<PAGE>

EXHIBIT 13

                               NEFFS BANCORP, INC.

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 2005


                                       1

<PAGE>

                          DIRECTORS OF THE CORPORATION
                                    AND BANK

Robert Heintzelman                                             John J. Remaley
                               Duane A. Schleicher
 Kevin A. Schmidt                                           John F. Sharkey, Jr.
                                 John F. Simock
 Herman P. Snyder                                              Mary Ann Wagner

                           OFFICERS OF THE CORPORATION

 John J. Remaley                                                Herman P. Snyder
    President                                                    Vice President

Kevin A. Schmidt                                                  Dawn E. Hamm
    Treasurer                                                       Secretary

                              OFFICERS OF THE BANK

                                Herman P. Snyder
                              Chairman of the Board

     John J. Remaley                                      Kevin A. Schmidt
        President                                   Executive Vice President and
                                                       Chief Executive Officer

    Michael J. Bailey                                      Carol L. Jones
       Cashier and                                      Assistant Cashier and
Chief Operations Officer                                 Operations Officer


                                        2

<PAGE>

Dear Shareholder:

     The day-to-day challenges that management experienced during the year 2005,
and the uncertainties imposed by local, national and international conditions,
made the task of overseeing the operations of the subsidiary something that
administrators in other professions might have difficulty pursuing. The
decisions made during one week were, at times, out-dated procedures for the next
week. By the time those short-term initiatives were in place, other
considerations were necessary to counteract the negativity.

     In spite of the events that neither the board of directors nor management
could control, Neffs Bancorp, Inc. and its subsidiary, The Neffs National Bank
experienced a prosperous and growth-oriented year of operation. Monitoring
interest rates was an on-going task, with the environment becoming more
competitive, as other businesses became involved in the "business of banking."

     Total Assets of the bank reached a new high, as did Retained Earnings. This
growth directly increases the value of the shareholders' investment, and
compliments your decision to trust the placement of your financial matters with
your locally-owned, growth and profit-oriented company.

     With the introduction of "Net Teller Online," the Internet Banking Option,
and "Bank Line," your 24-Hour Telephone Banking Service, we continue to offer
the most current technology available to our growing customer base. Both systems
are convenient, simple to use, and completely confidential.

     As we begin the new year, we express our sincere thanks to our shareholders
and patrons, and recognize the dedication and professionalism of our staff.

Cordially yours,


-------------------------------------
John J. Remaley
President


                                       3

<PAGE>

(BEARD MILLER COMPANY LOGO)

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Neffs Bancorp, Inc. and Subsidiary
Neffs, Pennsylvania

     We have audited the accompanying consolidated statements of financial
condition of Neffs Bancorp, Inc. and subsidiary as of December 31, 2005 and
2004, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2005. These 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 Neffs
Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.

                                        (BEARD MILLER COMPANY LLP)

Beard Miller Company LLP
Allentown, Pennsylvania
January 11, 2006


                                       4
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          -------------------
                                                                            2005       2004
                                                                          --------   --------
                                                                             (IN THOUSANDS,
                                                                           EXCEPT SHARE DATA)
<S>                                                                       <C>        <C>
                                            ASSETS

Cash and due from banks                                                   $  2,958   $  4,076
Interest bearing deposits with banks                                           163         23
Federal funds sold                                                           2,348      1,778
Securities available for sale                                               42,021     44,148
Securities held to maturity, fair value 2005 $79,248; 2004 $81,416          78,923     79,319
Loans receivable, net of allowance for loan losses 2005 $657; 2004 $663     82,385     76,315
Premises and equipment, net                                                  2,549      2,308
Other assets                                                                 2,200      1,836
                                                                          --------   --------
   TOTAL ASSETS                                                           $213,547   $209,803
                                                                          ========   ========

                             LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Deposits:
      Non-interest bearing                                                $ 16,912   $ 14,182
      Interest bearing                                                     156,364    157,470
                                                                          --------   --------
   Total Deposits                                                          173,276    171,652
Other liabilities                                                              977        835
                                                                          --------   --------
   TOTAL LIABILITIES                                                       174,253    172,487
                                                                          --------   --------

Stockholders' equity:
   Common stock, $1 par value; authorized 2,500,000 shares;
      issued 200,000 shares; outstanding 2005 197,941 shares;
      2004 197,091 shares                                                      200        200
   Paid-in capital                                                             753        690
   Retained earnings                                                        39,603     37,319
   Accumulated other comprehensive loss                                       (844)      (331)
   Treasury stock, at cost 2005 2,059 shares; 2004 2,909 shares               (418)      (562)
                                                                          --------   --------
   TOTAL STOCKHOLDERS' EQUITY                                               39,294     37,316
                                                                          --------   --------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $213,547   $209,803
                                                                          ========   ========
</TABLE>

See notes to consolidated financial statements.


