on the continued viability of the Northeastern Pennsylvania economy.  
The
loan portfolio does not consist of any form of credit involving highly-leveraged
transactions, defined as financing transactions that involve the buyout, 
acquisition
or recapitalization of an existing business, including credits extended to 
highly-leveraged industries. 
 
Securities and short-term investment activities are conducted with a diverse 
group of
government entities, corporations and depository institutions.  The Company 
evaluates
the counterparty's creditworthiness and the need for collateral on a 
case-by-case
basis.  At December 31, 1996 and 1995, there were no significant concentrations 
of
credit risk from any one issuer with the exception of U.S. Treasury securities 
and U.S. Government agencies.

5. COMMITMENTS, CONCENTRATIONS AND CONTINGENT LIABILITIES (CONTINUED):

There is no material legal proceeding to which the Company is a party, or to 
which
any of its property is the subject, except proceedings that arise in the normal
course of business.  Management, after consultation with 
legal counsel, does not anticipate that the ultimate liability, if any, arising 
out
of pending and threatened lawsuits will have a material effect on the Company's
results of operations or financial position.

6. PREMISES AND EQUIPMENT, NET:

The following table sets forth the major components of premises and furniture 
and equipment at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1996    1995
---------------------------------------------------------------------------------------
<S>                                                                      <C>     <C>
Land.................................................................... $  187  $  187
Premises................................................................  4,715   4,416
Leasehold improvements..................................................    243     166
Furniture and equipment.................................................  3,156   3,032
                                                                         ------  ------
                                                                          8,301   7,801
Less: accumulated depreciation..........................................  5,209   4,731
                                                                         ------  ------
  Total................................................................. $3,092  $3,070
                                                                         ======  ======

</TABLE>
Amounts charged to noninterest expense for depreciation amounted to $496, $428 
and $450 in 1996, 1995 and 1994, respectively.

Certain facilities and equipment are leased under operating lease agreements 
expiring
at various dates until the year 2009.  Two leases contain escalation clauses 
that
provide for cost of living adjustments, and several contain renewal options.  
The
realty leases require the Company to pay real estate taxes, insurances and 
repair
costs.  Rental expense on all such operating leases amounted to $281 in 1996, 
$304 in
1995 and $308 in 1994.  Minimum required annual rentals for each of the years 
1997
through 2001 are $128, $69, $69, $70 and $66, respectively, and $412, 
thereafter, totaling $814.

7. OTHER ASSETS:

The following table sets forth the major components of other assets at 
December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1996    1995
---------------------------------------------------------------------------------------
<S>                                                                      <C>     <C>
Goodwill................................................................ $1,440  $1,659
Deferred income taxes...................................................  1,051     875
Foreclosed assets.......................................................    420     441
Other...................................................................  1,253   1,313
                                                                         ------  ------
  Total................................................................. $4,164  $4,288
                                                                         ======  ======

</TABLE>
Total amortization expense on goodwill amounted to $218 per year for 1996, 1995 
and 1994.

8. DEPOSITS:

The following table sets forth the major components of interest-bearing and
noninterest-bearing deposits at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
DECEMBER 31                                                             1996       1995
---------------------------------------------------------------------------------------
<S>                                                                 <C>        <C>
Interest-bearing deposits:
  Money market accounts............................................ $ 16,168   $ 19,252
  NOW accounts.....................................................   17,915     14,989
  Savings accounts.................................................   66,037     68,722
  Time deposits less than $100.....................................  158,047    159,029
  Time deposits $100 or more.......................................   35,865     29,684
                                                                    --------   --------
    Total interest-bearing deposits................................  294,032    291,676
Noninterest-bearing deposits.......................................   26,424     25,423
                                                                    --------   --------
    Total deposits................................................. $320,456   $317,099
                                                                    ========   ========
</TABLE>

The Company accepts deposits of its directors, executive officers, principal
stockholders or any of their associates on the same terms and at the prevailing
interest rates offered at the time of deposit for comparable transactions with
unrelated parties.  The aggregate amount of deposits of such related parties was
$1,522 and $1,419 at December 31, 1996 and 1995, respectively.

The following table sets forth maturities of time deposits $100 or more at 
December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                               1996     1995
---------------------------------------------------------------------------------------
<S>                                                                    <C>      <C>
Within three months................................................... $ 8,598  $ 6,466
After three months but within six months..............................   9,958    6,646
After six months but within twelve months.............................  11,262    8,590
After twelve months...................................................   6,047    7,982
                                                                       -------  -------
  Total............................................................... $35,865  $29,684
                                                                       =======  =======

</TABLE>
Interest expense on time deposits $100 or more amounted to $1,647, $1,771 and 
$1,553
in 1996, 1995 and 1994, respectively.  The aggregate amounts of maturities for 
all
time deposits at December 31, 1996, were $118,506 in 1997, $30,332 in 1998, 
$20,638
in 1999, $16,394 in 2000, $6,519 in 2001 and $1,523 thereafter.  The aggregate 
amount
of transaction accounts reclassified as loans was $212 and $126 at 
December 31, 1996
and 1995, respectively.  The Company had no deposits that were received on terms
other than those available in the normal course of business in 1996 and 1995.

9. SHORT-TERM BORROWINGS:

Short-term borrowings available to the Company consist of a line of credit and 
fixed-
rate advances with the FHLB-Pgh secured under terms of a blanket collateral 
agreement
by a pledge of FHLB-Pgh stock and certain other qualifying collateral, such as
investment and mortgage backed securities and mortgage loans.  Such line has a
maximum borrowing capacity equal to
9. SHORT-TERM BORROWINGS (CONTINUED):

10.0 percent of total assets and accrues interest daily based on the federal 
funds
rate.  The line is renewable on the first day of each calendar year and carries 
no
associated commitment fees.  The FHLB-Pgh has the right to reduce or terminate 
the
line at any time without prior notice and the Company may repay such line at any
time
without incurring prepayment penalties.  Short-term, fixed-rate advances are 
issued
with maturities less than one year based on the FHLB-Pgh's current cost of funds
rate.  Such advances are limited to the Company's maximum borrowing capacity 
based on
a percentage of qualifying collateral assets.  There are no commitment fees and 
the
advance may be prepaid at the option of the Company upon payment of a prepayment
fee. 
The prepayment fee applicable to FHLB-Pgh advances is equal to the present value
of
the difference between cash flows generated at the advance rate from the date of
the
prepayment until the original maturity date, and the cash flows that would 
result
from the interest rate posted by the FHLB-Pgh on the date of prepayment for an
advance of comparable maturity.  The Company has not entered into repurchase
agreements with others during 1996 and 1995.  Repurchase agreements consist of
transactions whereby an institution sells securities and agrees to repurchase 
the
identical, or substantially the same securities, at a specified date for a 
specified price.

At December 31, 1996, and December 31, 1995, the Company had no short-term 
borrowings
outstanding.  The average daily balance and weighted-average rate on aggregate 
short-
term borrowings was $51 at 5.9 percent in 1996 and $9,935 at 6.8 percent in 
1995. 
The maximum amount of all short-term borrowings outstanding at any month-end was
$2,750 and $28,000 during 1996 and 1995, respectively.  Short-term borrowings 
during
1996 consisted entirely of the FHLB-Pgh line of credit.  During 1995, the 
FHLB-Pgh
line of credit included in total short-term borrowings had an average daily 
balance
of $3,589 and weighted-average rate of 6.2 percent.  The maximum amount of such 
loan outstanding at any month-end was $17,600 during 1995.                     
                                            
On June 28, 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities."  SFAS No. 125
provides accounting and reporting standards for transfers and servicing of 
financial
assets and extinguishments of liabilities.  Implementation guidance is provided 
in
SFAS No. 125 for assessing isolation of transferred assets and for accounting 
for
transfers of partial interests, servicing of financial assets, securitizations,
transfers of sales-type and direct financing lease receivables, securities 
lending
transactions, repurchase and reverse-repurchase agreements, dollar-roll 
transactions,
wash sales, loan syndications and participations, risk participations in 
banker's
acceptances, factoring arrangements, transfers of receivables with recourse, and
extinguishments of liabilities.  The accounting and reporting standards in SFAS 
No.
125 are based on consistent application of a financial-components approach that
focuses on control. 

9. SHORT-TERM BORROWINGS (CONTINUED):

Under such approach, after a transfer of financial assets, an enterprise 
recognizes
the financial and servicing assets it controls and the liabilities it has 
incurred,
derecognizes financial assets when control has been surrendered, and 
derecognizes
liabilities when extinguished.  SFAS No. 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that 
are
secured borrowings.  The Statement is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996, except as amended in SFAS No. 127, "Deferral of the Effective Date of 
Certain
Provisions of FASB Statement No. 125."  SFAS No. 125 is to be applied 
prospectively
with earlier or retroactive application prohibited.  Specifically, the 
provisions
identified as being deferred under SFAS No. 127 include secured borrowings,
collateralizations and transfers of financial assets that are part of repurchase
agreements, dollar-rolls, securities lending and similar transactions.  The 
adoption
of SFAS No. 125 standards in 1997 and those standards deferred by SFAS No. 127 
until
1998 are not expected to have a material effect on operating results or 
financial position.

10. LONG-TERM DEBT:

The following table sets forth the components of long-term debt at 
December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1996    1995
---------------------------------------------------------------------------------------
<S>                                                                       <C>    <C>
4.3% note due September 9, 1996..........................................        $3,000
7.5% note due September 2, 2009.......................................... $  46      48
                                                                          -----  ------
  Total.................................................................. $  46  $3,048
                                                                          =====  ======

</TABLE>
The Company redeemed a 5.7 percent fixed-rate note due in 1997 in October 1995, 
at
100.0 percent of the principal outstanding plus accrued interest.  No prepayment
fee was required upon redemption of such note as the interest 
rate on the advance approximated the prevailing interest rate at the date of the
prepayment for advances from the same amount and terms.  The 4.3 percent 
fixed-rate
advance of the FHLB-Pgh matured September 9, 1996, and was repaid in accordance 
with
its contracted terms.  The 7.5 percent FHLB-Pgh note is a fixed-rate, amortizing
advance from the FHLB-Pgh Community Investment Program that is subject to a
prepayment fee in the event the advance is repaid prior to maturity.   The 
scheduled
principal payments on such note total $2 for each of the five years 1997 through
2001.  The prepayment fee applicable to FHLB-Pgh advances is aforementioned in 
Note 9
to these financial statements.  Such advances are secured under terms of a 
blanket
collateral agreement by a pledge of qualifying investment and mortgage backed
securities, certain mortgage loans, and a lien on FHLB-Pgh stock.   The average 
daily
balance and weighted-average yield on long-term debt for 1996 were $2,122 and 
4.38
percent, respectively.  For 1995, the average daily balance and weighted-average
yield on long-term debt were $4,715 and 4.75 percent, respectively.  

11. EMPLOYEE BENEFIT PLANS:

The Company has a defined contribution plan covering all employees who meet the 
age
and service requirements.  Salaries and employee benefits expense included $67 
in 1996, $50 in 1995 and $87 in 1994 for the plan.

As aforementioned in Note 1 of these financial statements, the Company 
discontinued
its deferred compensation plan for certain senior management employees in 1996.
Expense for such plan amounted to $16 in 1996, $29 in 1995 and $29 in 1994.  
Funding for such plan was provided by life insurance contracts.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following table represents the carrying value and estimated fair value of
financial instruments at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

                                                     1996                  1995       
                                             --------------------   -------------------
                                              CARRYING       FAIR   CARRYING       FAIR
DECEMBER 31                                      VALUE      VALUE      VALUE      VALUE
---------------------------------------------------------------------------------------
<S>                                           <C>        <C>        <C>        <C>       
Financial assets:
Cash and cash equivalents.................... $ 11,032   $ 11,032   $ 21,990   $ 21,990
Interest-bearing deposits with banks.........                             90         90
Investment securities........................  101,994    101,994    108,706    108,706
Net loans....................................  231,859    230,579    209,932    214,595
Accrued interest receivable..................    2,671      2,671      2,872      2,872
                                              --------   --------   --------   --------
  Total...................................... $347,556   $346,276   $343,590   $348,253
                                              ========   ========   ========   ========

Financial liabilities:
Deposits without stated maturities........... $126,544   $126,544   $128,386   $128,386
Deposits with stated maturities..............  193,912    194,412    188,713    190,071
Long-term debt...............................       46         46      3,048     3,028
Accrued interest payable.....................    1,758      1,758      1,761      1,761
                                              --------   --------   --------   --------
  Total...................................... $322,260   $322,760   $321,908   $323,246
                                              ========   ========   ========   ========

</TABLE>
13. INCOME TAXES:

The following table sets forth the current and deferred amounts of the provision
for income tax expense (benefit) for the three years ended December 31, 1996:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                             1996   1995    1994
--------------------------------------------------------------------------------------
<S>                                                              <C>     <C>    <C>
Current......................................................... $1,079  $(412) $1,173
Deferred........................................................    (66)  (140)   (193)
                                                                 ------  -----  ------
  Total......................................................... $1,013  $(552) $  980
                                                                 ======  =====  ======

