EXHIBIT 13


                            ANNUAL REPORT TO STOCKHOLDERS
                       FOR FISCAL YEAR ENDED DECEMBER 31, 1995

 
          







     





































Comm Bancorp, Inc.
CONTENTS                                                                   
     INTRODUCTION                               MANAGEMENT'S DISCUSSION AND 
                                                ANALYSIS 1994 VERSUS 1993
  54  Consolidated Financial Highlights                  
                                            141 Overview         
  55  Dedication
                                            142 Review of Financial Position 
  56  President's Message to Stockholders                
                                            149 Review of Financial Performance
  58  Community Perspectives                                                 
                                                        
  61  Consolidated Selected Financial Data                   
                                                DIRECTORS AND OFFICERS 
                 
                                             154 Board of Directors and 
                                                 Corporate Officers         
      MANAGEMENT'S DISCUSSION AND ANALYSIS                                  
                                             155 Advisory Boards   
  62  Overview                                                              
                                             156 Officers       
  65  Review of Financial Position                               
                                             157 Glossary of Terms         
  98  Review of Financial Performance             
                                             160 Stockholder Information
  
                                                        
     CONSOLIDATED FINANCIAL STATEMENTS                          
                                                                 
 109  Report of Kronick Kalada Berdy & Company 
      Independent Auditors  
                                                                 
 110  Consolidated Statements of Income                          
                                                                 
 111  Consolidated Balance Sheets                                 
                                                                 
 112  Consolidated Statements of Changes in 
      Stockholders' Equity 
                                                                 
 113  Consolidated Statements of Cash Flows                      
                 

                                                
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 
                                                                 
 114  Summary of significant accounting policies                 
                                                                 
 120  Cash and cash equivalents                                  
                                                                 
 121  Investment securities                                      
                                                                 
 125  Loans and allowance for loan losses                        
                                                                 
 128  Premises and equipment, net                                
                                                                 
 128  Other assets                                               
                                                                 
 129  Deposits                                                   
                                                                 
 129  Short-term borrowings                                       
                                                                 
 130  Long-term debt                                             
                                                                 
 131  Employee benefit plans                                      
                                                                 
 131  Commitments, concentrations and contingent 
      liabilities   
                                                                 
 133  Fair value of financial instruments                        
                                                                 
 135  Income taxes                                               
                                                                 
 137  Parent Company financial statements                        
                                                                
 138  Regulatory matters                                         





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

YEAR ENDED DECEMBER 31                                        1995      1994      1993
______________________________________________________________________________________
<S>                                                       <C>       <C>       <C>
FINANCIAL POSITION:
Assets................................................... $350,948  $362,463  $339,007
Investment securities....................................  108,706   152,566   145,400
Net loans................................................  209,932   190,909   173,313
Deposits.................................................  317,099   316,169   297,235
Stockholders' equity..................................... $ 27,895  $ 22,689  $ 24,507

FINANCIAL PERFORMANCE:
Interest income.......................................... $ 26,467  $ 24,991  $ 24,094
Interest expense.........................................   14,994    12,942    12,000
Net interest income......................................   11,473    12,049    12,094
Net income...............................................      200     3,325     4,150
Cash dividends declared.................................. $    462  $    455  $    444

FINANCIAL RATIOS:
Return on average total assets...........................     0.06%     0.95%     1.30%
Return on average stockholders' equity...................     0.77     14.26     17.91
Tier I capital ratio.....................................    14.23     13.82     13.52
Total capital ratio......................................    15.49     15.68     15.49
Leverage ratio...........................................     6.95      7.13      6.84
Allowance for loan losses to loans, net..................     1.83%     1.84%     1.80%

PER SHARE DATA:
Net income............................................... $   0.27  $   4.53  $   5.66
Cash dividends declared..................................     0.63      0.62      0.61
Stockholders' equity..................................... $  38.04  $  30.94  $  33.42

</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.
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
DEDICATION                                                               

" THE FINAL TEST OF A LEADER IS THAT HE LEAVES BEHIND HIM IN OTHER MEN
THE CONVICTION AND THE WILL TO CARRY ON"
                                    - Walter Lippmann


It is with great appreciation and sadness that the many customers,
employees and stockholders bid farewell to Allan A. Hornbeck and Michael
T. Goskowski upon their retirement from the Board of Directors of Comm
Bancorp, Inc.

Albert Einstein once advised, "Try not to become a man of success, but
rather a man of value," Allan and Mike have managed to become both.

Throughout his life, Allan Hornbeck has worked diligently and graciously. 
He and wife, Velma, are the parents of four children and eleven
grandchildren.  He is the owner of Allan Hornbeck Chevrolet, the second
oldest Chevrolet dealership in the United States owned and operated by
the family who founded it.  As a distinguished contributor to the
community, Allan has set a standard of service excellence that is such a
vital part of Comm Bancorp, Inc. and Community Bank and Trust Company.

Mike Goskowski, secretary of Comm Bancorp, Inc., is president and founder
of Kartri Sales, Inc.  He and wife, Josephine, are the parents of two
daughters and one granddaughter.  He oversees the daily operation of M.G.
Manufacturing Co., Inc., and Mi-Jo Enterprises, Inc.  His companies
manufacture shower curtains as well as accessories such as robes,
bedspreads, slippers and embroidery products as well as screen printed
items.  

Mike has been very active in our community and has served on several
community boards.  He is chairman of the Carbondale Area Advisory
Council, director and past president of Marian Community Hospital
Foundation, director and past vice-president of Northeastern Pennsylvania
Boy Scouts of America, director and past president of Tri-County Human
Services, a former director/trustee of the St. Joseph's Hospital
executive board and holds memberships in several community organizations.

The directors, officers and employees of Comm Bancorp, Inc. and Community
Bank and Trust company would like to extend our best wishes and heartfelt
thanks to Allan and Mike for their efforts.  We wish them continued
success and good health in the years to come.










PRESIDENT'S MESSAGE TO STOCKHOLDERS                                      

This past year has been one of transition and challenge for Comm Bancorp,
Inc. and its subsidiary, Community Bank and Trust Company (collectively,
the "Company").  Management, consisting of the Board of Directors and
executive officers had to make many difficult but necessary decisions
during 1995.

As you are aware on May 24 1995, the Board of Directors of the Company
entered into a Memorandum of Understanding ("MOU") with the Federal
Reserve Bank of Philadelphia ("FRB") to reach a common goal of restoring
and maintaining financial security for the Company.  To accomplish this
it was necessary to radically change direction from recent years. 
Restructuring the investment portfolio was our first priority.  This
task, completed during the fourth quarter of 1995, significantly reduced
interest rate risk while eliminating regulatory criticism.  However, the
action resulted in the Company reporting security losses of $4.4 million. 
Action taken in 1995 involving the investment portfolio was the major
factor in the restoration of the Company's financial condition.

Due to the sale of securities and the resulting costs of the MOU,
earnings per share dropped from $4.53 in 1994 to $.27 in 1995.  In a
positive light, stockholders equity influenced by the recovery of the
unrealized loss on investments increased $5.2 million ending the year at
$27.9 million.  Book value of your stock increased $7.10 to $38.04 in
1995.

In addition, Management felt that the Company needed to enhance its
presence in the market areas therefore, marketing efforts intensified. 
These efforts emphasized our desire to return to a "Traditional Community
Bank".  The Company's loans grew approximately $19.3 million, or 10.0
percent.  Residential mortgages for the communities we serve increased
7.6 percent in 1995.  Average deposits of our customers grew $8.2 million
to $317.9 million during 1995.  Management took a less competitive stance
in deposit pricing during the latter part of 1995 as a result of our
improved liquidity position.  Management was able to reduce total
borrowings to $3.0 million at December 31, 1995, down significantly from
its peak of $34.6 million during the second quarter of 1995.

I am pleased to inform you that we will be implementing a document
imaging system in 1996.  This state of the art technology will allow us
to better serve our customers and will enhance profitability by reducing
costs in many areas.  Few other banks are currently utilizing this
technology.

Please note, this annual statement is dedicated to Mr. Allan A. Hornbeck
and Mr. Michael T. Goskowski who have retired from the Board of Comm
Bancorp, Inc. but will continue to serve on the Bank Board.  I would like
to thank them for their years of faithful service and wish them
prosperity and good health in all future endeavors.




PRESIDENT'S MESSAGE TO STOCKHOLDERS (CONTINUED)                          

Effective February 16, 1996, the MOU was withdrawn by the FRB.  I would
like to take this opportunity to thank Mr. William F. Farber, Chairman,
for his unwavering dedication and efforts, and the Board of Directors,
along with the entire staff for their support during a most difficult
period for the Company as these accomplishments could not have been
completed without that support.  And to the stockholders, a special word
of appreciation for your patience and understanding and pledge to you
that we will make every effort to enhance the value of your investment
and look forward to a very profitable 1996.


Sincerely,




David L. Baker
President and
Chief Executive Officer
































COMMUNITY PERSPECTIVES                                                   

Community Bank and Trust Company is nestled in the heart of Northeastern
Pennsylvania's Endless Mountains.  The natural beauty of the community is
reflected within the hearts and souls of its local residents.  Recent
trends have brought many big banks into our community, thus making
personal service a thing of the past.  This is not so at Community Bank
and Trust Company.  Customers are the reason we are in business and that
is why the bank provides our friends and neighbors with the kind of
service that can only come from a community bank.  In today's banking
environment this is no small feat.

People often ask, "Why does the bank spend so much time promoting its
community?".  The answer is that it has made a commitment to putting the
community first and keeping the local economy strong by reinvesting in
its people and future.  Our community, like the bank, was built on the
idea of individuals working together for a better place to live. 
Community Bank and Trust Company will continue to work with you to
nourish and support the beauty of our hometown.

The bank is proud to demonstrate its commitment to the community every
day and continues to maintain its "Outstanding" Community Reinvestment
Act rating.  This rating is given annually to a small percentage of banks
for meeting the credit needs of the communities they serve.  This rating,
as outlined by the Federal Reserve Bank, is given to a bank only when it
has maintained a record of, and provided leadership in, ascertaining and
helping to meet the credit needs of its entire delineated community,
including low- and moderate-income neighborhoods, in a manner consistent
with its resources and capabilities.

The U.S. Small Business Administration in Washington, D.C., recently
notified management that Community Bank and Trust Company has been ranked
as one of the leading banks in Pennsylvania in lending to small
businesses. The bank continues to make available to community members,
governmentally- supported lending programs, such as the U.S. Small
Business Administration's Low Documentation Program, better known as the
Low Doc Program, as an alternative to traditional financing.  The Low Doc
Program has enabled area businesses to grow.

In March, the bank had the honor of being the first lender in
Pennsylvania to close a FmHA subsidized loan under a new arrangement with
the Farmers Home Administration.  Ron Smith, the Montrose office manager,
had the privilege of closing this loan.  The Carbondale office is
currently working with the FmHA Subsidized Loan Program in conjunction
with the Rural Economic Community Development Agency.  The program helps
low income families purchase homes with moderate downpayment
requirements.  Two such loans were processed in November.

The Carbondale office is a part of a participation loan in conjunction
with other area banks for the relocation and expansion of the Carbondale
Public Library, which is a one million dollar project.  Bank officials
met with from the Susquehanna County Planning Commission and a consultant
from the Office of Community Affairs concerning a homeowners'
rehabilitation program for low- and moderate-income families in eastern
Susquehanna county.  The program was approved in early 1995 and will be
administered from the Clifford office.  Also, the Nicholson office has
worked with the Lackawanna County Redevelopment Authority to help finance
part of the NatWest project to develop the Montage Mountain industrial
area.

In the spring, Susan Faye Mancuso was appointed to the Simpson office
advisory board.  Mrs. Mancuso is a self-employed public accountant who
resides in Carbondale and is active in many community organizations.  In
May, Thomas M. Chesnick was appointed to the position of Forest City
office manager and Valerie Hite was promoted to the position of Simpson
office manager.

In June, bank employees participated in the Geisinger Children's Miracle
Network Telethon fundraiser.  By making a monetary donation to the
hospital, employees had the privilege of "dressing down" and wearing
their "Caring for Kids" t-shirts to work.

At the annual stockholders meeting held in September, the bank's holding
company honored retiring board member, Allan A. Hornbeck. Mr. Hornbeck
provided twelve years of dedicated service to Community Bank and Trust
Company and Comm Bancorp, Inc. 

The bank has been involved with countless community service and volunteer
projects such as Lackawanna County's Upper Valley Project Hope, the
Riverside Park Project in Tunkhannock and the Forest City Rotary Miners
Memorial.  Community Bank and Trust Company provides financial support
for activities of youth groups within the communities it serves such as
the Nicholson Athletic Association, B & M Little League, Fairdale
Baseball Association and Carbondale Miss C Softball, to name a few.  The
bank also supports activities and participates in fundraisers at local
school districts like Carbondale Area, Elk Lake, Forest City Regional,
Hancock Central, Lackawanna Trail, Montrose, Mountain View, Sacred Heart
and Tunkhannock Area.  In addition, Community Bank and Trust Company
encourages excellence in education by annually providing U.S. Savings
Bonds as awards to local high school seniors.

The bank and its staff hold memberships in the Chambers of Commerce
located in Carbondale Area, Hancock Area, Wyoming County and the newly
formed Susquehanna County Chamber.  This active participation helps
maintain a solid relationship with community business leaders and
encourages the development of new business within the bank's service
areas.

Directors, officers and staff volunteer their time and support to local
community projects by involving themselves in charitable events such as
Area "P" Special Olympics, the Fourth of July races in Montrose, Marian
Community Hospital Charity Ball, Forest City Old Home Week, March of
Dimes Walk-A-Thon and the Wyoming County Chamber of Commerce Annual
Auction. Dedicated employees continued to participate in local community
events by maintaining booths at Forest City Old Home Week, Wyoming County
Fair, "Three for the Fourth" Celebration in Montrose, the Blueberry
Festival, Nicholson Heritage Days, Endless Mountains Builders Show and
Susquehanna County Dairy Days.  Other community activities included the
Carbondale Pioneer Days, Fell Township's 150th Anniversary celebration
and the Great American Race in Thompson.

Community Bank and Trust Company would not have been able to provide
these fine services and contributions without the commitment of the
employees.  They are the true life blood of Community Bank and Trust
Company.  Accordingly, we would like to recognize the following employees
who reached milestones with the bank during 1995:  Mary Ann Musho and
Betty Oleniacz-25 years of service; Mary Anderson and Marie
Maciejewski-15 years of service; Joan Harvey, Annette Lynch, Janice Nesky
and Tom Sheridan-10 years of service; Diane Conboy, John B. Errico, Carol
Gacha, Lisa Goerlitz, Gloria Hancock, Faith Kramer, Charlene Martin,
Patty Seaman and Amy Trago-5 years of service.  






























CONSOLIDATED SELECTED FINANCIAL DATA                                    
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>


YEAR ENDED DECEMBER 31                                       1995       1994       1993       1992      1991 
____________________________________________________________________________________________________________
<S>                                                      (C>        <C>        <C>        <C>       <C>      
CONDENSED STATEMENTS OF FINANCIAL PERFORMANCE:
Interest income......................................... $ 26,467   $ 24,991   $ 24,094   $ 24,022  $ 23,512
Interest expense........................................   14,994     12,942     12,000     13,514    15,345
                                                         ________   ________   ________   ________  ________
  Net interest income...................................   11,473     12,049     12,094     10,508     8,167
Provision for loan losses...............................      435        800      1,080      1,285       820
                                                         ________   ________   ________   ________  ________ 
  Net interest income after provision for loan losses...   11,038     11,249     11,014      9,223     7,347
Noninterest income......................................   (3,196)     1,005      2,571      1,961       524
Noninterest expense.....................................    8,194      7,949      7,852      7,252     6,101
                                                         ________   ________   ________   ________  ________
  Income before income taxes............................     (352)     4,305      5,733      3,932     1,770
Provision for income taxes..............................     (552)       980      1,583      1,137       407
                                                         ________   ________   ________   ________  ________  
  Net income............................................ $    200   $  3,325   $  4,150   $  2,795  $  1,363 
                                                         ========   ========   ========   ========  ========


CONDENSED STATEMENTS OF FINANCIAL POSITION:
Investment securities................................... $123,922   $152,656   $149,672   $129,480  $103,919
Net loans...............................................  209,932    190,909    173,313    160,146   157,265
Other assets............................................   17,094     18,898     16,022     19,654    17,159
                                                         ________   ________   ________   ________  ________
  Total assets.......................................... $350,948   $362,463   $339,007   $309,280  $278,343
                                                         ========   ========   ========   ========  ========

Deposits................................................ $317,099   $316,169   $297,235   $280,826  $255,819
Short-term borrowings...................................              15,956      9,141      2,000           
Long-term debt..........................................    3,048      5,050      5,800      3,200     1,400
Other liabilities.......................................    2,906      2,599      2,324      2,454     2,697
Stockholders' equity....................................   27,895     22,689     24,507     20,800    18,427
                                                         ________   ________   ________   ________  ________    
  Total liabilities and stockholders' equity............ $350,948   $362,463   $339,007   $309,280  $278,343
                                                         ========   ========   ========   ========  ========


PER SHARE DATA:
Net income.............................................. $   0.27   $   4.53   $   5.66   $   3.81  $   1.86
Cash dividends declared.................................     0.63       0.62       0.61       0.59      0.57
Stockholders' equity.................................... $  38.04   $  30.94   $  33.42   $  28.36  $  25.13
Cash dividends declared as a percentage of net income...   231.00%     13.68%     10.70%     15.31%    30.67%
Average common shares...................................  733,360    733,357    733,298    733,031   732,922


SELECTED RATIOS (BASED ON AVERAGE BALANCES):
Net income as a percentage of total assets..............     0.06%      0.95%      1.30%      0.96%     0.52%
Net income as a percentage of stockholders' equity......     0.77      14.26      17.91      14.00      7.58
Stockholders' equity as a percentage of total assets....     7.25       6.65       7.26       6.68      6.91
Tier I capital as a percentage of adjusted total assets.     6.95       7.13       6.84       6.11      5.86
Net interest income as a percentage of earning assets...     3.48       3.68       4.09       3.95      3.49
Loans, net as a percentage of deposits..................    62.81%     61.01%     60.84%     59.15%    65.68%


SELECTED RATIOS AND DATA (BASED ON PERIOD END BALANCES):
Tier I capital as a percentage of risk-adjusted assets..    14.23%     13.82%     13.52%     12.38%    10.85%
Total capital as a percentage of risk-adjusted assets...    15.49      15.68      15.49      14.12     11.99
Allowance for loan losses as a percentage of loans, net.     1.83%      1.84%      1.80%      1.54%     1.00%
Full-time equivalent employees..........................      147        153        137        136       134
Locations...............................................       10         10         10         10        10
</TABLE>













Note:     Per share information reflects the retroactive effect of 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 109 and Management's Discussion and Analysis 1994
versus 1993 beginning on page 141.

