EXHIBIT 13

PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
FOR FISCAL YEAR ENDED DECEMBER 31, 2009

Comm Bancorp, Inc.
CONSOLIDATED SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)

Year Ended December 31		2009				2008				2007				2006				2005
Condensed statements of financial performance:
Interest income		$	30,490			$	32,901			$	35,654			$	33,040			$	28,359
Interest expense			10,100				12,467				14,449				12,505				10,103
Net interest income			20,390				20,434				21,205				20,535				18,256
Provision for loan losses			10,430				1,760				525				890				782
Net interest income after provision for loan losses			9,960				18,674				20,680				19,645				17,474
Noninterest income			6,517				3,961				3,543				3,408				3,884
Noninterest expense			18,968				16,317				15,420				14,829				14,897
Income (loss) before income taxes			(2,491	)			6,318				8,803				8,224				6,461
Provision for income tax expense (benefit)			(2,541	)			618				1,903				1,874				1,251
Net income		$	50			$	5,700			$	6,900			$	6,350			$	5,210
Condensed statements of financial position:
Investment securities		$	108,005			$	80,574			$	39,407			$	91,213			$	104,965
Net loans			466,482				480,627				466,720				403,639				384,475
Other assets			82,286				42,840				42,860				45,552				54,137
Total assets		$	656,773			$	604,041			$	548,987			$	540,404			$	543,577
Deposits		$	590,783			$	542,291			$	491,357			$	483,442			$	491,365
Long-term debt			8,000
Other liabilities			3,036				3,952				3,257				2,844				2,523
Stockholders’ equity			54,954				57,798				54,373				54,118				49,689
Total liabilities and stockholders’ equity		$	656,773			$	604,041			$	548,987			$	540,404			$	543,577
Per share data:
Net income		$	0.03			$	3.26			$	3.87			$	3.43			$	2.80
Cash dividends declared			0.98				1.08				1.04				1.00				0.92
Stockholders’ equity		$	31.93			$	33.41			$	31.01			$	29.27			$	26.86
Cash dividends declared as a percentage of net income			*				33.09	%			26.81	%			29.18	%			32.84	%
Average common shares outstanding			1,722,493				1,748,489				1,784,495				1,853,089				1,860,563
Selected ratios (based on average balances):
Net income as a percentage of total assets			0.01	%			0.98	%			1.24	%			1.17	%			0.97	%
Net income as a percentage of stockholders’ equity			0.09				10.10				12.94				12.18				10.68
Stockholders’ equity as a percentage of total assets			9.37				9.73				9.62				9.62				9.13
Tier I capital as a percentage of adjusted total assets			8.64				9.62				9.54				9.74				9.04
Net interest income as a percentage of earning assets			3.80				4.07				4.33				4.28				3.88
Loans, net, as a percentage of deposits			93.80	%			96.39	%			93.75	%			87.58	%			82.59	%
Selected ratios and data (based on period end balances):
Tier I capital as a percentage of risk-weighted assets			10.56	%			11.12	%			11.17	%			12.50	%			11.99	%
Total capital as a percentage of risk-weighted assets			13.39				12.17				12.15				13.55				13.02
Allowance for loan losses as a percentage of loans, net			2.19	%			1.08	%			0.98	%			1.09	%			1.06	%
Full-time equivalent employees			189				185				197				186				194
Locations			16				16				17				17				16

Note: Average balances were calculated using average daily balances. Average balances for loans include nonaccrual loans. Tax-equivalent adjustments were calculated using the prevailing statutory rate of 34.0 percent.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share data)

Management’s Discussion and Analysis appearing on the following pages should be read in conjunction with the Consolidated Financial Statements beginning on page 106.

Forward-Looking Discussion:

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

Local, domestic and international economic and political conditions and governmental monetary and fiscal policies affect banking both directly and indirectly. Inflation, recession, unemployment, volatile interest rates, tight money supply, real estate values, international conflicts and other factors beyond our control may also adversely affect our future results of operations. Our management team, consisting of the Board of Directors and executive officers, expects that no particular factor will affect the results of operations. The continuation of downward trends in areas such as real estate, construction and consumer spending may continue to adversely impact our ability to increase profitability.

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

To a certain extent, our success depends upon the general economic conditions in the geographic market area that we serve. Further adverse changes to economic conditions would likely impair loan collections and may continue to adversely affect our consolidated results of operations and financial position.

The banking industry is highly competitive, with rapid changes in product delivery systems and consolidation of service providers. We compete with many larger institutions in terms of asset size. These competitors also have substantially greater technical, marketing and financial resources. The larger size of these companies affords them the opportunity to offer some specialized products and services not offered by us. We are constantly striving to meet the convenience and needs of our customers and to enlarge our customer base, however, we cannot assure that these efforts will be successful.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Critical Accounting Policies:

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

For a discussion of the recent Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) refer to the note entitled “Summary of significant accounting policies — Recent accounting standards,” in the Notes to Consolidated Financial Statements to this Annual Report.

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

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

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

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

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

In the third quarter of 2009, we reevaluated our methodology for determining the adequacy of the allowance for loan losses account, as a result of the rapidly changing economic conditions in our market area. As part of this reevaluation, we reduced the number of periods used to determine historical loss factors for homogeneous pools of loans collectively evaluated and measured for impairment under FASB Accounting Standards Codification (“ASC”) 450, “Contingencies,” from the most recent rolling 20 quarters to the most recent rolling eight quarters. The reduction in the number of quarters better reflects the rapid deterioration in our local economic conditions. Moreover, we placed a higher weight on the latest four quarters to place a greater emphasis on the current periods compared to the previous four quarters in arriving at historical loss factors. This change in accounting estimate was applied prospectively in accordance with FASB ASC 250, “Accounting Changes and Error Corrections.” The impact of this change resulted in an increase in the provision for loan losses charged to operations of $3.6 million in the third quarter of 2009.

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

Real estate acquired in connection with foreclosures or in satisfaction of loans is adjusted to fair value based upon current estimates derived through independent appraisals less cost to sell. However, proceeds realized from sales may ultimately be higher or lower than those estimates.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

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

Intangible assets include goodwill. The valuation of goodwill is analyzed at least annually for impairment.

For a further discussion of our critical accounting policies, refer to the note entitled, “Summary of significant accounting policies,” in the Notes to Consolidated Financial Statements to this Annual Report. This note lists the significant accounting policies used by us in the development and presentation of our financial statements. This Management’s Discussion and Analysis, the Notes to the Consolidated Financial Statements and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for the understanding and evaluation of our financial position, results of operations and cash flows.

Operating Environment:

Although the United States economy contracted in 2009, as the gross domestic product (“GDP”), the value of all goods and services produced in the Nation, decreased 2.4 percent, the economy began slowly recovering from the recession and the largest financial crisis since the Great Depression in the second half of the year. Supported by an improvement in financial conditions and monetary and fiscal stimulus policies, the GDP gained 2.2 percent in the third quarter of 2009 and then grew by a strong 5.9 percent in the fourth quarter. Specifically, increases in consumer and federal government spending, and business investment for equipment and software all factored into the recovery.

As a result of economic weakness which emerged late in 2007, the Federal Open Market Committee (“FOMC”) lowered the federal funds rate over 400 basis points to a target range of 0 to 25 basis points during 2008. Despite the apparent recovery in 2009, many areas of the economy such as employment conditions and the housing market remained weak. Given these weaknesses, the FOMC decided that this extraordinary monetary policy accommodation was necessary to support the recovery. As a result, the target range for the federal funds rate remained at 0 to 25 basis points for the entire year and into the first quarter of 2010. At their most recent meeting on March 16, 2010, the FOMC indicated that economic conditions will continue to warrant policy accommodation for an extended period.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Fiscal stimulus initiatives were the main support for a nearly 2.5 percent increase in consumer spending in the second half of 2009. Specifically, on June 24, 2009, President Obama signed the “Car Allowance Rebate System” or “Cash-for-Clunkers.” This legislation provided consumers with a credit of up to $4,500 dollars to help pay for new, more fuel efficient vehicles. The program, which ended on November 1, 2009, provided $3.0 billion toward the purchase of new cars and trucks and resulted in an increase in the average annual rate of new motor vehicles sold to 11.3 million units in the second half of 2009 from 9.5 million units in the first half of 2009. In addition, the rise in consumer spending was bouyed by an increase in household wealth created by a rebound in equity prices. However, consumer sentiment remained low by historical standards, as continued weakness in employment conditions and the housing market continued to dampen their confidence in the recovery.