</TABLE>






13. INCOME TAXES (CONTINUED):

The following is a reconciliation between the effective income tax expense 
(benefit)
and the amount of income taxes (benefit) that would have been provided at the 
federal statutory rate of 34.0 percent for the three years ended 
December 31, 1996:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                             1996   1995    1994
--------------------------------------------------------------------------------------
<S>                                                              <C>     <C>    <C>
Federal income tax at statutory rate............................ $1,773  $(120) $1,464
Differences resulting from:
  Tax-exempt interest, net......................................   (668)  (416)   (408)
  Excess of cost over net assets acquired.......................     74     74      74
  Residential housing program tax credit........................   (160)           (71)
  Other.........................................................     (6)   (90)    (79)
                                                                 ------  -----  ------
    Total....................................................... $1,013  $(552) $  980
                                                                 ======  =====  ======

</TABLE>
The sources of the change in deferred income taxes and the related tax effects 
are as follows for the three years ended December 31, 1996:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                           1996    1995     1994
--------------------------------------------------------------------------------------
<S>                                                             <C>    <C>     <C>     
Allowance for loan losses...................................... $ (14) $ (111) $  (139)
Loans, net of unearned income..................................   (43)     18      (40)
Accrued interest receivable....................................   (26)    (15)      20 
Premises and equipment, net....................................   (28)    (37)     (30)
Other, net.....................................................    45       5       (4) 
                                                                -----  ------  -------
  Change in deferred income taxes affecting the statements of 
   income......................................................   (66)   (140)    (193)
Deferred income taxes on investment securities recognized in 
 stockholders' equity..........................................  (110)  2,816   (2,415)
                                                                -----  ------  -------
    Total change in deferred income taxes...................... $(176) $2,676  $(2,608)
                                                                =====  ======  =======

</TABLE>
The significant components of temporary differences between the financial 
statement
carrying amounts and tax bases of deferred tax assets and liabilities are as 
follows at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1996    1995
---------------------------------------------------------------------------------------
<S>                                                                      <C>     <C>    
Deferred tax assets:                                                            
  Allowance for loan losses............................................. $1,174  $1,160
  Loans, net of unearned income.........................................    315    272 
  Accrued interest receivable...........................................    160     134
  Other.................................................................             45 
                                                                         ------  ------
    Total...............................................................  1,649   1,611 
                                                                         ------  ------
Deferred tax liabilities:  
  Investment securities.................................................    291     401 
  Premises and equipment, net...........................................    307     335
                                                                         ------  ------
    Total...............................................................    598     736
                                                                         ------  ------
    Net deferred tax assets............................................. $1,051  $  875 
                                                                         ======  ======

</TABLE>






13. INCOME TAXES (CONTINUED):

The Company has determined that it is not required to establish a valuation 
reserve
for the deferred tax assets since it is more likely than not that the net 
deferred
tax assets could be principally realized through carryback to taxable income in 
prior
years and by future reversals of existing taxable temporary differences, or to a
lesser extent, through future taxable income.  The Company reviews the tax 
criteria related to the recognition of deferred tax assets on a quarterly basis.

Banks in Pennsylvania are not subject to state or local income taxes, however 
they pay a tax on capital.  Such tax is included in other expenses.

14. PARENT COMPANY FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31                                            1996     1995     1994
----------------------------------------------------------------------------------------
<S>                                                             <C>      <C>      <C>
Income:
Dividends from subsidiary...................................... $  753   $  821   $1,617
Management fees from subsidiary................................    176      180      180
Other income...................................................     69       51       64 
                                                                ------   ------   ------
  Total income.................................................    998    1,052    1,861
                                                                ------   ------   ------
Expense:
Interest.......................................................                        4
Other expenses.................................................    565      654      601
                                                                ------   ------   ------
  Total expenses...............................................    565      654      605
                                                                ------   ------   ------
Income before income taxes and undistributed income of 
 subsidiary....................................................    433      398    1,256
Income tax benefits............................................   (200)    (127)    (130)
                                                                ------   ------   ------
Income before undistributed income of subsidiary...............    633      525    1,386
Equity in undistributed income of subsidiary...................  3,567     (325)   1,939
                                                                ------   ------   ------
  Net income................................................... $4,200   $  200   $3,325
                                                                ======   ======   ======

</TABLE>

<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS

DECEMBER 31                                                                1996     1995
----------------------------------------------------------------------------------------
<S>                                                                     <C>      <C>
Assets:
Cash................................................................... $   253  $     7
Investment in bank subsidiary..........................................  30,240   27,337
Investment securities available for sale...............................   1,113      826
Other assets...........................................................     600      441
                                                                        -------  -------
  Total assets......................................................... $32,206  $28,611
                                                                        =======  =======

Liabilities:
Dividends payable...................................................... $   242  $   293
Other liabilities......................................................     708      423
                                                                        -------  -------
  Total liabilities....................................................     950      716
Stockholders' equity...................................................  31,256   27,895
                                                                        -------  -------
  Total liabilities and stockholders' equity........................... $32,206  $28,611
                                                                        =======  =======

</TABLE>



14. PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED):

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31                                            1996     1995     1994
----------------------------------------------------------------------------------------
<S>                                                            <C>      <C>      <C>
Cash flows from operating activities:
Net income.................................................... $ 4,200  $   200  $ 3,325
Adjustments:
  Equity in undistributed income of subsidiary................  (3,567)           (1,939) 
  Distributions in excess of earnings of subsidiary...........              325   
Gains on sale of investment securities......................      (8)               
     Changes in: 
    Other assets..............................................     136        1      239 
    Other liabilities.........................................     208      (54)    (103)
                                                               -------  -------  -------
      Net cash provided by operating activities...............     969      472    1,522
                                                               -------  -------  -------

Cash flows from investing activities:
Proceeds from sales of investment securities..................      25                  
Purchases of investment securities............................     (73)     (17)    (388)
                                                               -------  -------  -------
      Net cash used in investing activities...................     (48)     (17)    (388)
                                                               -------  -------  -------

Cash flows from financing activities:
Payments of long-term debt....................................                      (800)
Cash dividends paid...........................................    (675)    (455)    (448)
                                                               -------   ------  -------
      Net cash used in financing activities...................    (675)    (455)  (1,248)
                                                               -------   ------  -------
      Net increase (decrease) in cash.........................     246              (114)
      Cash at beginning of year...............................       7        7      121
                                                               -------  -------  -------
      Cash at end of year..................................... $   253  $     7  $     7
                                                               =======  =======  =======

Supplemental disclosure:
Noncash item:
  Change in net unrealized losses (gains) on available for 
   sale securities............................................ $   216  $(5,468) $ 4,688
                                                               =======  =======  =======

</TABLE>
15. REGULATORY MATTERS:

Under the Pennsylvania Business Corporation Law of 1988, as amended, the Company
may
not pay a dividend if, after giving effect thereto, either the Company would be
unable to pay its debts as they become due in the usual course of business, or 
the
Company's total assets would be less than its total liabilities.  The 
determination
of total assets and liabilities may be based upon: financial statements prepared
on
the basis of generally accepted accounting principles; financial statements that
are
prepared on the basis of other accounting practices and principles that are
reasonable under the circumstances; or a fair valuation or other method that is
reasonable under the circumstances.

In addition, the Company is subject to Federal Reserve Regulation H, which 
restricts
state member banks, such as Community Bank, from paying a dividend if the total 
of
all dividends declared by Community Bank in any calendar year exceeds the total 
of
its net profits, as defined, for that year combined with its retained net 
profits, as defined, of the preceding 
15. REGULATORY MATTERS (CONTINUED):

two calendar years, less any required transfers to surplus, unless Community 
Bank has
received the prior approval from the Federal Reserve Board.  Accordingly, the
subsidiary, without prior approval of bank regulators, may declare dividends to 
the
Company in 1997 totaling $3,166 plus net profits earned by the subsidiary for 
the
period from January 1, 1997, through the date of declaration, less dividends
previously paid in 1997.

Under the Pennsylvania Banking Code of 1965, as amended, cash dividends may be
declared and paid by Community Bank only out of accumulated net earnings.  Prior
to
the declaration of any dividend, if the surplus of Community Bank, as defined, 
is less than the amount of its capital, as defined, Community Bank shall, until 
surplus
is equal to such amount, transfer to surplus an amount that is at least 10.0 
percent
of the net earnings of Community Bank for the period since the end of the fiscal
year
or for any shorter period since the declaration of a dividend.  If the surplus 
of
Community Bank is less than 50.0 percent of the amount of the capital, no 
dividend
may be declared or paid without prior approval of the Department until such 
surplus is equal to 50.0 percent of Community Bank's capital.

The Company has paid cash dividends since its formation as a bank holding 
company in
1983.  It is the present intention of the Company's Board of Directors to 
continue
this dividend payment policy; however, further dividends must necessarily depend
upon earnings, financial condition, appropriate legal restrictions, and other 
factors
relevant at the time the Company's Board of Directors considers payment of 
dividends.

The provisions of section 23A of the Federal Reserve Act require that "covered
transactions," as defined, engaged in by insured banks and their subsidiaries 
with
certain affiliates, including the Parent Company, be at arm's length and limited
to
20.0 percent of capital and surplus, as defined, and "covered transactions" with
any
one such affiliate be limited to 10.0 percent of capital and surplus.  Covered
transactions are defined to include, among other things, loans and other 
extensions
of credit to such an affiliate and guarantees, acceptances and letters of credit
issued on behalf of such an affiliate.  Such loans, other extensions of credit,
guarantees, acceptances and letters of credit must be secured.  

At December 31, 1996, the maximum amount available for transfer from the 
subsidiary
to the Parent Company in the form of loans amounted to $3,168. There were no 
loans or
advances to the Parent Company from its subsidiary during 1996 and 1995, nor 
were there any such amounts outstanding.

15. REGULATORY MATTERS (CONTINUED):

The Company is also required to maintain certain capital to total risk-weighted 
asset
ratios as defined by Section 38 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA").  In the event an institution is deemed to be
undercapitalized by such standards, FDICIA 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 institutions that reach the significantly or
critically undercapitalized levels including restrictions on interest payable on
accounts, dismissal of management, and appointment of a receiver.  For well-
capitalized institutions, FDICIA 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 for asset quality, 
management,
earnings or liquidity.  The Company is required to have minimum Tier I and total
capital ratios of 4.0 percent and 8.0 percent, respectively.  At December 31, 
1996,
the Company's Tier I and total capital ratios were 15.4 percent and 16.7 
percent,
respectively. At December 31, 1995, such ratios were 14.2 percent and 15.5 
percent,
respectively.  Furthermore, the Federal Reserve Board has established a minimum 
level
of Tier I capital to adjusted total average assets, referred to as the Tier I
Leverage ratio, at 3.0 percent.  Such minimum ratio is applicable only to those
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.  At December 31, 1996 and 1995, the 
Company's
minimum ratios of Tier I capital to adjusted total average assets were 4.0 
percent
and 5.0 percent, respectively.  The Company's Tier I capital to adjusted total
average assets ratio at December 31, 1996 and 1995 was, 8.3 percent and 7.0 
percent,
respectively.  At September 30, 1996, the most recent notification from the FRB
categorized the Company as well capitalized under the regulatory framework for 
prompt
corrective action.  To be categorized as well capitalized, the Company must 
maintain
minimum  Tier I, total and Tier I Leverage ratios as set forth in the table.  
There
are no conditions or events since that notification that management believes 
have changed the Company's category.











15. REGULATORY MATTERS (CONTINUED):

The following table presents the Company's capital ratios at December 31, 1996 
and
1995, as well as the required minimum ratios for capital adequacy purposes and 
to be well capitalized under the prompt corrective action provisions:


<TABLE>
<CAPTION>                                                                                          MINIMUM TO BE WELL 
                                                                                          CAPITALIZED UNDER
                                                                 MINIMUM FOR CAPITAL      PROMPT CORRECTIVE
                                                  ACTUAL          ADEQUACY PURPOSES       ACTION PROVISIONS  
                                          ------------------------------------------------------------------
DECEMBER 31                                   1996      1995       1996         1995         1996       1995
------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>         <C>          <C>          <C>        <C>    
Tier I capital to risk-adjusted assets... $ 28,692  $ 24,845    $ 7,443      $ 6,983      $11,164    $10,475
Total capital to risk-adjusted assets....   31,038    27,048     14,886       13,966       18,607     17,458
Tier I capital to total average assets
 less goodwill...........................   28,692    24,845    $13,830      $17,871      $17,287    $17,871

Risk-adjusted assets.....................  180,809   170,089
Risk-adjusted off-balance sheet items....    5,261     4,489
Average assets for Leverage ratio........ $345,738  $357,410

Tier I capital as a percentage of risk-
 adjusted assets and off-balance sheet 
 items...................................    15.4%     14.2%       4.0%         4.0%         6.0%       6.0%

Total of Tier I and Tier II capital as a
 percentage of risk-adjusted assets and 
 off-balance sheet items.................    16.7      15.5        8.0          8.0         10.0       10.0 

Tier I capital as a percentage of total 
 average assets less goodwill............     8.3%      7.0%       4.0%         5.0%         5.0%       5.0%



</TABLE>
Prior to February 16, 1996, the Company was subject to a written supervisory
agreement in the form of a Memorandum of Understanding ("MOU") with the FRB.  
Such
agreement included various operating restrictions on capital, among others. 
Specifically, under the terms of the MOU, the Company was required to: 
(I) obtain the
prior written approval of the FRB to declare or pay any dividends; (II) obtain 
the prior written approval of 
the FRB before the Company incurs any debt other than normal operating expenses;
(III) obtain the prior written approval of the FRB before the Company redeems 
its own
stock; (IV) submit to the FRB a written plan to maintain capital ratios well in
excess of minimum regulatory guidelines; (V) submit to the FRB a written plan to
ensure appropriate authority over and oversight of the Company's investment
practices; (VI) prohibit the Company from additional purchases of high-risk
securities and structured notes as well as securities not in compliance with the
Federal Reserve Board's Supervisory Policy Statement on Securities Activities; 
(VII)
retain an independent consultant to review the Company's securities activities 
and
investments in the context of the Company's overall interest rate risk and 
liquidity
position and provide a written report to the FRB thereon; (VIII) submit to the 
FRB
revised investment policies and procedures to correct deficiencies cited in the 
FRB's
examinations with respect to prior investment practices involving the investment
portfolio; (IX) submit to the FRB a written liquidity plan to provide for an 
adequate
level of assets to fund operations and meet customer needs; (X) submit quarterly
progress reports to the FRB to assure compliance with the MOU; and (XI) submit 
the
written plans, policies and procedures to the FRB for review and approval.  
15. REGULATORY MATTERS (CONTINUED):

Significant steps taken by the Company to comply with the MOU in 1995 included 
the
divestiture of criticized investment securities, development of formalized 
plans,
policies and procedures, and reorganization of management oversight.  The costs
associated with the MOU included in noninterest expense approximated $500 in 
1995. 
The agreement was terminated on the aforementioned date as a result of the
significant improvement in the Company's overall financial condition and 
substantial compliance with such agreement.

16. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
<TABLE>
<CAPTION>

                                                    1996                                 1995                 
                                    --------------------------------------------------------------------------
QUARTER ENDED                       MARCH 31  JUNE 30  SEPT. 30  DEC. 31  MARCH 31  JUNE 30  SEPT. 30  DEC. 31
--------------------------------------------------------------------------------------------------------------
<S>                                   <C>      <C>       <C>      <C>       <C>     <C>       <C>       <C>  
INTEREST INCOME:
Interest and fees on loans:
  Taxable............................ $4,625   $4,637    $4,564   $4,618    $4,121  $ 4,274   $ 4,320   $4,523
  Tax-exempt.........................     50       57       102      101        48       81        59       52
Interest on investment securities 
 held to maturity: 
  Taxable............................                                        1,296    1,290     1,244
  Tax-exempt.........................                                          301      298       296
Interest and dividends on investment 
 securities available for sale:
  Taxable............................  1,026    1,037       983      868       777      715       384      963
  Tax-exempt.........................    485      488       501      509                                   305
  Dividends..........................     25       28        26       29        32        5        54       29
Interest on deposits with banks......                                            3        2         2        2
Interest on federal funds sold.......    126       76        55       43                 32       294      665
                                      ------   ------    ------   ------    ------  -------   -------   ------
    Total interest income............  6,337    6,323     6,231    6,168     6,578    6,697     6,653    6,539             
                                      ------   ------    ------   ------    ------  -------   -------   ------
                                    
INTEREST EXPENSE:
Interest on deposits.................  3,399    3,327     3,322    3,406     3,266    3,483     3,695    3,649 
Interest on short-term borrowings....                         1        2       334      343 
Interest on long-term debt...........     33       33        26        1        60       63        62       39
                                      ------   ------    ------   ------    ------  -------   -------   ------
    Total interest expense...........  3,432    3,360     3,349    3,409     3,660    3,889     3,757    3,688
                                      ------   ------    ------   ------    ------  -------   -------   ------
    Net interest income..............  2,905    2,963     2,882    2,759     2,918    2,808     2,896    2,851
Provision for loan losses............     75       75        75       75       210       75        75       75
                                      ------   ------    ------   ------    ------  -------   -------   ------
    Net interest income after 
     provision for loan losses.......  2,830    2,888     2,807    2,684     2,708    2,733     2,821    2,776
                                      ------   ------    ------   ------    ------  -------   -------   ------
                                       
NONINTEREST INCOME:
Service charges, fees and 
 commissions.........................    336      372       389      348       328      286       271      312
Net investment securities losses.....             (27)      (31)                     (1,885)   (2,508)        
                                      ------   ------    ------   ------    ------  -------   -------   ------
    Total noninterest income (loss)..    336      345       358      348       328   (1,599)   (2,237)     312
                                      ------   ------    ------   ------    ------  -------   -------   ------
                                                                              
NONINTEREST EXPENSE:
Salaries and employee benefits 
 expense.............................    962      981       826    1,039     1,002    1,219       998      809
Net occupancy and equipment expense..    327      314       285      287       312      296       304      310
Other expenses.......................    598      663       579      522       723      898       682      641       
                                      ------   ------    ------   ------    ------  -------   -------   ------  
    Total noninterest expense........  1,887    1,958     1,690    1,848     2,037    2,413     1,984    1,760  
                                      ------   ------    ------   ------    ------  -------   -------   ------
Income (loss) before income taxes....  1,279    1,275     1,475    1,184       999   (1,279)   (1,400)   1,328
Provision for income tax expense
 (benefit)...........................    278      274       326      135       231     (253)     (889)     359
                                      ------   ------    ------   ------    ------  -------   -------   -------
    Net income (loss)................ $1,001   $1,001    $1,149   $1,049    $  768  $(1,026)  $  (511)  $  969 
                                      ======   ======    ======   ======    ======  =======   =======   ======

Per share data:
Net income (loss).................... $ 0.45   $ 0.46    $ 0.52   $ 0.48    $ 0.35  $ (0.47)  $ (0.23)  $ 0.44  
Cash dividends declared.............. $ 0.05   $ 0.06    $ 0.06   $ 0.11                      $  0.08   $ 0.13



</TABLE>

OVERVIEW:

On May 24, 1995, the Board of Directors of Comm Bancorp, Inc. and subsidiary,
Community Bank and Trust Company (collectively, the "Company"), entered into a
Memorandum of Understanding ("MOU") with the Federal Reserve Bank of 
Philadelphia
("FRB") in recognition of their common goals to restore and maintain the 
financial
soundness of the Company and to improve the overall financial condition of 
Community
Bank and Trust Company.  The MOU was a direct result of regulatory concerns 
about
prior investment practices and noncompliance with previously issued informal
supervisory actions.  Such supervisory actions placed a significant 
administrative
and reporting burden on the Company and increased both monetary and opportunity
costs.

On February 16, 1996, management received a letter from the FRB terminating this
supervisory action as a result of the marked improvement in the Company's 
financial
position through a reduction in its overall risk profile.  During the latter 
part of
1994 and early portion of 1995, the Company was subject to an inordinate amount 
of
risk from changing interest rates as a result of the composition of its balance
sheet.  The Company was funding long-term assets with short-term liabilities,
exposing itself to significant loss from upward pressure in short-term interest
rates.  In addition, the Company's liquidity posture was such that it was 
completely
reliant on short-term borrowings from the Federal Home Loan Bank of Pittsburgh
("FHLB-Pgh") to fund normal operations.  Significant steps taken to relieve such
adverse pressures included the divestiture of criticized investment securities,
development of formalized plans, policies and procedures, and reorganization of
management oversight.  

During the second quarter of 1995, the Company's reliance on short-term 
borrowings to
fund long-term earning assets elevated to 15.2 percent.  The buildup in such 
funding
was primarily attributable to the structure and composition of the investment
portfolio.  Rising interest rates in 1994 and the first quarter of 1995 made
principal payments on mortgage backed securities virtually nonexistent and 
limited
the Company's ability to create liquidity through investment dispositions due to
their deteriorating market values.  Management alleviated the Company's 
liquidity
crisis through the sale of certain investment securities and loans and by
aggressively competing for retail deposits.  Such actions had a positive 
influence on
the Company's interest sensitivity posture as it allowed management to eliminate
the
Company's reliance on short-term funding and to reinvest the proceeds so the 
Company
could reduce its exposure to changes in interest rates.  As required by the MOU,
management developed formalized capital, liquidity and interest rate risk plans 
and
investment and asset/liability policies to provide a framework in meeting the
Company's strategic goal of becoming a "traditional community bank."  This type 
of
bank ensures safety to depositors while providing a reasonable rate of return to
stockholders by limiting the risk exposure of its assets.  The Board of 
Directors reorganized management oversight of the Company through increased
emphasis on director participation on committees, utilization of external 
consultants
to assure independence, and by naming a new President and Chief Executive 
Officer.

OPERATING ENVIRONMENT:

The Commerce Department reported the economy grew during 1995 at its slowest 
pace
since the 1991 recession.  The nation's gross domestic product, the total output
of
goods and services, declined to 2.1 percent in 1995 as compared to 3.5 percent 
in
1994.  Such reduction in economic activity was not expected based on the 
strength
demonstrated during the fourth quarter of 1994 when growth rates were at 4.0 
percent
annualized.  Gains in personal consumption expenditures, plant and equipment
spending, and net exports during January of 1995 prompted the Federal Reserve 
Open
Market Committee ("FOMC") to continue tightening its monetary policy, which 
began
February 4, 1994.  Accordingly the FOMC, concerned that high levels of business
activity would be inflationary, increased the overnight federal funds and 
discount
rates 50 basis points each on February 1, 1995.  However, the pace of the 
economy
began to falter at the end of the first quarter and throughout the second 
quarter of
1995, causing the FOMC to cut the federal funds rate by 25 basis points on 
July 6,
1995.  Weak motor vehicle sales and housing starts, sluggish retail sales, and
reduced levels of business spending in the fourth quarter of 1995 caused the 
FOMC to
continue easing by reducing the overnight federal funds rate another 25 basis 
points
on December 19, 1995.  Despite the slowdown in economic activity, unemployment 
and
inflation rates remained strong throughout 1995 at 5.6 percent and 2.8 percent,
respectively.

The 0.5 percent rate of economic expansion for Northeastern Pennsylvania during 
1995
lagged behind both the state and the nation.  Slower population growth and 
higher
unemployment and costs were principally responsible for the lower level of 
activity. 
Population throughout the Company's quad-county market area increased slightly 
at 1.0
percent based on a comparison of 1995 estimates to the 1990 census.  Census 
growth
rates for Pennsylvania and the nation were 1.7 percent and 5.6 percent, 
respectively. 
Unemployment rates in 1995 for the areas served by the Company continued to be 
higher
than Pennsylvania's overall rate of 5.9 percent.  Lackawanna, Susquehanna, Wayne
and
Wyoming counties experienced unemployment rates of 6.2 percent, 7.2 percent, 8.7
percent and 7.1 percent, respectively.  

The economic slowdown in 1995 had no material adverse effect on commercial banks
as
evidenced by marked improvements in profitability, loan demand, asset quality 
and
capitalization.  The nation's top fifty commercial banks reported increases in 
net
income, loan volume and capital of 9.2 percent, 12.3 percent and 8.7 percent,
respectively.  In addition, such institutions experienced reductions in 
nonperforming
loans and assets of 7.8 percent and 15.2 percent, respectively.  Banks in the 
FRB's
Third District, comprised of two-thirds of Pennsylvania, Delaware and southern 
New
Jersey, followed these national trends.  The earnings improvement and 
corresponding
capital appreciation were primarily attributable to higher noninterest income 
and
lower noninterest expense partially offset by a reduction in net interest 
margin. 
Reductions in the rates charged to borrowers, as a result of a decrease in 
general
market rates and an aggressive competitive environment, increased loan demand 
and improved asset quality.

REVIEW OF FINANCIAL POSITION:

Total assets declined $11.6 million or 3.2 percent, from $362.5 million at 
December
31, 1994, to $350.9 million at December 31, 1995.  Such decline was in response 
to
management's decision to sell investment securities criticized by regulators and
those demonstrating a high degree of risk in order to eliminate the Company's
reliance on short-term borrowings to fund normal operations.  In addition to 
being
relieved of its debt burden, the Company's liquidity, capital and interest
sensitivity positions improved as management redirected excess proceeds from the
sale
of such assets.  Liquidity, as defined by the net amount of liquid assets and
volatile liabilities, increased from $20.3 million at December 31, 1994, to 
$62.2
million at December 31, 1995.  The capital level strengthened as indicated by an
improvement in the ratio of stockholders' equity to total assets at 
December 31, 1994
and 1995, from 6.3 percent to 8.0 percent.  The depressed capital position at 
year-
end 1994 was primarily a reflection of the risk inherent throughout the 
investment
portfolio.  The Company reported net unrealized holding losses of $4.7 million 
at
December 31, 1994, as compared to net unrealized holding gains of $780 at 
December
31, 1995.  Such actions also improved the Company's exposure to changes in 
interest
rates as reflected by having approximately equal amounts of rate sensitive 
assets and rate sensitive liabilities repricing within the next year.

The reduced volume of local economic activity had a direct reflection on the 
demand
for credit during 1995.  Adjusting for short-term credit extensions to other
financial institutions and the sale of student loans, average loans increased 
$10.3
million in 1995, a reduction from the $14.2 million level experienced in 1994. 
Employment conditions deteriorated in Northeastern Pennsylvania as evidenced by 
a
reduction in average weekly earnings resulting from a decline in the average 
number
of hours worked.  The average weekly earnings of a manufacturing worker in the
Company's market area declined from four hundred forty-eight dollars at December
1994, to four hundred two dollars at December 1995.  Similarly, the average 
weekly hours worked decreased from 39.8 in 1994 to 33.3 in 1995.  