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.  Under the terms of the MOU, the Company and/or
subsidiary 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 Board of Governors of the Federal Reserve System's
("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.  The MOU was
a direct result of regulatory concerns about prior investment practices
and noncompliance with previously issued informal supervisory actions. 
Such supervisory action placed a significant administrative and reporting
burden on the Company and increased both monetary and opportunity costs. 
Management estimated the costs associated with compliance to the MOU
approximated $500 in 1995.

On February 16, 1996, the Company received the following information in a
letter from the FRB delineating the Company's improved financial
condition and strict compliance with all provisions of the MOU:


"As a result of the improving financial condition of Comm Bancorp, Inc.
and Community Bank and Trust Company, the Federal Reserve Bank of
Philadelphia is terminating the Memorandum of Understanding by and among
the Company and the FRB, dated May 24, 1995.  The termination of this
supervisory action is pursuant to the authority granted to the FRB in
provision 14.b. of the MOU.  The effective date of the termination is
February 16, 1996."

Management, consisting of the Board of Directors and executive officers,
in conjunction with regulatory guidance was able to demonstrate, within
nine months of the establishment of the MOU, a marked improvement in the
Company's financial strength while mitigating various risk elements that
restricted operations.  During the final months 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 ("FHLB") 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 that 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 insures 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 Pennsylvania 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.  In addition, Northeastern Pennsylvania was
comparatively more expensive with respect to costs in other areas of the
state with higher wages and benefits, energy, taxes and real estate
expenses.  In order to grow rapidly, a region needs an expanding market
and favorable cost structure.  As a result of the region lacking both
qualities, management expects the local economy to grow 0.7 percent in
1996, far below the anticipated national growth level of 2.3 percent.  

A continuation of the slowdown in economic activity could have a profound
effect on the future financial condition and operating results of the
banking industry.  Declines in loan demand and higher delinquencies
attributable to higher unemployment and interest rates, will adversely
affect the asset quality and profitability of financial institutions in
the future.  On average, loans account for nearly 60.0 percent of bank
assets, thus a reduced level of demand could tempt management to allocate
resources to risky investments in order to obtain yields similar to those
achieved through lending.  Generally, loans out-yield investment
securities by 200 to 300 basis points.  Moreover, further reductions in
economic activity will increase financial institutions' credit problems
and levels of loan charge-offs.  Such increase in net charge-offs, from
declines in recoveries and higher volumes of consumer credit, will prompt
banks to set aside larger provisions therefore reducing earnings.  At the
end of 1995, consumer installment debt totaled $1.05 trillion, up 13.4
percent from one year ago and 39.0 percent from 1990.  In addition,
rising interest rates as a result of inflationary pressure will have an
adverse effect on fund costs, further narrowing net interest margins. 
Banks may be able to offset some of these adverse influences through
reductions in noninterest operating expenses as a result of achieving
synergistic efficiencies from mergers and reductions in deposit insurance
premiums.  Bank mergers and acquisitions amounted to $42.0 billion in
1995 as a result of the easing of laws prohibiting interstate banking and
the push by large institutions to reduce their costs through efficiencies
of scale.  On average, institutions recovered a portion of the purchase
price of 1995 acquisitions through the elimination of 38.0 percent of the
target bank's noninterest expenses.  In addition, the Federal Deposit
Insurance Corporation's ("FDIC's") decision to lower deposit insurance
costs reduced noninterest expenses by $4.0 billion in 1995 and is
expected to further reduce such expenses by $1.0 billion in 1996.  It is
anticipated that the ten largest banks in the United States will save
$10.0 million each in deposit insurance expense during 1996.

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. 
Loan demand is expected to remain soft throughout 1996 as the number of
workers and their earnings remain relatively unchanged from 1995.  Gains
in the service sector will be offset by a declining number of
manufacturing positions.  In addition, wage growth will be restrained as
a result of job insecurity and increased pressure on companies to keep
operating costs low.

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.  Expectations of slightly higher unemployment levels and
greater volumes of consumer debt over the next twelve months could have a
profound adverse effect on future asset quality and the amount of loans
charged-off.  Net charge-offs during 1995 approximated 27.5 percent of
the 1994 level.  Management does not anticipate being able to sustain the
favorable volume experienced in 1995 as a result of reduced potential for
recoveries and instability of employment conditions.

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 last year of
$22.5 million or 7.8 percent and the favorable change of 7.6 percent in
the Company's peer group of 35 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.  Management may have to
reemphasize its historically aggressive product pricing if it perceives a
higher rate of disintermediation from customers who are willing to invest
in non-bank depository vehicles that yield higher returns but offer a
greater degree of risk.

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.  The investment portfolio reconstitution
materially reduced the Company's future exposure to capital depreciation
from deteriorating market values.  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. 
Although the size of the available for sale portfolio at year-end 1995
was twice the amount at the same period last year, the expected capital
loss from rising interest rates is considerably less because of
improvements in the quality, composition and structure of the investment
portfolio.

INVESTMENT PORTFOLIO:

Actions taken during 1995 involving the investment portfolio were the
most significant factors in restoring the strength of the Company's
financial condition.  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.  Credit risk, referring to the
probability that an issuer is unable to meet principal and interest
payments on a timely basis, was mitigated as the majority of the holdings
were directly or indirectly guaranteed by the U.S. Government or its
agencies.  However, the Company's prior investment practices and actions
exposed it to substantial interest rate risk from price volatility.  Such
practices and actions include those that are referred to as unsuitable
pursuant to the Federal Reserve Board's Supervisory Policy Statement on
Securities Activities, as revised April 15, 1994, and the Federal Reserve
Board's Supervisory Policy Statement on Structured Notes dated August 5,
1994.  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, development of
a formalized investment policy and procedures and formulation and
implementation of a portfolio reconstitution plan.  On April 26, 1995,
the Board of Directors exercised the termination option provision of the
then President and Chief Executive Officer's employment agreement.  Prior
to such date, the former President and Chief Executive Officer had
primary oversight and authority over the investment function.  Following
the execution of the termination provision, the Board of Directors
restructured the investment committee, emphasizing the need for its
proactive and direct involvement in the oversight 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.  Management utilized the
consultant's risk assessment analysis as one of its primary tools in
formulating the Company's reconstitution plan.  The investment policy,
approved by the Board of Directors on August 30, 1995, and deemed
acceptable by the FRB on September 21, 1995, prohibits practices
considered unsuitable as defined in the Federal Reserve Board's
Supervisory Policy Statement on Securities Activities along with options
and derivative transactions.  Such policy promotes investment portfolio
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.

Pursuant to the guidance set forth in the MOU, management submitted a
copy of a written report by the Company's external investment management
consultant to the FRB on July 5, 1995.  Such report was reviewed and
deemed acceptable by the FRB on July 24, 1995.  The report provided a
comprehensive review of the Company's securities activities and the
investments in its portfolio in the context of the Company's overall
interest rate risk and liquidity position.  Specifically, the report
provided a volatility analysis of yield, market value and other factors
to assess various risks over a variety of interest rate scenarios.  In
addition, the Company's investment and asset/liability management
policies and procedures were analyzed in making recommendations to the
Company's management concerning its risk identification procedures and
controls.  Such recommendations were included in the investment and
asset/liability policies adopted by the Board of Directors during 1995. 
The investment committee continues to utilize external investment
management consultants in reviewing the risk related to its investment
portfolio.

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, pursuant to guidance in the Financial Accounting Standards Board
("FASB") Emerging Issues Task Force ("EITF") Topic D-44 "Recognition of
Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose
Cost Exceeds Fair Value."  The Company's investment in such types of
securities, its investment in long-term variable-rate securities and
activities in writing options on U.S. Treasury and agency securities were
the primary focus of regulatory criticism.  High-risk CMOs, as defined in
the Federal Reserve Board's Supervisory Policy Statement on Securities
Activities, are mortgage derivative products that at the time of
purchase, or at a subsequent testing date, meet any of the average life
or interest sensitivity tests.  None of such Federal Reserve Board
defined high-risk securities met the definition of high-risk nonequity
CMOs as defined in Issue 2 of FASB's EITF 89-4, "Accounting for a
Purchased Investment in the Collateralized Mortgage Obligation Instrument
or in a Mortgage-Backed Interest-Only Certificate."  EITF 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 rates 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.  Subsequent to the aforementioned sale, the
Company held Federal Reserve Board defined high-risk CMOs with an
amortized cost and fair value of $4.3 million.  Structured notes, many of
which are issued by U.S. Government agencies, government-sponsored
agencies and other organizations with high credit ratings, are debt
securities having embedded options with cash flows that are often
dependent on one or more indices.  Such securities tend to have medium-
term maturities and reflect a wide variety of cash flow characteristics
that can be tailored to the needs of individual investors.  As a result
of their affiliation with the federal government, structured notes have
minimal credit risk.  However, such investments contain a high degree of
many of the other aforementioned types of risks.  The Company's holdings
of structured notes subsequent to the sale had an amortized cost of $18.0
million and a fair value of $17.6 million at June 30, 1995. 
Specifically, that portion of the investment portfolio 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 entity 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 were long-term
variable-rate securities.  The strategy to acquire variable rate
securities was implemented in order to reduce the Company's exposure to
net interest margin erosion and guard against price deterioration. 
However, as rates rose in 1994 and the early part of 1995, such
securities experienced significant price volatility even though their
interest rates reset monthly or quarterly.  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 such value deterioration. 
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, could have a material adverse impact on its book value in the
future.  Management will not be able to establish a held to maturity
classification for future purchases or transfers until a time when
circumstances have changed such that management can assert with a greater
degree of credibility that it now has the intent to hold debt securities
to maturity.  As a result, a significant rise in interest rates would
reduce the Company's book value as management would be required to report
the resulting unrealized loss, net of income taxes, as a separate
component of stockholders' equity.  On October 18, 1995, the FASB voted
to temporarily suspend 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 held without
calling into question the holding intent of that enterprise.  Management
was unaware that FASB would suspend such rule at the time it decided to
transfer securities from held to maturity to available for sale. 
Accordingly, management will not be able to establish a held to maturity
classification for an indefinite period, unlike enterprises that were
afforded the opportunity to transfer securities unchallenged during the
temporary dispensation period.

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>

                                          1995             1994             1993            1992             1991        
                                    ________________ ________________ ________________ ________________ _______________
DECEMBER 31                           AMOUNT    %      AMOUNT    %      AMOUNT    %     AMOUNT     %     AMOUNT    %   
_______________________________________________________________________________________________________________________
<S>                                 <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% $32,570  32.87%
U.S. Government agencies...........                    36,993  24.25    29,306  20.16     3,730   3.37    3,389   3.42
State and municipals...............                    20,616  13.51    20,000  13.75    13,065  11.82    4,075   4.11
Mortgage backed securities.........                    38,015  24.92    28,042  19.29    21,339  19.30   54,325  54.83
Other securities...................                                      1,305   0.90     3,125   2.83    4,726   4.77
                                    ________ ______  ________ ______  ________ ______  ________ ______  _______ ______  
  Total held to maturity...........                   107,666  70.57    91,680  63.06    69,215  62.60   99,085 100.00 
                                    ________ ______  ________ ______  ________ ______  ________ ______  _______ ______

Available for sale:
U.S. Treasury securities........... $ 43,751  40.25%    3,366   2.21     2,995   2.06
U.S. Government agencies...........   26,213  24.11     7,283   4.77     5,959   4.10
State and municipals...............   30,512  28.07
Mortgage backed securities.........    6,154   5.66    29,444  19.30    41,854  28.78    41,357  37.40
Other securities...................    2,076   1.91     4,807   3.15     2,912   2.00                  
                                    ________ ______  ________ ______  ________ ______  ________ ______  _______ ______
  Total available for sale.........  108,706 100.00    44,900  29.43    53,720  36.94    41,357  37.40                
                                    ________ ______  ________ ______  ________ ______  ________ ______ 
    Total.......................... $108,706 100.00% $152,566 100.00% $145,400 100.00% $110,572 100.00% $99,085 100.00%
                                    ======== ======  ======== ======  ======== ======  ======== ======  ======= ======
</TABLE>


The investment portfolio represented 32.2 percent of earning assets at
December 31, 1995, compared with 43.9 percent a year ago.  As evidenced
by such reduction, management expects the investment portfolio to become
less prominent in the Company's asset mix as it focuses efforts on
satisfying local credit demand.  As aforementioned, the Company
transferred its entire held to maturity portfolio to available for sale
during the third quarter of 1995.  In comparison, the peer group held
87.7 percent of its investments in the available for sale classification
at December 31, 1995.  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 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 $2.4 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.

Management performs quarterly stress tests on the investment portfolio to
determine what effects interest rate changes will have on its value. 
These tests indicate the investment portfolio at December 31, 1995, would
lose approximately 2.7 percent of its value with a 100 basis point
increase in general market rates as compared to an expected additional
loss of approximately 5.5 percent at December 31, 1994.


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, 1995.  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 and CMOs, which have been presented based upon
estimated cash flows, assuming no change in the current interest rate
environment.  Expected maturities will differ from contracted maturities
because borrowers have the right to call or prepay obligations with or
without call or prepayment penalties.  

MATURITY DISTRIBUTION OF AVAILABLE FOR SALE PORTFOLIO 
<TABLE>
<CAPTION>

                                                AFTER ONE        AFTER FIVE
                                  WITHIN        BUT WITHIN       BUT WITHIN        AFTER
                                 ONE YEAR       FIVE YEARS       TEN YEARS       TEN YEARS         TOTAL    
                              ______________________________________________________________________________
DECEMBER 31, 1995             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.... $16,124  5.70% $27,370   5.62%                                  $ 43,494   5.65%
U.S. Government agencies....   4,699  4.80   21,817   4.88                                     26,516   4.87
State and municipals........     405  5.82    3,947   5.82   $5,780   8.33% $19,485   8.11%    29,617   7.82
Mortgage backed securities..     341  6.89    2,601   6.48    3,182   5.82                      6,124   6.16
Other securities............                                                  1,774   6.00      1,774   6.00
                             _______        _______          ______         _______          ________        
  Total..................... $21,569  5.52% $55,735   5.38%  $8,962   7.44% $21,259   7.93%  $107,525   6.09%
                             =======        =======          ======         =======          ========        

Fair value:
U.S. Treasury securities.... $16,166        $27,585                                          $ 43,751
U.S. Government agencies....   4,685         21,528                                            26,213
State and municipals........     405          3,946          $6,034         $20,127            30,512
Mortgage backed securities..     342          2,614           3,198                             6,154
Other securities............                                                  2,076             2,076
                             _______        _______          ______         _______          ________
  Total..................... $21,598        $55,673          $9,232         $22,203          $108,706
                             =======        =======          ======         =======          ========


In October 1994, the FASB issued SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments," which requires disclosures about amounts, nature and terms
of derivative financial instruments.  In addition, SFAS No. 119 requires
that a distinction be made between financial instruments held or issued
for trading purposes and those held or issued for other than trading
purposes.  For entities that hold or issue derivative financial
instruments for trading purposes, SFAS No. 119 requires disclosure of
average fair value and of net trading gains or losses.  For entities that
hold or issue derivative financial instruments for purposes other than
trading, it requires disclosure about those purposes and how the
instruments are reported in financial statements.  For entities that hold
or issue derivative financial instruments and account for them as hedges
of anticipated transactions, it requires disclosure about the anticipated
transactions, the classes of derivative financial instruments used to
hedge those transactions, the amounts of hedging gains and losses
deferred and the transactions or other events that result in recognition
of the deferred gains or losses in earnings.


Because SFAS No. 119 excludes mortgage backed securities and interest-
only and principal-only obligations from its definition of derivative
financial instruments, the Company's involvement was limited to its
writing of covered call option contracts on U.S. Treasury securities,
which were subsequently exercised or expired.  Such options were used to
limit its exposure to market fluctuations on investment securities  and
were not used for trading purposes.  A call option obligates the Company
to sell a fixed quantity of securities to the option holder at a specific
price within a specific term.  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
aggregate trading account losses amounted to $656 in 1994.  The Company
did not recognize any such gains or losses in 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.

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.  Analysts
believe the high spending patterns of individuals and businesses
demonstrated during 1995, would have been greater, if not for the
moderate economic conditions.

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.  

Indications are that economic and employment conditions throughout
Northeastern Pennsylvania will remain below the expected moderate level
of the nation during 1996.  Should this occur, management may have to
become more aggressive with respect to product pricing.  Such action
could have a material adverse effect on the Company's net interest margin
if management is unable to make a corresponding reduction in fund costs.

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 commerical and industrial loans.  Loans, net of unearned
income, as a percentage of total earnings assets were 63.3 percent and
56.0 percent at December 31, 1995 and 1994, respectively.  Such material
increase was a result of the implementation of the investment portfolio
reconstitution plan and reflected management's desire to redirect the
institution's asset base in becoming a "traditional community bank." 
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 came primarily 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. 
Management expects loan yields to remain level or decline further during
1996 as a result of the falling interest rate environment.  Additionally,
yields may not improve as management attempts to increase the volume of
loans through competitive product pricing and new product introductions.

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.  The
Company's loan demand is expected to improve during 1996 as management
places increased emphasis on building the loan portfolio through
competitive product pricing and enhanced marketing efforts.  Such
improvement could be hampered if local economic conditions deteriorate. 
Based on the Company's asset/liability simulation model, management feels
confident it can facilitate loan demand through payments and prepayments
on investments and loans and increases in core deposits.  Management
expects to receive approximately $49.8 million from repayments on loans
and investment securities during 1996.  In the event an uncharacteristic
increase in loan demand arises in 1996, management could facilitate such
demand by aggressively competing for deposits or utilizing various credit
products available through the FHLB.

At December 31, 1995, the Company had no loan concentrations exceeding
10.0 percent of total loans.  Loan concentrations are considered to exist
when there are amounts lent 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 56.6 percent of total loans outstanding are secured by
residential properties.  The average mortgage outstanding on a
residential property was $32.9 at December 31, 1995.  The Company
maintains a policy restricting the loan-to-value ratio to 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 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.  Such commitments are recorded in the
financial statements when they are exercised.  The Company's involvement
in and exposure to credit loss in the event of nonperformance by the
other party is represented by the contractual amounts of such
commitments.  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, 1995 or 1994.  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, if deemed
necessary by the Company upon extension of credit, 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 remained constant at $9.6 million
at December 31, 1995 and 1994, respectively.