Although still below pre-recessionary levels, corporate profits rebounded over the course of 2009. The rebound in profits, coupled with an improvement in sales prospects, led to a 2.9 percent increase in business investment in the fourth quarter. This was the first increase in business spending since the second quarter of 2008. However, for all of 2009, business investment fell 17.9 percent. The spending increase in the fourth quarter was concentrated in outlays for equipment and software, specifically light motor vehicles and information technology. Contrarily, businesses continued to dramatically cut spending on nonresidential structures. Spending on structures decreased 15.4 percent in the fourth quarter of 2009 and 19.7 percent for the entire year.

Although business investment improved in the fourth quarter, uncertainty with regard to the overall state of the economy influenced employment conditions in 2009. Businesses were very reluctant to add to their payrolls during the year. Although the civilian labor force decreased by 1.4 million, the number of people employed fell 5.5 million. As a result, the unemployment rate for the Nation spiked to a seasonally-adjusted rate of 10.1 percent in October 2009 from 7.4 percent in December 2008. The unemployment rate settled at 10.0 percent in December 2009. Similar to 2008, every industry, except for education and health services, experienced substantial job losses. Goods producing industries, which include construction and manufacturing, lost over 2.3 million jobs, while cutbacks in service producing industries totaled over 1.9 million. Despite the job losses, the labor market shows signs of stabilizing as the unemployment rate, although still very high, fell to 9.7 percent in February 2010.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

National, Pennsylvania and our market area’s seasonally-adjusted unemployment rates at December 31, 2009 and 2008, are summarized as follows:

December 31		2009				2008
National			10.0	%			7.4	%
Pennsylvania			8.9				6.4
Lackawanna County			9.2				7.4
Luzerne County			10.1				7.8
Monroe County			9.7				8.0
Susquehanna County			8.8				8.0
Wayne County			8.1				7.0
Wyoming County			9.6	%			7.5	%

Employment conditions deteriorated for the Commonwealth of Pennsylvania, as the unemployment rate rose to 8.9 percent for 2009 from 6.4 percent in 2008. Similarly, the unemployment rate increased for all counties in our market area. The unemployment rate for the Scranton/Wilkes-Barre metropolitan area rose to 9.5 percent in December 2009, the highest level since April 1996. Retailers and manufacturers, as well as professional and business services, continued to cut jobs in the midst of uncertainty in economic conditions.

Weak labor conditions and rising unemployment led to a 31.5 percent increase in the number of personal bankruptcy filings in the United States to 1,412,838 filings in 2009 from 1,074,108 filings in 2008. In addition, the number of personal filings in our circuit and district increased 10.9 percent to 12,225 filings in 2009 from 11,025 filings in 2008. On a positive note, although foreclosure rates in our market area are elevated, the Scranton/Wilkes-Barre region has fewer bank-owned foreclosures than other regions. According to the “MetroMonitor Report” issued by the Brookings Institution, a nonprofit, public policy organization based in Washington D.C., the rate of bank-owned homes in our region was 1.24 for every 1,000 mortgage properties, the eighth lowest rate in the Nation.

It was another troublesome year for the banking industry, characterized by operating losses, further asset quality deterioration and the largest number of bank failures since 1992. Earnings for all Federal Deposit Insurance Corporation (“FDIC”)-insured commercial banks fell $7.9 billion or 42.2 percent to $10.8 billion in 2009 from $18.7 billion in 2008. For the third consecutive year, the primary factor responsible for the earnings decline was a marked increase in loan loss provisions. According to FDIC statistics, 29.4 percent of insured commercial banks were unprofitable, while 120 commercial banks failed and another six applied for FDIC assistance. These statistics were significantly higher than the previous year in which 23.4 percent of insured commercial banks were unprofitable, 20 commercial banks failed and four banks applied for assistance. At the end of 2008, the FDIC Deposit Insurance Fund (“DIF”) had fallen below the minimum required reserve ratio and reached the lowest level since 1993. In 2009, due to the rising number of bank failures, the DIF fell to negative 0.39 percent of insured deposits by year end. On October 7, 2008, the FDIC proposed a Restoration Plan for the DIF. The final Restoration Plan was approved on February 27, 2009, and called for an increase in assessment rates in order to return the DIF to 1.15 percent within seven years. On May 22, 2009, the FDIC issued a final rule which levied a special emergency assessment of 5 basis points of total assets less Tier I capital as of June 30, 2009, on all insured depository institutions. In addition, on November 12, 2009, the FDIC issued another final rule that required all insured depository institutions to prepay their estimated quarterly assessments for the fourth quarter of 2009, and all of 2010, 2011 and 2012. Under this latest final rule, the FDIC adopted a uniform assessment rate increase of $0.03 per $100 dollars of assessable deposits effective January 1, 2011.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

With regard to bank balance sheets, total assets for all FDIC-insured commercial banks, which grew 10.2 percent in 2008, decreased 3.8 percent in 2009. The decline, for the most part, resulted from a substantial reduction in loan demand, as total loans and leases decreased $338.6 billion or 5.0 percent to $6,499.8 billion at December 31, 2009, from $6,838.4 billion at the end of 2008. On the other hand, FDIC-insured commercial banks experienced strong demand for their deposit products. Total deposits for all FDIC-insured commercial banks grew $251.0 billion or 3.1 percent in 2009. Interest-bearing deposits rose $114.6 billion or 1.7 percent, while noninterest-bearing deposits increased $136.4 billion or 9.5 percent. Asset quality continued to deteriorate in the banking industry as growth in noncurrent assets accelerated further in 2009. Increased delinquencies and foreclosures of real estate loans had the greatest impact on nonperforming asset levels. As evidenced by an increase in risk-based capital ratios, FDIC-insured commercial banks remained well capitalized. Equity capital increased 15.4 percent in 2009. The Leverage ratio for these institutions equaled 8.6 percent at December 31, 2009, and 7.4 percent at the end of 2008.

As previously mentioned, the banking industry experienced an earnings decrease for the third consecutive year. Higher net interest income and noninterest income were overshadowed by greater noninterest expense and a substantial increase in loan loss provisions. The poor earnings performance was concentrated in community banks with total assets between $100.0 million and $1.0 billion and regional banks with total assets between $1.0 billion and $10.0 billion. For all FDIC-insured commercial banks, the provision for loan losses amounted to $229.6 billion in 2009, an increase of $77.1 billion or 50.6 percent from $152.5 billion in 2008. The significant increase was in response to the 78.4 percent growth in noncurrent assets and a 94.4 percent increase in net charge-offs. Return on average assets (“ROAA”) and return on average equity (“ROAE”) decreased dramatically. ROAA for insured commercial banks decreased to 0.09 percent in 2009 from 0.13 percent in 2008, while ROAE fell to 0.85 percent from 1.32 percent comparing 2009 and 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Similarly, FDIC-insured commercial banks located in Pennsylvania recorded decreased earnings in 2009. For these banks, net income declined $369.0 million or 25.3 percent. Similar to all FDIC-insured commercial banks, higher net interest income and noninterest income were more than entirely offset by increases in the loan loss provisions and noninterest expense. This marked the fourth year in a row insured Pennsylvania banks recorded an earnings decrease. In addition to the decline in net income, growth in both assets and equity caused a further deterioration in ROAA and ROAE. For these banks, ROAA and ROAE equaled 0.27 percent and 2.62 percent in 2009 compared to 0.54 percent and 5.22 percent in 2008.

U.S. equity markets recovered remarkably in 2009 after being poised on the brink of disaster one year earlier. U.S. equity markets, as well as every major world market, plunged at the end of 2008 amid what has been tagged as the worst financial crisis since the Great Depression. In 2009, the Dow Jones Industrial Average (“DJIA”) rose 18.8 percent after plummeting 33.8 percent in 2008, which was the worst drop in the DJIA since 1931. Similarly, the Standard & Poor’s 500 and the NASDAQ Composite gained 23.5 percent and 43.9 percent in 2009. These indices fell 38.5 percent and 40.5 percent in 2008. With regard to the banking industry, reported losses continued to weigh heavily on bank stocks as the NASDAQ Bank Index Composite fell 374.90 points or 18.5 percent comparing year-end 2009 and 2008. The composite of bank stocks on this index fell 637.04 points or 23.9 percent in 2008.