Such weakness in local economic conditions also affected the Company's asset 
quality
during 1995.  Nonperforming assets increased 27.4 percent from $3.3 million to 
$4.2
million at December 31, 1994 and 1995, respectively.  Net charge-offs during 
1995 approximated 27.5 percent of the 1994 level.

Regulatory authorities characterized the Company's investment portfolio during 
1994 as one exhibiting an inordinate amount of risk while being an inadequate 
source of
secondary liquidity.  Such riskiness was demonstrated by the aggregate fair 
value of
the portfolio being $12.0 million below amortized cost at December 31, 1994. 
Additionally, the weighted-average life of all investments held approximated 
10.3
years at year-end 1994.  Moreover, nearly half of the portfolio was invested in
lower-quality mortgage backed securities exhibiting greater risk due to the 
structure
and composition of such holdings.  Management took significant steps in 
addressing
regulatory concerns through restructuring its oversight of the investment 
function,
hiring an external investment management consultant group, and formulating and
implementing a portfolio reconstitution plan.  As a result of such action, 
management
constructed a portfolio that provides a reasonable rate of return with 
considerably
less risk while assuring a continuous flow of cash to fund normal operations.  
At
December 31, 1995, the investment portfolio fair value exceeded its amortized 
cost by
$1.2 million.  The weighted-average life of such portfolio was 3.2 years with an
expected average term until cash flows are received of 2.4 years.  The amount of
investment repayments from maturities and principal payments due within one year
increased substantially from $1.4 million at December 31, 1994, to $21.6 million
at
December 31, 1995.  Attestation of the improved quality and elimination of risk 
in
the investment portfolio was the removal of the aforementioned supervisory 
action, which was a direct result of the past problems with such asset base.

Average deposit volumes grew $8.2 million from $309.7 million in 1994 to $317.9
million in 1995, a 2.6 percent increase.  The deposit increase for 1995 falls 
below
the increase for the comparable period of 1994 of $22.5 million or 7.8 percent 
and
the favorable change of 7.6 percent in the Company's peer group of thirty-five 
banks
in Northeastern Pennsylvania.  The Company's reduced rate of deposit growth in 
1995
was attributable to less aggressive competition for funds during the latter part
of the year in light of its improved liquidity position.  

Stockholders' equity increased $5.2 million from $22.7 million at 
December 31, 1994,
to $27.9 million at December 31, 1995.  The 22.9 percent rise in capital was 
directly
attributable to a reversal in the unrealized holding adjustment on available for
sale
investment securities of $5.5 million during 1995.  In accordance with Statement
of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain 
Investments
in Debt and Equity Securities," reductions in the fair values of available for 
sale
investments below their amortized costs are recorded as adjustments, net of 
income
taxes, to stockholders' equity.  The 300 basis point rise in general market 
rates
during 1994 caused stockholders' equity to be reduced $4.7 million at 
December 31, 1994.  

INVESTMENT PORTFOLIO:

Actions taken during 1995 involving the investment portfolio were the most
significant factors in restoring the strength of the Company's financial 
position. 
As aforementioned, the investment portfolio, prior to such actions, was subject 
to
harsh regulatory criticism for exposing the Company to inordinate amounts of 
risk
while providing insufficient liquidity to fund normal operations.  Although
containing minimal credit risk, the portfolio was subject to an excessive amount
of
interest rate, extension, call and marketability risk.  Rises in general market 
rates
during 1994 and the first quarter of 1995 caused strains on the Company's 
liquidity
position as a significant portion of the investment portfolio could not be 
disposed
of without realizing significant losses.  The aggregate market value 
deteriorated
from a gain of $1.5 million at December 31, 1993, to a loss of $12.0 million at
December 31, 1994.  Moreover, such changes in general market rates caused a
significant slowdown in the cash flows received from mortgage backed securities 
and
extended the weighted-average life of the portfolio.  Monthly cash receipts from
mortgage backed securities declined from $3.5 million in January of 1994 to $133
in December of 1994.  Such slowdown also adversely affected the Company's
asset/liability sensitivity position as it restricted management's ability to
reinvest such receipts at higher interest rates.  Many securities included 
embedded
options, allowing the issuer to call the debt if interest rates declined, thus
restricting the Company to only obtaining the contractual premium rate when 
market
rates exceed such premium rate, making it less attractive by comparison.  In
addition, poor quality with respect to the structure and composition of the 
holdings
subjected the Company to marketability risk.  Management experienced difficulty 
in
determining the value at which a security could actually be sold because of the 
size
of the spread between the bid price and offer price.  As a direct result of the
excessive amount of these types of risks prevalent throughout the portfolio, the
Company was placed under an MOU from May 24, 1995, to February 16, 1996.

In order to address regulatory concerns and significantly mitigate the 
portfolio's
risk, management formulated an action plan.  Such plan included restructuring
management oversight of the investment function, hiring an external investment
management consultant group, developing a formalized investment policy and
procedures, and formulating and implementing a portfolio reconstitution plan.  
During
the second quarter of 1995, the Board of Directors restructured the investment
committee and replaced the individual primarily responsible for the oversight 
and
authority of the investment function.  Shortly after its restructuring, the 
committee
hired an external investment management consultant group.  Such group, a 
division of
a large international certified public accounting firm, was hired primarily to 
assist
management in assessing the amount and degree of the portfolio's risk and in
formulating a sound investment policy and procedures to be followed 
consistently. 
The investment policy prohibits unsuitable securities activities and promotes 
safety
and soundness through establishment of strict limitations to the quality, 
quantity
and maximum maturity for each type of security.  Moreover, various operational
procedures were adopted to enhance internal controls and assure adherence with 
the investment policy.

Management took the first step in reconstituting the investment portfolio during
the
end of the second quarter and early part of the third quarter of 1995 by 
disposing of
thirty-two available for sale securities having an amortized cost and fair value
of
$31.1 million and $29.2 million, respectively.  Specifically, the sale consisted
of
twenty-six high-risk collateralized mortgage obligations ("CMOs") having an 
amortized
cost of $25.0 million and a fair value of $23.4 million and six structured notes
having an amortized cost of $6.1 million and a fair value of $5.8 million. The 
$1.9
million loss arising from such sale was recognized in the second quarter of 
1995, the
period in which the decision to sell was made. Subsequent to the aforementioned 
sale,
the Company held the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") defined high-risk CMOs with an amortized cost and fair value of 
$4.3
million and structured notes with an amortized cost of $18.0 million and a fair 
value
of $17.6 million at June 30, 1995.  Specifically, the remaining structured notes
consisted of $15.0 million of step-up bonds, $1.0 million of dual index notes, 
and $2.0 million of de-leveraged bonds.

The second phase of the investment portfolio's reconstitution was more difficult
as
it considered the reclassification of securities designated as held to maturity 
to available for sale.  SFAS No. 115 requires an enterprise to reassess the
appropriateness of its accounting and reporting classifications of debt and 
equity
securities at each reporting date.  Accordingly, management prepared a 
comprehensive
analysis to the effects of  such action from both a regulatory and accounting
position.  Pursuant to the MOU, the Company was required to maintain a Tier I
Leverage ratio exceeding 5.0 percent after adjusting for market depreciation, 
net of
taxes, in securities classified as available for sale and those high-risk CMOs 
and
structured notes classified as held to maturity.  An enterprise not subject to 
such
supervisory action excludes such adjustments in calculating its Tier I Leverage
ratio.  In addition to the regulatory consideration, management had to consider 
the
effects of such action on a financial accounting basis.  Contrary to standard
regulatory accounting treatment, whereby an institution not subject to 
supervisory
actions can exclude the unrealized holding adjustment on available for sale
securities, financial accounting requires such adjustment to be included as a
separate component of stockholders' equity.  The Board of Directors, after an
extensive examination of the results set forth in such analysis on September 30,
1995, voted unanimously to transfer the entire held to maturity portfolio to
available for sale.  In conjunction with its review of the analysis, the Board 
of
Directors made the decision to sell specific securities that were transferred 
from
the held to maturity portfolio to the available for sale portfolio, which it did
in
the beginning of October 1995.  The resulting loss of $2.5 million on the sale 
was
recognized in earnings in the third quarter of 1995, the period in which the 
decision
to sell was made.  Securities disposed of during the second phase of the 
portfolio
reconstitution plan had an amortized cost of $59.5 million and a fair value of 
$57.0
million.  As a result of completing the second phase, management eliminated all 
CMOs
designated as high-risk and those that had the possibility of meeting any of the
average life or interest sensitivity tests in the future.  In addition, the 
carrying value of structured notes was reduced through sales from $21.1 million 
at December 31, 1994, to $2.9 million at December 31, 1995.  After a discussion 
with an 
external investment management consultant and review by the FRB, management 
decided to retain
three structured notes with maturities of less than three years.  The decision 
to hold these securities was based on their market values being less than their 
economic
value at the analysis date.  Another major group of securities sold during the 
second
phase of the reconstitution was long-term, variable rate securities.  
Unattractive
coupons relative to alternatives and the existence of embedded caps, which 
restrict
the coupon rate from exceeding a certain level regardless of rises in general 
market
rates, were principally responsible for the divestiture of such securities.  The
Company's holdings of variable rate securities declined from $52.0 million at
December 31, 1994, to $17.3 million at December 31, 1995.  The weighted-average 
life
of such securities decreased significantly from 13.2 years to 2.5 years at 
year-end 1994 and 1995, respectively.  

Pursuant to SFAS No. 115, sales or transfers from the held to maturity 
classification
for reasons other than those specified, call into question an enterprise's 
intent to
hold other debt securities to maturity in the future.  Accordingly, the 
successful
implementation of the reconstitution plan, which benefited the Company by 
materially
reducing its risk posture, prohibited it from reestablishing a held to maturity
classification for purchases or transfers in the near term. 

The investment portfolio represented 32.2 percent of earning assets at 
December 31,
1995, compared with 43.9 percent a year earlier.  Proceeds from the sale of 
available
for sale securities amounted to $87.1 million and $13.6 million in 1995 and 
1994,
respectively.  The Company realized net securities losses of $4.4 million in 
1995 and
net securities gains of $495 in 1994 as a result of such sales.  The proceeds 
were
used primarily to retire short-term debt and fund loan demand.  For the years 
ended
December 31, 1995 and 1994, the Company had repayments from maturities, calls 
and
principal payments on securities totaling $4.9 million and $15.4 million,
respectively.  Securities purchases amounted to $44.2 million and $38.9 million
during 1995 and 1994, respectively.  Purchases during 1995 consisted principally
of
short-term U.S. Treasury securities to provide future liquidity in funding the 
loan
portfolio and medium-term obligations of states and municipalities to lower the
Company's effective tax rate.  The net unrealized holding gain amounted to $780,
net
of income taxes of $401, at December 31, 1995.  Such gain represents a change in
the
net unrealized adjustment of $5.5 million, net of income taxes of $2.8 million, 
from
December 31, 1994.  The net unrealized holding loss totaled $4.7 million, net of
income taxes of $2.4 million, at December 31, 1994.

The tax equivalent yield on the investment portfolio improved from 6.1 percent 
in
1994 to 6.4 percent in 1995.  The improvement was principally due to the Company
replacing lower-yielding, variable-rate securities with higher-yielding, 
fixed-rate
securities.  As a result of the portfolio reconstitution, U.S. Treasury and tax-
exempt municipal securities accounted for 68.3 percent of total investments at
December 31, 1995, as compared to 23.6 percent at December 31, 1994.  The 
investment
portfolio contains minimal credit risk since the majority of its holdings are 
issued
and/or guaranteed by the U.S. Government or federally-sponsored agencies.  
Except for
U.S. Treasury securities and U.S. Government agencies, there were no securities 
of
any individual issuer that exceeded 10.0 percent of the Company's stockholders'
equity at December 31, 1995 and 1994.  All of the securities in the Company's
portfolio were considered "investment grade," receiving a rating of "Baa" or 
higher
from Moody's or "BBB" or higher from Standard and Poor's rating services, except
for
$2.4 million of tax-exempt obligations of local municipalities, at 
December 31, 1995. 
Investment securities with an amortized cost of $34.0 million and $39.0 million 
at
December 31, 1995 and 1994, respectively, were pledged to secure deposits, to 
qualify
for fiduciary powers, and for other purposes required or permitted by law.  The 
fair
value of such securities was $34.1 million and $36.7 million at December 31, 
1995 and 1994, respectively.

LOAN PORTFOLIO:

Despite the modest level of economic expansion, bank loan portfolios grew in 
response
to the conducive interest rate environment.  Loan volumes for all commercial 
banks in
the United States grew 9.4 percent during 1995 while the volumes for the 
Company's
peer group increased 7.8 percent over the same period.  Lower interest rates 
provided
a more favorable environment for purchasing homes while reducing costs 
associated
with business loans, as well as costs related to the purchase of other goods on
credit.  The favorable impact of declining interest rates was partially offset 
by
consumer anxiety over adding to their already high debt burdens, given the
uncertainty of job and income growth.  

For the year consumer lending, consisting of household debt not secured by real
estate, grew 13.4 percent for all commercial banks in the United States and
represented 45.0 percent of bank lending.  Consumers took on debt at an average
annual rate of 10.8 percent in the second half of 1995, somewhat less than the 
15.0
percent annualized rate for the first half of the year.  By year-end, consumer
installment debt reached $1.05 trillion, marking an increase of 39.0 percent 
over the
1990 level.  Commercial lending also increased in 1995, rising 8.2 percent over 
1994
volumes.  Reductions in the cost of financing investments in new capital 
provided
some offset to the slowing tendencies that normally accompany a moderation in
economic growth.