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

DISTRIBUTION OF LOAN PORTFOLIO

</TABLE>
<TABLE>
<CAPTION>

                                         1995             1994             1993             1992             1991      
                                 ________________  ______________ _________________ ________________ _________________
DECEMBER 31                        AMOUNT    %      AMOUNT    %      AMOUNT    %      AMOUNT    %      AMOUNT     %    
______________________________________________________________________________________________________________________
<S>                              <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>       <C>      
Commercial, financial and others $ 41,593  19.45% $ 29,419  15.13% $ 22,633  12.82% $ 21,754  13.38% $ 25,770   16.22%
Real estate:
  Construction..................    1,014   0.47     2,771   1.42     5,079   2.88     4,980   3.06     3,092    1.95
  Mortgage......................  151,926  71.05   138,379  71.15   125,848  71.31   112,544  69.20    99,724   62.78
Consumer, net...................   19,302   9.03    23,916  12.30    22,922  12.99    23,365  14.36    30,255   19.05
                                _________ ______  ________ ______  ________ ______  ________ ______  ________  ______ 
  Loans, net of unearned income.  213,835 100.00%  194,485 100.00%  176,482 100.00%  162,643 100.00%  158,841  100.00%
Less: allowance for loan losses.    3,903 ======     3,576 ======     3,169 ======     2,497 ======     1,576  ======
                                 ________         ________         ________         ________         ________    
    Net loans................... $209,932         $190,909         $173,313         $160,146         $157,265
                                 ========         ========         ========         ========         ========  
</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 41.1 percent of the
lending portfolio will reprice within the next twelve months as
management attempts to reduce the average term of fixed-rate loans and
increase its holdings of adjustable rate loans in order to limit interest
rate risk in the future.  The 41.1 percent surpasses the 30.3 percent at
December 31, 1994, as a result of increased level of short-term funding
and a slight improvement towards achieving management's goal of
generating variable-rate loans.

The following table sets forth the maturity and repricing information of
the loan portfolio by major category at December 31, 1995:

MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF LOAN PORTFOLIO
<TABLE>
<CAPTION>

                                                                        AFTER ONE
                                                            WITHIN      BUT WITHIN       AFTER     
DECEMBER 31, 1995                                          ONE YEAR     FIVE YEARS     FIVE YEARS       TOTAL
_____________________________________________________________________________________________________________
<S>                                                         <C>            <C>           <C>         <C>      
Maturity schedule:
Commercial, financial and others........................... $23,673        $ 7,994       $  9,926    $ 41,593
Real estate:
  Construction.............................................   1,014                                     1,014
  Mortgage.................................................   3,164         17,547        131,215     151,926 
Consumer, net..............................................     347         13,500          5,455      19,302
                                                            _______        _______       ________    ________
    Total.................................................. $28,198        $39,041       $146,596    $213,835
                                                            =======        =======       ========    ========


Repricing schedule:
Predetermined interest rates............................... $46,563        $54,808       $ 71,109    $172,480
Floating or adjustable interest rates......................  41,355                                    41,355
                                                            _______        _______       ________    ________
    Total.................................................. $87,918        $54,808       $ 71,109    $213,835
                                                            =======        =======       ========    ========

</TABLE>

The Company does not sell loans secured by real estate.  Accordingly,
SFAS No. 122, "Accounting for Mortgage Servicing Rights," which is
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 strong
asset quality is expected to deteriorate slightly during 1996 as a result
of increased amounts of problem loans and net charge-offs.  Many banks
have been aggressive in extending credit to consumers.  It appears,
however, that some have not been highly selective in their solicitations. 
The high rate of extensions, which has increased debt burden over the
past year, has been the primary factor in the deterioration of credit
card deficiency ratios.  Of the credit card loans extended in 1995, 4.3
percent were written-off as losses.  Recent history shows a decline in
commercial loan charge-off ratios due to large  recoveries offsetting
charged-off loans.  This trend is not expected to continue as the
potential for recovery does not appear as strong as in past years. 
Current conditions also indicate greater deficiency ratios in the credit
card loan sector.  

Higher unemployment levels in the Company's market area as compared to
Pennsylvania and the United States have already resulted in asset quality
deteriorations as indicated by 1995 statistics.  Such deterioration is
evidenced by an increase in the peer group's ratio of nonperforming
assets as a percentage of loans, net 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.  Management is aware that asset quality could decay further if
local economic conditions remain weak in 1996.  As a result, management
will place additional emphasis on committing more resources to monitor
asset quality during 1996.

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 future 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 lending 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 committees, comprised of senior lending management and
board members, attempt 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 full board approval.

In addition, the Company minimizes credit risk by conducting an internal
loan review and contracting with an external loan review company to
perform such function independently on an annual basis.  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
the FHLB at June 30, 1995, indicated no material difference from the
assets identified through the Company's review program.

Effective January 1, 1995, the Company adopted 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 not 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 by 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 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. 
Restructured loans are loans with original terms that have been modified
to below market rate terms as a result of a change in the borrower's
financial condition.  

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.  In-substance
foreclosures are properties in which the borrower has little or no equity
in the collateral, where repayment of the loan is expected only from the
operation or sale of the collateral and the borrower either effectively
abandons control of the property or the borrower has retained control of
the property but the borrower's ability to rebuild equity based on
current financial  conditions  is considered doubtful.  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 its appraised fair value less estimated cost
to sell 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 expenses. 
In addition, any gain or loss realized upon disposal is included in other
income or expense.

The following table sets forth information concerning nonperforming loans
and foreclosed assets for the last five years.  The table includes all
credits classified for regulatory purposes as loss or doubtful.  Also
included are all material credits that cause management to have serious
doubts as to the borrowers' ability to comply with present loan repayment
terms.

DISTRIBUTION OF NONPERFORMING ASSETS 
<TABLE>
<CAPTION>

DECEMBER 31                                                         1995     1994     1993     1992     1991
____________________________________________________________________________________________________________
<S>                                                               <C>      <C>      <C>      <C>      <C>    
Nonaccrual loans:
Commercial, financial and others................................. $  167   $   45   $  137   $  227   $  675
Real estate:
  Construction...................................................
  Mortgage.......................................................  1,164    1,352    1,497    1,067    1,185
Consumer, net....................................................                       40                14
                                                                  ______   ______   ______   ______   ______
    Total nonaccrual loans.......................................  1,331    1,397    1,674    1,294    1,874
                                                                  ______   ______   ______   ______   ______

Loans past due 90 days or more:
Commercial, financial and others.................................    181       33       62      462      620
Real estate:
  Construction...................................................
  Mortgage.......................................................  1,633    1,194    1,130    2,375    1,490
Consumer, net....................................................    336      197      374      285      323
                                                                  ______   ______   ______   ______   ______
    Total loans past due 90 days or more.........................  2,150    1,424    1,566    3,122    2,433
                                                                  ______   ______   ______   ______   ______
Restructured loans...............................................    262      236      275                  
                                                                  ______   ______   ______   ______   ______ 
    Total nonperforming loans....................................  3,743    3,057    3,515    4,416    4,307
Other real estate................................................    441      226      248      244       19
                                                                  ______   ______   ______   ______   ______
    Total nonperforming assets................................... $4,184   $3,283   $3,763   $4,660   $4,326
                                                                  ======   ======   ======   ======   ======

Ratios:
Nonperforming assets as a percentage of loans, net...............   1.96%    1.69%    2.13%    2.87%    2.72%
Loans past due 90 days or more as a percentage of loans, net.....   1.01%    0.73%    0.89%    1.92%    1.53%
</TABLE>


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 condition 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.  Although concerned with the buildup, management is
aware that approximately 76.0 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 deteriorating.  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 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 include 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 $57 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 and 1994.

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 review process,
regulators from the FRB and Pennsylvania Department of Banking classified
assets of the Company at October 31, 1995.  The result of such process
indicated a decline of 2.3 percent in the ratio of classified assets as a
percentage of Tier I capital from the September 30, 1994, 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 with subsequent recoveries, if any, being 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 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 1995 examination, as regulators
considered the Company's allowance for loan losses account adequate based
on the risk characteristics and size of the loan portfolio.  Upon its
review of the 1995 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 the Board of Directors, 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, 1995, based on the results of this regulatory calculation. 
However, management will continue to perform a full and thorough analysis
of the bank'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:

DISTRIBUTION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
                                       1995            1994             1993             1992             1991      
                                  -------------   --------------   --------------   --------------   --------------
                                       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. $1,358  19.45%  $1,188   15.13%  $  944   12.82%  $  722   13.38%  $  618   16.22%
Real estate:
  Construction...................          0.47             1.42             2.88             3.06             1.95
  Mortgage.......................  1,333  71.05    1,251   71.15    1,135   71.31      815   69.20      337   62.78
Consumer, net....................  1,212   9.03    1,137   12.30    1,090   12.99      960   14.36      621   19.05
                                  ------ ------   ------  ------   ------  ------   ------  ------   ------  ------
    Total........................ $3,903 100.00%  $3,576  100.00%  $3,169  100.00%  $2,497  100.00%  $1,576  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:

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

DECEMBER 31                                                         1995     1994     1993     1992     1991
------------------------------------------------------------------------------------------------------------
<S>                                                               <C>      <C>      <C>      <C>      <C>    
Allowance for loan losses at beginning of period................. $3,576   $3,169   $2,497   $1,576   $1,105
Loans charged-off: 
Commercial, financial and others.................................    136      243      177       93      143
Real estate:
  Construction...................................................    
  Mortgage.......................................................    171      176      263      233       56
Consumer, net....................................................     86      131      140      178      248
                                                                  ------   ------   ------   ------   ------
    Total........................................................    393      550      580      504      447
                                                                  ------   ------   ------   ------   ------
Loans recovered:                                   
Commercial, financial and others.................................     80        7       42       52       44
Real estate:
  Construction...................................................
  Mortgage.......................................................    144       64       69       44         
Consumer, net....................................................     61       86       61       44       54
                                                                  ------   ------   ------   ------   ------
    Total........................................................    285      157      172      140       98
                                                                  ------   ------   ------   ------   ------
Net loans charged-off............................................    108      393      408      364      349
                                                                  ------   ------   ------   ------   ------
Provision charged to operating expense...........................    435      800    1,080    1,285      820
                                                                  ------   ------   ------   ------   ------
Allowance for loan losses at end of period....................... $3,903   $3,576   $3,169   $2,497   $1,576
                                                                  ======   ======   ======   ======   ======

Ratios:
Net loans charged-off as a percentage of average loans           
 outstanding.....................................................   0.05%    0.21%    0.23%    0.22%    0.23%
Allowance for loan losses as a percentage of period end loans....   1.83%    1.84%    1.80%    1.54%    1.00%

</TABLE>

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.  

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.  In
response to the increase in nonperforming assets and delinquent credits,
management remained cautious and built its allowance. Management may
consider reducing the provision credited to the allowance account upon
improvements in nonperforming asset levels.  

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 $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.  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.  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.  Management
expects 1996 net charge-off levels to revert to those experienced prior
to 1995 should local unemployment rates escalate.

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 billion during 1995, approximately twice the amount of
1994.  Aggregate deposit growth for United States financial institutions
was 6.6 percent in 1995.  Management expects savings levels to rise
throughout 1996 as customers build reserves in response to their
continued concerns over employment security.

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

DEPOSIT DISTRIBUTION
<TABLE>
<CAPTION>

                                1995              1994              1993              1992              1991      
                            ---------------------------------------------------------------------------------------
                            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..... $ 21,869    3.47% $ 23,955    3.31% $ 22,267    3.26% $ 22,819    3.84% $ 20,350    5.39%
NOW accounts..............   15,550    1.96    15,151    1.96    14,406    2.35    13,742    3.36    11,197    4.75
Savings accounts..........   71,911    3.25    83,142    3.13    73,400    3.34    56,288    4.21    36,883    5.35
Time less than $100.......  155,183    5.75   139,641    4.94   131,572    5.26   130,753    6.19   123,604    7.65
Time $100 or more.........   29,336    6.04    25,995    5.97    25,960    5.02    25,956    6.11    28,700    7.55
                           --------          --------          --------          --------          --------
  Total interest-bearing..  293,849    4.80%  287,884    4.22%  267,605    4.39%  249,558    5.36%  220,734    6.89%
Noninterest-bearing.......   24,090            21,849            19,657            18,657            16,056  
                           --------          --------          --------          --------          --------
  Total deposits.......... $317,939          $309,733          $287,262          $268,215          $236,790
                           ========          ========          ========          ========          ========
</TABLE>


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 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 will further 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.  Management anticipates a reduction in the Company's
cost of funds during 1996 as a result of its improved liquidity position.

An integral part of achieving lower costs is dependent on 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's choice not to
aggressively compete for these deposits during 1995 due to their higher
cost and the Company's improved liquidity position.

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

MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100 OR MORE
<TABLE>
<CAPTION>

DECEMBER 31                                                         1995     1994     1993     1992     1991
------------------------------------------------------------------------------------------------------------
<S>                                                              <C>      <C>      <C>      <C>      <C>     
Within three months............................................. $ 6,466  $ 7,861  $ 5,817  $ 4,529  $ 9,180
After three months but within six months........................   6,646    4,200    5,447    6,133    9,045
After six months but within twelve months.......................   8,590   10,740    5,957    5,242    7,707
After twelve months.............................................   7,982    7,410    7,060    8,179    4,187
                                                                 -------  -------  -------  -------  -------
  Total......................................................... $29,684  $30,211  $24,281  $24,083  $30,119
                                                                 =======  =======  =======  =======  =======

</TABLE>

As a result of the aforementioned actions taken to improve the liquidity
posture of the Company, management effectively eliminated its reliance on
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 secured under terms
of a blanket collateral agreement by a pledge of FHLB stock and certain
other qualifying collateral, such as investment and mortgage backed
securities and mortgage loans.  Such line had a maximum borrowing
capacity equal to 10.0 percent of total assets and accrued 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 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'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 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
resulting from the interest rate posted by the FHLB on the date of
prepayment for an advance of comparable maturity.  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 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 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:

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 Asset Liability Management Committee ("ALCO"). 
Specifically, ALCO utilizes a number of computerized modeling techniques
to monitor and attempt to control influences market changes have on the
Company's rate sensitive assets and liabilities.  One such technique
utilizes a static gap report, which attempts to measure the Company's
interest rate exposure by calculating the net amount of rate sensitive
assets ("RSA") and rate sensitive liabilities ("RSL") that reprice within
specific time intervals.  A positive gap, indicated by an RSA/RSL ratio
greater than 1.0, means 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.

Pursuant to the guidelines set forth in the MOU, management was required
to submit 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.  On August 2, 1995, the Company submitted to the FRB an interest
rate mitigation plan.  Such plan was deemed acceptable by the FRB on
August 22, 1995.  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.  

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.






INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>

                                                  DUE AFTER           DUE AFTER
                                                  THREE MONTHS        ONE YEAR
                                 DUE WITHIN       BUT WITHIN          BUT WITHIN       DUE AFTER
DECEMBER 31, 1995               THREE MONTHS      TWELVE MONTHS       FIVE YEARS       FIVE YEARS       TOTAL
-------------------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>              <C>              <C>         <C>      
Rate sensitive assets:
Investment securities.............. $ 16,212           $ 19,774         $ 43,540         $ 29,180    $108,706
Loans, net of unearned income......   70,529             17,389           54,808           71,109     213,835
Interest-bearing balances..........       26                 90                                           116
Federal funds sold.................   15,100                                                           15,100
                                    --------           --------         --------         --------    -------- 
  Total............................ $101,867           $ 37,253         $ 98,348         $100,289    $337,757
                                    ========           ========         ========         ========    ========

Rate sensitive liabilities:
Money market accounts..............                    $ 19,252                                      $ 19,252
NOW accounts.......................                      14,989                                        14,989
Savings accounts................... $    299                            $ 68,423                       68,722
Time deposits less than $100.......   25,801             64,523           68,699         $      6     159,029
Time deposits $100 or more.........    6,834             14,868            7,982                       29,684
Other borrowings...................                       3,000               48                        3,048
                                    --------           --------         --------         --------    --------
  Total............................ $ 32,934           $116,632         $145,152         $      6    $294,724
                                    ========           ========         ========         ========    ========

Rate sensitivity gap:
  Period........................... $ 68,933           $(79,379)        $(46,804)        $100,283     
  Cumulative....................... $ 68,933           $(10,446)        $(57,250)        $ 43,033    $ 43,033

RSA/RSL ratio:
  Period...........................     3.09               0.32             0.68        16,714.83        
  Cumulative.......................     3.09               0.93             0.81             1.15        1.15 

</TABLE>

Management has effectively lessened the Company's exposure to changing
interest rates as represented by the 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, this ratio falls 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.

Based on the static gap model at December 31, 1995, it appears the
Company is properly matched to guard against risk from fluctuations in
interest rates.  However, management is aware that should such an
interest rate fluctuation occur, depositors could shift funds from
transaction accounts into retail time deposits causing an increase in
fund costs.  Such a shift would negate some of the positive effects of
short-term loans and investments.

Although understanding the Company's gap position is important in
determining interest rate exposure, an interest rate sensitivity table
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 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 twelve 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 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 proforma net interest income scenarios under various
interest rate assumptions ("shocks").  Model results from December 31,
1995, indicate  that a decline in net interest income of 5.4 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 4.9 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 interest
rate changes has been limited through asset/liability management.

LIQUIDITY:

Liquidity is defined as a company's 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.  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 as 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.  

In accordance with the requirement of the MOU, the Company developed a
liquidity plan during the third quarter of 1995.   Such plan was
submitted to the FRB on August 21, 1995, and was deemed acceptable on
September 21, 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 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 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
respectively, recorded by the peer group at year-end 1995.  By placing
emphasis on the composition of the investment portfolio, management
expects continued stability in these ratios.

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 makes the Company less susceptible to market
depreciation on available for sale securities resulting from rising
interest rates.

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. 
Institutions not possessing the highest regulatory composite rating or
those experiencing significant growth are expected to operate well above
such minimum capital standards.  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 or
liquidity.