The United States economy is expected to continue a slow recovery in 2010. Moderate economic growth is expected with GDP advancing between 2.5 percent and 3.5 percent according to the February 24, 2010, Board of Governors of the Federal Reserve System’s (“Federal Reserve Board”) “Monetary Report to Congress.” Labor markets are expected to further stabilize, with a slight decrease in unemployment, and inflation is expected to remain subdued. Given the very slow pace of recovery and sustained weakness in certain areas, the FOMC has indicated that they will keep interest rates low for some time. Our earnings, along with those of all financial institutions, could be strained further in 2010 should the pace of recovery be slower than anticipated, which may cause a continuation of asset quality issues. In addition, operating income of financial institutions will be strained by the mounting burden of deposit insurance premiums.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Review of Financial Position:

We are located in Northeastern Pennsylvania and offer traditional bank products and services, including loans, deposits and trust and wealth management services, through our primary subsidiary, Community Bank and Trust Company (“Community Bank”). Our other subsidiary, Comm Realty Corporation (“Comm Realty”), holds, manages and sells foreclosed or distressed assets on behalf of Community Bank. Community Bank operates 15 full-service branch banking offices and one loan production office located within a contiguous six-county market area and primarily services individuals and small- and medium-sized businesses. Community Bank has three subsidiaries, Community Leasing Corporation (“Community Leasing”), Comm Financial Services Corporation (“Comm Financial Services”) and Community Abstract Services, LLC (“Community Abstract”). Community Leasing provides direct lease financing to commercial customers, Comm Financial Services offers various types of insurance products and asset management services to both individuals and businesses and Community Abstract offers title insurance and abstract services to residential and commercial mortgage loan customers.

Due to the strain on the banking industry and the recent escalation in the number of bank failures, regulatory oversight of banks intensified in 2009. Regulators are extremely critical in their evaluations of capital adequacy, and in particular, the reserves banks set aside for potential loan losses. As a result of this emphasis, coupled with the recent deterioration evidenced in the commercial and construction sectors of our loan portfolio and the continuation of the downturn in economic conditions, we reevaluated our loan review process and our allowance for loan loss methodology. The result of this reevaluation led us to record additional reserves through an $8.7 million provision for loan losses in the third quarter of 2009. The rapid devaluation of collateral values used to measure impairment on specifically identified loans, coupled with a shortening of the loss experience period utilized to estimate losses in the remainder of the portfolio, necessitated the large provision. With this provision, we believe the allowance for loan losses is adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of December 31, 2009.

For 2009, we reported net income significantly lower than that reported in recent years. The earnings reduction was a direct result of asset quality weakness. In addition to the $8.7 million provision for loan losses recorded in the third quarter, we experienced a reduction in net interest income due in part to higher levels of nonaccrual loans. Asset quality deterioration also factored into an increase in noninterest expense. Loan collection expense, legal and consulting fees, appraisal costs, credit reports and searches expense, other real estate expense and losses on sales of foreclosed assets all increased comparing the years ended December 31, 2009 and 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Our challenges appear to be specifically limited to certain sectors of the loan portfolio, accounting for less than 5.0 percent of the overall balance sheet. Moreover, many financial institutions experienced major losses in their investment portfolios due to impaired securities. We were not subject to any such losses. Furthermore, Community Bank’s regulatory capital ratios continue to exceed the levels required to be considered “well capitalized” under applicable regulatory standards at December 31, 2009.

With regard to our financial position, total assets increased $52.8 million or 8.7 percent to $656.8 million at December 31, 2009, from $604.0 million at December 31, 2008. For the year ended December 31, 2009, total assets averaged $621.9 million, an increase of $42.2 million or 7.3 percent from $579.7 million for the same period of 2008. Earning assets averaged $594.1 million and equaled 95.5 percent of total average assets in 2009, compared to $550.5 million or 95.0 percent of total average assets in 2008.

The balance sheet growth was driven by a $48.5 million or 8.9 percent increase in total deposits to $590.8 million at the end of 2009, from $542.3 million at year-end 2008. Total interest-bearing deposits increased $39.8 million or 8.6 percent, while noninterest-bearing deposits rose $8.7 million or 10.9 percent. With regard to interest-bearing deposits, interest-bearing transaction accounts, which include money market, NOW and savings accounts increased $39.7 million or 18.8 percent comparing December 31, 2009 and 2008. The growth in these types of accounts reflected cyclical deposit trends of our municipal and local school district accounts, as well as the reduced risk tolerance of our customer base due to uncertainty in the stock market. The balance in total time deposits was stable from year-end 2008 to the end of 2009. As previously mentioned, short-term interest rates remained at historically low levels in 2009. As a result, we experienced a 73 basis point reduction in our cost of funds to 2.11 percent in 2009 from 2.84 percent in 2008.

A decline in loan demand, coupled with tightened lending standards, led to a $9.0 million reduction in loans, net of unearned income, to $476.9 million at December 31, 2009, from $485.9 million at December 31, 2008. Loans averaged $512.2 million and represented 86.2 percent of average earning assets in 2009, compared to $495.3 million or 90.0 percent in 2008. The tax-equivalent yield on the loan portfolio decreased 77 basis points to 5.66 percent in 2009 from 6.43 percent in 2008. Excess deposits not used to fund loans were directed into the investment portfolio. Available-for-sale investment securities increased $27.4 million to $108.0 million at the end of 2009 from $80.6 million at December 31, 2008. We had $25.3 million in federal funds sold outstanding at December 31, 2009, compared to $12.7 million at year-end 2008. Overall, we experienced an 83 basis point reduction in the tax-equivalent yield on earning assets to 5.50 percent in 2009 from 6.33 percent in 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Stockholders’ equity equaled $55.0 million or $31.93 per share at December 31, 2009, and $57.8 million or $33.41 per share at December 31, 2008. Our Leverage ratio was 8.64 percent at the end of 2009, compared to 9.62 percent at December 31, 2008. The Leverage ratio, as well as our risk-based capital ratios, exceeded regulatory standards for capital adequacy purposes.

Our foremost goal for 2010 is to work diligently to increase our Company’s profitability. In order to accomplish this goal, we and Community Bank drafted a Capital Plan, which was approved by each of our Boards of Directors early in 2010. In addition, we have implemented cost curtailment initiatives in the latter part of 2009, which extended into 2010.

The cost curtailment initiatives that were implemented during 2009 included, among others:

	•		The cancellation of 2009 Board of Director and management bonuses;
	•		The elimination of paid expenses for Board of Director seminars and conventions;
	•		The suspension of 2009 annual employee salary increases; and
	•		The reduction of marketing-related expenses in 2009 and 2010.

There are two broad objectives with regard to the Capital Plan: (i) to improve asset quality by reducing the level of problem assets and (ii) to strengthen our capital position thereby increasing our regulatory capital ratios. We have already taken concrete steps in regard to the first objective of improving asset quality including, hiring an independent loan review company to assist us with credit risk management, enhancing staff within our Special Assets Division and tightening our underwriting standards.

With regard to the objective of strengthening our capital position, on December 31, 2009, Community Bank completed an $8.0 million subordinated debt offering. The offering, which was oversubscribed, matures on December 31, 2016, and bears interest at an annual rate of 8.0 percent. Our ability to raise capital within a short time span is a testimonial to the market’s perception of our ability to meet our goals in these very challenging times.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Investment Portfolio:

Primarily, our investment portfolio provides a source of liquidity needed to meet expected loan demand and generates a reasonable return in order to increase our profitability. Additionally, we utilize the investment portfolio to meet pledging requirements and reduce income taxes. At December 31, 2009, our portfolio consisted primarily of short-term U.S. Government agency mortgage-backed securities, which provide a source of liquidity and intermediate-term, tax-exempt state and municipal obligations, which mitigate our tax burden.

Our investment portfolio is subject to various risk elements that may negatively impact our liquidity and profitability. The greatest risk element affecting our portfolio is market risk or IRR. Understanding IRR, along with other inherent risks and their potential effects, is essential in effectively managing the investment portfolio.

Market risk or IRR relates to the inverse relationship between bond prices and market yields. It is defined as the risk that increases in general market interest rates will result in market value depreciation. A marked reduction in the value of the investment portfolio could subject us to liquidity strains and reduced earnings if we are unable or unwilling to sell these investments at a loss. Moreover, the inability to liquidate these assets could require us to seek alternative funding, which may further reduce profitability and expose us to greater risk in the future. In addition, since our entire investment portfolio is designated as available-for-sale and carried at estimated fair value, with net unrealized gains and losses reported as a separate component of stockholders’ equity, market value depreciation could negatively impact our capital position.