                                        2

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                            ------------------------------
                                                              2005       2004       2003
                                                            --------   --------   --------
                                                             (DOLLARS IN THOUSANDS, EXCEPT
                                                                    PER SHARE DATA)
<S>                                                         <C>        <C>        <C>
INTEREST INCOME
   Interest and fees on loans                               $  5,001   $  4,747   $  5,044
   Interest and dividends on investments:
      Taxable                                                  3,313      3,075      2,193
      Exempt from federal income taxes                         2,058      2,158      2,268
   Interest on federal funds sold                                 82         67        128
                                                            --------   --------   --------
      TOTAL INTEREST INCOME                                   10,454     10,047      9,633
INTEREST EXPENSE, DEPOSITS                                     4,469      4,082      4,434
                                                            --------   --------   --------
      NET INTEREST INCOME                                      5,985      5,965      5,199
PROVISION FOR LOAN LOSSES                                         --         36         88
                                                            --------   --------   --------
      NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES      5,985      5,929      5,111
                                                            --------   --------   --------

OTHER INCOME
   Service charges on deposit accounts                           161        177        178
   Other service charges and fees                                 78         44         54
   Other income                                                   37         47         41
                                                            --------   --------   --------
      TOTAL OTHER INCOME                                         276        268        273
                                                            --------   --------   --------

OTHER EXPENSES
   Salaries and employee benefits                              1,242      1,137      1,121
   Occupancy                                                     154        148        165
   Furniture and equipment                                       210        151        151
   Pennsylvania shares tax                                       312        288        309
   Other expenses                                                694        661        523
                                                            --------   --------   --------
      TOTAL OTHER EXPENSES                                     2,612      2,385      2,269
                                                            --------   --------   --------
      INCOME BEFORE INCOME TAXES                               3,649      3,812      3,115
                                                            --------   --------   --------

INCOME TAX (BENEFIT) EXPENSE
   Current                                                       631        710        508
   Deferred                                                      (54)      (103)      (167)
                                                            --------   --------   --------
      TOTAL INCOME TAX EXPENSE                                   577        607        341
                                                            --------   --------   --------
      NET INCOME                                            $  3,072   $  3,205   $  2,774
                                                            ========   ========   ========
EARNINGS PER SHARE, BASIC                                   $  15.58   $  16.26   $  14.11
                                                            ========   ========   ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                   197,117    197,091    196,529
                                                            ========   ========   ========
</TABLE>

See notes to consolidated financial statements.


                                        3

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2005, 2004 and 2003

<TABLE>
<CAPTION>
                                                                                   ACCUMULATED
                                                                                      OTHER                      TOTAL
                                                    COMMON   PAID-IN   RETAINED   COMPREHENSIVE   TREASURY   STOCKHOLDERS'
                                                     STOCK   CAPITAL   EARNINGS   INCOME (LOSS)     STOCK        EQUITY
                                                    ------   -------   --------   -------------   --------   -------------
                                                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>      <C>       <C>        <C>             <C>        <C>
BALANCE - DECEMBER 31, 2002                         $  200     $609    $32,610        $  21         ($615)      $32,825
                                                                                                                -------
Comprehensive income:
   Net income                                           --       --      2,774           --            --         2,774
   Change in unrealized net gains (losses) on
      securities available for sale, net of taxes       --       --         --         (147)           --          (147)
                                                                                                                -------
   TOTAL COMPREHENSIVE INCOME                                                                                     2,627
                                                                                                                -------
   Cash dividends declared on common stock, $2.70
      per share                                         --       --       (531)          --            --          (531)
   Sale of treasury stock (660 shares)                  --       81         --           --            53           134
                                                    ------     ----    -------        -----        ------       -------

BALANCE - DECEMBER 31, 2003                            200      690     34,853         (126)         (562)       35,055
                                                                                                                -------
Comprehensive income:
   Net income                                           --       --      3,205           --            --         3,205
   Change in unrealized net gains (losses) on
      securities available for sale, net of taxes       --       --         --         (205)           --          (205)
                                                                                                                -------
   TOTAL COMPREHENSIVE INCOME                                                                                     3,000
                                                                                                                -------
   Cash dividends declared on common stock, $3.75
      per share                                         --       --       (739)          --            --          (739)
                                                    ------     ----    -------        -----        ------       -------

BALANCE - DECEMBER 31, 2004                            200      690     37,319         (331)         (562)       37,316
                                                                                                                -------
Comprehensive income:
   Net income                                           --       --      3,072           --            --         3,072
   Change in unrealized net gains (losses) on
      securities available for sale, net of taxes       --       --         --         (513)           --          (513)
                                                                                                                -------
   TOTAL COMPREHENSIVE INCOME                                                                                     2,559
                                                                                                                -------
   Cash dividends declared on common stock, $4.00
      per share                                         --       --       (788)          --            --          (788)
   Sale of treasury stock (850 shares)                  --       63         --           --           144           207
                                                    ------     ----    -------        -----        ------       -------
BALANCE - DECEMBER 31, 2005                         $  200     $753    $39,603        $(844)       $ (418)      $39,294
                                                    ======     ====    =======        =====        ======       =======
</TABLE>

See notes to consolidated financial statements.