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, 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 sets forth the risk-adjusted core and total capital
calculations at December 31, 1995 and 1994:

RISK-ADJUSTED CAPITAL
<TABLE>
<CAPTION>

DECEMBER 31                                                                                  1995       1994
------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>        <C>
Tier I capital.......................................................................... $ 24,845   $ 24,839 
Tier II capital.........................................................................    2,203      3,338
                                                                                         --------   --------
  Total capital......................................................................... $ 27,048   $ 28,177
                                                                                         ========   ========

Risk-adjusted assets.................................................................... $170,089   $175,093
Risk-adjusted off-balance sheet items...................................................    4,489      4,632
Adjusted average assets for Leverage ratio.............................................. $357,410   $348,422

Tier I capital as a percentage of risk-adjusted assets and off-balance sheet items......     14.2%      13.8%
Total of Tier I and Tier II capital as a percentage of risk-adjusted assets and off-
 balance sheet items....................................................................     15.5       15.7 
Tier I capital as a percentage of total average assets less goodwill....................      7.0%       7.1%

</TABLE>

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.  Accordingly, such adjustment
is not required to be included in the preceding table.  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 addition, the MOU required the Company to submit 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.  Such
plan was submitted to the FRB on July 21, 1995, and was deemed acceptable
on September 8, 1995.  The plan was required to address, at a minimum,
(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 the Company's 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 Company's 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.  It was noted that the Company's
Leverage ratio is not projected to fall below the 5.0 percent minimum,
pursuant to the MOU, during the period covered by the plan.  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 recognition of the economic loss in the Company's investment
portfolio and the generation of capital through other means.

On August 2, 1995, 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 ("FDICIA")
regarding interest rate risk ("IRR").  Such ruling went into effect on
September 1, 1995.  This will allow regulatory agencies to consider the
potential negative effects 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, 1995.

The Company's dividends declared increased from $455 or $.62 per share to
$462 or $.63 per share 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.  It is the present
intention of the Board of Directors to continue to increase dividends in
the future.  However, these decisions will depend on operating results,
financial and economic conditions, capital needs, growth objectives,
appropriate dividend restrictions related to the Company and its
subsidiary and other relevant factors.  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 1996 totaling $1,612 plus net
profits earned by the subsidiary for the period from January 1, 1996,
through the date of declaration, less dividends previously paid in 1996.

REVIEW OF FINANCIAL PERFORMANCE:

The nation's top 50 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.  FDIC insurance premiums have been lowered again
effective January 1, 1996, and are estimated to save banks approximately
$1.0 billion dollars for the year.

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.  

Bank earnings in 1996 are expected to remain relatively unchanged from
1995 levels as improved cost controls are offset by higher provisions for
loan losses and continued pressure on net interest margins.  Declines in
recoveries of charged-off loans and greater volumes of nonperforming
loans are expected to result in higher loan loss provisions.  Such
increases in nonperforming loans along with more aggressive competition
for loans and deposits will restrict the earning potential of the banking
industry for 1996.

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
$0.27 for the year, compared with $4.53 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 product 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:

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 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.  Management anticipates an increase in
net interest income during 1996 if successful in building the Company's
loan portfolio and reducing its cost of funds.  In following its strategy
of becoming a traditional community bank, management plans to emphasize
loan growth through competitive pricing and offering new and enhanced
credit products.  The Company's improved liquidity position should also
aid in increasing net income as it will not be forced to aggressively
compete for funds or be reliant on high-cost borrowings.  However, higher
levels of impaired loans may result if local unemployment conditions
deteriorate thus diluting such positive influences.

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.  Should lending rates continue to decline, the
Company's return on the loan portfolio will flatten or decline as
competition for loan demand intensifies.   Management expects the
Company's net interest margin to improve during 1996 as its strengthened
liquidity position allows it to be more selective in competing for funds.






















Management analyzes interest income and interest expense by segregating
volume and rate 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.

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

                                                          1995 VS. 1994                 1994 VS. 1993       
                                                    --------------------------    --------------------------
                                                       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......................................... $ 1,477  $   638    $   839    $   13  $(1,124)    $1,137
  Tax-exempt......................................      92       16         76        46      (60)       106 
Investments:
  Taxable.........................................  (1,037)     305     (1,342)      864     (477)     1,341
  Tax-exempt......................................       1      (14)        15       229     (109)       338
Interest-bearing deposits with banks..............      (8)      (1)        (7)      (58)      50       (108)
Federal funds sold................................     982        5        977      (103)      12       (115)
                                                   -------  -------    -------    ------  -------     ------
    Total interest income.........................   1,507      949        558       991   (1,708)     2,699
                                                   -------  -------    -------    ------  -------     ------

Interest expense:
Money market accounts.............................     (34)      37        (71)       66       11         55 
NOW accounts......................................       8                   8       (41)     (58)        17
Savings accounts..................................    (266)      97       (363)      152     (160)       312
Time deposits less than $100......................   2,018    1,202        816       (20)    (432)       412
Time deposits $100 or more........................     218       18        200       249      247          2 
Short-term borrowings.............................     132      198        (66)      512       23        489
Long-term debt....................................     (24)      (8)       (16)       24      (38)        62
                                                   -------  -------    -------    ------  -------     ------
    Total interest expense........................   2,052    1,544        508       942     (407)     1,349
                                                   -------  -------    -------    ------  -------     ------
    Net interest income........................... $  (545) $  (595)   $    50    $   49  $(1,301)    $1,350
                                                   =======  =======    =======    ======  =======     ======

</TABLE>
















SUMMARY OF NET INTEREST INCOME
<TABLE>
<CAPTION>

                                                           1995                            1994               
                                                ---------------------------     ---------------------------
                                                         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..................................... $195,047   $17,238      8.84%   $185,318   $15,761      8.50%
  Tax-exempt..................................    4,649       364      7.83       3,657       272      7.44
Investments:
  Taxable.....................................  113,675     6,789      5.97     136,386     7,826      5.74
  Tax-exempt..................................   20,775     1,818      8.75      20,609     1,817      8.82
Interest-bearing deposits with banks..........      170        13      7.65         250        21      8.40
Federal funds sold............................   16,900       987      5.84         134         5      3.73
                                               --------   -------              --------   -------   
    Total earning assets......................  351,216    27,209      7.75%    346,354    25,702      7.42%
Less: allowance for loan losses...............    3,816                           3,540
Other assets..................................   11,770                           7,586  
                                               --------                        --------
    Total assets.............................. $359,170                        $350,400
                                               ========                        ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts......................... $ 21,869       758      3.47%   $ 23,955       792      3.31%
NOW accounts..................................   15,550       305      1.96      15,151       297      1.96
Savings accounts..............................   71,911     2,336      3.25      83,142     2,602      3.13
Time deposits less than $100..................  155,183     8,923      5.75     139,641     6,905      4.94
Time deposits $100 or more....................   29,336     1,771      6.04      25,995     1,553      5.97
Short-term borrowings.........................    9,935       677      6.82      11,186       545      4.87
Long-term debt................................    4,715       224      4.75       5,050       248      4.91
                                               --------   -------              --------   -------
    Total interest-bearing liabilities........  308,499    14,994      4.86%    304,120    12,942      4.26% 
Noninterest-bearing deposits..................   24,090                          21,849
Other liabilities.............................      547                           1,120
Stockholders' equity..........................   26,034                          23,311          
                                               --------   -------              --------   -------
    Total liabilities and stockholders' equity $359,170    14,994              $350,400    12,942
                                               ========   -------              ========   -------
    Net interest/income spread................            $12,215      2.89%              $12,760      3.16%
                                                          =======                         =======
    Net interest margin.......................                         3.48%                           3.68%
Tax equivalent adjustments:
Loans.........................................            $   124                         $    93
Investments...................................                618                             618
                                                          -------                         -------
    Total adjustments.........................            $   742                         $   711
                                                          =======                         =======






















</TABLE>

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 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. 

SUMMARY OF NET INTEREST INCOME (CONTINUED)
<TABLE>
<CAPTION>
 
                                                               1993                           1992           
                                                    ---------------------------    --------------------------
                                                             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......................................... $172,416   $15,748      9.13%  $157,674   $15,573    9.88%    
  Tax-exempt......................................    2,343       226      9.65      5,169       456    8.82
Investments:
  Taxable.........................................  113,380     6,962      6.14     96,964     7,181    7.41 
  Tax-exempt......................................   16,841     1,588      9.43     10,581     1,021    9.65  
Interest-bearing deposits with banks..............    2,255        79      3.50        694        39    5.62
Federal funds sold................................    3,281       108      3.29      7,936       254    3.20  
                                                   --------   -------             --------   -------
    Total earning assets..........................  310,516    24,711      7.96%   279,018    24,524    8.79% 
Less: allowance for loan losses...................    2,886                          2,114      
Other assets......................................   11,784                         15,399
                                                   --------                       --------
    Total assets.................................. $319,414                       $292,303 
                                                   ========                       ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts............................. $ 22,267       726      3.26%   22,819        876    3.84%
NOW accounts......................................   14,406       338      2.35    13,742        462    3.36
Savings accounts..................................   73,400     2,450      3.34    56,288      2,369    4.21  
Time deposits less than $100......................  131,572     6,925      5.26   130,753      8,088    6.19
    Time deposits $100 or more....................   25,960     1,304      5.02    25,956      1,586    6.11  
Short-term borrowings.............................    1,005        33      3.28       797         24    3.00
Long-term debt....................................    3,866       224      5.79     1,817        109    6.00
                                                   --------   -------            --------    ------- 
    Total interest-bearing liabilities............  272,476    12,000      4.40%  252,172     13,514    5.36%
Noninterest-bearing deposits......................   19,657                        18,657     
    Other liabilities.............................    4,104                         1,513      
    Stockholders' equity..........................   23,177                        19,961            
                                                   --------   -------            --------    -------
    Total liabilities and stockholders' equity.... $319,414    12,000            $292,303     13,514 
                                                   ========   -------            ========    -------
    Net interest/income spread....................            $12,711      3.56%             $11,010    3.43%
                                                              =======                        =======
    Net interest margin...........................                         4.09%                        3.95%  
Tax equivalent adjustments:
Loans.............................................            $    77                        $   155
Investments.......................................                540                            347
                                                              -------                        -------
    Total adjustments.............................            $   617                        $   502
                                                              =======                        =======
      
</TABLE>
                                                              


















SUMMARY OF NET INTEREST INCOME (CONTINUED)
<TABLE>
<CAPTION>
 
                                                                    1991              
                                                         ---------------------------
                                                                  INTEREST  AVERAGE   
                                                         AVERAGE  INCOME/   INTEREST
                                                         BALANCE  EXPENSE     RATE  
                                                         -------  --------  --------
<S>                                                     <C>        <C>         <C>
ASSETS:
Earning assets:
Loans:
  Taxable.............................................. $149,191   $16,114     10.80%
  Tax-exempt...........................................    6,356       588      9.25
Investments:
  Taxable..............................................   74,891     5,994      8.00
  Tax-exempt...........................................    7,194       726     10.09
Interest-bearing deposits with banks...................      914        74      8.10
Federal funds sold.....................................    8,390       463      5.53     
                                                        --------   ------- 
    Total earning assets...............................  246,936    23,959      9.70%
Less: allowance for loan losses........................    1,397
Other assets...........................................   14,463   
                                                        --------
    Total assets....................................... $260,002
                                                        ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts.................................. $ 20,350     1,096      5.39% 
NOW accounts...........................................   11,197       532      4.75
Savings accounts.......................................   36,883     1,972      5.35
Time deposits less than $100...........................  123,604     9,451      7.65
Time deposits $100 or more.............................   28,700     2,166      7.55
Short-term borrowings..................................          
Long-term debt.........................................    1,452       128      8.82
                                                        --------   -------
    Total interest-bearing liabilities.................  222,186    15,345      6.91%
Noninterest-bearing deposits...........................   16,056
Other liabilities......................................    3,783
Stockholders' equity...................................   17,977
                                                        --------   -------            
    Total liabilities and stockholders' equity......... $260,002    15,345
                                                        ========   -------
    Net interest/income spread.........................            $ 8,614      2.79%
                                                                   =======
    Net interest margin................................                         3.49%
Tax equivalent adjustments:
Loans..................................................            $   200
Investments............................................                247
                                                                   -------
    Total adjustments..................................            $   447
                                                                   =======
                                                              

</TABLE>

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 0.28 percent in 1995 from 0.24 percent in 1994.  Even after taking
higher provisions, net charge-offs still outdistanced the provision for
the year by $800 million, resulting in a 1.0 percent reduction in the
allowance for loan losses account.  It is likely that net charge-off
ratios will continue to climb in 1996 as credit card charge-offs 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 1996.

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 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.  Consideration will be made with respect to reducing the amount
credited to the allowance account should nonperforming asset levels
improve and loan demand not fluctuate significantly from expected amounts
in 1996.

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:

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 $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. 
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 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.  As of February 16, 1996, the Company,
due to its substantial compliance with all provisions of the MOU, had
such directive rescinded.  As a result, management expects a decline in
legal and consulting costs during 1996.

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 ("FDIC Board") put its
proposal to lower bank deposit insurance premiums into effect.  Such
reduction came in response to the recapitalization of the Bank Insurance
Fund ("BIF") 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.  On November 14, 1995,
the FDIC Board voted to further reduce the insurance premiums paid on
deposits covered by the BIF effective January 1, 1996.  Under the new
rate structure, rates will range from 3 to 27 cents per every one hundred
dollars of insured deposits, subject to the statutory requirement that
all institutions pay no less than $2 annually for FDIC insurance.  Such
rates came in response to the FDIC Board seeking to balance the
applicable requirements of meeting BIF long-term funding, the statutory
requirement of maintaining a risk-based deposit insurance system and
maintaining the BIF reserve ratio at the target Designated Reserve Ratio. 
Based upon its current risk characteristics, the Company's FDIC insurance
expense is expected to decline $415 in 1996 as compared to the 1995
level.

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

NONINTEREST EXPENSE
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                               1995     1994     1993     1992     1991
-------------------------------------------------------------------------------------------------------------
<S>                                                                <C>      <C>      <C>      <C>      <C>
Salaries and employee benefits expense:    
Salaries and payroll taxes........................................ $3,429   $3,022   $2,585   $2,432   $2,238  
Employee benefits.................................................    599      760      746      614      459
                                                                   ------   ------   ------   ------   ------
  Salaries and employee benefits expense..........................  4,028    3,782    3,331    3,046    2,697
                                                                   ------   ------   ------   ------   ------

Net occupancy and equipment expense:
Net occupancy expense.............................................    684      784      680      579      529
Equipment expense.................................................    538      465      654      781      657
                                                                   ------   ------   ------   ------   ------
Net occupancy and equipment expense...............................  1,222    1,249    1,334    1,360    1,186
                                                                   ------   ------   ------   ------   ------

OTHER EXPENSES:
Marketing expense.................................................    281      201      211      177      145 
Other taxes.......................................................    200      191      127      199      172
Stationery and supplies...........................................    250      262      338      337      168
Contractual services..............................................    879      727      597      682      486
Insurance including FDIC assessment...............................    480      717      807      630      611
Other.............................................................    854      820    1,107      821      636
                                                                   ------   ------   ------   ------   ------
  Other noninterest expense.......................................  2,944    2,918    3,187    2,846    2,218 
                                                                   ------   ------   ------   ------   ------
    Total noninterest expense..................................... $8,194   $7,949   $7,852   $7,252   $6,101
                                                                   ======   ======   ======   ======   ======  

</TABLE>

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.  Management anticipates a reduction in the
effective tax rate for 1996 as a result of higher levels of tax-exempt
income on investment securities and recognition of tax credits on its
limited partnership investment in a residential housing program.  Such
investment will provide for a reduction in income taxes by utilization of
tax credits allowed on such investments.  During 1995, the Company
recognized $71 of the $895 of total tax credits available from such
project that will be recognized annually until the year 2003.



As required by SFAS No. 109, "Accounting for Income Taxes," 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.


























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, 1995 and 1994, 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, 1995.  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, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1995, in conformity with
generally accepted accounting principles.




February 2, 1996




KRONICK KALADA BERDY & COMPANY
Kingston, Pennsylvania


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF INCOME                                       
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
           
YEAR ENDED DECEMBER 31                                                               1995      1994     1993
____________________________________________________________________________________________________________
<S>                                                                               <C>       <C>      <C>
INTEREST INCOME:
Interest and fees on loans:
  Taxable........................................................................ $17,238   $15,761  $15,748
  Tax-exempt.....................................................................     240       179      149
Interest on investment securities held to maturity:                                                           
  Taxable........................................................................   3,830     4,134    3,902
  Tax-exempt.....................................................................     895     1,199    1,048
Interest and dividends on investment securities available for sale:               
  Taxable........................................................................   2,839     3,518    2,839
  Tax-exempt.....................................................................     305                   
  Dividends......................................................................     120        79       91
Interest on trading account securities...........................................                95      130
Interest on deposits with banks..................................................      13        21       79
Interest on federal funds sold...................................................     987         5      108
                                                                                  _______   _______  _______ 
    Total interest income........................................................  26,467    24,991   24,094
                                                                                  _______   _______  _______
 
INTEREST EXPENSE:
Interest on deposits.............................................................  14,093    12,149   11,743
Interest on short-term borrowings................................................     677       545       33
Interest on long-term debt.......................................................     224       248      224
                                                                                  _______   _______  _______
    Total interest expense.......................................................  14,994    12,942   12,000
                                                                                  _______   _______  _______
    Net interest income..........................................................  11,473    12,049   12,094
Provision for loan losses........................................................     435       800    1,080
                                                                                  _______   _______  _______
    Net interest income after provision for loan losses..........................  11,038    11,249   11,014
                                                                                  _______   _______  _______

NONINTEREST INCOME:
Service charges, fees and commissions............................................   1,197     1,166    1,013
Net investment securities gains (losses).........................................  (4,393)      495    1,261 
Trading account profits (losses).................................................              (656)     297 
                                                                                  _______   _______  _______ 
    Total noninterest income (losses)............................................  (3,196)    1,005    2,571
                                                                                  _______   _______  _______

NONINTEREST EXPENSE:
Salaries and employee benefits expense...........................................   4,028     3,782    3,331
Net occupancy and equipment expense..............................................   1,222     1,249    1,334
Other expenses...................................................................   2,944     2,918    3,187
                                                                                  _______   _______  _______
    Total noninterest expense....................................................   8,194     7,949    7,852
                                                                                  _______   _______  _______
Income (loss) before income taxes................................................    (352)    4,305    5,733
Provision for income tax expense (benefit).......................................    (552)      980    1,583
                                                                                  _______   _______  _______
    Net income................................................................... $   200   $ 3,325  $ 4,150
                                                                                  =======   =======  =======



PER SHARE DATA:
Net income.......................................................................   $0.27     $4.53    $5.66
Cash dividends declared..........................................................   $0.63     $0.62    $0.61
Average common shares............................................................ 733,360   733,357  733,298

</TABLE>







See notes to consolidated financial statements.