As previously mentioned, the FOMC indicated that throughout 2009 economic conditions warranted exceptionally low levels for the federal funds rate for an extended period. Yields on short-term U.S. Treasury securities hovered around the target range for the federal funds rate of 0 to 25 basis points in 2009, as economic data suggested weak employment conditions and relatively low inflation. However, the majority of incoming data suggested improved economic conditions. As a result, yields on intermediate-term and longer-term Treasury securities increased throughout 2009 as the market anticipated higher interest rates in the future. Our investment portfolio consists primarily of fixed-rate bonds. As a result, changes in general market interest rates have a significant influence on the fair value of our portfolio. Specifically, the parts of the yield curve most closely related to our investments include the 3-year and 10-year U.S. Treasury securities. The yield on the 3-year U.S. Treasury note affects the values of our mortgage-backed securities, whereas the 10-year U.S. Treasury note influences the value of tax-exempt state and municipal obligations. The yield on the 3-year U.S. Treasury, which started the year at 1.00 percent, rose 64 basis points to 1.64 percent at June 30, 2009, and another 6 basis points to close the year at 1.70 percent. In addition, the yield on the 10-year U.S. Treasury rose 128 basis points to 3.53 percent at June 30, 2009, and another 32 basis points to 3.85 percent at December 31, 2009. Since bond prices move inversely to yields, we experienced a decrease in the aggregate fair value of our investment portfolio.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

We reported net unrealized holding gains, included as a separate component of stockholders’ equity of $819, net of income taxes of $422, at December 31, 2009, and $1,671, net of income taxes of $861, at December 31, 2008. We realize that the market value of our investments and our capital position could be negatively impacted by increases in interest rates. In order to monitor the potential effects an increase in interest rates could have on the value of our investments, we perform stress test modeling on the portfolio. Stress tests conducted on our portfolio at December 31, 2009, indicated that should general market rates instantaneously increase by 100, 200 and 300 basis points, we would anticipate declines of 4.0 percent, 8.1 percent and 12.0 percent in the market value of our portfolio. Our IRR exposure with regard to market value depreciation weakened slightly in comparison to the previous year end. At December 31, 2008, we anticipated market value depreciation of 2.8 percent, 5.9 percent and 8.9 percent given the same rate shocks.

In order to independently measure our performance, we monitor and evaluate our investment portfolio with respect to total return in comparison to a national industry benchmark. Total return is a comprehensive industry-wide approach measuring investment portfolio performance. This measure is superior to measuring performance strictly on the basis of yield since it not only considers income earned similar to the yield approach, but also includes the reinvestment income on repayments and capital gains and losses, whether realized or unrealized. The total return of our investment portfolio was 6.1 percent in 2009, compared to 8.3 percent in 2008. Despite the decrease from the prior year, the total return on our investment portfolio outperformed the Barclay’s Capital U.S. Aggregate Bond Index, a benchmark used by most investment managers, which scored a total return of 5.9 percent in 2009.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

The carrying values of the major classifications of available-for-sale securities as they relate to the total investment portfolio for the past five years are summarized as follows:

Distribution of investment securities available-for-sale

		2009								2008								2007								2006								2005
December 31		Amount				%				Amount				%				Amount				%				Amount				%				Amount				%
U.S. Government-sponsored																										$	39,201				42.98	%		$	42,711				40.69	%
State and municipals:
Taxable																		$	5,227				13.26	%			11,912				13.06				15,268				14.54
Tax-exempt		$	26,862				24.87	%		$	47,007				58.34	%			30,897				78.41				30,956				33.94				33,795				32.20
Mortgage-backed securities:
U.S. Government			78,155				72.36				31,957				39.66				1,087				2.76				1,458				1.60				1,826				1.74
U.S. Government-sponsored			220				0.21				269				0.33				817				2.07				6,302				6.91				10,391				9.90
Equity securities:
Restricted			2,537				2.35				1,116				1.39				1,128				2.86				1,206				1.32				808				0.77
Other			231				0.21				225				0.28				251				0.64				178				0.19				166				0.16
Total		$	108,005				100.00	%		$	80,574				100.00	%		$	39,407				100.00	%		$	91,213				100.00	%		$	104,965				100.00	%

Available-for-sale investment securities increased $27.4 million to $108.0 million at December 31, 2009, from $80.6 million at December 31, 2008. Due to continued uncertainty with regard to economic conditions, loan demand remained subdued in 2009. Deposit gathering was strong, as stock market volatility caused investors to seek safer alternatives and landowners in our market area continue to receive proceeds from leasing their properties to natural gas drilling companies. As a result, excess deposited funds were directed into the investment portfolio. Security purchases totaled $94.5 million in 2009, with the majority of the purchases occurring in the third and fourth quarters of the year. Specifically, we purchased $93.0 million in Government National Mortgage Association federal agency mortgage-backed securities, which are direct obligations of the U.S. Government and $1.5 million in restricted equity securities.

Repayments of investment securities totaled $10.1 million in 2009. We received proceeds of $56.8 million from the sale of investment securities in 2009. In the fourth quarter of 2009, we began making a significant investment in an elderly, low income housing project, which will provide us with investment tax credits. In order to mitigate the possibility of being subject to alternative minimum tax in the future as a result of this investment, we sold $13.9 million of tax-exempt state and municipal obligations. In addition to tax-exempt securities, we sold certain U.S. Government agency mortgage-backed securities that had values based on the 3-year U.S. Treasury yield. Economic conditions during the second half of 2009 caused an unprecedented run up in the price of U.S. Treasury securities, which resulted in a tightening of spreads between comparable U.S. Treasury and U.S. Agency securities and a significant increase in the fair value of these securities. Based on this increase and implementing asset/liability strategies, we sold $41.3 million of U.S. Government Agency mortgage-backed securities during the second half of 2009. Net gains recognized on the sale of available-for-sale investment securities totaled $1.6 million in 2009. No securities were sold in 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Investment securities averaged $65.0 million and equaled 10.9 percent of average earning assets in 2009, compared to $44.2 million and 8.0 percent in 2008. The tax-equivalent yield on the investment portfolio decreased 81 basis points to 5.60 percent in 2009 from 6.41 percent in 2008.

At December 31, 2009, investment securities with an amortized cost of $58.8 million were pledged to secure deposits, to qualify for fiduciary powers and for other purposes required or permitted by law. At December 31, 2008, the amortized cost of pledged securities equaled $31.9 million. The fair value of such securities equaled $58.4 million at December 31, 2009, and $32.2 million at December 31, 2008.

At December 31, 2009 and 2008, there were no securities of any individual issuer, except for U.S. Government agency mortgage-backed securities, that exceeded 10.0 percent of stockholders’ equity.

The maturity distribution of the amortized cost, fair value and weighted-average, tax-equivalent yield of the available-for-sale portfolio at December 31, 2009, is summarized as follows. The weighted-average yield, based on amortized cost, has been computed for tax-exempt state and municipals on a tax-equivalent basis using the prevailing federal statutory tax rate of 34.0 percent. The distributions are based on contractual maturity with the exception of mortgage-backed securities and equity securities. Mortgage-backed securities are presented based upon estimated cash flows, assuming no change in the current interest rate environment. Equity securities with no stated contractual maturities are included in the “After ten years” maturity distribution. Expected maturities may differ from contractual maturities, or estimated maturities for mortgage-backed securities, because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Maturity distribution of available-for-sale portfolio

										After one								After five
		Within								but within								but within								After
		one year								five years								ten years								ten years								Total
December 31, 2009		Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield
Amortized cost:
State and municipals		$	2,024				7.74	%		$	2,825				7.84	%		$	11,293				7.36	%		$	9,201				7.08	%		$	25,343				7.34	%
Mortgage-backed securities:
U.S. Government			15,504				3.95				35,002				3.53				27,798				3.71				233				4.62				78,537				3.68
U.S. Government-sponsored			64				6.75				134				6.71				10				6.65												208				6.72
Equity securities:
Restricted																											2,537				0.25				2,537				0.25
Other																											139				1.49				139				1.49
Total		$	17,592				4.40	%		$	37,961				3.86	%		$	39,101				4.76	%		$	12,110				5.54	%		$	106,764				4.47	%
Fair value:
State and municipals		$	2,080							$	2,930							$	12,223							$	9,629							$	26,862
Mortgage-backed securities:
U.S. Government			15,403								34,739								27,780								233								78,155
U.S. Government-sponsored			68								142								10																220
Equity securities:
Restricted																											2,537								2,537
Other																											231								231
Total		$	17,551							$	37,811							$	40,013							$	12,630							$	108,005

Loan Portfolio:

Economic factors and how they affect loan demand are of extreme importance to us and the overall banking industry, as lending is a primary business activity. Loans are the most significant component of earning assets and they generate the greatest amount of revenue for us. Similar to the investment portfolio, there are risks inherent in the loan portfolio that must be understood and considered in managing the lending function. These risks include IRR, credit concentrations and fluctuations in demand. Changes in economic conditions and interest rates affect these risks which influence loan demand, the composition of the loan portfolio and profitability of the lending function. According to a February 24, 2010, “Wall Street Journal” article, United States banks posted their sharpest decline in lending since 1941. Continued low corporate profit levels, weakness in loan demand, staggering delinquency rates and tightened lending standards all factored into a drastic decline in commercial lending. In addition, residential mortgage lending weakened, as depressed home values offset the positive effects of low mortgage rates. Finally, despite a rebound in equity prices, consumers continued to de-leverage, resulting in a steep contraction in consumer loans.