                                        4
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                          -----------------------------
                                                            2005      2004       2003
                                                          -------   --------   --------
                                                                  (IN THOUSANDS)
<S>                                                       <C>       <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                             $ 3,072   $  3,205   $  2,774
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation                                         170        124        116
         Provision for loan losses                             --         36         88
         Net amortization of securities                       228        193        389
         Deferred income tax benefit                          (54)      (103)      (167)
         (Increase) decrease in assets:
            Accrued interest receivable                       (28)       (47)       (76)
            Other assets                                      (17)        46        (77)
         Increase (decrease) in liabilities:
            Accrued interest payable                          131        (19)      (104)
            Other liabilities                                  11         33         (8)
                                                          -------   --------   --------
         NET CASH PROVIDED BY OPERATING ACTIVITIES          3,513      3,468      2,935
                                                          -------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES
   Net (increase) decrease in interest bearing               (140)        23        (28)
       deposits with banks
   Net (increase) decrease in federal funds sold             (570)     7,612      1,085
   Purchases of securities available for sale              (8,438)   (24,647)   (25,100)
   Purchases of securities held to maturity                (4,116)    (9,623)   (33,881)
   Proceeds from maturities/calls and principal
      repayments of securities available for sale           9,566      7,370      7,295
   Proceeds from maturities/calls of securities held to
      maturity                                              4,505     13,017     35,384
   Net increase in loans                                   (6,070)    (6,102)    (1,303)
   Proceeds from sale of foreclosed real estate                --         10         --
   Purchases of premises and equipment                       (411)       (77)       (75)
                                                          -------   --------   --------
         NET CASH USED IN INVESTING ACTIVITIES             (5,674)   (12,417)   (16,623)
                                                          -------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits                                 1,624      8,958     16,159
   Dividends paid                                            (788)      (739)      (531)
   Sales of treasury stock                                    207         --        134
                                                          -------   --------   --------
         NET CASH PROVIDED BY FINANCING ACTIVITIES          1,043      8,219     15,762
                                                          -------   --------   --------
         NET INCREASE (DECREASE) IN CASH AND CASH          (1,118)      (730)     2,074
            EQUIVALENTS
CASH AND CASH EQUIVALENTS - BEGINNING                       4,076      4,806      2,732
                                                          -------   --------   --------
CASH AND CASH EQUIVALENTS - ENDING                        $ 2,958   $  4,076   $  4,806
                                                          =======   ========   ========
SUPPLEMENTARY CASH FLOWS INFORMATION
   Interest paid                                          $ 4,337   $  4,101   $  4,538
                                                          =======   ========   ========
   Income taxes paid                                      $   655   $    645   $    567
                                                          =======   ========   ========
</TABLE>

See notes to consolidated financial statements.


                                        5

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
     Neffs Bancorp, Inc. (the "Corporation") and its wholly-owned subsidiary,
     The Neffs National Bank (the "Bank"). All material intercompany
     transactions have been eliminated.

NATURE OF OPERATIONS

     The Bank operates from one location in Lehigh County, Pennsylvania. The
     Bank provides a full range of financial services to individuals, small
     businesses and corporate customers. The primary source of revenue is
     providing residential mortgages, consumer loans and commercial loans to
     customers located within the Lehigh Valley. The Bank's primary deposits are
     checking accounts, savings accounts and certificates of deposit. As a
     national bank, the Bank is subject to regulation of the Office of the
     Comptroller of Currency and the Federal Deposit Insurance Corporation. The
     Corporation is subject to regulations of the Federal Reserve Bank.

ESTIMATES

     In preparing financial statements in conformity with accounting principles
     generally accepted in the United States of America, management is required
     to make estimates and assumptions that affect the reported amounts of
     assets and liabilities and the disclosure of contingent assets and
     liabilities at the date of the financial statements and income and expenses
     during the reporting period. Actual results could differ from those
     estimates. Material estimates that are particularly susceptible to
     significant changes in the near term relate to the determination of the
     allowance for loan losses.

SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

     Most of the Corporation's activities are with customers located within the
     Lehigh Valley of Pennsylvania. Note 3 discusses the types of securities
     that the Corporation invests in. Note 4 discusses the types of lending that
     the Corporation engages in. The Corporation does not have any significant
     concentrations to any one industry or customer. Although, the Corporation
     has a diversified loan portfolio, exposure to credit loss can be adversely
     impacted by downturns in local economic and employment conditions.

SECURITIES

     Securities classified as held to maturity are those debt securities the
     Corporation has both the intent and ability to hold to maturity regardless
     of changes in market conditions, liquidity needs or changes in general
     economic conditions. These securities are carried at cost adjusted for the
     amortization of premium and accretion of discount, computed by the interest
     method over the terms of the securities.