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS                                             
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                        
DECEMBER 31                                                                               1995          1994
____________________________________________________________________________________________________________
<S>                                                                                   <C>           <C>            
ASSETS:
Cash and due from banks.............................................................. $  6,864      $  6,783
Interest-bearing deposits with banks.................................................      116            90
Federal funds sold...................................................................   15,100              
Investment securities:
  Held to maturity (market value 1994, $101,850).....................................                107,666
  Available for sale.................................................................  108,706        44,900
Loans, net of unearned income........................................................  213,835       194,485
  Less: allowance for loan losses....................................................    3,903         3,576
                                                                                      ________      ________
Net loans............................................................................  209,932       190,909
Premises and equipment, net..........................................................    3,070         3,293
Accrued interest receivable..........................................................    2,872         2,636
Other assets.........................................................................    4,288         6,186
                                                                                      ________      ________
    Total assets..................................................................... $350,948      $362,463  
                                                                                      ========      ========
 
LIABILITIES:
Deposits:
  Noninterest-bearing................................................................ $ 25,423      $ 23,462
  Interest-bearing...................................................................  291,676       292,707
                                                                                      ________      ________
    Total deposits...................................................................  317,099       316,169
Short-term borrowings................................................................                 15,956
Long-term debt.......................................................................    3,048         5,050
Accrued interest payable.............................................................    1,761         1,556
Other liabilities....................................................................    1,145         1,043
                                                                                      ________      ________
    Total liabilities................................................................  323,053       339,774
                                                                                      ________      ________


STOCKHOLDERS' EQUITY:
Common stock, par value $1, authorized 4,000,000 shares, issued and outstanding 
 733,360 shares......................................................................      733           733
Capital surplus......................................................................    6,310         6,310
Retained earnings....................................................................   20,072        20,334
Net unrealized gain (loss) on available for sale securities..........................      780        (4,688) 
                                                                                      ________      ________
    Total stockholders' equity.......................................................   27,895        22,689
                                                                                      ________      ________ 
    Total liabilities and stockholders' equity....................................... $350,948      $362,463
                                                                                      ========      ========
</TABLE>























See notes to consolidated financial statements.



<TABLE>
<CAPTION>




CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY              
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                                
                                                                                NET UNREALIZED         TOTAL
                                            COMMON  CAPITAL  RETAINED TREASURY  GAIN (LOSS) ON  STOCKHOLDERS'
FOR THE THREE YEARS ENDED DECEMBER 31, 1995  STOCK  SURPLUS  EARNINGS    STOCK      SECURITIES        EQUITY   BALANCE,
____________________________________________________________________________________________________________
<S>                                           <C>    <C>      <C>          <C>         <C>           <C>   
DECEMBER 31, 1992............................ $733   $6,310   $13,758      $(1)                      $20,800
Net income...................................                   4,150                                  4,150
Sale of common stock held in treasury, net...                                1                             1
Dividends declared: $0.61 per share..........                    (444)                                  (444)
                                              ____   ______   _______      ___         _______       _______
BALANCE, DECEMBER 31, 1993...................  733    6,310    17,464                                 24,507
Net income...................................                   3,325                                  3,325
Dividends declared: $0.62 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: $0.63 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
                                              ====   ======   =======      ===         =======       =======

</TABLE>





































See notes to consolidated financial statements.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31                                                               1995      1994     1993  
____________________________________________________________________________________________________________
<S>                                                                              <C>        <C>      <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $    200   $ 3,325  $ 4,150
Adjustments:                                                                            
  Provision for loan losses.....................................................      435       800    1,080
  Depreciation and amortization.................................................      645       667      532
  Amortization of loan fees.....................................................     (179)     (173)    (318)
  Deferred income tax benefit...................................................     (140)   (2,608)    (300)
  (Gains) losses on sale of investment securities available for sale............    4,393      (495)  (1,261)
  Gains on sale of loans........................................................      (72)                  
  (Gains) losses on sale of other real estate...................................      (36)       (9)       6 
  Changes in:
    Trading account securities..................................................                287      910 
    Interest receivable.........................................................     (236)     (322)     (26)
    Other assets................................................................     (783)    2,242     (154)
    Interest payable............................................................      205       316      (37)
    Other liabilities...........................................................       95       (48)    (101)
                                                                                 ________   _______  _______
      Net cash provided by operating activities.................................    4,527     3,982    4,481
                                                                                 ________   _______  _______       
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities............................   87,103    13,637   69,161
Proceeds from repayments of investment securities:
  Held to maturity..............................................................    2,970    13,833   31,590
  Available for sale............................................................    1,887     1,532    9,731
Purchases of investment securities:
  Held to maturity..............................................................     (179)   (9,597) (53,979)
  Available for sale............................................................  (44,054)  (29,284) (89,994)
Proceeds from sale of loans.....................................................    5,591                   
Proceeds from sale of other real estate.........................................      457       291      106
Net increases in lending activities.............................................  (25,434)  (18,483) (14,039)
Purchases of premises and equipment.............................................     (204)     (860)    (223)
                                                                                 ________   _______  _______
      Net cash provided by (used in) investing activities.......................   28,137   (28,931) (47,647)
                                                                                 ________   _______  _______

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
  Money market, NOW, savings and noninterest-bearing accounts...................  (13,946)    4,560   13,564
  Time deposits.................................................................   14,877    14,374    2,845 
  Short-term borrowings.........................................................  (15,956)    6,815    7,141
Proceeds from the issuance of long-term debt....................................                 50    3,000
Payments on long-term debt......................................................   (2,002)     (800)    (400)
Proceeds from the issuance of common shares, net................................                           1  
Cash dividends paid.............................................................     (456)     (448)    (436)
                                                                                 ________   _______  _______
      Net cash provided by (used in) financing activities.......................  (17,483)   24,551   25,715
                                                                                 ________   _______  _______
      Net increase (decrease) in cash and cash equivalents......................   15,181      (398) (17,451)
      Cash and cash equivalents at beginning of year............................    6,783     7,181   24,632
                                                                                 ________   _______  _______
      Cash and cash equivalents at end of year.................................. $ 21,964   $ 6,783  $ 7,181 
                                                                                 ========   =======  =======

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
  Interest...................................................................... $ 14,789   $12,626  $12,037
  Income taxes..................................................................      114     1,511    2,125
Noncash items:
  Transfers of:
    Loans to other real estate..................................................      636       260  $   110
    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...... $ (5,468)  $ 4,688

</TABLE>






See notes to consolidated financial statements.




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Business:

Comm Bancorp, Inc. provides a full range of banking and related financial
services through its subsidiary to individuals and corporate customers
and is subject to intense competition from other financial service
companies with respect to these services and customers.  Comm Bancorp,
Inc., which is a holding company, is also subject to the regulations of
certain federal and state agencies and undergoes periodic examinations by
such regulatory authorities.

Basis of presentation:

The consolidated financial statements of Comm Bancorp, Inc. and
subsidiary, Community Bank and Trust Company, (collectively, the
"Company") have been prepared in conformity with generally accepted
accounting principles, Regulation S-X 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.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported periods.  Actual results could differ from those
estimates.

Investment securities: 

Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."   This Statement 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 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.


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

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 in implementing asset/liability strategies or would 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 generally 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, except for Federal Home Loan Bank ("FHLB") and Federal Reserve
Bank ("FRB") stock, which are carried at cost.  Estimated fair values for
investment securities are based on quoted market prices from a national
electronic pricing service.  Fair values of securities unavailable
through such service are arrived at through dealer or broker price
quotations. 

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.

Financial options:

The Company utilized option contracts to limit its exposure to market
fluctuations on investment securities prior to the fourth quarter of
1994. 


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): 

Options commit the Company to purchase or sell securities at a specified
price at a future date.   Premiums received from writing options were
included in other liabilities until the option was exercised and
thereafter included in the cost of such investment, or until the
expiration date, when they were recognized in noninterest income.

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 mortgage loans.
Accordingly, SFAS No. 122, "Accounting for Mortgage Servicing Rights,"
which is required to be applied prospectively in fiscal years beginning
after December 15, 1995, will not have any effect on future operating
results or financial position.

Nonperforming assets:

Effective January 1, 1995, the Company adopted 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 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 
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):

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.  Restructured loans
are loans with original terms that have been modified to below-market
rate terms as a result of a change in the borrower's financial condition. 


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.  In-substance
foreclosures are properties in which the borrower has little or no equity
in the collateral, where repayment of the loan is expected only from the
operation or sale of the collateral and the borrower either effectively
abandons control of the property or the borrower has retained control of
the property but the borrower's ability to rebuild equity based on
current financial  conditions  is considered doubtful.  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 its appraised fair value less estimated cost
to sell 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.

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.

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 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

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.

Under SFAS No. 114, the 1995 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.  Prior to 1995, the allowance for loan losses
related to such loans was based on undiscounted cash flows or the fair
value of the collateral for collateral dependent loans.  The adoption of
SFAS No. 114 did not have a material effect on operating results or
financial position.

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 account.  Such agencies may require
the
Company to recognize additions to the allowance based on their judgments
concerning 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, 1995.

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.  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.




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Long-lived and intangible assets:

In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of."  SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identified 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 is
included in other assets and amortized on a straight-line basis over
fifteen years.  SFAS No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995, with earlier application
encouraged.  The Company's adoption of SFAS No. 121 in 1996 is not
expected to have any material effect on operating results or financial
position.

Earnings per share:

Earnings per common share is based on the weighted average number of
common shares outstanding during the period.  Common shares outstanding
have been adjusted to reflect a four-for-one stock split effective
February 1, 1994, which changed par value from $4.00 per share to $1.00
per share.

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, commercial letters of credit and securities option
contracts.  Such financial instruments are recorded in the financial
statements when they are exercised.

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.  Pension costs are
accrued monthly to salaries and benefits expense with the plan being
funded annually.

In addition, the Company has a deferred compensation plan for certain
senior management employees.  Costs for such plan are recognized monthly
in salaries and benefits expense on the accrual basis.

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.

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,
noninterest-bearing balances due from banks and federal funds sold.
Federal funds are highly liquid investments sold for one-day periods.

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.  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.

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

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 $1,057
and $1,022 at December 31, 1995 and 1994, respectively.  Such reserve
balances averaged $1,079 in 1995 and $985 in 1994.  In addition,
compensating balances are maintained with the FRB and 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 of $2,890 and $2,663 at December
31, 1995 and 1994, respectively.  Compensating balances averaged $3,124
in 1995 and $3,314 in 1994.




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 at September 30, 1995, to
available for sale after reviewing a comprehensive analysis of the risk
profile of its held to maturity classification.  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, as 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 loss on securities transferred from
held to maturity to available for sale included in such loss was $1,825. 
The Company did not sell any security from the held to maturity
classification in 1995 or 1994.

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.  On October 18, 1995, the FASB voted to temporarily suspend this
rule allowing enterprises a one-time opportunity during the fourth
quarter of 1995 to reassess the appropriateness of the classifications of
all securities held without calling into question the holding intent of
that enterprise.  Management was unaware that FASB would suspend such
rule at the time it decided to transfer securities from held to maturity
to available for sale.  Accordingly, management will not be able to
establish a held to maturity classification for future purchases or
transfers for an indefinite period.

During the third quarter of 1994, management reevaluated its intent to
hold a portion of its available for sale portfolio based on
asset/liability management considerations.  Upon completion of such
considerations and within the confines of the rules, management
transferred twenty-two securities with an amortized cost of $17,470 to
the held to maturity classification.  These available for sale securities
had a net unrealized loss of $998 at the transfer date.  Such loss
continued to be reported in a separate component of stockholders' equity,
being amortized over the lives of the securities as an adjustment to
yield in a manner consistent with the amortization of any discount, until
such securities were transferred back to available for sale at September
30, 1995.



3. INVESTMENT SECURITIES (CONTINUED):

The following table sets forth the amortized cost and fair value of
securities classified as held to maturity at December 31, 1994:
<TABLE>
<CAPTION>

                                            AMORTIZED  UNREALIZED  UNREALIZED      FAIR
DECEMBER 31, 1994                                COST       GAINS      LOSSES     VALUE
_______________________________________________________________________________________                  
<S>                                          <C>              <C>      <C>     <C> 
U.S. Treasury securities.................... $ 12,042         $ 1      $  454  $ 11,589
U.S. Government agencies....................   36,993                   2,543    34,450
State and municipals........................   20,616          87         713    19,990
Mortgage backed securities..................   38,015                   2,194    35,821
                                             ________         ___      ______  ________ 
  Total..................................... $107,666         $88      $5,904  $101,850
                                             ========         ===      ======  ========
</TABLE>

The following tables set forth the amortized cost and fair value of
securities classified as available for sale at December 31, 1995 and
1994:

<TABLE>
<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 
Other securities............................    1,774         302                 2,076
                                             ________      ______        ____  ________
  Total..................................... $107,525      $1,597        $416  $108,706
                                             ========      ======        ====  ========

</TABLE>

<TABLE>
<CAPTION>
                                            AMORTIZED  UNREALIZED  UNREALIZED      FAIR
DECEMBER 31, 1994                                COST       GAINS      LOSSES     VALUE
_______________________________________________________________________________________
<S>                                           <C>            <C>       <C>      <C>
U.S. Treasury securities....................  $ 3,735                  $  369   $ 3,366
U.S. Government agencies....................    8,358                   1,075     7,283
Mortgage backed securities..................   34,186        $  1       4,743    29,444 
Other securities............................    4,801         131         125     4,807
                                              _______        ____      ______   _______
  Total.....................................  $51,080        $132      $6,312   $44,900
                                              =======        ====      ======   =======


Proceeds from the sales of available for sale securities amounted to
$87,103, $13,637 and $69,161 in 1995, 1994 and 1993, respectively.  The
Company realized gross gains of $320 in 1995, $549 in 1994 and $1,325 in
1993.  Gross losses of $4,713, $54 and $64 were realized in 1995, 1994
and 1993, respectively.  The net unrealized holding gain, included as a
separate component of stockholders' equity, amounted to $780, net of
income taxes of $401, at December 31, 1995.  Such gain represents a
change in the net unrealized adjustment of $5,468, net of income taxes of
$2,816, from December 31, 1994.  The net unrealized holding loss totaled
$4,688, net of income taxes of $2,415, at December 31, 1994.  Such
unrealized holding loss included $923 that represented the unamortized
unrealized loss, aforementioned in this note, related to available for
sale securities transferred to held to maturity.

At December 31, 1995 and 1994, other securities include marketable equity
securities of $2,076 and $2,018, respectively.  The fair value of such
securities exceeded their cost by $302 and $131 at December 31, 1995 and
1994, respectively.

3. INVESTMENT SECURITIES (CONTINUED):

The Company held collateralized mortgage obligations ("CMOs") deemed to
be high-risk as defined in the Board of Governors of the Federal Reserve
System's ("Federal Reserve Board's") Supervisory Policy Statement on
Securities Activities during 1995, 1994 and 1993.  High-risk CMOs are
defined as any mortgage derivative product 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, 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.  None of such Federal Reserve Board defined high-risk securities
met the definition of high-risk nonequity CMOs as defined in Issue 2, of
FASB's Emerging Issues Task Force ("EITF") 89-4, "Accounting for a
Purchased Investment in a Collateralized Mortgage Obligation Instrument
or in a Mortgage-Backed Interest-Only Certificate."  EITF 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.  The amortized cost and fair value of
Federal Reserve Board defined high-risk CMOs at December 31, 1994,
amounted to $26,481 and $22,251, respectively.  Such securities had gross
unrealized losses of $4,230 at December 31, 1994.  Proceeds from the sale
of high-risk CMOs amounted to $27,674 in 1995, $8,611 in 1994 and $23,879
in 1993.  Gross gains on such sales of $66, $338 and $437 were realized
in 1995, 1994 and 1993, respectively.  Gross losses of $1,621 were
realized on the sale of Federal Reserve Board defined high-risk CMOs in
1995.

Investment securities with an amortized cost of $33,997 and $38,971 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 $34,050 and
$36,738 at December 31, 1995 and 1994, 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, 1995.  The weighted average
yield based 



3. INVESTMENT SECURITIES (CONTINUED):

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 and CMOs, which have been presented based upon
estimated cash flows, assuming no change in the current interest rate
environment.  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>
<TABLE>
<CAPTION>

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, 1995              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..... $16,124   5.70% $27,370   5.62%                                $ 43,494   5.65%
U.S. Government agencies.....   4,699   4.80   21,817   4.88                                   26,516   4.87 
State and municipals.........     405   5.82    3,947   5.82   $5,780   8.33% $19,485  8.11%   29,617   7.82
Mortgage backed securities...     341   6.89    2,601   6.48    3,182   5.82                    6,124   6.16
Other securities.............                                                   1,774  6.00     1,774   6.00
                              _______         _______          ______         _______        ________ 
  Total...................... $21,569   5.52% $55,735   5.38%  $8,962   7.44% $21,259  7.93% $107,525   6.09%
                              =======         =======          ======         =======        ========

Fair value:
U.S. Treasury securities..... $16,166         $27,585                                        $ 43,751
U.S. Government agencies.....   4,685          21,528                                          26,213
State and municipals.........     405           3,946          $6,034         $20,127          30,512
Mortgage backed securities...     342           2,614           3,198                           6,154
Other securities.............                                                   2,076           2,076
                              _______         _______          ______         _______        ________
  Total...................... $21,598         $55,673          $9,232         $22,203        $108,706
                              =======         =======          ======         =======        ======== 
</TABLE>

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 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
$2,420 of tax-exempt obligations of local municipalities, at December 31,
1995.

In October 1994, the FASB issued SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments," which requires disclosures about amounts, nature and terms
of derivative financial instruments.  In addition, SFAS No. 119 requires
that a distinction be made between financial instruments held or issued
for trading purposes and those held or issued for other than trading
purposes. For entities that hold or issue derivative financial
instruments for trading purposes, SFAS No. 119 requires disclosure of
average fair value and of net trading gains or losses.  For entities that
hold or issue derivative financial instruments for purposes other than
trading, it requires disclosure about those purposes and how the
instruments are reported  in  financial  statements.    For  entities 
that  hold or  issue  
3. INVESTMENT SECURITIES (CONTINUED):

derivative financial instruments and account for them as hedges of
anticipated transactions, it requires disclosure about the anticipated
transactions, the classes of derivative financial instruments used to
hedge those transactions, the amounts of hedging gains and losses
deferred and the transactions or other events that result in recognition
of the deferred gains or losses in earnings.

Because SFAS No. 119 excludes mortgage backed securities and interest-
only and principal-only obligations from its definition of derivative
financial instruments,  the  Company's  involvement  was  limited  to 
its  writing 
of covered call option contracts on U.S. Treasury securities, which were
subsequently exercised or expired.  Such options were used to limit its
exposure to market fluctuations on investment securities and were not
used for trading purposes.  A call option obligates the Company to sell a
fixed quantity of securities to the option holder at a specific price
within a specific term.  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 $155 and
gross losses of $110 and $41 in 1994 and 1993, respectively, 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 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 option and trading activities
in the future.