The interest rate environment also encouraged growth in the mortgage sector.  
Average
mortgage rates began 1995 at 9.2 percent and dropped to 7.1 percent by year-end.
Reductions in mortgage interest rates have put the cost of financing a house 
within
reach for a greater number of families and made it possible for a significant 
number
of households to ease their debt-service burdens by refinancing their homes at 
lower
rates.  Refinancing accounted for 51.5 percent of conventional home loans made 
by
banks in 1995.  Reductions in the construction of new homes and apartments by 
7.3
percent in 1995 was offset by sales of existing homes of 3.8 million units 
accounting
for the 5.0 percent rise in median home prices.  Home prices in the Northeast
contradicted such trend declining 0.7 percent during 1995.  

Loans, net of unearned income, were $213.8 million at December 31, 1995, an 
increase
of $19.4 million, or 9.9 percent, over the volume reported at December 31, 1994.
Such increase, adjusted for short-term credit extensions to other financial
institutions and the disposition of student loans, would have amounted to $5.9
million in 1995.  The Company had aggregate loans of $19.0 million to certain 
large
Pennsylvania-based commercial banks at December 31, 1995.  None of such loans 
had
maturities greater than six months.  In addition, management, in response to
liquidity strains, sold student loans with a carrying value of $5.6 million to 
its
servicing agent during the second quarter of 1995.  The increase in aggregate 
loan
demand, after considering such adjustments, can be explained by a rise in the 
volume
of loans to finance one-to-four family residential properties of $8.6 million 
and
those to finance commercial real estate properties of $3.2 million offset 
primarily
by a decline in commercial and industrial loans.  Loans, net of unearned income,
as a
percentage of total earning assets were 63.3 percent and 56.0 percent at 
December 31,
1995 and 1994, respectively.  During 1995, the peer group's average loans 
accounted
for 62.2 percent of average assets as compared to the Company's ratio of 55.6
percent.

The Company's volume of loans with predetermined interest rates increased $5.7
million and represented 80.7 percent of the portfolio while those bearing 
floating or
adjustable interest rates rose $13.7 million and represented 19.3 percent of the
portfolio at December 31, 1995.  Customers, in taking advantage of declining 
interest
rates, opted for variable-rate products as opposed to higher-costing, fixed-rate
products.  The tax equivalent yield on the loan portfolio rose from 8.5 percent 
in
1994 to 8.8 percent in 1995.  Such increase occurred during the first half of 
1995
when interest rates were at their highest point.  With the decline in rates, the
Company's yield remained level throughout the second half of 1995.  Contrary to 
the
large volume of refinancings nationwide, the volume of refinanced residential
mortgages declined significantly from $14.4 million in 1994 to $9.5 million in 
1995.  

The composition of the loan portfolio changed during 1995 primarily due to the
effects of the short-term credit extensions made to commercial banks and the
disposition of student loans.  Commercial loans increased $12.2 million during 
1995
and represented 19.5 percent of loans, net of unearned income.  Excluding the
commercial bank loans, such segment of the loan portfolio would have experienced
a decline of $6.8 million during 1995.  Although banks throughout the nation
experienced a marked increase in consumer credit, the Company experienced a drop
in
such loans.  The $4.6 million decline in consumer loans from $23.9 million at
December 31, 1994, to $19.3 million at December 31, 1995, was primarily 
attributable
to the Company's sale of student loans to a servicing agent in the second 
quarter of
1995.  Had such sale not occurred, the Company would have had an increase of 
$1.0
million in consumer loans for 1995.  Despite such nonrecurring effects, loans to
finance real estate remained at approximately 72.0 percent of total loans
outstanding.  A favorable interest rate climate coupled with declining home 
prices in
the Northeast were the primary reasons for the increased residential mortgage
lending.  The Company's interest rates on mortgage loans peaked at 9.5 percent 
during
the first quarter of 1995.  By the end of the fourth quarter, rates as low as 
7.0 percent were being offered on the same products.  

At December 31, 1995 and 1994, the Company had no loan concentrations exceeding 
10.0
percent of total loans.  The Company limits its exposure to concentrations of 
credit
risk by the nature of its lending activities as approximately 56.6 percent of 
total
loans outstanding were secured by residential properties.  The average mortgage
outstanding on a residential property was $32.9 at December 31, 1995.  In 
addition,
the loan portfolio did not consist of any form of credit involving 
highly-leveraged
transactions, defined as financing transactions that involve the buyout, 
acquisition
or recapitalization of an existing business and include credits extended to 
highly-leveraged industries, at December 31, 1995 or 1994.

In the ordinary course of business, the Company has entered into off-balance 
sheet
financial commitments consisting of commitments to extend credit, unused 
portions of
home equity and credit card lines, and commercial letters of credit.  The 
Company's
exposure to such commitments remained constant at $9.6 million at 
December 31, 1995
and 1994.  No provision for losses on these off-balance sheet commitments was 
deemed necessary for 1995 or 1994.

Management continually examines the maturity distribution and interest rate 
sensitivity of the loan portfolio in an attempt to limit interest rate risk.  At
December 31, 1995, management determined that approximately 41.1 percent of the
lending portfolio was scheduled to reprice within twelve months.  The 41.1 
percent
surpassed the 30.3 percent at December 31, 1994, as a result of an increased 
level of
short-term funding and a slight improvement towards achieving management's goal 
of generating variable-rate loans.

The Company does not sell loans secured by real estate.  Accordingly, 
SFAS No. 122,
"Accounting for Mortgage Servicing Rights," which was required to be applied
prospectively in fiscal years beginning after December 31, 1995, will not have 
any effect on future operating results or financial position.

ASSET QUALITY:

Banking industry credit problems were low during 1995 as evidenced by declines 
in the
levels of nonperforming loans and nonperforming assets of 7.8 percent and 15.2
percent, respectively.  Nonperforming assets, as a percentage of loans, net, was
1.6
percent at December 31, 1994, as compared to 1.2 percent at December 31, 1995.  
Net
charge-offs as a percentage of average loans outstanding increased slightly from
0.24
percent at year-end 1994 to 0.28 percent at year-end 1995.  Such increase was a
result of mounting credit card deficiency ratios.  Of the credit card loans 
extended in 1995, 4.3 percent were written-off as losses.  

Higher unemployment levels in the Company's market area as compared to 
Pennsylvania
and the United States resulted in asset quality deteriorations as indicated by 
1995
statistics.  The peer group's ratio of nonperforming assets as a percentage of 
loans,
net, increased from 1.51 percent at December 31, 1994, to 1.71 percent at 
December
31, 1995.  Moreover, the peer group reported deteriorating levels of net 
charge-offs
as a percentage of average loans outstanding from 0.27 percent in 1994 to 0.20
percent in 1995.  

Nonperforming assets, consisting of nonperforming loans and foreclosed assets,
totaled $4.2 million at December 31, 1995, compared to $3.3 million at 
December 31,
1994.  The Company experienced a net increase of $215 in foreclosed assets 
during
1995, as transfers of six loans from nonaccrual status totaling $452 were offset
by
the sale of six properties totaling $457, including net gains on such 
dispositions of
$36.  Also included in other real estate was a property originally purchased by 
the
Company to be used as a site for a new branch office.  As a result of the 
downturn in
the Company's financial position prior to management's corrective actions, 
management
decided to suspend its plan and transferred such property to other real estate 
at
$220, which equals 80.0 percent of its appraised value with the difference being
recorded in other losses.  The carrying values of all properties included in 
other
real estate were less than 80.0 percent of their collateral values at 
December 31, 1995.

Nonperforming loans, consisting of accruing loans past due 90 days or more and
impaired loans, increased $686 during 1995.  The increase in nonperforming loans
was
principally due to the $726 rise in accruing loans past due 90 days or more, 
offset
by a $40 decline in impaired loans.  The $40 change in impaired loans included 
gross
loans placed into such category of $1,081 and gross loans removed as a result of
charge-offs, transfers to other real estate, and principal repayments totaling 
$69,
$457 and $595, respectively.  Accruing loans past due 90 days or more increased 
from
$1.4 million at December 31, 1994, to $2.2 million at December 31, 1995.  The 
ratios
of nonperforming assets and loans past due 90 days or more as a percentage of 
total
loans, net, of 1.96 percent and 1.01 percent, respectively, at December 31, 
1995,
compared unfavorably to ratios of the peer group of 1.71 percent and 0.34 
percent,
respectively.  The ratio of assets classified by bank examiners in 1995 as a
percentage of Tier I capital declined 2.3 percent from the comparable ratio of 
1994.

The Company's recorded investment in impaired loans, consisting of nonaccrual 
and
restructured loans, was $1,593 and $1,633 at December 31, 1995 and 1994,
respectively.  The average recorded investment in impaired loans was $1,621 for 
1995
and $2,075 for 1994.  Impaired loans included a $262 restructured loan to one
commercial customer.  Such credit has been performing in accordance with its 
modified
terms since the initial restructuring of $315 in 1993 and the additional
restructuring of $64 of an existing loan to the same customer in 1995, with $38 
in
repayments received in 1995.  As a result of a 1994 reevaluation of the 
collateral
value of such loan, management feels confident that the credit is adequately 
secured
in order to eliminate any possibility of loss.  Interest income related to 
impaired
loans would have been $66 and $136 in 1995 and 1994, respectively, had such 
loans
been current and the terms not been modified.  Interest recognized on impaired 
loans
amounted to $92 in 1995 and $45 in 1994.  Included in these amounts is interest
recognized on a cash basis of $87 and $40, respectively.  Cash received on 
impaired
loans applied as a reduction of principal totaled $595 in 1995 and $183 in 1994.
There were no commitments to extend additional funds to such parties at 
December 31, 1995 or 1994.

The allowance for loan losses, against which loans are charged-off, was $3.9 
million
at December 31, 1995, representing 1.83 percent of loans, net, compared to $3.6
million and 1.84 percent at December 31, 1994.    Improved success rates in loan
collections coupled with monthly provisions to the allowance account provided 
the
greatest influence to the increased volume.  In comparison, the peer group 
reported
ratios of 1.43 percent and 1.46 percent at December 31, 1995 and 1994, 
respectively. 
Management and external examiners deemed the Company's allowance for loan losses
account to be adequate at December 31, 1995 and 1994.

Included in the allowance account were amounts for impaired loans of $1,331 in 
1995
and $1,397 in 1994 for which there are related allowances for loan losses of 
$614 and
$488, respectively.  The recorded investment, for which there was no related
allowance for loan losses, was $262 and $236 at December 31, 1995 and 1994,
respectively.  In 1995, activity in the allowance for loan losses account 
related to
impaired loans included a provision charged to operations of $4, losses charged 
to the allowance of $69 and recoveries of amounts charged-off of $191.

As a percentage of nonperforming loans, the allowance account covered 104.3 
percent
and 117.0 percent at year-end 1995 and 1994, respectively.  Relative to all
nonperforming assets, the allowance covered 93.3 percent at December 31, 1995, 
and 108.9 percent at December 31, 1994.  

Net charge-offs were $108 or 0.05 percent of average loans outstanding in 1995
compared to $393 or 0.21 percent in 1994.  The peer group reported net 
charge-offs as
a percentage of average loans outstanding of 0.20 percent and 0.27 percent in 
1995
and 1994, respectively.  Approximately 36.4 percent of the gross charge-off 
activity
in 1995 resulted from recognizing write-downs upon reappraisals of collateral
securing nonaccrual loans in accordance with maintaining appropriate 
loan-to-value ratios.  

DEPOSITS:

In 1995, banks throughout the nation experienced a rebirth in personal savings
patterns despite a decline in the interest rate environment.  Personal savings 
rates,
a measure of savings as a percentage of disposable after-tax income, rose to 4.4
percent in 1995 compared to 3.8 percent in 1994.  Demographics played an 
instrumental
role in this increase as the "baby boomer" generation approached its peak 
earning
years and began to increase savings in preparation for retirement.  Increased 
savings
levels cause consumer spending levels to slow at a greater rate but may aid in
controlling inflation and reducing interest rates.  Such reductions in interest 
rates
occur because there is more money being deposited into savings accounts, which 
leads
to banks having greater access to funds for lending, thus lowering borrowing 
costs
for consumers and businesses.  The falling interest rate environment caused a 
change
in the deposit structure of banks as customers chose shorter-term deposit 
products in
place of those products having longer maturities.  One-year certificates of 
deposit
had only a 76 basis point decrease compared to 1994 while the five-year product
declined by nearly double that amount, closing 1995 at 5.31 percent.  Overall, 
retail
time deposits grew over $100.0 billion during 1995, approximately twice the 
amount of
1994.  Aggregate deposit growth for United States financial institutions was 
6.6 percent in 1995.  