     Securities classified as available for sale are those debt securities that
     the Corporation intends to hold for an indefinite period of time but not
     necessarily to maturity. Any decision to sell a security classified as
     available for sale would be based on various factors, including significant
     movement in interest rates, changes in the maturity mix of the
     Corporation's assets and liabilities, liquidity needs, regulatory capital
     considerations and other similar factors. Securities available for sale are
     carried at fair value. Unrealized gains or losses are reported as increases
     or decreases in other comprehensive income (loss), net of the related
     deferred tax effect. Realized gains or losses, determined on the basis of
     the cost of the specific securities sold, are included in earnings.
     Premiums and discounts are recognized in interest income using the interest
     method over the terms of the securities.


                                        6

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SECURITIES (CONTINUED)

     Management determines the appropriate classification of debt securities at
     the time of purchase and re-evaluates such designation as of each balance
     sheet date.

     Declines in the fair value of held to maturity and available for sale
     securities below their cost that are deemed to be other than temporary are
     reflected in earnings as realized losses. In estimating
     other-than-temporary impairment losses, management considers (1) the length
     of time and the extent to which the fair value has been less than cost, (2)
     the financial condition and near-term prospects of the issuer, and (3) the
     intent and ability of the Corporation to retain its investment in the
     issuer for a period of time sufficient to allow for any anticipated
     recovery in fair value.

     Equity securities include restricted investments, primarily Federal Home
     Loan Bank stock, which is carried at cost. Federal law requires a member
     institution of the Federal Home Loan Bank system to hold stock of its
     district Federal Home Loan Bank according to a predetermined formula.

LOANS

     Loans receivable that management has the intent and ability to hold for the
     foreseeable future or until maturity or payoff are stated at their
     outstanding unpaid principal balances. Interest income is accrued on the
     unpaid principal balance.

     The accrual of interest is generally discontinued when the contractual
     payment of principal or interest has become 90 days past due or management
     has serious doubts about further collectibility of principal or interest,
     even though the loan is currently performing. A loan may remain on accrual
     status if it is in the process of collection and is either guaranteed or
     well secured. When a loan is placed on nonaccrual status, unpaid interest
     credited to income in the current year is reversed and unpaid interest
     accrued in prior years is charged against the allowance for loan losses.
     Interest received on nonaccrual loans generally is either applied against
     principal or reported as interest income, according to management's
     judgment as to the collectibility of principal. Generally, loans are
     restored to accrual status when the obligation is brought current, has
     performed in accordance with the contractual terms for a reasonable period
     of time and the ultimate collectibility of the total contractual principal
     and interest is no longer in doubt.

ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses is established through provisions for loan
     losses charged against income. Loans deemed to be uncollectible are charged
     against the allowance for loan losses and, subsequent recoveries, if any,
     are credited to the allowance.

     The allowance for loan losses is maintained at a level considered adequate
     to provide for losses that can be reasonably anticipated. Management's
     periodic evaluation of the adequacy of the allowance is based on the
     Corporation's past loan loss experience, known and inherent risks in the
     portfolio, adverse situations that may affect the borrower's ability to
     repay, the estimated value of any underlying collateral, composition of the
     loan portfolio, current economic conditions and other relevant factors.
     This evaluation is inherently subjective as it requires material estimates
     that may be susceptible to significant revision as more information becomes
     available.


                                        7

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOWANCE FOR LOAN LOSSES (CONTINUED)

     The allowance consists of specific, general and unallocated components. The
     specific component relates to loans that are classified as either doubtful,
     substandard or special mention. For such loans that are also classified as
     impaired, an allowance is established when the discounted cash flows (or
     collateral value or observable market price) of the impaired loan is lower
     than the carrying value of that loan. The general component covers
     non-classified loans and is based on historical loss experience adjusted
     for qualitative factors. An unallocated component is maintained to cover
     uncertainties that could affect management's estimate of probable losses.
     The unallocated component of the allowance reflects the margin of
     imprecision inherent in the underlying assumptions used in the
     methodologies for estimating specific and general losses in the portfolio.

     A loan is considered impaired when, based on current information and
     events, it is probable that the Corporation will be unable to collect the
     scheduled payments of principal or interest when due according to the
     contractual terms of the loan agreement. Factors considered by management
     in determining impairment include payment status, collateral value and the
     probability of collecting scheduled principal and interest payments when
     due. Loans that experience insignificant payment delays and payment
     shortfalls generally are not classified as impaired. Management determines
     the significance of payment delays and payment shortfalls on a case-by-case
     basis, taking into consideration all of the circumstances surrounding the
     loan and the borrower, including the length of the delay, the reasons for
     the delay, the borrower's prior payment record and the amount of the
     shortfall in relation to the principal and interest owed. Impairment is
     measured on a loan by loan basis for commercial and construction loans by
     either the present value of expected future cash flows discounted at the
     loan's effective interest rate, the loan's obtainable market price or the
     fair value of the collateral if the loan is collateral dependent.