The January 2010 “Senior Loan Officers Opinion Survey on Bank Lending Practices,” issued by the Federal Reserve Board, indicated that a majority of responding banks in the United States reported that demand for business loans continued to weaken in the second half of 2009. Respondents noted that reduced demand reflected business customers’ reduced need to finance investment in plant and equipment, accounts receivable, inventories and mergers and acquisitions. In addition, due to severe asset quality deterioration, banks further tightened lending standards during 2009. Commercial loans, including commercial real estate loans, for all FDIC-insured commercial banks, decreased $237.4 billion or 10.0 percent to $2,138.4 billion at December 31, 2009, from $2,375.8 billion at the end of 2008. In addition, construction and land development loans declined $117.1 billion or 22.0 percent comparing year end 2009 and 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Mortgage rates remained at historically low levels in 2009. The rate for a fixed-rate first mortgage was 4.93 percent at December 31, 2009, a decrease of 40 basis points from 5.33 percent at December 31, 2008. In addition, one of the key provisions of the American Recovery and Reinvestment Act signed into law on February 17, 2009, was an $8 tax credit available to first-time home buyers for the purchase of a principal residence. Despite these favorable conditions, the housing market continued to contract in 2009. According to the U.S. Commerce Department, the percentage of Americans who owned their home fell to 67.3 percent at the end of 2009, the lowest percentage since the second quarter of 2000. In addition, home sales fell 22.9 percent in 2009. For all FDIC-insured commercial banks, one-to-four family residential mortgages, including home equity loans, increased $68.0 billion or 3.3 percent in 2009 contrary to the downturn in housing market statistics.

We experienced unprecedented demand in our Secondary Mortgage Banking Division. The volume of mortgages originated by us and subsequently sold in the secondary market totaled $69.1 million in 2009, an increase of $51.1 million from $18.0 million in 2008. Gains realized on the sale of these loans were $1,350 in 2009 and $467 in 2008. Residential mortgage loans serviced for the Federal National Mortgage Association (“FNMA”) totaled $151.9 million at December 31, 2009, an increase of $27.3 million or 21.9 percent from $124.6 million at the end of 2008. Mortgage loans held for sale totaled $2.0 million at December 31, 2009, and $1.4 million at the end of 2008.

As a result of the historically low mortgage rates, we experienced a slight increase in refinancing activity in 2009. Refinancings totaled $8.6 million, an increase of $1.5 million or 21.1 percent from $7.1 million in 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

The composition of the loan portfolio at year end for the past five years is summarized as follows:

Distribution of loan portfolio

		2009								2008								2007								2006								2005
December 31		Amount				%				Amount				%				Amount				%				Amount				%				Amount				%
Commercial, financial and others		$	160,945				33.75	%		$	170,305				35.05	%		$	181,417				38.49	%		$	141,868				34.77	%		$	137,034				35.27	%
Real estate:
Construction			23,195				4.86				25,332				5.21				12,810				2.72				5,513				1.35				2,575				0.66
Residential			104,925				22.00				112,053				23.06				110,633				23.47				98,262				24.08				92,717				23.86
Commercial			155,269				32.55				142,641				29.36				128,852				27.33				129,411				31.71				125,438				32.28
Consumer, net			29,447				6.18				32,812				6.76				35,149				7.46				31,500				7.72				29,157				7.50
Lease financing, net			3,163				0.66				2,739				0.56				2,483				0.53				1,520				0.37				1,682				0.43
Loans, net of unearned income			476,944				100.00	%			485,882				100.00	%			471,344				100.00	%			408,074				100.00	%			388,603				100.00	%
Less: allowance for loan losses			10,462								5,255								4,624								4,435								4,128
Net loans		$	466,482							$	480,627							$	466,720							$	403,639							$	384,475

Loans, net of unearned income, decreased $9.0 million or 1.9 percent to $476.9 million at December 31, 2009, from $485.9 million at the end of 2008. Reductions in residential mortgages, construction loans and consumer loans, partially offset by an increase in business lending, factored into the overall decrease in the loan portfolio. Business loans, including commercial loans, commercial mortgages and lease financing, increased $3.7 million to $319.4 million at December 31, 2009, from $315.7 million at year-end 2008. Residential mortgage loans decreased $7.2 million to $104.9 million at the close of 2009 from $112.1 million at December 31, 2008. Construction loans, which include land development loans, decreased $2.1 million. Consumer loans, including ready reserve and credit card loans, decreased $3.4 million or 10.4 percent to $29.4 million at December 31, 2009, from $32.8 million at December 31, 2008.

Loans averaged $512.2 million in 2009, an increase of $16.9 million or 3.4 percent compared to $495.3 million in 2008. Taxable loans increased $5.7 million, while tax-exempt loans rose $11.2 million. Due to the decline in loan demand, the loan portfolio played a less prominent role in our earning asset mix. As a percentage of earning assets, average loans equaled 86.2 percent in 2009 compared to 90.0 percent in 2008.

The prime rate was unchanged at 3.25 percent for 2009. The unprecedented low prime rate, coupled with a high level of nonaccrual loans, caused the tax-equivalent yield on our loan portfolio to decrease 77 basis points to 5.66 percent in 2009 from 6.43 percent in 2008. The effect of an unchanged, low prime rate on our loan portfolio’s yield can be evidenced by evaluating quarterly loan yields, which continued to decline during 2009. After being relatively unchanged in the first quarter, the tax-equivalent yield on the loan portfolio fell 8 basis points to 5.78 percent in the second quarter from 5.86 percent in the first quarter of 2009. The yield on the loan portfolio fell another 28 basis points in the third quarter. Loan yields stabilized in the fourth quarter, increasing 2 basis points. The FOMC has indicated that interest rates will remain at extremely low levels for most of 2010 in order to support economic recovery. As a result, we anticipate a possible decline in the tax-equivalent yield on our loan portfolio, as there are still adjustable-rate loans that will reprice downward throughout the year.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

The maturity distribution and repricing information of the loan portfolio by major classification at December 31, 2009, is summarized as follows:

Maturity distribution and interest sensitivity of loan portfolio

						After one
		Within				but within				After
December 31, 2009		one year				five years				five years				Total
Maturity schedule:
Commercial, financial and others		$	68,546			$	45,957			$	46,442			$	160,945
Real estate:
Construction			18,001				2,458				2,736				23,195
Residential			13,846				48,346				42,733				104,925
Commercial			21,661				58,345				75,263				155,269
Consumer, net			3,937				20,889				4,621				29,447
Lease financing, net			632				2,531								3,163
Total		$	126,623			$	178,526			$	171,795			$	476,944
Predetermined interest rates		$	45,551			$	99,760			$	63,657			$	208,968
Floating or adjustable interest rates			81,072				78,766				108,138				267,976
Total		$	126,623			$	178,526			$	171,795			$	476,944

As previously mentioned, there are numerous risks inherent in the loan portfolio. We manage the portfolio by employing sound credit policies and utilizing various modeling techniques in order to limit the effects of such risks. In addition, we utilize private mortgage insurance (“PMI”) and guaranteed Small Business Administration and Federal Home Loan Bank of Pittsburgh (“FHLB-Pgh”) loan programs to mitigate credit risk in the loan portfolio.