Total deposits averaged $317.9 million in 1995 as compared to $309.7 million in 
1994,
an increase of 2.6 percent.  The average growth experienced by Northeastern
Pennsylvania banks was 7.6 percent for the comparable period.  The majority of 
the
Company's deposit growth occurred during the second quarter as deposits grew at 
an
annualized rate of 12.6 percent.  Most of the second quarter growth was 
attributable
to an increase in retail time deposits as management aggressively competed for 
funds
in order to reduce its reliance on FHLB-Pgh short-term borrowings to fund normal
daily operations.  Once management resolved the Company's liquidity problem, it
became less competitive with respect to product pricing as evidenced by a
significantly slower growth rate in deposit volumes of 4.4 percent annualized 
during
the third quarter of 1995.  Management made further reductions in rates during 
the
fourth quarter of 1995 as the proceeds from the investment portfolio 
reconstitution
resulted in a liquidity surplus.  Such action, coupled with normal cyclical 
deposit
reductions caused by increased spending during the holiday season, resulted in 
the
Company reporting an annualized decline of 8.8 percent in deposits during the 
fourth
quarter of 1995.  The deposit composition changed as evidenced by a decline in 
the
average volume of transaction accounts as a percentage of average total deposits
from
46.5 percent to 42.0 percent in 1994 and 1995, respectively.  Such change is a
function of depositors sacrificing accessibility by transferring funds from 
lower-
yielding transaction accounts to higher-yielding time deposits.  Although 
beneficial
in funding loan demand, the growth of retail certificates of deposit increased 
the
Company's reliance on higher-costing funding sources.  Average time deposits
accounted for 51.4 percent of average assets during 1995 as compared to 36.9 
percent
for the peer group.  The Company also experienced a downward shift in its 
average
core deposits to average total deposits from 91.6 percent in 1994, to 90.8 
percent in
1995.  The Company's cost of deposits rose from 4.2 percent in 1994 to 4.8 
percent in
1995 as compared to the peer group's cost from 3.7 percent to 4.5 percent,
respectively.  The average rate on certificates of deposit less than $100 
increased
from 5.5 percent during the first quarter of 1995 to 5.9 percent during the 
fourth quarter of 1995.  

An integral part of achieving lower costs is the Company's ability to build its 
base
of noninterest-bearing deposits.  The Company's noninterest-bearing deposits 
grew
$1.9 million from $23.5 million at December 31, 1994, to $25.4 million at 
December
31, 1995.  Average volumes of noninterest-bearing deposits increased from $21.8
million to $24.1 million in 1994 and 1995, respectively, and comprised 6.7 
percent of
total average assets for 1995, compared to 6.2 percent for 1994.  Such 
improvement
resulted from building stronger relationships with local businesses and
municipalities.

Volatile deposits, time deposits in denominations of $100 or more, decreased 
from
$30.2 million at December 31, 1994, to $29.7 million at December 31, 1995, 
however
the Company exhibited a lesser reliance on such funding as compared to the peer 
group
during 1995.  Average volatile deposits, as a percentage of average assets, was 
8.2
percent in 1995 as compared to 8.7 percent for the peer group.  The average cost
of
such funds rose 14 basis points during 1995.  The slight decline in the volume 
of
Volatile deposits resulted from management choosing not to aggressively compete 
for
these deposits during 1995 due to their higher cost and the Company's improved
liquidity position.

As a result of the aforementioned actions taken to improve the liquidity posture
of
the Company, management effectively eliminated its reliance on short-term 
borrowings
to fund normal operations.  During the second quarter of 1995, the Company's 
reliance
on borrowed funds peaked at $34.6 million, funding 10.2 percent of earning 
assets. 
At December 31, 1995, aggregate borrowings amounted to $3.1 million or 0.9 
percent of
earning assets.  The Company's total borrowings averaged $14.7 million with a
weighted-average rate of 6.2 percent in 1995 as compared to $16.2 million at 4.9
percent in 1994.  The higher cost of such funding was a result of an increase in
the
cost of short-term borrowings from 4.9 percent in 1994 to 6.8 percent in 1995.  

At December 31, 1995, the Company had no short-term borrowings outstanding.  At
December 31, 1994, total short-term borrowings amounted to $16.0 million at 6.6
percent.  Short-term borrowings consisted of a line of credit and fixed-rate 
advances
with the FHLB-Pgh secured under terms of a blanket collateral agreement by a 
pledge
of FHLB-Pgh stock and certain other qualifying collateral, such as investment 
and
mortgage backed securities and mortgage loans.  The average daily balance of
aggregate short-term borrowings was $9.9 million in 1995 and $11.2 million in 
1994. 
The maximum amount of all short-term borrowings outstanding at any month-end was
$28.0 million and $19.4 million during 1995 and 1994, respectively.  The 
FHLB-Pgh
line of credit included in total short-term borrowings had an average daily 
balance
of $3.6 million and weighted-average rate of 6.2 percent during 1995.  The 
maximum
amount of such loan outstanding at any month-end was $17.6 million during 1995. 
Short-term borrowings during 1994 consisted entirely of the FHLB-Pgh line of 
credit.

In addition, the Company reduced its long-term debt by $2.0 million during 1995 
as a
5.7 percent fixed-rate advance was redeemed at the option of management.  No
prepayment fee was required upon redemption of such note as the interest rate on
the
advance approximated the prevailing interest rate at the date of the prepayment 
for advances of the same amount and terms.

INTEREST RATE SENSITIVITY:

Pursuant to the guidelines set forth in the MOU, management submitted to the FRB
a
written plan to limit and/or reduce the Company's overall exposure to interest 
rate
risk.  Such plan was required to consider the Company's earning capacity,
capitalization and funding profile.  According to the FRB, such plan provided a 
very
comprehensive assessment of the Company's overall exposure to interest rate 
risk,
including a summary of how changes in interest rates would impact the Company's
earnings performance, liquidity provisions and capital position.  Also addressed
were
actions taken to reduce the Company's overall exposure and management's plans to
further mitigate the Company's risks through the reconstitution of the available
for
sale portfolio and the restructuring of the Company's balance sheet.  Additional
strategies outlined in the plan, which the Company considers proprietary in 
nature,
included the disposition of securities having a high degree of market value and
liquidity risk, development and enhancement of monitoring and reporting systems 
to
demonstrate that the Company has an understanding and ability to manage risk, 
and the
development of investment policies and procedures and an asset/liability policy 
to control and monitor the Company's interest rate exposure.  

Management effectively lessened the Company's exposure to changing interest 
rates as
represented by an improvement in its ratio of rate sensitive assets to rate 
sensitive
liabilities repricing within one year from 0.84 at December 31, 1994, to 0.93 at
December 31, 1995.  Based upon the guidelines set forth in the Company's
asset/liability management policy, these ratios fell within the 0.7 and 1.3 
deemed by
management to be acceptable.  Such an improvement was directly attributable to 
the
Company's disposal of long-term investment securities.  The proceeds from such 
sales
were used to retire short-term debt and invest in short-term securities and 
loans. 
The Company's cumulative one-year gap position improved as a result of such 
action,
partially offset by an increase in the volume of retail time deposits repricing
within one year.  Such deposits amounted to $79.4 million at December 31, 1994, 
as compared to $90.3 million at December 31, 1995.

As a result of gap analysis failures to address dynamic changes in the balance 
sheet
composition or prevailing interest rates, the Company enhances its 
asset/liability
management by using a simulation model.  Such model creates pro forma net 
interest
income scenarios under various interest rate assumptions ("shocks").  Model 
results
from December 31, 1995, indicated  that a decline in net interest income of 5.4
percent was expected had a parallel and instantaneous rise in interest rates of 
100
basis points occurred.  Conversely, a similar decline in interest rates would 
have resulted in a 4.9 percent increase in net interest income.

LIQUIDITY:

In accordance with the requirement of the MOU, the Company developed a liquidity
plan
during the third quarter of 1995.   The mission of such plan is to ensure the 
Company
has the ability to generate cash at a reasonable cost in order to satisfy 
commitments
to borrowers as well as to meet the demands of depositors and debtholders.  The
Company's liquidity plan consists of an assessment of its current liquidity 
position
and includes a determination of appropriate standards for the volume, mix, price
and
maturity of loans, investments and deposits.  In addition, management ascertains
the
appropriate level of short-term assets required to fund normal day-to-day 
operations
and to ensure the Company's ability to meet off-balance sheet commitments and
unanticipated deposit withdrawals.  The plan developed control and monitoring
procedures for evaluating the Company's daily liquidity position.  Finally, the 
plan
introduced strategies to assure future liquidity.  Such strategies, which the 
Company
considers proprietary in nature, include the maintenance of a minimum net 
federal
funds sold cushion, a capital contingency strategy, and enhanced strategies on 
loan and deposit pricing.

The most significant action taken during 1995 in improving the liquidity 
position of
the Company occurred on September 30, 1995, when the Board of Directors voted
unanimously to reconstitute the entire investment portfolio.  Such action 
eliminated
the Company's reliance on short-term borrowings and certain securities having 
long
average lives that exhibited high degrees of market price volatility and those
securities that were exposed to extension risk.  The reconstituted portfolio 
consists
of securities that are of significantly higher quality with lower average lives 
and
that demonstrate more stable cash flows.  This type of portfolio will assure the
Company of a secondary source of liquidity without incurring severe losses in 
market
value during a rising interest rate environment.  Other actions taken in 1995 to
alleviate the Company's liquidity strains included the introduction of a program
to
aggressively compete for deposits during the second quarter of 1995 and the
disposition of its student loan portfolio.

As a result of such actions and the institution of the liquidity plan, the 
Company
showed a marked improvement in its liquidity position in 1995 compared to 1994. 
The
Company's temporary investments to volatile liabilities and its volatile 
liabilities
less temporary investments to total assets less temporary investments ratios 
improved
dramatically from 8.7 percent and 11.8 percent at December 31, 1994, 
respectively, to
118.9 percent and negative 1.8 percent at December 31, 1995, respectively.  
These
ratios were also well above the 110.9 percent and 0.7 percent ratios 
respectively, recorded by the peer group at year-end 1995.  

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 and due from banks and federal funds sold, 
increased
$15.2 million in 1995.  Net cash provided by operating activities totaled $4.6
million and resulted primarily from net income adjusted for deferred income 
taxes and securities losses.

Net cash provided by investing activities of $28.1 million was the major 
component of
the net increase in cash and cash equivalents.  The major component of the 
inflow
from investing activities was investment sales and repayments in excess of 
investment
purchases, partially offset by the net increase in lending activities.  The 
$47.7
million in net cash provided through security activities resulted primarily from
receiving proceeds from sales of available for sale investment securities of 
$87.1
million.  Such sales were in line with the Company's efforts to reconstitute the
portfolio to mitigate risk through higher-quality investments with shorter 
average
lives and more stable cash flows.  The $25.4 million net outflow from lending
activities consisted almost entirely of short-term loans issued to various banks
during the fourth quarter of 1995.  

Net cash used in financing activities totaled $17.5 million in 1995, principally
as a
result of the Company reducing its short-term borrowings by $16.0 million for 
the
year as well as paying off a $2.0 million long-term note in the fourth quarter.
Partially offsetting these decreases was an increase in deposits of $1.0 
million. 

CAPITAL ADEQUACY:

Stockholders' equity improved $5.2 million during 1995 principally due to the
reversal in the Company's unrealized holding adjustment.  The Company reported a
net
unrealized holding loss of $4.7 million at December 31, 1994, and a net 
unrealized
holding gain of $780 at December 31, 1995.  The implementation of the 
reconstitution
plan during 1995 limited the Company's exposure to interest rate risk through
improvements in the quality, composition and structure of the investment 
portfolio. 
Such improved risk position made the Company less susceptible to market 
depreciation
on available for sale securities resulting from rising interest rates.

In accordance with the MOU, which became effective May 24, 1995, and was 
terminated
on February 16, 1996, the Company was required to maintain a Tier I Leverage 
ratio of
no less than 5.0 percent after adjusting for unrealized holding losses, net of 
income
taxes, in securities classified as available for sale and those high-risk 
securities
and structured notes classified as held to maturity.  At December 31, 1995, the
Company classified all securities as available for sale, which had an unrealized
holding gain, net of income taxes, of $780.  At December 31, 1994, the Company
exceeded all requirements of the well-capitalized regulatory classification that
include a total risk-based ratio of at least 10.0 percent, a Tier I ratio of at 
least
6.0 percent, and a Leverage ratio of at least 5.0 percent.  Although the Company
exceeded the required ratio levels to be considered well-capitalized at 
December 31,
1995, such designation could not be given as a result of the MOU provision 
requiring
it to meet and maintain the specified capital level.  Subsequent to the 
termination date of the MOU, the Company regained its well-capitalized status.

In accordance with the MOU, the Company submitted a written plan to maintain an
adequate capital position acceptable to the FRB, taking into account the risk
inherent in the Company's securities portfolio.  The plan addressed: (I) the 
current
and future capital requirements of the Company, including the maintenance of 
capital
ratios well in excess of minimum regulatory guidelines; (II) the market value of
the
Company's securities and the resulting effect on its capital; (III) the 
maintenance
of a Tier I Leverage ratio of no less than 5.0 percent after adjusting for 
market
depreciation, net of applicable taxes, in securities classified as available for
sale
and those high-risk securities and structured notes classified as held to 
maturity;
(IV) any planned growth in the Company's assets; (V) the Company's anticipated 
level
of net earnings, taking into account the projected asset/liability position and
exposure to changes in market interest rates; and (VI) the source and timing of
additional funds to fulfill the future capital requirement set forth in the MOU.
The
submitted plan covered the period from July 1, 1995, to June 30, 1998, taking 
into
account the market value of the Company's securities and the resulting effect on
capital position under four different interest rate scenarios.  