     Large groups of smaller balance homogeneous loans are collectively
     evaluated for impairment. Accordingly, the Corporation does not separately
     identify individual residential and consumer loans for impairment
     disclosures, unless such loans are subject of a restructuring agreement.

FORECLOSED ASSETS

     Foreclosed assets are comprised of property acquired through a foreclosure
     proceeding or acceptance of a deed in lieu of foreclosure and loans
     classified as in-substance foreclosure. The Corporation includes such
     property in other assets. A loan is classified as in-substance foreclosure
     when the Corporation has taken possession of the collateral regardless of
     whether formal foreclosure proceedings take place. Foreclosed assets
     initially are recorded at fair value, net of estimated selling costs, at
     the date of foreclosure establishing a new cost basis. After foreclosure,
     valuations are periodically performed by management and the assets are
     carried at the lower of cost or fair value minus estimated costs to sell.
     Revenues and expenses from operations and changes in the valuation
     allowance are included in other expenses. The Corporation had no foreclosed
     assets at December 31, 2005 and 2004.

TRANSFERS OF FINANCIAL ASSETS

     Transfers of financial assets, including sales of loan participations, are
     accounted for as sales, when control over the assets has been surrendered.
     Control over transferred assets is deemed to be surrendered when (1) the
     assets have been isolated from the Corporation, (2) the transferee obtains
     the right (free of conditions that constrain it from taking advantage of
     that right) to pledge or exchange the transferred assets and (3) the
     Corporation does not maintain effective control over the transferred assets
     through an agreement to repurchase them before their maturity.


                                        8

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PREMISES AND EQUIPMENT

     Premises and equipment are carried at cost less accumulated depreciation
     and amortization. Depreciation is computed on the straight-line method over
     the estimated useful lives of the premises and equipment. Charges for
     maintenance and repairs are expensed as incurred.

ADVERTISING COSTS

     The Corporation follows the policy of charging the costs of advertising to
     expense as incurred. Total advertising expense for the years ended December
     31, 2005, 2004, and 2003 was $64,000, $25,000 and $26,000, respectively.

INCOME TAXES

     Deferred taxes are provided on the liability method whereby deferred tax
     assets are recognized for deductible temporary differences and deferred tax
     liabilities are recognized for taxable temporary differences. Temporary
     differences are the differences between the reported amounts of assets and
     liabilities and their tax basis. Deferred tax assets are reduced by a
     valuation allowance when, in the opinion of management, it is more likely
     than not that some portion of the deferred tax assets will not be realized.
     Deferred tax assets and liabilities are adjusted for the effects of changes
     in tax laws and rates on the date of enactment. The Corporation files a
     consolidated federal income tax return.

EARNINGS PER SHARE

     Earnings per share is based on the weighted average shares of common stock
     outstanding during each year. The Corporation currently maintains a simple
     capital structure, thus there are no dilutive effects on earnings per
     share.

EMPLOYEE BENEFIT PLAN

     The Bank has a non-contributory defined contribution pension plan covering
     all employees having at least one year of service. Contribution amounts are
     determined annually by the Corporation and are charged to current operating
     expense. The expense amounted to $64,000, $57,000, and $60,000, for 2005,
     2004 and 2003, respectively.

COMPREHENSIVE INCOME

     Accounting principles generally require that recognized revenue, expenses,
     gains and losses be included in net income. Although certain changes in
     assets and liabilities, such as unrealized gains and losses on available
     for sale securities, are reported as a separate component of the equity
     section of the statement of financial condition, such items, along with net
     income, are components of comprehensive income.

CASH AND CASH EQUIVALENTS

     For purposes of reporting cash flows, the Corporation has defined cash and
     cash equivalents as cash on hand and amounts due from banks.


                                        9

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEGMENT REPORTING

     The Corporation acts as an independent community financial services
     provider and offers traditional banking and related financial services to
     individual, business and government customers. The Corporation offers a
     full array of commercial and retail financial services, including the
     taking of time, savings and demand deposits; the making of commercial,
     consumer and mortgage loans and the providing of other financial services.

     Management does not separately allocate expenses, including the cost of
     funding loan demand, between the commercial and retail operations of the
     Corporation. As such, discrete information is not available and segment
     reporting would not be meaningful.