4. LOANS AND ALLOWANCE FOR LOAN LOSSES:

The following table sets forth the composition of the loan portfolio, net
of unearned interest of $2,682 and $3,042 and net unamortized loan fees
of $801 and $852 at December 31, 1995 and 1994, respectively:
<TABLE>
<CAPTION>

DECEMBER 31                                                            1995        1994
_______________________________________________________________________________________
<S>                                                                <C>         <C>     
Commercial, financial and other................................... $ 41,593    $ 29,419
Real estate:
  Construction....................................................    1,014       2,771
  Mortgage........................................................  151,926     138,379
Consumer, net.....................................................   19,302      23,916
                                                                   ________    ________
    Total......................................................... $213,835    $194,485 
                                                                   ========    ========
</TABLE>

Loans with fixed interest rates totaled $172,480 and $166,815 while loans
with variable interest rates totaled $41,355 and $27,670 at December 31,
1995 and 1994, respectively.




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

The following table sets forth maturity information of the loan portfolio
by major category at December 31, 1995:

<TABLE>
<CAPTION>
                                                  AFTER ONE
                                      WITHIN      BUT WITHIN       AFTER     
DECEMBER 31, 1995                    ONE YEAR     FIVE YEARS     FIVE YEARS       TOTAL
_______________________________________________________________________________________
<S>                                   <C>            <C>           <C>         <C>     
Maturity schedule:
Commercial, financial and other...... $23,673        $ 7,994       $  9,926    $ 41,593
Real estate: 
  Construction.......................   1,014                                     1,014
  Mortgage...........................   3,164         17,547        131,215     151,926
Consumer, net........................     347         13,500          5,455      19,302 
                                      _______        _______       ________    ________
    Total............................ $28,198        $39,041       $146,596    $213,835
                                      =======        =======       ========    ========
</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 $3,157 at December 31, 1995,
and $4,828 at December 31, 1994.  Originations totaled $2,099 while
repayments totaled $3,606 for such loans during 1995.  In addition,
changes in the composition of the Board of Directors and the group
comprising executive officers accounted for a reduction of $164 in such
loans.  At December 31, 1995 and 1994, none of such loans were classified
as nonaccrual, past due, restructured or potential problem loans.

At December 31, 1995, the Company had no concentrations of loans
exceeding 10.0 percent of total loans 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 the second quarter of 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 had no loans for sale at
December 31, 1995.












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

The following table sets forth information concerning nonperforming
loans at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31                                                            1995        1994
_______________________________________________________________________________________
<S>                                                                  <C>         <C>
Nonaccrual loans:
Commercial, financial and other..................................... $  167      $   45
Real estate:
  Construction......................................................
  Mortgage..........................................................  1,164       1,352
Consumer, net.......................................................                   
                                                                     ______      ______
    Total nonaccrual loans..........................................  1,331       1,397
                                                                     ______      ______

Loans past due 90 days or more:
Commercial, financial and other.....................................    181          33
Real estate:
  Construction......................................................
  Mortgage..........................................................  1,633       1,194
Consumer, net.......................................................    336         197
                                                                     ______      ______
    Total loans past due 90 days or more............................  2,150       1,424
                                                                     ______      ______   
Restructured loans..................................................    262         236
                                                                     ______      ______
    Total nonperforming loans....................................... $3,743      $3,057
                                                                     ======      ======
</TABLE>

The average recorded investment in impaired loans was $1,621 for 1995 and
$2,075 for 1994.  The recorded investment in impaired loans was $1,593
and $1,633 at December 31, 1995 and 1994, respectively.  Included in
these amounts were $1,331 and $1,397, respectively, for which there were
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.  Interest income related to impaired loans would have been $57,
$136 and $103 in 1995, 1994 and 1993, respectively, had such loans been
current and the terms of the loans not been modified. Interest recognized
on impaired loans amounted to $92 in 1995, $45 in 1994 and $14 in 1993. 
Included in these amounts is interest recognized on a cash basis of $87,
$40 and $9, respectively.  Cash received on impaired loans applied as a
reduction of principal totaled $595, $183 and $64 in 1995, 1994 and 1993,
respectively.  There were no commitments to extend additional funds to
such parties at December 31, 1995 and 1994.









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

The following table sets forth an analysis of changes affecting the
allowance for loan losses account for the three years ended December 31,
1995:
<TABLE>
<CAPTION>

                                                                  1995    1994    1993
______________________________________________________________________________________
<S>                                                             <C>     <C>     <C>  
Balance, January 1............................................. $3,576  $3,169  $2,497
Provision for loan losses......................................    435     800   1,080
Loans charged-off..............................................   (393)   (550)   (580)
Loans recovered................................................    285     157     172
                                                                ______  ______  ______
Balance, December 31........................................... $3,903  $3,576  $3,169
                                                                ======  ======  ======
</TABLE>

5. PREMISES AND EQUIPMENT, NET:

The following table sets forth the major components of premises and
furniture and equipment at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31                                                                1995    1994
_______________________________________________________________________________________
<S>                                                                      <C>     <C>   
Land.................................................................... $  187  $  517
Premises................................................................  4,582   4,384
Leasehold improvements..................................................    166     166
Furniture and equipment.................................................  2,866   2,564
                                                                         ______  ______
                                                                          7,801   7,631
Less: accumulated depreciation..........................................  4,731   4,338
                                                                         ______  ______
  Total................................................................. $3,070  $3,293
                                                                         ======  ======
</TABLE>

Amounts charged to noninterest expense for depreciation amounted to $428,
$450 and $320 in 1995, 1994 and 1993, respectively.

Certain facilities and equipment are leased under operating lease
agreements expiring at various dates until the year 2009.  One lease
provides 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 $304 in 1995, $308 in 1994 and $397 in 1993.  Minimum
required annual rentals for each of the years 1996 through 2000 are $304,
$212, $149, $70 and $71, respectively, and $468, thereafter, totaling
$1,274.

6. OTHER ASSETS:

The following table sets forth the major components of other assets at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1995    1994
_______________________________________________________________________________________
<S>                                                                      <C>     <C>   
Goodwill................................................................ $1,659  $1,878
Deferred income taxes...................................................    875   3,551
Other real estate.......................................................    441     226
Other...................................................................  1,313     531
                                                                         ______  ______
  Total................................................................. $4,288  $6,186
                                                                         ======  ======
</TABLE>

Total amortization expense on goodwill amounted to $218 per year for
1995, 1994 and 1993.

7. DEPOSITS:

The following table sets forth the major components of interest-bearing
and noninterest-bearing deposits at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31                                                              1995      1994
_______________________________________________________________________________________
<S>                                                                  <C>       <C>           
Interest-bearing deposits:
  Money market accounts............................................. $ 19,252  $ 23,958
  NOW accounts......................................................   14,989    14,698
  Savings accounts..................................................   68,722    80,215
  Time deposits less than $100......................................  159,029   143,625
  Time deposits $100 or more........................................   29,684    30,211
                                                                     ________  ________
    Total interest-bearing deposits.................................  291,676   292,707
Noninterest-bearing deposits........................................   25,423    23,462
                                                                     ________  ________
    Total deposits.................................................. $317,099  $316,169
                                                                     ========  ========
</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 $1,419 and $2,373 at December 31,
1995 and 1994, respectively.

The following table sets forth maturities of time deposits $100 or more
at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31                                                               1995     1994
_______________________________________________________________________________________
<S>                                                                    <C>      <C>
Within three months................................................... $ 6,466  $ 7,861
After three months but within six months..............................   6,646    4,200
After six months but within twelve months.............................   8,590   10,740
After twelve months...................................................   7,982    7,410
                                                                       _______  _______
  Total............................................................... $29,684  $30,211
                                                                       =======  =======
</TABLE>

Interest expense on time deposits $100 or more amounted to $1,771, $1,553
and $1,304 in 1995, 1994 and 1993, respectively.  The aggregate amounts
of maturities for all time deposits at December 31, 1995, were $105,410
in 1996, $35,071 in 1997, $19,690 in 1998, $13,558 in 1999, $14,291 in
2000 and $693 thereafter.

8. SHORT-TERM BORROWINGS:

Short-term borrowings consist of a line of credit and fixed-rate advances
with the FHLB secured under terms of a blanket collateral agreement by a
pledge of FHLB 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 has the right to reduce or
terminate the line at any time without prior notice  and the Company may
repay such line at any  

8. SHORT-TERM BORROWINGS (CONTINUED):

time without incurring prepayment penalties.  Short-term fixed-rate 
advances are issued with maturities less than one year based on FHLB'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 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 resulting from the interest rate posted by the FHLB on the date of
prepayment for an advance of comparable maturity.

At December 31, 1995, the Company had no short-term borrowings
outstanding.  At December 31, 1994, total short-term borrowings amounted
to $15,956 at 6.6 percent.  The average daily balance and weighted
average rate on aggregate short-term borrowings was $9,935 at 6.8 percent
in 1995 and $11,186 at 4.9 percent in 1994.  The maximum amount of all
short-term borrowings outstanding at any month end was $28,000 and
$19,430 during 1995 and 1994, respectively.  The FHLB 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 during 1995.  The maximum
amount of such loan outstanding at any month-end was $17,600 during 1995. 
Short-term borrowings during 1994 consisted entirely of the FHLB line of
credit.

9. LONG-TERM DEBT:

The following table sets forth the components of long-term debt at
December 31, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31                                                                1995    1994
_______________________________________________________________________________________
<S>                                                                      <C>     <C>
4.3% note due September 9, 1996......................................... $3,000  $3,000
5.7% note due September 23, 1997........................................          2,000
7.5% note due September 2, 2009.........................................     48      50
                                                                         ______  ______
  Total................................................................. $3,048  $5,050
                                                                         ======  ======
</TABLE>
 

The 5.7 percent fixed-rate note due in 1997 was redeemed at the option of
the Company 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
of the same amount and terms. 

The 4.3 percent fixed-rate note due 1996 is an advance from the FHLB. 
The note requires monthly interest payments and is redeemable, subject to
a prepayment fee, in whole or in part at the option of the Company prior
to maturity.    The 7.5 percent FHLB note is a fixed-rate amortizing
advance 
9. LONG-TERM DEBT (CONTINUED):

from the FHLB 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 1996
through 2000.  The prepayment fee applicable to FHLB advances is
aforementioned in Note 8 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 stock.

10. EMPLOYEE BENEFIT PLANS:

The Company has a defined contribution plan covering all employees who
meet the age and service requirements.  Contributions to the plan are
determined by the Board of Directors and are based upon a prescribed
percentage of the annual compensation of all participants.  Salaries and
employee benefits expense included $50 in 1995, $87 in 1994 and $91 in
1993 for the plan.

The Company also has a deferred compensation plan for certain senior
management employees.  Expense for such plan is being recognized through
the full eligibility dates of the participants and amounted to $29 in
1995, 1994 and 1993.  Life insurance contracts are being used to fund
this plan.

11. COMMITMENTS, CONCENTRATIONS AND CONTINGENT LIABILITIES:

The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates.  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, 1995 and 1994:
<TABLE>
<CAPTION>

DECEMBER 31                                                               1995     1994
_______________________________________________________________________________________
<S>                                                                     <C>      <C>
Commitments to extend credit........................................... $7,191   $7,619
Unused portions of home equity and credit card lines...................  1,382    1,451
Commercial letters of credit...........................................  1,009      486
                                                                        ______   ______
  Total................................................................ $9,582   $9,556
                                                                        ======   ======
</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 

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

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 canceled prior to such date at the
option of the Company.

The Company utilized option contracts to limit its exposure to market
fluctuations on investment securities prior to the fourth quarter of
1994. Options give the holder the right to purchase or sell securities at a
specified price at a future date.  The contractual or notional amount of
option contracts does not represent exposure to credit loss, but rather
the principal amount of the underlying securities.

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, 1995 and 1994.  Such commitments are generally issued for one year or
less and often expire unused in whole or in part by the customer.  The
amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, 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 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.  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 maintains
loan-to-value ratios of no greater than 80.0 percent.  Although the
credit portfolio is diversified, the Company and its borrowers are
dependent on the continued viability of the Northeastern Pennsylvania
economy.

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,
1995, there were no significant concentrations of credit risk from any
one issuer 

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

with the exception of U.S. Treasury securities and U.S. Government agencies.

There is no material legal proceeding to which the Company is a party, or
of 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.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company discloses fair value information about financial instruments,
whether or not recognized in 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.  Certain financial instruments and all nonfinancial
instruments are excluded from disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.

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.

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.

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.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):

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 is the amount payable on demand at the reporting date.

Deposits with stated maturities:
The present value of future cash flows for time deposits is used to
estimate fair value.  The discount rates used are the current rates
offered for time deposits with similar maturities.

Short-term borrowings:
The carrying value of short-term borrowings at a variable interest rate
approximates the fair value.

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.

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.













12. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):

The following table represents the carrying value and estimated fair
value of financial instruments at December 31, 1995 and 1994:
<TABLE>
<CAPTION>

                                                     1995                  1994        
                                              _________________________________________
                                              CARRYING       FAIR   CARRYING       FAIR
DECEMBER 31                                      VALUE      VALUE      VALUE      VALUE
_______________________________________________________________________________________
<S>                                           <C>        <C>        <C>        <C>
Financial assets:
Cash and cash equivalents.................... $ 21,964   $ 21,964   $  6,783   $  6,783
Interest-bearing deposits with banks.........      116        116         90         90
Investment securities........................  108,706    108,706    152,566    146,750
Net loans....................................  209,932    214,595    190,909    181,465
Accrued interest receivable..................    2,872      2,872      2,636      2,636
                                              ________   ________   ________   ________
  Total...................................... $343,590   $348,253   $352,984   $337,724
                                              ========   ========   ========   ========

Financial liabilities:
Deposits without stated maturities........... $128,386   $128,386   $142,333   $142,333
Deposits with stated maturities..............  188,713    190,071    173,836    173,380
Short-term borrowings........................                         15,956     15,956
Long-term debt...............................    3,048      3,028      5,050      4,948
Accrued interest payable.....................    1,761      1,761      1,556      1,556
                                              ________   ________   ________   ________
  Total...................................... $321,908   $323,246   $338,731   $338,173
                                              ========   ========   ========   ========
</TABLE>

13. INCOME TAXES:

The following table sets forth the current and deferred amounts of the
provision for income taxes (benefit) for the three years ended December
31, 1995:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31                                            1995    1994    1993
______________________________________________________________________________________
<S>                                                              <C>    <C>     <C>
Current......................................................... $(412) $1,173  $1,883
Deferred........................................................  (140)   (193)   (300)
                                                                 _____  ______  ______
  Total......................................................... $(552) $  980  $1,583
                                                                 =====  ======  ======
</TABLE>

The following is a reconciliation between the effective income tax
expense (credit) and the amount of income taxes (credit) that would have
been provided at the federal statutory rate of 34.0 percent for the three
years ended December 31, 1995:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                            1995    1994    1993
______________________________________________________________________________________
<S>                                                              <C>    <C>     <C>
Federal income tax at statutory rate............................ $(120) $1,464  $1,949
Differences resulting from:
  Tax-exempt interest, net......................................  (416)   (408)   (440)
  Excess of cost over net assets acquired.......................    74      74      74
  Other.........................................................   (90)   (150)       
                                                                 _____  ______  ______
    Total....................................................... $(552) $  980  $1,583
                                                                 =====  ======  ======
</TABLE>







13. INCOME TAXES (CONTINUED):

The sources of deferred income taxes and the related tax effects are as
follows for the three years ended December 31, 1995:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31                                            1995     1994   1993
______________________________________________________________________________________
<S>                                                             <C>     <C>      <C>
Allowance for loan losses...................................... $ (111) $  (139) $(234)
Loans, net of unearned income..................................     18      (40)   (12)
Accrued interest receivable....................................    (15)      20    (35)
Premises and equipment, net....................................    (37)     (30)    (7)
Other, net.....................................................      5       (4)   (12) 
                                                                ______  _______  _____ 
  Deferred income taxes recognized in statements of income.....   (140)    (193)  (300)
Deferred income taxes on investment securities recognized in 
 stockholders' equity..........................................  2,816   (2,415)      
                                                                ______  _______  _____
    Total deferred income taxes................................ $2,676  $(2,608) $(300)
                                                                ======  =======  =====
</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, 1995 and 1994:
<TABLE>
<CAPTION>

DECEMBER 31                                                                1995    1994
_______________________________________________________________________________________
<S>                                                                      <C>     <C>
Deferred tax assets:                                                            
  Allowance for loan losses............................................. $1,160  $1,049
  Loans, net of unearned income.........................................    272     290 
  Accrued interest receivable...........................................    134     119
  Investment securities.................................................          2,415
  Other.................................................................     45      50 
                                                                         ______  ______
    Total...............................................................  1,611   3,923 
                                                                         ______  ______
Deferred tax liabilities:  
  Investment securities.................................................    401         
  Premises and equipment, net...........................................    335     372
                                                                         ______  ______
    Total...............................................................    736     372
                                                                         ______  ______
    Net deferred tax assets............................................. $  875  $3,551 
                                                                         ======  ======
</TABLE>


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                                            1995     1994     1993
________________________________________________________________________________________
<S>                                                             <C>      <C>      <C>
Income:
Dividends from subsidiary...................................... $  821   $1,617   $  866
Management fees from subsidiary................................    180      180      330
Other income...................................................     51       64       60 
                                                                ______   ______   ______
  Total income.................................................  1,052    1,861    1,256
                                                                ______   ______   ______
Expense:
Interest.......................................................               4       56
Other expenses.................................................    654      601      708
                                                                ______   ______   ______
  Total expenses...............................................    654      605      764
                                                                ______   ______   ______
Income before income taxes and undistributed income of 
 subsidiary....................................................    398    1,256      492
Income tax benefits............................................   (127)    (130)     (67)
                                                                ______   ______   ______
Income before undistributed income of subsidiary...............    525    1,386      559
Equity in undistributed income of subsidiary...................   (325)   1,939    3,591
                                                                ______   ______   ______
  Net income................................................... $  200   $3,325   $4,150
                                                                ======   ======   ======
</TABLE>

<TABLE>
<CAPTION>

CONDENSED BALANCE SHEETS

DECEMBER 31                                                                1995     1994
________________________________________________________________________________________
<S>                                                                     <C>      <C>       
Assets:
Cash................................................................... $     7  $     7
Investment in bank subsidiary..........................................  27,337   22,603
Investment securities available for sale...............................     826      639
Other assets...........................................................     441      147
                                                                        _______  _______
  Total assets......................................................... $28,611  $23,396
                                                                        =======  =======