The Company's dividends declared increased from $455 to $462 for the years of 
1994
and 1995, respectively.  The capital appreciation of the Company's common stock
amounted to 5.0 percent for the year ended December 31, 1995.  
REVIEW OF FINANCIAL PERFORMANCE:

The nation's top fifty commercial banks posted a $32.1 billion profit for 1995, 
a 9.0
percent increase over the 1994 level.  Higher noninterest income and lower
noninterest expenses were the major components in improved earnings partially 
offset
by a tightening of the net interest margin.  Noninterest income levels, 
excluding
securities transactions and nonrecurring income, increased 11.0 percent over 
1994
recorded levels while noninterest expenses were confined to a 5.0 percent rise. 
The
net interest margin of such banks narrowed from 4.1 percent in 1994 to 3.9 
percent in 1995.

Over $42.0 billion in bank mergers occurred in 1995, nearly four times the 
activity
of 1994.  An easing of interstate banking laws, in response to the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994, made bank mergers a 
more
attractive option.  In addition, consolidations and restructuring within the 
industry
continued during 1995 as institutions anticipate interstate branching.  Such
activities influence earnings levels of the banking industry in several ways. 
Mergers often lead to higher service charges as larger banks tend to charge 
higher
fees and usually require larger minimum balances than smaller banks.  Over the 
past
two years, large bank service charges have risen at twice the inflation rate.  
Also,
services that were free to customers in the past now carry charges.  Mergers 
also
reduce noninterest expenses for banks.  Expense benefits associated with bank 
mergers
are cost reductions from the consolidation of offices, elimination of branches, 
and
personnel downsizing.  On average, banks that made acquisitions during 1995 
reduced
the expenses of the acquired bank by 38.0 percent.  Noninterest expenses were 
also
aided by the August 8, 1995, decision by the FDIC to reduce insurance premiums 
paid
by banks.  This decision provided savings of approximately $4.0 billion for the
banking industry.  

The beneficial effects from the improvements in noninterest income and expenses 
were
partially offset by tighter net interest margins.  As market interest rates fell
in
1995, the importance of deposits as a funding source and the value of customer
relationships, as openings to offer other products, kept institutions from 
lowering rates to the same degree as experienced in general market rates.  

The Company's reported net income for the year ended December 31, 1995, was $200
compared to $3,325 in 1994.  On a per share basis, earnings were $0.09 for the 
year,
compared with $1.51 reported in 1994.  The material reduction in net income was 
a
direct result of the Company's recognition of nonrecurring losses from 
restructuring
the investment portfolio and nonrecurring costs associated with its compliance 
to the
MOU.  Net income, excluding such one-time adjustments, would have totaled $3.4
million in 1995 similar to the comparable net income of 1994.  The return on 
average
assets and return on average stockholders' equity were 0.06 percent and 0.77 
percent
in 1995, respectively, as compared to 0.95 percent and 14.26 percent in 1994,
respectively.  Adjusting for the aforementioned nonrecurring charges, return on
average assets and return on average equity would have been 0.95 percent and 
13.17
percent, respectively, in 1995.  The comparable ratios of the peer group were 
1.11 percent and 11.18 percent in 1995, respectively.

Net interest income on a tax equivalent basis declined from $12,760 in 1994 to
$12,215 in 1995.  Such reduction was a result of the Company's cost of funds
increasing at a greater rate than its yield on earning assets.  Interest income 
on a
tax equivalent basis increased $1,507 from $25,702 in 1994 to $27,209 in 1995. 
Interest expense increased $2,052 from $12,942 in 1994 to $14,994 in 1995.  

As a result of being adequately reserved after consideration of the Company's 
loan
volume and asset quality, management reduced its monthly provision charged to
operations during 1995.  Accordingly, the loan loss provision declined from $800
in 1994 to $435 in 1995.
 
Noninterest income recorded a loss of $3,196 in 1995, a decrease of $4,201  
compared
to 1994.  The majority of such decrease was attributable to reporting investment
securities losses of $4,393 in 1995 as opposed to net investment and trading
securities losses of $161 in 1994.  Revenue from service charges, fees and
commissions increased $31 from 1994 to 1995.

Noninterest expense totaled $8,194 in 1995, an increase of $245, or 3.1 percent,
compared to 1994.  During 1995, the rise in salaries and employee benefits 
expense
and other expenses of $246 and $26, respectively, was partially offset by a 
decline
in net occupancy and equipment expense of $27.  The unfavorable variance of $245
includes nonrecurring expenses of approximately $500 associated with compliance 
to the MOU.

NET INTEREST INCOME:

Net interest income on a tax equivalent basis decreased to $12,215 in 1995, a
reduction of $545 or 4.3 percent, compared to 1994.  Such reduction resulted 
from a
decline in the Company's net interest margin partially offset by the growth in
average earning assets exceeding that of interest-bearing liabilities.  

Changes in the volumes of average earning assets in excess of average interest-
bearing liabilities resulted in a positive influence of $50 on net interest 
income. 
Total average earning assets increased $4.9 million to $351.2 million in 1995 
while
average interest-bearing liabilities increased $4.4 million to $308.5 million in
1995.  The Company experienced a 5.7 percent increase in its volume of average 
loans
from $189.0 million to $199.7 million in 1994 and 1995, respectively.  Such 
increase
was responsible for $915 of the improvement in interest income as a result of 
volume
changes.  The other major contributor to the favorable rise in interest income 
was
the higher average volume of federal funds sold in 1995, which contributed $977 
to
the rise in interest income.  Average federal funds sold increased $16.8 million
during 1995 as management invested proceeds from the sales of securities into 
such
funds in response to a flattening yield curve.  The decision to reconstitute the
investment portfolio led to a $1,327 unfavorable volume variance in investments.
The
average volume of investments declined $22.5 million or 14.3 percent to $134.5
million during 1995.  The unfavorable volume variance of $508 in interest 
expense
partially offset the favorable volume variance of $558 in interest income.  
Increased
volumes of retail and commercial time deposits, partially offset by decreased 
savings
volumes, were the major contributors to such variance.  Average aggregate time
deposits grew from $165.6 million in 1994 to $184.5 million in 1995 as customers
sacrificed accessibility to obtain higher yields.

The Company's unfavorable rate variance of $595 in net interest income for the
comparable years of 1994 versus 1995 resulted from a decline in the Company's 
net
interest margin as earning assets yield rose at a slower pace than cost of 
funds. 
The Company's net interest margin decreased by 20 basis points from 3.68 percent
in
1994 to 3.48 percent in 1995 while its net interest spread fell 27 basis points 
from
3.16 percent to 2.89 percent for the same period.  Earning assets yield rose 
from
7.42 percent to 7.75 percent while funds cost rose from 4.26 percent to 4.86 
percent
for the comparable years of 1994 and 1995.  The cost of funds increase came in
response to the Company's aggressive retail time deposit product pricing in 
light of
prior liquidity strains.  Such pricing was responsible for $1,202 of the $1,544
negative rate variance in interest expense.  A $949 positive rate variance 
associated
with interest income partially offset the negative rate impact on interest 
expense. 
Such increase came primarily from the loan portfolio as it accounted for $654 of
the
increase.  Loan yields rose 33 basis points in 1995 from 8.48 percent to 8.81
percent.  

PROVISION FOR LOAN LOSSES:

Provisions for loan losses for the nation's top 50 banks increased 10.0 percent 
in
1995 to $7.8 billion.  Such increase came in response to a rise in net 
charge-offs
for the year of 13.0 percent to $8.6 billion, which pushed net charge-offs as a
percentage of average loans outstanding to 0.54 percent in 1995 from 0.53 
percent in
1994.  Even after taking higher provisions, net charge-offs still outdistanced 
the
provision for the year by $800.0 million, resulting in a 1.0 percent reduction 
in the allowance for loan losses account.  

Contrary to the provision stance taken by the banking industry, the Company 
reduced
its provision for loan losses by $365 to $435 in 1995 from the $800 taken in 
1994. 
As net charge-off levels rose nationwide, the Company experienced an improvement
in
its level.  Net charge-offs for the Company declined to $108 from $393 for the
comparable periods of 1995 and 1994.  

NONINTEREST INCOME:

The Company reported a loss of $3,196 in noninterest income for the year ended
December 31, 1995, as compared to income totaling $1,005 for the year ended 
December
31, 1994.  The $4,201 decline was primarily a result of reporting net losses on
investment securities of $4,393 in 1995 compared to net losses of $161 in 1994 
on
investment and trading account securities.  The divestiture of high-risk CMOs,
structured notes and other highly criticized investments provided the major 
component of the 1995 securities losses.  

An increased volume of service charges, fees and commissions partially offset 
the net
security losses incurred in 1995.  The $31 or 2.7 percent increase over the 
previous
year was principally due to fees recognized during the first six months of 1995 
from
forfeitures on certificates of deposit as customers took advantage of higher 
yields offered on longer-term instruments.

NONINTEREST EXPENSE:

Noninterest expense totaled $8,194 in 1995, an increase of $245, or 3.1 percent,
compared to 1994.  The Company had a net overhead expense to average assets 
ratio of
1.9 percent, an improvement over the 2.0 percent recorded in 1994.  In relation 
to
the peer group ratio of 2.8 percent, the Company continues to demonstrate a 
greater
efficiency level.  In addition, the Company's operating efficiency ratio showed 
an
increase from 59.6 percent at December 31, 1994, to 64.1 percent at December 31,
1995.  Reduced levels of net interest income, coupled with the increase in
noninterest expense, were responsible for the adverse change in such ratio.

Salaries and benefits composed 49.2 percent of noninterest expense and totaled 
$4,028
in 1995, representing a $246 or a 6.5 percent increase compared to 1994.  The
majority of such increase was attributable to the Company's Board of Directors
exercising its termination option of the former President and Chief Executive
Officer's written employment agreement during the second quarter of 1995.  The 
one-time cost of exercising such agreement approximated $207. 

Net occupancy and equipment expense amounted to $1,222, a decrease of $27, or 
2.2
percent, compared to 1994.  The reduction is a reflection of lower costs 
associated
with the maintenance of bank facilities partially offset by greater costs 
related to the maintenance of equipment used in normal bank operations.  

Other expenses totaled $2,944 in 1995, an increase of $26 compared to the 1994 
level. 
Such increase came as a direct result of the Company's compliance with the MOU. 
The
aggregate costs associated with compliance approximated $500 for the year ended
December 31, 1995.  Had the Company not been under this written directive, other
expenses would have declined $474 for 1995 as compared to 1994.  

Partially offsetting the increase in other expenses associated with the MOU was 
a
reduction in the Company's FDIC insurance expense.  Effective August 8, 1995, 
the
FDIC's Board of Directors put its proposal to lower bank deposit insurance 
premiums
into effect.  Such reduction came in response to the recapitalization of the 
Bank
Insurance Fund during the second quarter of 1995.  Under the plan, rates ranging
from
4 to 31 cents per every one hundred dollars of insured deposits were assessed
dependent upon risk characteristics of each institution.  Based on the 
evaluation of
its risk characteristics, the Company's insurance rate was reassessed from 26 
cents
per every one hundred dollars of insured deposits to 7 cents per every one 
hundred
dollars of insured deposits.  This reevaluation led to a $261 reduction in the
Company's FDIC insurance premiums for 1995.  

INCOME TAXES:

As a result of the loss before income taxes, the Company reported a tax benefit 
for
1995.  The tax benefit was 156.8 percent of the loss before tax and above the
marginal tax rate due to the effect of tax-exempt income.  The Company was able 
to
utilize the tax benefit because of taxable income in previous years and 
expectations
of the future realization of the benefit.  During 1994, the Company's effective 
tax rate was 22.8 percent.  
As required by SFAS No. 109, "Accounting for Income Taxes," the Company has
determined that it was not required to establish a valuation reserve for the 
deferred
tax assets in 1995 or 1994 since it is more likely than not that the net 
deferred tax
assets could be principally realized through carryback to taxable income in 
prior
years and by future reversals of existing taxable temporary differences or, to a
lesser extent, through future taxable income.  


COMM BANCORP, INC.
DIRECTORS AND OFFICERS                                                   

BOARD OF DIRECTORS        
COMM BANCORP, INC.

DAVID L. BAKER
PRESIDENT AND 
CHIEF EXECUTIVE OFFICER
Comm Bancorp, Inc. and
Community Bank and Trust Company

DONALD R. EDWARDS, SR.
Owner, Mountain View Inn

WILLIAM F. FARBER, SR.
CHAIRMAN OF THE BOARD
President, Farber's Restaurants

JUDD B. FITZE
Attorney
Farr, Davis & Fitze

JOHN P. KAMEEN
SECRETARY
Publisher, Forest City News

WILLIAM B. LOPATOFSKY
Retired

J. ROBERT MCDONNELL
VICE PRESIDENT
Owner, McDonnell's Restaurant

JOSEPH P. MOORE, JR.
President, Elk Mountain Ski Resort, Inc.

ERIC STEPHENS
Auto Dealer, 
H.L. Stephens and Son

         
CORPORATE OFFICERS
COMM BANCORP, INC.

DAVID L. BAKER
President and 
Chief Executive Officer

THOMAS M. CHESNICK
Assistant Secretary

WILLIAM F. FARBER, SR.
Chairman of the Board

JOHN P. KAMEEN
Secretary

J. ROBERT McDONNELL
Vice President

SCOTT A. SEASOCK
Senior Vice President
Chief Financial Officer

THOMAS E. SHERIDAN
Senior Vice President
Chief Operations Officer<PAGE>

BOARD OF DIRECTORS
COMMUNITY BANK AND TRUST COMPANY

ROBERT BABCOCK
Retired

DAVID L. BAKER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Comm Bancorp, Inc. and 
Community Bank and Trust Company

DONALD R. EDWARDS, SR.
Owner, Mountain View Inn

WILLIAM F. FARBER, SR.
CHAIRMAN OF THE BOARD
President, Farber's Restaurants

JUDD B. FITZE
Attorney
Farr, Davis & Fitze

MICHAEL T. GOSKOWSKI
SECRETARY
Owner, Kartri Sales Mfg.