NEW ACCOUNTING STANDARDS

     In March 2004, the FASB's Emerging Issues Task Force (EITF) reached a
     consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary
     Impairment and Its Application to Certain Investments." EITF 03-1 provides
     guidance on other-than-temporary impairment models for marketable debt and
     equity securities accounted for under SFAS 115 and non-marketable equity
     securities accounted for under the cost method. The EITF developed a basic
     three-step model to evaluate whether an investment is
     other-than-temporarily impaired. In November 2005, the FASB approved the
     issuance of FASB Staff Position FAS No. 115-1 and FAS 124-1, "The Meaning
     of Other-Than-Temporary Impairment and Its Application to Certain
     Investments." The FSP addresses when an investment is considered impaired,
     whether the impairment is other-than-temporary and the measurement of an
     impairment loss. The FSP also includes accounting considerations subsequent
     to the recognition of an other-than-temporary impairment and requires
     certain disclosures about unrealized losses that have not been recognized
     as other-than-temporary. The FSP is effective for reporting periods
     beginning after December 15, 2005 with earlier application permitted. For
     the Corporation, the effective date will be the first quarter of fiscal
     2006. The adoption of this accounting principle is not expected to have a
     significant impact on our financial position or results of operations.

     In July 2005, the FASB issued a proposed interpretation of FAS 109,
     "Accounting for Income Taxes," to clarify certain aspects of accounting for
     uncertain tax positions, including issues related to the recognition and
     measurement of those tax positions. If adopted as proposed, any adjustments
     required to be recorded as a result of adopting the interpretation would be
     reflected as a cumulative effect from a change in accounting principle. We
     are currently in the process of determining the impact of adoption of the
     interpretation as proposed on our financial position or results of
     operations.


                                       10
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - CASH AND DUE FROM BANKS

Regulations of the Board of Governors of the Federal Reserve System impose
uniform reserve requirements on all depository institutions with transaction
accounts (checking accounts, NOW accounts, etc.). Reserves are maintained in the
form of vault cash or a non-interest bearing balance held with the Federal
Reserve Bank. The Bank also, from time to time, maintains deposits with the
Federal Reserve Bank and other banks for various services such as check
clearing. The reserve requirement at December 31, 2005 and 2004 was $520,000 and
$454,000, respectively.

NOTE 3 - SECURITIES

The amortized cost and fair values of securities are as follows:

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 2005
                                         ---------------------------------------------
                                                        GROSS        GROSS
                                         AMORTIZED   UNREALIZED   UNREALIZED    FAIR
                                            COST        GAINS       LOSSES     VALUE
                                         ---------   ----------   ----------   -------
                                                         (IN THOUSANDS)
<S>                                      <C>         <C>          <C>          <C>
SECURITIES AVAILABLE FOR SALE:
   Mortgage-backed securities             $42,731      $   14      $(1,293)    $41,452
   Equity securities                          569          --           --         569
                                          -------      ------      -------     -------
                                          $43,300      $   14      $(1,293)    $42,021
                                          =======      ======      =======     =======

SECURITIES HELD TO MATURITY:
   Obligations of U.S. Government
      agencies                            $29,683      $   --      $  (781)    $28,902
   Obligations of states and political
      subdivisions                         45,424       1,217          (63)     46,578
   Corporate securities                     1,848          38         (124)      1,762
   Mortgage-backed securities               1,968          40           (2)      2,006
                                          -------      ------      -------     -------
                                          $78,923      $1,295      $  (970)    $79,248
                                          =======      ======      =======     =======
</TABLE>


                                       11

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - SECURITIES (CONTINUED)

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 2004
                                         ---------------------------------------------
                                                        GROSS        GROSS
                                         AMORTIZED   UNREALIZED   UNREALIZED    FAIR
                                            COST        GAINS       LOSSES     VALUE
                                         ---------   ----------   ----------   -------
                                                         (IN THOUSANDS)
<S>                                      <C>         <C>          <C>          <C>
SECURITIES AVAILABLE FOR SALE:
   Mortgage-backed securities             $43,976      $   92       $(593)     $43,475
   Equity securities                          673          --          --          673
                                          -------      ------       -----      -------
                                          $44,649      $   92       $(593)     $44,148
                                          =======      ======       =====      =======

SECURITIES HELD TO MATURITY:
   Obligations of U.S. Government
      agencies                            $27,162      $   53       $(124)     $27,091
   Obligations of states and political
      subdivisions                         46,425       2,039         (42)      48,422
   Corporate securities                     2,597          84          (9)       2,672
   Mortgage-backed securities               3,135          96          --        3,231
                                          -------      ------       -----      -------
                                          $79,319      $2,272       $(175)     $81,416
                                          =======      ======       =====      =======
</TABLE>

The amortized cost and fair values of securities at December 31, 2005, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                          AVAILABLE FOR SALE     HELD TO MATURITY
                                         -------------------   -------------------
                                         AMORTIZED     FAIR    AMORTIZED     FAIR
                                            COST      VALUE       COST      VALUE
                                         ---------   -------   ---------   -------
                                                       (IN THOUSANDS)
<S>                                      <C>         <C>       <C>         <C>
Due in one year or less                   $    --    $    --    $   200    $   201
Due after one year through five years          --         --      5,255      5,213
Due after five years through ten years         --         --     31,391     31,393
Due after ten years                            --         --     40,109     40,435
                                          -------    -------    -------    -------
                                               --         --     76,955     77,242
Mortgage-backed securities                 42,731     41,452      1,968      2,006
Equity securities                             569        569         --         --
                                          -------    -------    -------    -------
                                          $43,300    $42,021    $78,923    $79,248
                                          =======    =======    =======    =======
</TABLE>

There were no sales of securities during 2005, 2004, and 2003.