Liabilities:
Dividends payable...................................................... $   293  $   286
Other liabilities......................................................     423      421
                                                                        _______  _______ 
  Total liabilities....................................................     716      707
Stockholders' equity...................................................  27,895   22,689
                                                                        _______  _______
  Total liabilities and stockholders' equity........................... $28,611  $23,396
                                                                        =======  ======= 
</TABLE>

14. PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED):

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31                                            1995     1994     1993
________________________________________________________________________________________
<S>                                                            <C>      <C>      <C>     
Cash flows from operating activities:
Net income.................................................... $   200  $ 3,325  $ 4,150
Adjustments:
  Equity in undistributed income of subsidiary................           (1,939)  (3,591) 
  Distributions in excess of earnings of subsidiary...........     325
  Gains on sale of investment securities......................                       (22)
  Changes in:
    Other assets..............................................       1      239      295 
    Other liabilities.........................................     (54)    (103)      35
                                                               _______  _______  _______
      Net cash provided by operating activities...............     472    1,522      867
                                                               _______  _______  _______

Cash flows from investment activities:
Proceeds from sales of investment securities..................                        55
Purchases of investment securities............................     (17)    (388)     (14)
                                                               _______  _______  _______
      Net cash provided by (used in) investment activities....     (17)    (388)      41
                                                               _______  _______  _______

Cash flows from financing activities:
Payments of long-term debt....................................             (800)    (400)
Proceeds from issuance of common shares, net..................                         1
Cash dividends paid...........................................    (455)    (448)    (436)
                                                               _______  _______  _______
      Net cash used in financing activities...................    (455)  (1,248)    (835)
                                                               _______  _______  _______
      Net increase (decrease) in cash.........................             (114)      73 
      Cash at beginning of year...............................       7      121       48
                                                               _______  _______  _______
      Cash at end of year..................................... $     7  $     7  $   121
                                                               =======  =======  =======

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

15. REGULATORY MATTERS:

During the fourth quarter of 1995, the FRB and the State Department of
Banking conducted a joint examination of the Company at September 30,
1995.  The examination results delineated a significant improvement in
the Company's overall financial condition and substantial compliance with
the May 24, 1995, written supervisory agreement in the form of a
Memorandum of Understanding ("MOU") with the FRB.  Accordingly, the FRB
terminated the MOU on February 16, 1996, releasing the Company from the
supervisory actions of the agreement.  The MOU was a direct result of
regulatory concerns about prior investment practices and noncompliance
with previously issued informal supervisory actions.  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;
 
15. REGULATORY MATTERS (CONTINUED):

(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.  Significant steps taken by the Company
to comply with the MOU in 1995 included the divestiture of criticized
investment securities, development of formalized policies, plans and
procedures and reorganization of management oversight.  The costs
associated with the MOU included in noninterest expense approximated $500
in 1995.  Management expects the removal of such supervisory action to
have a positive effect on future operating results and financial
position.

The Company is also subject to Federal Reserve Regulation H, which
restricts state member banks from paying a dividend if the total of all
dividends declared by the 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 two calendar years, less any
required transfers to surplus, unless the 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 1996 totaling $1,612 plus net profits earned by the subsidiary
for the period from January 1, 1996, through the date of declaration,
less dividends previously paid in 1996.

In addition, 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.  

15. REGULATORY MATTERS (CONTINUED): 

At December 31, 1995, the maximum amount available for transfer from the
subsidiary to the Parent Company in the form of loans amounted to $2,808.
There were no loans or advances to the Parent Company from its subsidiary
during 1995 and 1994, nor were there any such amounts outstanding.

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").  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, 1995, the Company's Tier
I and total capital 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 at 3.0 percent.  The
Company's Tier I capital to adjusted total average assets ratio at
December 31, 1995, was 7.0 percent.  Institutions not possessing the
highest regulatory composite rating or those experiencing significant
growth are expected to operate well above such minimum capital standards. 
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.
































OVERVIEW:             

Comm Bancorp, Inc. ("Company") surpassed its $3.1 million profit goal for
1994, earning $3.3 million or $4.53 per share, despite weathering an
operating environment highlighted by transitional monetary policy and
intensified legislative emphasis on fiscal policy.

The operating environment of 1994 was highlighted by the strongest
economic growth in ten years at 3.5 percent. In response, the Federal
Open Market Committee decided to raise short-term interest rates,
beginning in February 1994, aimed at fostering a financial environment
conducive to sustained economic growth through price stability.  Although
economic expansion is necessary in promoting an increased standard of
living, growth at too rapid a rate can lend itself to higher wages and
long-term interest rates that can starve future productivity.  Stable
labor costs are essential in protecting the prices of gtry experienced the 
lowest jobless rate in over four years at 5.4 percent. 

The other major factor affecting the 1994 operating environment was the
increased legislative presence on fiscal or budgetary policy.  A major 
election sweep by Republicans and the introduction of plans for a
Balanced Budget Amendment, spending cuts and tax reform caused changes in
consumer and business spending, saving and borrowing patterns.

The impact of economic change was more significant to the banking
industry than to any other industry as a function of the monetary nature
of its assets.  In 1994, the nation's commercial banks set a profit
record for the third consecutive year at $44.7 billion, surpassing the
$43.1 billion and $32.0 billion reported for 1993 and 1992, respectively. 
However, the 1994 record was more impressive than previous years since it
was set in a period of rising rates that adversely affected fund costs
and, to a lesser degree due to pent up consumer demands, credit
extensions.  Moreover, interest rate spreads were adversely impacted as
banks encouraged households and businesses to shift borrowing from other
sources by easing lending standards and not allowing the entire rise in
market rates to be added to the rate charged to their customers. Interest
rate increases adversely affected borrowers' cash flows, reducing their
ability to service variable rate loans, which caused a deterioration in
asset quality.  Rising rates severely impacted asset valuations as banks
were forced to hold loans and securities carrying below-market yields
simply to avoid recognition of unrealized losses associated with these
assets.  Such inability to divest asset positions placed a strain on
liquidity levels and adversely impacted profitability as banks were
forced to borrow or raise deposit rates in order to fund loan demand.



REVIEW OF FINANCIAL POSITION:

The Company's financial position improved during 1994, as total assets
increased $23.5 million or 6.9 percent from $339.0 million at December
31, 1993, to $362.5 million at December 31, 1994.  Such growth was below
the $29.7 million experienced in 1993 when both major earning asset
groups contributed significantly to improving the Company's financial
position, whereas growth in 1994 was primarily a function of improvements
in the loan portfolio.  Although increasing during 1994, investment
securities played a lesser role in the growth of assets as a result of
the nonconducive nature of the interest rate environment during the past
year.  Average loan volumes increased $14.2 million during 1994 as
compared to $11.9 million during the previous year.  Average deposit
volumes grew $22.4 million from $287.3 million in 1993 to $309.7 million
in 1994, a 7.8 percent increase.  The deposit increase in 1994 exceeds
the increase of last year of $19.1 million or 7.1 percent.

The liquidity posture of the Company was significantly impacted by the
Board of Governors of the Federal Reserve System ("Federal Reserve
Board") monetary policy changes during 1994.  Rising interest rates
severely affected cash prepayment speeds on loans and mortgage backed
securities.  Proceeds from repayments on investment securities decreased
62.8 percent primarily from the reductions in the monthly payments on
mortgage backed securities.  In addition, increased interest rates caused
a severe deterioration in the value of investment securities that limited
the Company's ability to create liquidity through dispositions of
available for sale securities.  The investment portfolio had a positive
carry-to-market of $1.5 million at December 31, 1993, compared to a
negative carry-to-market of $12.0 million at December 31, 1994.  Proceeds
from the sale of available for sale securities declined from $69.2
million to $13.6 million in 1993 and 1994, respectively.  As a result of
the onset of illiquidity in the investment portfolio, the Company
supported excess loan demand not funded from deposit growth by exercising
its line of credit with the Federal Home Loan Bank ("FHLB").

Stockholders' equity declined $1.8 million from $24.5 million at December
31, 1993, to $22.7 million at December 31, 1994.  The Company's adoption
of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting 
for Certain Investments in Debt and Equity Securities," on January 1,
1994, caused the Company to recognize a capital reduction of $4.7 million
during 1994 to reflect the devaluation, net of income taxes, of available
for sale securities.  Such decrease was partially offset by the retention
of $2.9 million of earnings.






INVESTMENT PORTFOLIO:

The rising interest rate environment of 1994 had a severe impact on the
value and liquidity of the Company's investment portfolio.  The Federal
Reserve Board began raising short-term rates in February in an attempt to
ward off potential inflation and the relational increase in long-term
rates.  Despite having a positive impact on inflationary pressures, long-
term rates grew with each increase in short-term rates, with the
exception of the final increase of 1994. Such increases caused the
Company to recognize net unrealized holding losses of $4.7 million, net
of income taxes of $2.4 million, at December 31, 1994.  

Prepayments on mortgage backed securities also declined substantially due
to the rising interest rate environment.  Cash flows from repayments on
such securities declined from $3.5 million in January 1994 to $133 in
December 1994 with most of the reduction occurring during the first
quarter.  The steep fall off in receipts lengthened the weighted average
life of the portfolio, adversely affecting the marketability and
underlying value of the securities.  The weighted average life of
mortgage backed securities rose from 9.3 years to 15.0 years at December
31, 1993 and 1994, respectively.  In the past, the Company relied on its
ability to sell securities in order to fund loan demand in excess of
deposits.  However, such luxury dissipated during 1994 as the majority of
the securities held at year-end had fair values below their costs and
could not be liquidated without realizing losses.  As a result,
management substituted FHLB borrowings to fund excess loan demand, which
adversely impacted operating results and capital resources.

The investment portfolio represented 43.9 percent of earning assets at
December 31, 1994.  The available for sale classification declined
throughout 1994 as a result of sales and transfers and represented 29.4
percent of total investments at year-end.  Proceeds from the sale of
available for sale securities amounted to $13.6 million and $69.2 million
in 1994 and 1993, respectively.  The Company realized securities gains of
$495 in 1994 and $1,261 in 1993 as a result of such sales.  The proceeds
were used primarily to purchase variable rate securities and fund loan
demand.  Based on asset/liability management considerations, management
reevaluated its intent to hold a portion of its available for sale
portfolio during the third quarter 1994.  Upon completion of such
considerations and within the confines of SFAS No. 115, management
transferred twenty-two securities with an amortized cost of $17.5 million
to the held to maturity classification.  These available for sale
securities had a net unrealized loss of $998 at the transfer date.  

The tax equivalent yield on the investment portfolio declined from 6.6
percent in 1993 to 6.1 percent in 1994.  The Company held $52.0 million
of variable rate securities, representing one-third of the total
portfolio, at December 31, 1994.  The weighted average lives of the fixed and
variable rate portfolios were 8.7 years and 13.2 years at December 31, 1994,
respectively.

The Company held structured notes having a carrying value of $21.1
million at December 31, 1994.  Specifically, this portion of the
portfolio consisted of $16.1 million of step-up bonds, $3.0 million of
dual index notes and $2.0 million of de-leveraged bonds.  Such securities
earned a weighted average coupon rate of 5.5 percent and had a 10.0
percent negative carry-to-market at December 31, 1994. In addition, the
portfolio included  high-risk collateralized mortgage obligations
("CMOs") having an amortized cost of $26.5 million and a fair value of
$22.3 million at December 31, 1994.  The average life of such securities
approximated 14.0 years.  The amortized cost and fair value of high-risk
CMOs approximated $20.1 million at December 31, 1993. Such securities had
gross unrealized losses of $4.2 million at December 31, 1994, and gross
unrealized losses of $349 and gross unrealized gains of $390 at December
31, 1993.

The Company adopted SFAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," on December 31,
1994. Management's involvement with derivative financial instruments was
limited to its writing of option contracts on U.S. Treasury securities
during 1994.  The Company had no option contracts outstanding at December
31, 1994.  Accordingly, SFAS No. 119 had no effect on operating results
or financial position.

Except for U.S. Treasury and U.S. Government agency securities, there
were no securities of any individual issuer that exceeded 10.0 percent of
the Company's stockholders' equity at December 31, 1994 and 1993. 
Furthermore, all of the investment securities in the Company's portfolio
were considered investment grade at December 31, 1994 and 1993.    

LOAN PORTFOLIO:

Credit conditions improved throughout the United States during 1994
despite the rise in interest rates as borrowing increased in response to
greater spending patterns of both consumers and businesses.  In addition,
the increased level of credit extension was influenced by the aggressive
behavior of banks in response to an inability to find suitable
alternative investments.  The Company's loan demand was similarly
affected, experiencing its second consecutive year of significant loan
growth during 1994.  Loans, net of unearned income, were $194.5 million
at December 31, 1994, an increase of $18.0 million or 10.2 percent over
the volume reported at December 31, 1993.  Such increase was a result of
improved local employment conditions, higher volumes of consumer spending
for durables and an inability to place funds into investment portfolios
that experienced a significant adverse reaction to changing market
conditions.  Total loans averaged $189.0 million in 1994, an increase of
$14.2 million from 1993.  The cyclical nature of loan demand during 1994
was similar to that experienced by the peer group with the second and
third quarters being most active.  The Company's credit demand grew at
annualized rates of 16.3 percent and 17.8 percent during such periods,
respectively.  Although not as active as the Company's loan demand,
competing regional banks' loans grew at annualized rates of 14.4 percent
and 13.9 percent over the comparable quarters.  However, the Company did
not act consistently compared to its peers in considering the terms of
such demand as the majority of credit extensions came in the form of
fixed-rate loans.  The Company's volume of loans with predetermined
interest rates increased $16.1 million while those bearing floating or
adjustable interest rates rose $1.9 million during 1994.  Customers,
fearful of rapidly changing interest rates, converted borrowings from
variable rate products to higher-costing fixed-rate products to avoid
potential debt servicing problems.  The tax equivalent yield on the loan
portfolio declined from 9.1 percent in 1993 to 8.5 percent in 1994.  Such
decline was a function of 1994 being the first year earnings received the
full impact of the refinancing frenzy.  The volume of refinanced
residential mortgages declined significantly from $23.6 million in 1993
to $14.4 million in 1994.

The composition of the loan portfolio changed slightly during 1994 as
commercial lending experienced its first significant increase since 1991,
growing $6.8 million, as compared to a $0.9 million increase during 1993. 
Taxable commercial lending was responsible for $4.6 million of the 1994
increase as companies sought to avoid potentially higher interest rate
burdens by replacing variable rate funding from other sources with fixed-
rate products from the Company.  The remaining $2.2 million increase in
commercial lending was attributable to establishing stronger customer
relationships with state and political subdivisions in line with tax
planning strategies.  Loans to finance one-to-four family residential
properties were principally responsible for the $11.2 million increase in
retail lending.  Falling home prices in the Northeast and favorable
employment conditions, partially offset by the rise in mortgage rates,
were responsible for the growth of residential mortgages.

At December 31, 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 57.9 percent of total loans outstanding are secured by
residential properties.  The average mortgage outstanding on a
residential property was $37.2 at December 31, 1994.  The loan portfolio
did not consist of any form of credit involving highly-leveraged
transactions at December 31, 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
increased from $7.8 million at December 31, 1993, to $9.6 million at
December 31, 1994.

At December 31, 1994, management determined that approximately 30.3
percent of the lending portfolio would reprice within the next twelve
months. The 30.3 percent surpasses the 21.3 percent at December 31, 1993,
as a result of increased demand for short-term funding and a slight
improvement towards achieving management's goal of generating variable-
rate loans.

ASSET QUALITY:

The Company benefited from improvements in local employment conditions as
the level of nonperforming assets and accruing loans past due 90 days or
more declined during 1994.  Such decline was also attributable to
improvements in internal procedures with respect to delinquent credits. 
Nonperforming assets were $3.3 million at December 31, 1994. 
Nonperforming loans declined $458 during 1994. The ratios of
nonperforming assets and loans past due 90 days or more as a percentage
of total loans, net, were 1.69 percent and 0.73 percent, respectively, at
December 31, 1994.

Interest income related to nonaccrual and restructured loans would have
been $136 in 1994 and $103 in 1993, had such loans been current and the
terms not been modified.  Interest recognized on nonaccrual loans
amounted to $40 in 1994 and $9 in 1993.  There were no commitments to
extend additional funds to such parties at December 31, 1994. 

The Company experienced a net decline of $22 in other real estate during
1994, as transfers of four loans from nonaccrual status totaling $260
were offset by the sale of six properties totaling $291, including net
gains on such dispositions of $9.  The carrying value of properties
included in other real estate was less than 80.0 percent of the
collateral value at December 31, 1994.

Loans past due 90 days or more declined $142 during 1994, primarily from
a reduction in the volume of consumer loans.  Such reduction is a
reflection of improvements made in credit administration, as
approximately three- quarters of the amelioration resulted from customers
paying-off or bringing credits current.  

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.  Classified assets as a percentage of Tier I capital decreased 6.5
percent in comparing the Federal Reserve Bank of Philadelphia ("FRB")
Reports of Examination for 1994 and 1993.

The allowance for loan losses, against which loans are charged-off, was
$3.6 million at December 31, 1994, representing 1.84 percent of total
loans, compared to $3.2 million and 1.80 percent at December 31, 1993. 
In comparison, the peer group reported ratios of 1.46 percent and 1.64
percent at December 31, 1994 and 1993, respectively.  As a percentage of
nonperforming loans, the allowance account covered 117.0 percent and 90.2
percent at year-end 1994 and 1993, respectively.  Relative to all
nonperforming assets, the allowance covered 108.9 percent at December 31,
1994, and 84.2 percent at December 31, 1993.

Net charge-offs were $393 or 0.21 percent of average loans outstanding in
1994 compared to $408 or 0.23 percent in 1993.  The peer group reported
net charge-offs as a percentage of average loans outstanding of 0.27
percent and 0.33 percent in 1994 and 1993, respectively.  Approximately
one-third of the gross charge-off activity in 1994 resulted from
recognizing write- downs upon reappraisals of collateral securing
nonaccrual loans in accordance with maintaining appropriate loan-to-value
ratios.

DEPOSITS:

Total deposits averaged $309.7 million in 1994 as compared to $287.3
million in 1993, an increase of 7.8 percent.  The average growth
experienced by Northeastern Pennsylvania banks was 5.2 percent for the
comparable period.  The majority of the Company's deposit growth occurred
during the third quarter as deposits grew at an annualized rate of 19.1
percent.  Most of the third quarter growth was attributable to retail
certificates of deposit with stated maturities less than two years. 
Average time deposits accounted for 47.3 percent of average assets during
1994 as compared to 31.8 percent for the peer group. The Company's cost
of deposits declined from 4.4 percent in 1993 to 4.2 percent in 1994 as
compared to the peer group's cost declining from 4.0 percent to 3.7
percent, respectively.  The reduction is comparably smaller than prior
years as a result of increases in the cost of retail time deposits.  The
average yield on certificates of deposit less than $100 increased from
4.9 percent during the first quarter 1994 to 5.1 percent during the
fourth quarter 1994.  