Federal regulators are specifically concerned with certain high-risk loan products offered by the banking industry. Our loan portfolio does not contain option adjustable-rate mortgage products, high loan-to-value ratio mortgages, subprime loans or loans with initial teaser rates. At December 31, 2009, we had $28.4 million in junior-lien mortgages and $106.6 million in interest-only loans. We mitigate credit risk associated with these loans having junior-lien positions by limiting the loan-to-value ratios to supervisory limits set forth in the Federal Financial Institutions Examination Council (“FFIEC”) Interagency Guidelines for Real Estate Lending Policies. Risk associated with interest-only loans is reduced through ensuring adequate collateralization within our policy guidelines. Generally, collateral for interest-only loans includes deposits, real estate and marketable equity securities. The loan-to-value ratios for junior-lien mortgages and interest-only loans is 80.0 percent. The amount of refinanced or modified interest-only loans was $165 for the 12 months ended December 31, 2009. There were no junior-lien mortgages refinanced or modified during this same period. Nonperforming junior-lien mortgages totaled $619 and nonperforming interest-only loans amounted to $4.4 million at December 31, 2009. There were two loans totaling $211 of junior-lien mortgages and two loans totaling $2.4 million of interest-only loans considered troubled debt restructures at December 31, 2009. In addition, we had one junior-lien, interest-only loan of $431, which was considered a troubled debt restructure at the close of 2009.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

We continuously monitor our liquidity position so that adequate funds are available to meet loan demand. Based on our asset/liability simulation model, we feel confident that loan demand can be facilitated through payments and prepayments on investments and loans, and increases in core deposits. We expect to receive approximately $144.2 million from repayments on loans and investment securities during 2010. In the event an unforeseen increase in loan demand arises, we could fund the demand by aggressively competing for deposits, by selling available-for-sale securities or by utilizing various credit products available through the FHLB-Pgh.

In an attempt to limit IRR and liquidity strains, we continually examine the maturity distribution and interest rate sensitivity of the loan portfolio. For 2009, market interest rates remained at historically low levels. Accordingly, we continued to place emphasis on originating loans with interest rates that have short repricing terms. Upon the threat of rising interest rates, we will shift to promoting floating-rate loans that reprice immediately with changes in the prime rate. Adjustable-rate loans represented 56.2 percent of the loan portfolio at December 31, 2009, compared to 50.2 percent at the end of 2008. Approximately 41.3 percent of the loan portfolio is expected to reprice within the next 12 months.

Additionally, our secondary market mortgage banking program provides us with an additional source of liquidity and a means to limit our exposure to IRR. Through this program, we are able to competitively price conforming one-to-four family residential mortgage loans without taking on IRR which would result from retaining these long-term, low fixed-rate loans on our books. The loans originated are subsequently sold in the secondary market, with the sales price locked in at the time of commitment, thereby greatly reducing our exposure to IRR.

Loan concentrations are considered to exist when the total amount of loans to any one borrower, or a multiple number of borrowers engaged in similar business activities or having similar characteristics, exceeds 10.0 percent of loans outstanding in any one category. We provide deposit and loan products and other financial services to individual and corporate customers in our six-county market area. There are no significant concentrations of credit risk from any individual counterparty or groups of counterparties, except for geographic concentrations.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

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

Credit risk is the principal risk associated with these instruments. Our involvement and exposure to credit loss in the event that the instruments are fully drawn upon and the customer defaults is represented by the contractual amounts of these instruments. In order to control credit risk associated with entering into commitments and issuing letters of credit, we employ the same credit quality and collateral policies in making commitments that we use in other lending activities. We evaluate each customer’s creditworthiness on a case-by-case basis, and if deemed necessary, obtain collateral. The amount and nature of the collateral obtained is based on our credit evaluation.

The contractual amounts of off-balance sheet commitments at year-end for the past five years are summarized as follows:

Distribution of off-balance sheet commitments

December 31		2009				2008				2007				2006				2005
Commitments to extend credit		$	81,945			$	69,235			$	80,675			$	60,878			$	59,135
Unused portions of lines of credit			24,723				19,855				17,901				21,091				20,257
Commercial letters of credit			20,982				15,447				19,634				21,405				18,565
Total		$	127,650			$	104,537			$	118,210			$	103,374			$	97,957

We record an allowance for off-balance sheet credit losses, if deemed necessary, separately as a liability. No allowance was deemed necessary at December 31, 2009 and 2008. We do not anticipate that losses, if any, that may occur as a result of funding off-balance sheet commitments, would have a material adverse effect on our operating results or financial position.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Asset Quality:

Credit quality continued to be of great concern to the banking industry and bank regulators given the current state of the economy, characterized by high unemployment and record foreclosure and delinquency rates. The Mortgage Bankers Association (“MBA”) reported that delinquency rates, which reached record levels in 2008, continued climbing in 2009. According to the “Fourth Quarter of 2009 U.S. Housing Market Conditions” report issued by the U.S. Department of Housing and Urban Development, the MBA reported that delinquency rates for all mortgage loans increased to 9.64 percent in the third quarter of 2009, from 6.99 percent for the third quarter of 2008. The delinquency rate for prime mortgages increased to 6.84 percent in the third quarter of 2009, from 4.34 percent one year ago, while the delinquency rate for subprime mortgages increased to 26.42 percent from 20.03 percent for the respective periods. In addition, newly initiated foreclosures represented 1.42 percent of all mortgage loans in the third quarter of 2009 compared to 1.07 percent one year earlier. Foreclosures started on prime loans rose to 1.14 percent in the third quarter of 2009, compared to 0.61 percent for the same quarter of 2008. Contrarily, foreclosures started on subprime loans fell to 3.76 percent from 4.23 percent for the third quarters of 2009 and 2008. The increase in foreclosures on prime loans suggests a shift away from mortgage defaults due to interest rate increases on subprime adjustable-rate mortgages to defaults caused by unemployment and the recession.

Subprime lending generally refers to lending to borrowers who do not qualify for prime interest rates because of one or more of the following criteria: (i) weakened credit histories; (ii) previous charge-offs; (iii) judgments or bankruptcies; (iv) low credit scores; (v) high debt-burden ratios; or (vi) high loan-to-value ratios. These borrowers are charged either higher or adjustable interest rates to compensate for the greater credit risk. We do not have a subprime lending program. Our residential mortgage portfolio consists primarily of one-to-four family residential mortgages originated with loan-to-value ratios not exceeding 80.0 percent. Borrowers wanting to finance more than 80.0 percent of the appraised value are required to obtain PMI. The majority of these loans are sold without recourse to FNMA.

In addition to concerns over residential mortgage foreclosures, another area of concern for the banking industry, specifically small community banks, is exposure related to market devaluations of commercial real estate collateralizing loans to small businesses. According to findings released by a Congressional Oversight Panel in February 2010, approximately 36.9 percent of U.S. banks have a problematic exposure to commercial real-estate loans. In addition, the majority of the exposure is concentrated in the Nation’s smaller institutions. Banks are faced with several risks associated with commercial real estate loans including: (i) borrowers that will not be able to cover principal and interest payments due to turbulent economic conditions; (ii) borrowers that will not be able to refinance the loan because of tougher underwriting standards or decreases in property values; and (iii) should the borrower default, loan balances that will not be recouped due to significant devaluations in collateral values consequently forcing banks to realize substantial losses.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

As a result of these influences, the banking industry experienced substantial deterioration in asset quality for the third consecutive year. For all FDIC-insured commercial banks, nonperforming loans and leases increased $157.9 billion or 78.4 percent to $359.4 billion at December 31, 2009, from $201.5 billion at the end of 2008. The ratio of nonperforming assets to total assets for these institutions increased to 3.36 percent at December 31, 2009, from 1.84 percent at year-end 2008. In addition, net charge-offs for these institutions increased 94.4 percent comparing 2009 and 2008. As a result, FDIC-insured commercial banks increased their loan loss provisions 50.6 percent in 2009. As a percentage of total loans and leases, loan and lease loss reserves for FDIC-insured commercial banks equaled 3.27 percent, the highest level since the creation of the FDIC.

Similar to all FDIC-insured commercial banks, insured Pennsylvania banks also experienced even greater asset quality deterioration, as evidenced by a 381.3 percent increase in nonperforming assets to $13,861.3 billion at December 31, 2009, from $2,879.7 billion at the end of 2008. In addition, net charge-offs for these institutions increased 334.9 percent while their loan loss provisions increased 239.6 percent.

With regard to managing our exposure to credit risk caused by devaluations in real estate values, according to our Loan Policy, maximum loan-to-value ratios for commercial mortgage loans cannot exceed 75.0 percent of the lower of cost or appraised value. With regard to residential mortgages, customers with loan-to-value ratios between 80.0 percent and 100.0 percent are required to obtain PMI. There are no residential mortgage loans outstanding with loan-to-value ratios in excess of 100.0 percent. The 80.0 percent loan-to-value threshold provides a cushion in the event the property is devalued. PMI is used to protect us from loss in the event loan-to-value ratios exceed 80.0 percent and the customer defaults on the loan. Written appraisals are obtained prior to approval for all real estate loans. Appraisals are performed by an independent appraiser engaged by us, not the customer, who is either state certified or state licensed depending upon collateral type and loan amount.