                                       12

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - SECURITIES (CONTINUED)

The changes in net unrealized holding gains (losses) on securities available for
sale that have been included in other comprehensive income (loss) for the years
ended December 31, 2005, 2004, and 2003 are as follows:

<TABLE>
<CAPTION>
                                             2005    2004    2003
                                            -----   -----   -----
                                                (IN THOUSANDS)
<S>                                         <C>     <C>     <C>
Gross change in unrealized gains (losses)
   on securities available for sale         $(778)  $(310)  $(223)
Reclassification adjustment for gains
   realized in income                          --      --      --
                                            -----   -----   -----
   Net Unrealized Losses                     (778)   (310)   (223)
Tax effect                                    265     105      76
                                            -----   -----   -----
   Net of Tax Amount                        $(513)  $(205)  $(147)
                                            =====   =====   =====
</TABLE>

Securities with an amortized cost and fair value of approximately $3,586,000 and
$3,498,000 at December 31, 2005 and $3,450,000 and $3,442,000 at December 31,
2004 were pledged to secure public deposits and for other purposes required or
permitted by law.

The following tables show the Corporation's investments' gross unrealized losses
and fair value, aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position, at
December 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                            LESS THAN 12 MONTHS     12 MONTHS OR MORE            TOTAL
                                           --------------------   --------------------   --------------------
                                             FAIR    UNREALIZED     FAIR    UNREALIZED     FAIR    UNREALIZED
                                            VALUE      LOSSES      VALUE      LOSSES      VALUE      LOSSES
                                           -------   ----------   -------   ----------   -------   ----------
                                                                     (IN THOUSANDS)
<S>                                        <C>       <C>          <C>       <C>          <C>       <C>
DECEMBER 31, 2005:
   SECURITIES AVAILABLE FOR SALE:
      Mortgage-backed securities           $10,181      $196      $29,332     $1,097     $39,513     $1,293
   SECURITIES HELD TO MATURITY:
      Obligations of U.S. Government
         agencies                           26,006       677        2,896        104      28,902        781
      Obligations of states and
         political subdivisions              2,351        12        2,233         51       4,584         63
      Corporate securities                     789        59          185         65         974        124
      Mortgage-backed securities               383         2           --         --         383          2
                                           -------      ----      -------     ------     -------     ------
   TOTAL TEMPORARILY IMPAIRED SECURITIES   $39,710      $946      $34,646     $1,317     $74,356     $2,263
                                           =======      ====      =======     ======     =======     ======
</TABLE>


                                       13
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - SECURITIES (CONTINUED)

<TABLE>
<CAPTION>
                                                LESS THAN 12 MONTHS      12 MONTHS OR MORE            TOTAL
                                                --------------------   --------------------   --------------------
                                                  FAIR    UNREALIZED     FAIR    UNREALIZED     FAIR    UNREALIZED
                                                 VALUE      LOSSES      VALUE      LOSSES      VALUE      LOSSES
                                                -------   ----------   -------   ----------   -------   ----------
                                                                          (IN THOUSANDS)
<S>                                             <C>       <C>          <C>       <C>          <C>       <C>
DECEMBER 31, 2004:
   SECURITIES AVAILABLE FOR SALE:
      Mortgage-backed securities                $21,001      $302      $15,654      $291      $36,655      $593
   SECURITIES HELD TO MATURITY:
      Obligations of U.S. Government agencies     4,484        16        6,392       108       10,876       124
      Obligations of states and
         political subdivisions                     255         5        2,520        37        2,775        42
      Corporate securities                          493         7          248         2          741         9
                                                -------      ----      -------      ----      -------      ----
      TOTAL TEMPORARILY IMPAIRED SECURITIES     $26,233      $330      $24,814      $438      $51,047      $768
                                                =======      ====      =======      ====      =======      ====
</TABLE>

Unrealized losses detailed above relate primarily to U.S. Government agency
mortgage-backed securities, U.S. Government agency obligations, and municipal
securities. The Corporation had 153 and 90 securities in an unrealized loss
position at December 31, 2005 and 2004, respectively. The decline in fair value
is due only to interest rate fluctuations. As the Corporation has the intent and
ability to hold such investments until maturity or market price recovery, no
securities are deemed to be other-than-temporarily impaired. None of the
individual unrealized losses are significant.