Volatile deposits, defined as time deposits in denominations of $100 or
more, increased from $24.3 million at December 31, 1993, to $30.2 million
at December 31, 1994.  The Company exhibited a greater dependence on such
funding as compared to the peer group during 1994.  Average volatile
deposits, as a percentage of average assets, was 7.4 percent in 1994 as
compared to 5.4 percent for the peer group.  The average cost of such
funds rose 95 basis points during 1994.  

A decline in the Company's ability to fund asset growth through cash
flows from the investment portfolio caused a greater reliance on FHLB
borrowings in 1994.  The Company's total borrowings averaged $4.9 million
with a weighted average rate of 5.3 percent in 1993 as compared to $16.2
million at 4.9 percent in 1994.  The decline in the cost of such funding
was a result of a greater proportion of short-term borrowings during
1994.  Management chose short-term borrowings as opposed to aggressively
competing for deposits due to their lower cost and exemption from
insurance costs.

Short-term borrowings consisted of a line of credit with the FHLB secured
under terms of a blanket collateral agreement by a pledge of FHLB stock
and certain other qualifying collateral, such as investment and mortgage
backed securities and mortgage loans.  The average daily balance and
weighted average rate on the FHLB line was $11.2 million at 4.9 percent
in 1994 and $1.0 million at 3.3 percent in 1993.  The average volume and
weighted average rate on long-term debt amounted to $5.1 million at 4.9
percent and $3.9 million at 5.8 percent in 1994 and 1993, respectively.

INTEREST RATE SENSITIVITY:

The Company's three-month asset sensitive position improved from $19.2
million in 1993 to $28.1 million in 1994.  Such an improvement was
directly attributable to the change in depositor attitudes as they
lengthened their deposit maturities in order to enhance yield.  Retail
time deposits scheduled to reprice within three months declined from
$37.5 million to $20.3 million at December 31, 1993 and 1994,
respectively.  The weighted average maturity of retail time deposits
increased from 1.8 years to 2.2 years during 1994.  The cumulative one-
year rate sensitive asset to rate sensitive liability ratio declined from
0.95 at December 31, 1993, to 0.84 at December 31, 1994.  The
deterioration in the cumulative one-year rate sensitive position was due
to the reduction in prepayments on mortgage backed securities and loans,
partially offset by lengthening retail time deposit maturities. 
Estimated prepayments on mortgage backed securities included in the
cumulative one-year period were $530 and $8.4 million at December 31,
1994 and 1993, respectively.  Rising interest rates also slowed the
estimated loan prepayments from refinancings.  The volume of refinancings
in the low rate environment of 1993 amounted to $23.6 million as opposed
to the rising rate environment of 1994 totaling $14.4 million.  The
Company's cumulative one-year gap position was favorably affected by a
reduction in the volume of retail time deposits repricing during such
time frame.  Such deposits amounted to $95.6 million at December 31,
1993, as compared to $79.4 million at December 31, 1994.

The Company enhances its asset/liability management through use of a
simulation model.  The simulation model results at December 31, 1994,
indicate a departure from the expected results of the static gap model. 
Net interest income is expected to decrease 10.7 percent should interest
rates rise 50 basis points.  Conversely, a similar decline in interest
rates would result in an increase in net interest income of 10.7 percent.

LIQUIDITY:

The Company's liquidity position deteriorated in 1994 primarily due to
reductions in prepayments on mortgage backed securities and an inability
to dispose of available for sale securities as a result of rising
interest rates.  

The consolidated statements of cash flows present the change 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, decreased $0.4 million in 1994.  Net cash provided by
operating activities totaled $4.0 million and was the result of net
income of $3.3 million adjusted for changes in deferred tax assets and
other assets.

Net cash used in investing activities was the major component of the
change in cash and cash equivalents, resulting in a net outflow of $28.9
million.  The major components of such outflow were the net increase in
lending activities, and to a lesser extent, investment purchases in
excess of sales and repayments.  The $18.5 million outflow from lending
activities was a function of increased loan demand and management's
aggressiveness to extend credit.  Net cash used to fund investment growth
was $9.9 million.  Net cash provided by financing activities totaled
$24.6 million in 1994 as a result of attracting deposits and taking
advantage of short-term funding. 

CAPITAL ADEQUACY:

Stockholders' equity declined $1.8 million during 1994 as a result of the
effects of adopting SFAS No. 115, partially offset by the retention of
net income in excess of dividends declared.  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.  The Company was not subject to any written
agreement, order, capital directive or prompt corrective action directive
to meet and maintain a specific capital level for any capital measure at
December 31, 1994.

The Company's dividend payout ratio increased from 10.7 percent to 13.7
percent for the years ended December 31, 1993 and 1994, respectively. 
The capital appreciation of the Company's common stock amounted to 33.3
percent for the year ended December 31, 1994.  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,
could declare dividends to the Company totaling $5,531 at year-end 1994.

REVIEW OF FINANCIAL PERFORMANCE:

Net income for the year ended December 31, 1994, was $3,325 compared to
$4,150 in 1993, a decrease of $825, or 19.9 percent.  On a per share
basis, earnings were $4.53 for the year, compared with $5.66 reported in
1993.  Net income, excluding the effects of investment security gains or
losses, would have totaled $3,431 or $4.68 per share in 1994 as compared
to $3,121 or $4.26 per share in 1993.  The return on average assets and
return on average stockholders' equity were 0.95 percent and 14.26
percent in 1994, respectively, as compared to 1.30 percent and 17.91
percent in 1993, respectively.  The comparable ratios of the peer group
were 1.12 percent and 11.80 percent in 1994, respectively.

Net interest income on a tax equivalent basis improved slightly from
$12,711 in 1993 to $12,760 in 1994.  The greater volume of earning assets
offset the adverse increase in fund costs.  Interest income on a tax
equivalent basis increased $991 from $24,711 in 1993 to $25,702 in 1994. 
Interest expense increased $942 from $12,000 in 1993 to $12,942 in 1994.

The monthly provision charged to operations in 1994 was slightly lower
than the level experienced during 1993.  The $280 reduction in the
provision during 1994 was a reflection of improvements in asset quality
and, to a lesser extent, higher earnings achieved in 1993.

Noninterest income totaled $1,005 in 1994, a decrease of $1,566 or 60.9
percent, compared to 1993.  The majority of such decrease was
attributable to reporting net investment and trading securities gains of
$1,558 in 1993 as opposed to net investment and trading securities losses
of $161 in 1994.  Revenue from service charges, fees and commissions
increased $153 from 1993 to 1994.

Noninterest expense totaled $7,949 in 1994, an increase of $97 or 1.2
percent, compared to 1993.  During 1994, the rise in salaries and
benefits expense of $451 was partially offset by declines in net
occupancy and equipment and other expenses of $85 and $269, respectively. 


NET INTEREST INCOME:

Net interest income on a tax equivalent basis increased at its lowest
level in over five years, initiating concern as gains in net earning
asset growth approximated the unfavorable decline in net interest margin. 
Rises in general market rates caused a corresponding effect on deposits
that could not be transferred to loan customers as a result of
competitive pressures.  Tax equivalent net interest income improved
slightly to $12,760 in 1994, an increase of $49 or 0.4 percent, compared
to 1993.

Changes in the volumes of average earning assets in excess of average
interest-bearing liabilities resulted in a positive influence of $1,350
on net interest income.  Total average earning assets increased $35.8
million to $346.4 million in 1994 while average interest-bearing
liabilities increased $31.6 million to $304.1 million.  The Company
experienced its second consecutive year of strong loan growth evidenced
by an increase in the volume of average loans from $174.8 million to
$189.0 million in 1993 and 1994, respectively.  Such increase was
responsible for $1,243 of the $2,699 improvement in net interest income
as a result of volume changes.  The other major contributor to the
favorable rise in net interest income was the higher average volume of
investments in 1994.  Average investments increased $26.8 million during
1994 as management increased its holdings of variable rate securities to
address interest rate risk and tax-exempt securities to lower the
Company's tax burden.  The unfavorable volume variance of $1,349 in
interest expense partially offset the improvement in net interest income. 
Increased volumes of savings, retail time deposits and short-term
borrowings were the major contributors to such variance.  The Company
chose to facilitate loan demand in excess of deposits through FHLB
borrowings as a result of their lower cost and exemption from Federal
Deposit Insurance Corporation ("FDIC") insurance.

The rapid rise in general market rates was the primary cause for the
Company reporting an unfavorable rate variance of $1,301 in net interest
income for the comparable years of 1993 versus 1994.  The Company's net
interest margin decreased by 41 basis points from 4.09 percent in 1993 to
3.68 percent in 1994.  Such decline is the first reported since 1991 when
the net interest margin declined 19 basis points in response to
reductions in loan demand along with increased levels of nonperforming
assets and refinancing activities.  The 41 basis point decline in the net
interest margin is a result of earning asset yields falling faster than
fund costs.  As a result of competitive pressure, management was unable
to apply the same changes in interest rates to lending as required in
order to retain deposits.  The unfavorable rate variance of $1,301 in net
interest income was primarily attributable to recording a negative rate
impact of $1,708 to interest income partially offset by a favorable rate
variance of $407 in interest expense.  The Company's yield on earning
assets declined from 7.96 percent in 1993 to 7.42 percent in 1994.  The
lending portfolio was the principal reason for reporting the negative
rate variance as management was required to competitively price loan
products in light of the unsuitable investing environment.  The adverse
impact of aggressive competition was partially offset by lower levels of
nonperforming assets and greater volumes of adjustable rate loans.  The
negative rate variance of $586 in investment securities was a function of
converting higher-yielding fixed- rate securities to variable rate
securities, along with recognizing smaller amounts of accretion on
mortgage backed securities in line with the slowdown of prepayments.  The
Company's cost of funds declined from 4.40 percent in 1993 to 4.26
percent in 1994.  The slight improvement in interest expense, as
evidenced by the favorable rate variance of $407, resulted from a
reduction in the cost of retail time deposits from 5.26 percent in 1993
to 4.94 percent in 1994.  Such trend reversed itself during the final
half of 1994 in line with changes in general market rates.  

PROVISION FOR LOAN LOSSES:

Contrary to the behavior of many financial institutions, management
continued its prudent policy of building its allowance account despite
improvement in asset quality.  The Company's provision for loan losses
declined $280 from $1,080 in 1993 to $800 in 1994.  The decrease resulted
from reporting a reduced amount of net charge-offs in 1994 as compared to
1993, and to a lesser extent, higher reported earnings in 1993.  Although
the Company experienced reduced nonperforming assets and delinquent
credits, it continued to build its allowance through the provision in
response to greater loan demand.  

NONINTEREST INCOME:

Noninterest income totaled $1,005 for the year ended December 31, 1994,
as compared to $2,571 for the year ended December 31, 1993.  The $1,566
decline was primarily a result of reporting net losses of $161 in 1994
and net gains of $1,558 in 1993 on investment and trading account
securities.  Most of the losses realized in 1994 occurred as a result of
marking trading account assets to market in accordance with SFAS No. 115
rules.  The majority of such assets was obtained through exercised
written put option contracts and was marked to market prior to their
transfer into the available for sale or held to maturity portfolios.  The
sale of mortgage backed securities displaying volatile prepayment speeds,
and those with fixed interest rates to adjust interest rate sensitivity,
provided the major component of the 1993 securities gains.  An increased
volume of service charges, fees and commissions partially offset the net
security losses incurred in 1994.  The $153 increase over the previous
year was a result of taking a more aggressive stance toward insufficient
funds activities and a growth in the volume of accounts.

NONINTEREST EXPENSE:

Noninterest expense totaled $7,949 in 1994, an increase of $97, or 1.2
percent, compared to 1993.  The Company had a net overhead expense to
average assets ratio of 2.0 percent, an improvement over the 2.1 percent
recorded in 1993.  In relation to the peer group ratio of 2.8 percent,
the Company continued to demonstrate a greater efficiency level.  The
Company's operating efficiency ratio showed a slight increase from 59.1
percent at December 31, 1993, to 59.6 percent at December 31, 1994.

Salaries and benefits composed 47.6 percent of noninterest expense and
totaled $3,782 in 1994, representing a $451 or a 13.5 percent increase
compared to 1993. Salaries and payroll taxes increased in 1994
principally due to annual merit raises coupled with the addition of new
employees.  Additional staff was required to meet and improve on
regulatory compliance issues and to pursue the expansion of the
commercial segment. Higher costs of providing medical and other
insurances also contributed to the increase in salaries and employee
benefits expense.

Net occupancy and equipment expense amounted to $1,249, a decrease of
$85, or 6.4 percent, compared to 1993.  The reduction is a reflection of
lower costs associated with the Company's conversion to an in-house
computer system in 1992 thus eliminating charges paid to a service
bureau.  In addition, leases on branch automation equipment having
aggregate annual payments of $166 expired in the fourth quarter of 1993. 
An increase of $104 in net occupancy expense partially diluted the
reduction in equipment expense.  Such increase was a result of expenses
related to relocating a branch office to a larger facility.

Other expenses totaled $2,918 in 1994, a decrease of $269 or 8.4 percent,
compared to the 1993 level.  Reductions in postage expense and other
insurances partially offset by an increase in Pennsylvania Capital Shares
Tax were the major factors influencing such decrease.

INCOME TAXES:

The Company's effective tax rate declined from 27.6 percent in 1993 to
22.8 percent in 1994.  Implementation of tax planning strategies
involving tax-exempt assets and a limited partnership investment coupled
with reporting lower levels of earnings were primarily responsible for
such decline.

During the first quarter of 1993, the Company acquired a limited
partnership interest in a residential housing program designed for the
elderly and for low- to moderate-income families.  Such investment will
provide for a reduction in income taxes by utilizing tax credits allowed
on such investments.  During 1994, the Company recognized $71 of the $895
of total tax credits available from such project that will be recognized
annually until the year 2003.


























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
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.

JOHN P. KAMEEN
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

MICHAEL T. GOSKOWSKI
Secretary

J. ROBERT McDONNELL
Vice President

SCOTT A. SEASOCK
Senior Vice President
Chief Financial Officer

THOMAS E. SHERIDAN
Senior Vice President
Chief Operating Officer

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
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





























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

HENRY E. DEECKE
Henry E. Deecke Real Estate

GEORGE HORNBECK III
Hornbeck Chevrolet-Cadillac

HAROLD McGOVERN
McGovern Insurance Agency
Gantar Insurance


CLIFFORD OFFICE
_______________
DONALD R. EDWARDS
Owner, Mountain View Inn

JOSEPH KOCHMER
Kochmer Stone Quarry

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 Industrial Engineer


SIMPSON OFFICE
______________
WILLIAM A. KERL
Kerl's Coal and Oil

BERNARD M. LAPERA
Lapera Oil Company

SUSAN MANCUSO
Accountant

GERALD SALKO, D.D.S.
Dentist





















































DIRECTORS AND OFFICERS (CONTINUED)                                      

OFFICERS
COMMUNITY BANK AND TRUST COMPANY
________________________________
DAVID L. BAKER 
President and 
Chief Executive Officer                                  

WILLIAM R. BOYLE
Vice President
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

KENNETH LEONE
Eaton Township Branch Manager

PAMELA S. MAGNOTTI
Compliance Officer

JOELYN MARK
Vice President
Marketing

MARY ANN MUSHO
Assistant Cashier
Human Resource Officer 

JANICE NESKY
Nicholson Branch Manager

M. EVELYN PANTZAR
Vice President
Internal Auditor

JOSEPH V. PAVLOVICH
Vice President
Tunkhannock 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 Operating Officer

RONALD K. SMITH
Vice President
Montrose Branch Manager

TAMI L. SNYDER
Vice President
Information Services

GEORGE WEISS
Lake Winola Branch Manager
























































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.

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 with respect to the loan portfolio.

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.


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).

























STOCKHOLDER INFORMATION                                                  

CORPORATE HEADQUARTERS:
521 Main Street 
P.O. Box 129
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 & Company
190 Lathrop Street
Kingston, PA  18704

TRANSFER AGENT:
Comm Bancorp, Inc.
Stock Transfer Department   
521 Main Street
P.O. Box 129
Forest City, PA  18421

MARKET MAKERS:
The primary market makers in Comm
Bancorp, Inc. stock are the
investment-brokerage houses of
Rutherford Brown and Catherwood, Inc.
and Hopper Soliday & Co., Inc. 

SEC REPORTS AND ADDITIONAL
INFORMATION:
Copies of Comm Bancorp'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, including charitable
contributions, may be obtained
without charge by writing to Joelyn
Mark, Vice President, at corporate
headquarters.

ANNUAL STOCKHOLDERS MEETING:
All Stockholders are invited to
attend the Company's annual meeting
on Friday June 7, 1996 at 1:00 p.m.
at the American Legion Post# 524,
Dundaff Street, Forest City,
Pennsylvania.   

COMMON STOCK MARKET INFORMATION:
Shares of Comm Bancorp, Inc. common
stock are traded in the over-the-
counter market and "bid" and "asked"
quotations regularly appear on the
Over-the-Counter Electronic Bulletin
Board system under the symbol "CCBP."
As of March 1, 1996, two firms were
listed on the Over-the-Counter
Electronic Bulletin Board system as
market makers for the Company's
common stock.  The following table
sets forth: (1) the quarterly average
bid and asked prices for a share of
the Company's common stock during the
periods indicated as reported by
Rutherford Brown and Catherwood, Inc.
of Clarks Summit, Pennsylvania, one
of the market makers of the Company's
common stock and (2) dividends on a
share of the common stock with
respect to each dividend declared
since January 1, 1994.  The following
quotations represent prices between
buyers and sellers and do not include
retail markup, markdown or
commission.  There may have been
transactions or quotations at higher
or lower prices of which management
is unaware.

<TABLE>
<CAPTION>

             AVERAGE STOCK PRICES CASH DIVIDENDS
             _____________________
1995:               BID     ASKED    DECLARED    
                _______    ______ ______________
<S>              <C>       <C>              <C>
First Quarter... $40.00    $40.00               
Second Quarter..  40.00     40.00         
Third Quarter...  40.00     40.00           $.23
Fourth Quarter.. $40.00    $42.00           $.40

1994:
First Quarter... $30.00    $32.00
Second Quarter..  32.00     35.00           $.23
Third Quarter...  35.00     40.00
Fourth Quarter.. $40.00    $40.00           $.39

</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.