ALLAN A. HORNBECK
President, Allan Hornbeck Chevrolet

JOHN P. KAMEEN
Publisher, Forest City News

ERWIN KOST
Owner, Kost Tire and Muffler

WILLIAM B. LOPATOFSKY
Retired

J. ROBERT McDONNELL
VICE PRESIDENT
Owner, McDonnell's Restaurant

JOSEPH P. MOORE, JR.
President, Elk Mountain Ski Resort, Inc.

THEODORE POROSKY
Owner, Porosky Lumber

ROBERT T. SEAMANS
Owner, Seamans Airport

ERIC STEPHENS
Auto Dealer,
H.L. Stephens and Son
















COMM BANCORP, INC.
DIRECTORS AND OFFICERS (CONTINUED)                                       

ADVISORY BOARDS
COMMUNITY BANK AND TRUST COMPANY

CARBONDALE OFFICE

JOSEPH J. BRENNAN
Brennan and Brennan Funeral Home

JOHN J. CERRA
Attorney
Walsh and Cerra

ROBERT W. FARBER
R.W.F. Computer Consulting Co.

HENRY E. DEECKE
Henry E. Deecke Real Estate

HAROLD McGOVERN
McGovern Insurance Agency
Gantar Insurance


CLIFFORD OFFICE

DONALD R. EDWARDS, SR.
Owner, Mountain View Inn

WILLIAM F. FARBER, JR.
Manager, Farber's Restaurants

THOMAS J. LOPATOFSKY, JR.
Lenox Propane

JOSEPH T. McGRAW
Attorney
McGraw and McGraw

ERIC STEPHENS
Auto Dealer, 
H.L. Stephens and Son


EATON TOWNSHIP,
LAKE WINOLA AND
TUNKHANNOCK OFFICES

ROD AZAR
Azar Insurance Agency

JUDD B. FITZE
Attorney
Farr, Davis & Fitze

DOUG GAY
Gay's True Value

THOMAS KUKUCHKA
Sheldon-Kukuchka Funeral Home

GLEN LAYAOU
Eaton Hills Development Corp.
Layaou Construction Co.

HOWARD TRAUGER
Trauger's, Inc.






MONTROSE OFFICE

ROBERT BABCOCK
Retired

EDGAR B. BAKER
Consultant

DUANE JERAULD
Montrose Beverage

TOM KERR
Tom Kerr Chevrolet

ROBERT LEE
Lee's Furniture Store

DONNA WILLIAMS
Livestock Dealer/Farmer


NICHOLSON OFFICE

RICHARD LOCHEN
Lochen's Market

MARK NOVITCH
Kram Trucking

DAVID SCHMIDT, JR.
Schmidt's Valley Farm Market

CHARLES SPENCER
Retired 


SIMPSON OFFICE

WILLIAM A. KERL
Kerl's Coal and Oil

FRANCIS LAPERA
Lapera Oil Company

SUSAN MANCUSO
Accountant
Mancuso and Mancuso

GERALD SALKO, D.D.S.
Dentist























COMM BANCORP, INC.
DIRECTORS AND OFFICERS (CONTINUED)                                      

OFFICERS
COMMUNITY BANK AND TRUST COMPANY

DEBORAH AYERS
Acting Tunkhannock
Branch Manager

DAVID L. BAKER 
President and 
Chief Executive Officer                                  

WILLIAM R. BOYLE
Vice President
Branch Administrator     
Carbondale Branch Manager

MARK E. CATERSON
Vice President
Senior Trust Officer

THOMAS M. CHESNICK
Vice President, Cashier
Forest City Branch Manager

JOHN B. ERRICO
Comptroller

CRAIG FISCHER
Lakewood Branch Manager

VALERIE HITE
Simpson Branch Manager

RANDOLPH LaCROIX
Clifford Branch Manager

PAMELA S. MAGNOTTI
Compliance Officer

JOELYN MARK
Vice President
Marketing

MARY ANN MUSHO
Assistant Cashier
Human Resource Officer 

IRENE Y. O'MALLEY
Senior Loan Administrator

JANICE NESKY
Nicholson Branch Manager

M. EVELYN PANTZAR
Vice President
Internal Auditor

RUBY SANDS
Lake Winola Branch Manager

SCOTT A. SEASOCK
Senior Vice President
Chief Financial Officer

THOMAS W. SHEPPARD
Vice President
Senior Loan Officer







THOMAS E. SHERIDAN
Senior Vice President
Chief Operations Officer

RONALD K. SMITH
Vice President
Montrose Branch Manager

TAMI L. SNYDER
Vice President
Information Services

STEVEN URSICH
Carbondale Assistant Branch Manager

GEORGE WEISS
Eaton Township Branch Manager























































COMM BANCORP, INC.
GLOSSARY OF TERMS                                                        

BASIS POINT - Unit of measure equal to one hundredth of one percent.

BOOK VALUE PER COMMON SHARE - Value of one share of common stock calculated by
dividing stockholders' equity by the total number of common shares outstanding.

COMMON SHARES OUTSTANDING - The total number of common shares issued less any 
shares held in the treasury.

CORE DEPOSITS - Total deposits excluding time deposits of $100,000 or more.

EARNING ASSETS - Assets that generate interest income and/or yield-related fee
income.  Such assets include loans, securities and short-term investments.

EARNINGS PER SHARE - Net income divided by the average number of common shares
outstanding.

FULLY TAX EQUIVALENT - An adjustment made for tax-exempt instruments equal to 
the
amount of taxes that would have been paid had these instruments been taxable at 
the statutory rate of 34.0 percent.

INTEREST-BEARING LIABILITIES - Liabilities on which interest is paid for the use
of funds.  Such liabilities include interest checking, savings, time deposit 
accounts and borrowed funds.

INTEREST SENSITIVE ASSETS/LIABILITIES - Interest-bearing assets and liabilities
adjustable within a specified period due to maturity or contractual agreements. 
These agreements typically relate stated interest rates to the prime rate.

INTEREST SENSITIVITY - A measurement of the effect on net interest income due to
changes in interest rates.

LEVERAGE RATIO - Determined by dividing total stockholders' equity less 
intangible
assets and unrealized holding gains and losses by current average tangible 
assets.

LIQUIDITY - A corporation's ability to meet cash requirements.  Deposits, 
borrowings,
capital and/or asset conversions are all items used for the raising of cash.

MORTGAGE BACKED SECURITIES - Securities collateralized by pools of residential
mortgages having cash flows serviced by repayment activity on the underlying
mortgages.

NET CHARGE-OFFS - The amount of loans charged against the allowance for loan 
loss account less any recoveries on loans previously charged-off.

COMM BANCORP, INC.
GLOSSARY OF TERMS (CONTINUED)                                            

NET INTEREST INCOME - Income earned on earning assets less interest expense paid
on interest-bearing liabilities.

NET INTEREST MARGIN - Net interest income on a fully tax equivalent basis 
divided by total average earning assets.

NET INTEREST SPREAD - Difference between the average tax equivalent rate 
received on
earning assets and the average rate paid on interest-bearing liabilities.

NONACCRUAL LOANS - Loans that have had interest accruals interrupted due to the
financial difficulties of the borrower.

NONPERFORMING ASSETS - Assets consisting of nonperforming loans and foreclosed
assets.  Nonperforming loans are defined as accruing loans past due 90 days or 
more,
loans on which interest is currently not being accrued or loans on which the 
rate or
term has been altered due to the deteriorated financial condition of the 
borrower.

OVERHEAD RATIO - Used as a measurement of the relationship between operating 
expenses
and revenues.  It is total noninterest expenses divided by the total of tax
equivalent net interest income and noninterest income.

PAST DUE LOANS - Loans that are still accruing interest but are past due 90 days
or more with respect to the collection of principal or interest.

PROVISION FOR LOAN LOSSES - A charge against income made to estimate the expense
related to management's estimated losses with respect to the loan portfolio.

RESERVE FOR LOAN LOSSES - A valuation allowance charged against the loan 
portfolio
representing the amount considered by management to be adequate to cover 
estimated losses.

RETURN ON AVERAGE TOTAL ASSETS - Net income divided by the average total assets 
for the period.

RETURN ON AVERAGE TOTAL EQUITY - Net income divided by the average total
stockholders' equity for the period.

RISK-ADJUSTED ASSETS - Assets and credit-equivalent amounts of off-balance sheet
items that have been adjusted according to regulatory guidelines into their 
assigned risk weights.

RISK-BASED CAPITAL RATIOS - Guidelines set forth by regulatory agencies as to 
the
measurement of capital and how total assets and certain off-balance sheet items 
are to be risk-adjusted to reflect levels of credit risk.



COMM BANCORP, INC.
GLOSSARY OF TERMS (CONTINUED)                                            

SENSITIVITY GAP - The difference between rate sensitive assets and rate 
sensitive
liabilities for a designated period.  Assets exceeding liabilities reflect a 
positive
or net asset position.  Liabilities exceeding assets reflect a negative or a net
liability position.

STOCKHOLDERS' EQUITY - Total investment by holders of common stock plus retained
earnings.

STOCKHOLDERS' EQUITY PER COMMON SHARE - The value of a common share of stock
calculated by dividing total common stockholders' equity by the total number of
outstanding common shares at the end of the period.

TIER I RISK-BASED CAPITAL - Stockholders' equity less goodwill and any other
intangible items.

TOTAL RISK-BASED CAPITAL - The sum of Tier I capital and the allowance for loan
losses (restricted by certain regulatory limitations).




COMM BANCORP, INC.
STOCKHOLDER INFORMATION                                                  

CORPORATE HEADQUARTERS:
521 Main Street 
Forest City, PA  18421

LEGAL COUNSEL:
Schnader Harrison Segal & Lewis
Suite 700              
30 North Third Street
Harrisburg, PA  17101-1713

INDEPENDENT AUDITORS:
Kronick Kalada Berdy & Co., P.C.
190 Lathrop Street
Kingston, PA  18704

TRANSFER AGENT:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY  10005

MARKET MAKERS:
Robert W. Baird & Co., Inc.
777 E. Wisconsin Avenue
Milwaukee, WI  53202-5391
414-765-3500

Ryan, Beck & Co.
80 Main Street
West Orange, NJ  07052
201-325-3000

Hopper Soliday & Co., Inc.
1703 Oregon Pike
Lancaster, PA  17604-4548
717-560-3015

SEC REPORTS AND ADDITIONAL INFORMATION:
Copies of Comm Bancorp Inc.'s Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q
to the Securities and Exchange Commission or
additional financial information concerning
Comm Bancorp, Inc. may be obtained without
charge by writing to Scott A. Seasock, Chief
Financial Officer, at corporate headquarters.

COMMUNITY REINVESTMENT:
Copies of Community Bank and Trust Company's
community reinvestment statement may be
obtained without charge by writing to Pamela
Magnotti, Compliance Officer, at corporate
headquarters.

   
COMMON STOCK MARKET INFORMATION:
Shares of Comm Bancorp, Inc. common stock
began listing on the National Association of
Securities Dealers Automated Quotation
("NASDAQ") National Market Tier of the NASDAQ
Stock Market as CommBcp under the Symbol
"CCBP" on June 17, 1996.  Prior to June 17,
1996, the Company's common stock was quoted on
the Over-the-Counter Electronic Bulletin Board
Interdealer System.  As of March 1, 1997,
three firms were listed on the NASDAQ system
as market makers for the Company's common
stock.  The following table sets forth: (1)
the high and low closing sale prices for a
share of the Company's common stock during the
periods indicated and (2) dividends on a share
of the common stock with respect to each
dividend declared since January 1, 1995. 
Retroactive effect is given in sale price and
dividend information for a three-for-one stock
split effectuated April 1, 1996.
<TABLE>
<CAPTION>


                                      CASH DIVIDENDS
1996:              HIGH       LOW        DECLARED    
                 ------    ------     --------------
<S>              <C>       <C>                  <C>
First Quarter... $14.00    $14.00               $.05
Second Quarter..  23.75     14.00                .06
Third Quarter...  25.50     21.50                .06
Fourth Quarter.. $27.50    $25.00               $.11

1995:
First Quarter... $13.38    $13.38
Second Quarter..  13.38     13.38               
Third Quarter...  13.38     13.38               $.08
Fourth Quarter.. $14.00    $13.38               $.13

</TABLE>
Holders of Comm Bancorp, Inc. common stock are
entitled to receive dividends when declared by
the Board of Directors out of funds legally
available.  Comm Bancorp, Inc. has paid cash
dividends since its formation as a bank
holding company in 1983.  It is the present
intention of the Board of Directors to
continue this dividend payment policy;
however, further dividends must necessarily
depend upon earnings, financial condition,
appropriate legal restrictions and other
factors relevant at the time the Board of
Directors of Comm Bancorp, Inc. considers
payment of dividends.  For information with
respect to dividend restrictions of Comm
Bancorp, Inc., refer to Note 15 of the Notes
to Consolidated Financial Statements.