We are committed to developing and maintaining sound, quality assets through our credit risk management policies and procedures. Credit risk is the risk to earnings or capital which arises from a borrower’s failure to meet the terms of their loan agreement. We manage credit risk by diversifying the loan portfolio and applying policies and procedures designed to foster sound lending practices. These policies include certain standards that assist lenders in making judgments regarding the character, capacity, capital structure and collateral of the borrower. As a result of our heightened asset quality issues, our Board of Directors adopted two plans in 2010 specifically designed to address these issues. As mentioned previously, commercial real estate loans have become an increasing concern for smaller banks. Accordingly, management developed a Commercial Real Estate Concentration Risk Management Plan in order to address this concern. The purpose of this Plan is to outline steps to help establish specific commercial real estate limits and promote sound risk management practices to enable Community Bank to pursue commercial real estate lending in a safe and sound manner. The Plan enhances monitoring and requires stress tests of the commercial real estate portfolio in accordance with regulatory guidance. The second plan, the Problem Loan Management Plan’s primary objectives include: (i) ensuring adequate resources are dedicated to resolving problem loans in a timely manner; (ii) enhancing the monitoring of loans throughout their life cycle; (iii) requiring updated supporting documentation of the current status of credits; and (iv) ensuring the prompt charge-off of loans determined to be confirmed losses.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

With respect to lending procedures, lenders must determine the borrower’s ability to repay the credit based on prevailing and expected market conditions prior to requesting approval for the loan. The Board of Directors establishes and reviews, at least annually, the lending authority for all loan officers and branch managers. Credits beyond the scope of the loan officers and branch managers are forwarded to the Directors’ Loan Committee. This Committee, comprised of senior management and board members, attempts to assure the quality of the loan portfolio through careful analysis of credit applications, adherence to credit policies and the examination of outstanding loans and delinquencies. These procedures assist in the early detection and timely follow-up of problem loans. Credits in excess of $2.0 million are subject to approval by our Board of Directors.

Credit risk is also minimized by quarterly internal reviews of our loan portfolio. These reviews aid us in identifying deteriorating financial conditions of borrowers, allowing us to assist customers in remedying these situations.

Nonperforming assets consist of nonperforming loans and foreclosed assets. Nonperforming loans include nonaccrual loans, restructured loans and accruing loans past due 90 days or more. For a discussion of our policy regarding nonperforming assets, refer to the note entitled, “Summary of significant accounting policies — Nonperforming assets,” in the Notes to Consolidated Financial Statements to this Annual Report.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Information concerning nonperforming assets for the past five years is summarized as follows. The table includes credits classified for regulatory purposes and all material credits that cause us to have serious doubts as to the borrower’s ability to comply with present loan repayment terms.

Distribution of nonperforming assets

December 31		2009				2008				2007				2006				2005
Nonaccrual loans:
Commercial, financial and others		$	7,438			$	7,608			$	2,444			$	1,060			$	1,574
Real estate:
Construction			4,532				8,775
Residential			1,797				1,070				755				414				1,088
Commercial			5,196				5,498				2,057				442				626
Consumer, net			52				117				77				94				98
Lease financing, net
Total nonaccrual loans			19,015				23,068				5,333				2,010				3,386
Restructured loans:
Commercial, financial and others			1,777
Real estate:
Construction
Residential
Commercial			2,525
Consumer, net
Lease financing, net
Total restructured loans			4,302
Accruing loans past due 90 days or more:
Commercial, financial and others			263				170				80				13				62
Real estate:
Construction
Residential			603				75				295				217				230
Commercial			469				417				1,757								103
Consumer, net			134				104				85				60				118
Lease financing, net			165				69				17				2				33
Total accruing loans past due 90 days or more			1,634				835				2,234				292				546
Total nonperforming loans			24,951				23,903				7,567				2,302				3,932
Foreclosed assets			3,209				336				125				352				363
Total nonperforming assets		$	28,160			$	24,239			$	7,692			$	2,654			$	4,295
Ratios:
Nonperforming loans as a percentage of loans, net			5.23	%			4.92	%			1.61	%			0.56	%			1.01	%
Nonperforming assets as a percentage of loans, net, and foreclosed assets			5.86	%			4.99	%			1.63	%			0.65	%			1.10	%

Similar to the banking industry in general, we continued to experience asset quality deterioration in 2009. The economic malaise in our market area continued to adversely affect our commercial customer base and the market values of the collateral supporting their loans with us. Nonperforming assets increased $4.0 million to $28.2 million or 5.86 percent of loans, net of unearned income, and foreclosed assets at December 31, 2009, from $24.2 million or 4.99 percent at the end of 2008. The deterioration resulted from increases of $4.3 million in loans with terms modified under troubled debt restructures, $2.9 million in foreclosed assets and $0.8 million in loans past due 90 days or more and still accruing. Partially offsetting these increases was a decrease of $4.0 million in nonaccrual loans.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

There were three properties with an aggregate fair value less cost to sell of $336 in foreclosed assets at December 31, 2008. During 2009, 15 properties with an aggregate fair value less cost to sell of $4,871 were transferred to foreclosed assets. Ten properties with an aggregate carrying value of $1,798 were sold for $1,531, resulting in a net realized loss of $267. In addition, the carrying value of one property, which was sold in 2009, was written down $200 during 2009. At December 31, 2009, there were eight properties with an aggregate fair value less cost to sell of $3,209 in foreclosed assets.

As a result of the significant deterioration over the past two years, during the second half of 2009, we initiated several remedial steps to improve asset quality. These steps include:

	•		Hiring an independent loan review company to assist and advise us with our credit risk management practices, including the review of and recommendations for enhancing the allowance for loan loss policy, loan review function and credit related processes such as underwriting, approval and monitoring of loans;
	•		Enhancing the oversight and workout of classified assets by hiring an internal attorney to expedite the process of loan foreclosures and redeploying existing staff to the workout and loan review functions;
	•		Initiating the formation of a problem loan committee for the purpose of monitoring the status of problem assets and devising action plans for the timely workout or liquidation of these assets;
	•		Overhauling the appraisal process by requiring new appraisals on all impaired loans subject to evaluation under FASB ASC 310, “Receivables,” and any loan that is delinquent over 60 days; and
	•		Tightening underwriting standards to ensure a more rigorous review of potential loans and more conservative lending standards.

We maintain the allowance for loan losses at a level we believe adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of the balance sheet date. The balance in the allowance for loan losses account is based on past events and current economic conditions. We employ the FFIEC Interagency Policy Statement, as amended, and GAAP in assessing the adequacy of the allowance account. Under GAAP, the adequacy of the allowance account is determined based on the provisions of FASB ASC 310 for loans specifically identified to be individually evaluated for impairment and the requirements of FASB ASC 450, for large groups of smaller-balance homogeneous loans to be collectively evaluated for impairment.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

We follow our systematic methodology in accordance with procedural discipline by applying it in the same manner regardless of whether the allowance is being determined at a high point or a low point in the economic cycle. Each quarter, our loan review division identifies those loans to be individually evaluated for impairment and those to be collectively evaluated for impairment utilizing a standard criteria. Internal loan review grades are assigned quarterly to loans identified to be individually evaluated. A loan’s grade may differ from period to period based on current conditions and events, however, we consistently utilize the same grading system each quarter.

In the third quarter of 2009, as part of our remedial initiatives, we reevaluated our methodology for determining the adequacy of the allowance for loan losses account. This reevaluation was performed as a result of the rapidly changing economic conditions in our market area. As part of this reevaluation, we reduced the number of periods utilized to determine historical loss factors for homogeneous pools of loans collectively evaluated and measured for impairment under FASB ASC 450 from the most recent rolling 20 quarters to the most recent rolling eight quarters to better reflect the rapid deterioration in local economic conditions. Moreover, we placed a higher weight on the latest four quarters to place greater emphasis on the current periods compared to the previous four quarters in arriving at historical loss factors. Total loss factors, which include historical loss factors and qualitative factors, were also affected by changes in the impairment status of certain credits evaluated and measured for impairment under FASB ASC 310, which migrated from unconfirmed losses, having an allocation included in the allowance for loan losses to confirmed losses with realization of those losses being charged-off through the allowance for loan losses.

For a further discussion of our accounting policies for determining the amount of the allowance and a description of the systematic analysis and procedural discipline applied, refer to the notes entitled, “Summary of significant accounting policies — Use of estimates,” and “Summary of significant accounting policies — Allowance for loan losses,” in the Notes to Consolidated Financial Statements to this Annual Report.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Information concerning impaired loans for the past five years is summarized as follows. The table includes credits classified for regulatory purposes and all material credits that cause us to have serious doubts as to the borrower’s ability to comply with present loan repayment terms.

Distribution of impaired loans

December 31		2009				2008				2007				2006				2005
Nonaccrual loans:
Commercial, financial and others		$	7,438			$	7,608			$	2,444			$	1,060			$	1,574
Real estate:
Construction			4,532				8,775
Residential			1,797				1,070				755				414				1,088
Commercial			5,196				5,498				2,057				442				626
Consumer, net			52				117				77				94				98
Lease financing, net
Total nonaccrual loans			19,015				23,068				5,333				2,010				3,386
Accruing loans:
Commercial, financial and others			3,400				1,920				2,338				1,312				638
Real estate:
Construction							1,512
Residential			55				486												158
Commercial			5,198				6,904				7,247				6,334				1,464
Consumer, net							9								44				61
Lease financing, net
Total accruing loans			8,653				10,831				9,585				7,690				2,321
Total impaired loans		$	27,668			$	33,899			$	14,918			$	9,700			$	5,707
Ratio:
Impaired loans as a percentage of loans, net			5.80	%			6.98	%			3.16	%			2.38	%			1.47	%

Impaired loans decreased $6.2 million or 18.4 percent to $27.7 million at December 31, 2009, from $33.9 million at December 31, 2008. The decrease in impaired loans resulted from a $4.0 million decrease in nonaccrual loans, coupled with a $2.2 million decrease in impaired loans still accruing. Intense remedial and workout efforts played an integral role in reducing the balance of impaired loans.

At December 31, 2009 and 2008, we had a recorded investment in impaired loans of $27.7 million and $33.9 million. The recorded investment in impaired loans averaged $31.8 million in 2009 and $32.8 million in 2008. As of December 31, 2009, the amount of recorded investment in impaired loans for which there was a related allowance for loan losses was $13.5 million. The amount of the corresponding allowance was $5.8 million. Comparatively, the amount of these loans and their related allowance was $19.7 million and $3.6 million at December 31, 2008. The amount of recorded investment for which there was no related allowance for loan losses was $14.2 million at December 31, 2009 and 2008. Interest income, related to impaired loans, would have been $1,789 in 2009 and $2,349 in 2008 had the loans been current and the terms of the loans not been modified. Interest recognized on impaired loans amounted to $956 in 2009 and $1,621 in 2008. Included in these amounts was interest recognized on a cash basis of $785 and $1,400. Cash received on impaired loans, applied as a reduction of principal, totaled $4,217 in 2009 and $2,900 in 2008. At December 31, 2009, we had commitments in the form of letters of credit, which aggregated $1,546, to guarantee the performance of four commercial customers with impaired loans. At December 31, 2008, we had a $508 commitment to one commercial customer with impaired loans.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

At December 31, 2009 and 2008, we had a recorded investment in impaired loans of $27.7 million and $33.9 million. The recorded investment in impaired loans averaged $31.8 million in 2009 and $32.8 million in 2008. As of December 31, 2009, the amount of recorded investment in impaired loans for which there was a related allowance for loan losses was $13.5 million. The amount of the corresponding allowance was $5.8 million. Comparatively, the amount of these loans and their related allowance was $19.7 million and $3.6 million at December 31, 2008. The amount of recorded investment for which there was no related allowance for loan losses was $14.2 million at December 31, 2009 and 2008. Interest income, related to impaired loans, would have been $1,789 in 2009 and $2,349 in 2008 had the loans been current and the terms of the loans not been modified. Interest recognized on impaired loans amounted to $956 in 2009 and $1,621 in 2008. Included in these amounts was interest recognized on a cash basis of $785 and $1,400. Cash received on impaired loans, applied as a reduction of principal, totaled $4,217 in 2009 and $2,900 in 2008. At December 31, 2009, we had commitments in the form of letters of credit, which aggregated $1,546, to guarantee the performance of four commercial customers with impaired loans. At December 31, 2008, we had a $508 commitment to one commercial customer with impaired loans.

A reconciliation of the allowance for loan losses and an illustration of charge-offs and recoveries by major loan category for the past five years are summarized as follows:

Reconciliation of allowance for loan losses

December 31		2009				2008				2007				2006				2005
Allowance for loan losses at beginning of period		$	5,255			$	4,624			$	4,435			$	4,128			$	3,859
Loans charged-off:
Commercial, financial and others			1,396				172				177				199				45
Real estate:
Construction			3,048
Residential			42				58				15				187				116
Commercial			745				749				24				33				128
Consumer, net			187				241				225				298				297
Lease financing, net							16
Total			5,418				1,236				441				717				586
Loans recovered:
Commercial, financial and others			131				12				32				12				1
Real estate:
Construction
Residential			5				3				3				4				13
Commercial
Consumer, net			59				92				70				118				59
Lease financing, net
Total			195				107				105				134				73
Net loans charged-off			5,223				1,129				336				583				513
Provision for loan losses			10,430				1,760				525				890				782
Allowance for loan losses at end of period		$	10,462			$	5,255			$	4,624			$	4,435			$	4,128
Ratios:
Net loans charged-off as a percentage of average loans outstanding			1.02	%			0.23	%			0.07	%			0.14	%			0.13	%
Allowance for loan losses as a percentage of period end loans			2.19	%			1.08	%			0.98	%			1.09	%			1.06	%

The allowance for loan losses increased $5,207 to $10,462 at December 31, 2009, from $5,255 at the end of 2008. The increase resulted from a provision for loan losses of $10,430 exceeding net loans charged-off of $5,223. The allowance for loan losses, as a percentage of loans, net of unearned income, was 2.19 percent at the end of 2009, compared to 1.08 percent at the end of 2008.

Comm Bancorp, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
(Dollars in thousands, except per share data)

Past due loans not satisfied through repossession, foreclosure or related actions are evaluated individually to determine if all or part of the outstanding balance should be charged against the allowance for loan losses account. Any subsequent recoveries are credited to the allowance account. Net loans charged-off increased $4,094 or 362.6 percent to $5,223 in 2009 from $1,129 in 2008. Net charge-offs, as a percentage of average loans outstanding, equaled 1.02 percent in 2009 and 0.23 percent in 2008. For our peer group, a group of 439 bank holding companies located within the Federal Reserve District of Philadelphia with consolidated assets between $500.0 million and $1.0 billion, net charge-offs, as a percentage of average loans outstanding, increased to 1.12 percent in 2009 from 0.52 percent in 2008.

The allocation of the allowance for loan losses for the past five years is summarized as follows:

Allocation of the allowance for loan losses

		2009								2008								2007								2006								2005
						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
Allocated allowance:
Specific:
Commercial, financial and others		$	3,679				2.27	%		$	1,533				1.96	%		$	2,216				1.01	%		$	1,000				0.58	%		$	1,549				0.57	%
Real estate:
Construction			1,002				0.95				1,516				2.12
Residential			265				0.39				169				0.32				63				0.16				4				0.10				298				0.32
Commercial			812				2.18				253				2.55				860				1.97				1,292				1.66				234				0.54
Consumer, net			4				0.01				101				0.03				77				0.02				114				0.03				125				0.04
Lease financing, net
Total specific			5,762				5.80				3,572				6.98				3,216				3.16				2,410				2.37				2,206				1.47
Formula:
Commercial, financial and others			1,024				31.48				253				33.09				247				37.48				120				34.19				123				34.70
Real estate:
Construction			1,645				3.91				37				3.09								2.72								1.35								0.66
Residential			103				21.61				246				22.74				108				23.31				231				23.98				201				23.54
Commercial			1,413				30.37				522				26.81				118				25.36				289				30.05				271				31.74
Consumer, net			184				6.17				511				6.73				344				7.44				374				7.69				360				7.46
Lease financing, net			12				0.66				7				0.56								0.53								0.37								0.43
Total formula			4,381				94.20				1,576				93.02				817				96.84				1,014				97.63				955				98.53
Total allocated allowance			10,143				100.00	%			5,148				100.00	%			4,033				100.00	%			3,424				100.00	%			3,161				100.00	%
Unallocated allowance			319								107								591								1,011								967
Total		$	10,462							$	5,255							$	4,624							$	4,435							$	4,128