NOTE 4 - LOANS

The composition of the Corporation's loan portfolio at December 31, 2005 and
2004 is as follows:

<TABLE>
<CAPTION>
                              2005       2004
                            --------   --------
                               (IN THOUSANDS)
<S>                         <C>        <C>
Commercial                   $ 4,832    $ 4,095
Commercial real estate        16,440     13,925
Residential real estate       37,057     36,115
Real estate construction         384      1,376
Home equity                   17,072     14,560
Other consumer                 7,257      6,907
                             -------    -------
                              83,042     76,978
Allowance for loan losses       (657)      (663)
                             -------    -------
                             $82,385    $76,315
                             =======    =======
</TABLE>


                                       14

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - ALLOWANCE FOR LOAN LOSSES

Transactions in the allowance for loan losses are summarized as follows:

<TABLE>
<CAPTION>
                                                2005   2004   2003
                                                ----   ----   ----
                                                  (IN THOUSANDS)
<S>                                             <C>    <C>    <C>
Balance, beginning                              $663   $637   $564
   Provisions for loan losses                     --     36     88
   Recoveries on loans previously charged off      7     15     18
   Loans charged off                             (13)   (25)   (33)
                                                ----   ----   ----
Balance, ending                                 $657   $663   $637
                                                ====   ====   ====
</TABLE>

Loans on which the accrual of interest has been discontinued amounted to $-0-
and $126,000 at December 31, 2005 and 2004, respectively. Loan balances past due
90 days or more and still accruing interest, but which management expects will
eventually be paid in full, amounted to $67,000 and $63,000 at December 31, 2005
and 2004, respectively.

There were no impaired loans as of December 31, 2005 and 2004. The average
recorded investment in impaired loans during 2005, 2004 and 2003 was $-0-, $-0-,
and $-0-, respectively.

NOTE 6 - PREMISES AND EQUIPMENT

The following summarizes premises and equipment at December 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                      2005      2004
                                    -------   -------
                                      (IN THOUSANDS)
<S>                                 <C>       <C>
Premises                            $ 2,633   $ 2,607
Furniture, fixtures and equipment     1,957     1,574
                                    -------   -------
                                      4,590     4,181
Accumulated depreciation             (2,279)   (2,111)
                                    -------   -------
                                      2,311     2,070
Land                                    238       238
                                    -------   -------
                                    $ 2,549   $ 2,308
                                    =======   =======
</TABLE>


                                       15

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - INTEREST BEARING DEPOSITS

Interest bearing deposits include certificates of deposit issued in
denominations of $100,000 or greater which amounted to $30,852,000 and
$25,191,000 at December 31, 2005 and 2004, respectively.

Interest bearing deposits at December 31, 2005 and 2004 are further detailed as
follows:

<TABLE>
<CAPTION>
                                         2005       2004
                                       --------   --------
                                          (IN THOUSANDS)
<S>                                    <C>        <C>
Savings accounts                       $ 55,531   $ 67,703
NOW accounts                              9,106      9,174
Certificates and other time deposits     91,727     80,593
                                       --------   --------
                                       $156,364   $157,470
                                       ========   ========
</TABLE>

Time deposits at December 31, 2005 had the following scheduled maturities (in
thousands):

<TABLE>
<S>       <C>
2006      $35,894
2007       21,461
2008        8,583
2009        8,113
2010       17,676
          -------
          $91,727
          =======
</TABLE>

NOTE 8 - BORROWING CAPACITY

The Bank has a line of credit commitment available from Atlantic Central Bankers
Bank for borrowings up to $4,000,000 in federal funds. Borrowings on this line
are repaid on a daily basis. There were no borrowings under this line of credit
as of December 31, 2005 and 2004.

The Bank's maximum borrowing capacity with the Federal Home Loan Bank was
$100,709,000. There were no borrowings outstanding at December 31, 2005 and
2004. Advances from the Federal Home Loan Bank are secured by qualifying assets
of the Bank.


                                       16
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - INCOME TAXES

The components of the net deferred tax asset at December 31, 2005 and 2004 are
as follows:

<TABLE>
<CAPTION>
                                                       2005   2004
                                                       ----   ----
                                                     (IN THOUSANDS)
<S>                                                  <C>      <C>
AMT credit carryforward                                $300   $247
Unrealized losses on securities available for sale      436    171
Allowance for loan losses                               172    174
Accrued benefits                                         12     10
                                                       ----   ----
   TOTAL DEFERRED TAX ASSETS                            920    602
                                                       ----   ----
Securities accretion                                     21     16
Depreciation                                             17     23
                                                       ----   ----
   TOTAL DEFERRED TAX LIABILITIES                        38     39
                                                       ----   ----
   NET DEFERRED TAX ASSET                              $882   $563
                                                       ====   ====
</TABLE>

The income tax provision for financial reporting purposes differs from the
amount computed by applying the statutory income tax rate to income before
income taxes. The differences for the years ended December 31, 2005, 2004, and
2003 are as follows:

<TABLE>
<CAPTION>
                                      2005              2004              2003
                                ---------------   ---------------   ---------------
                                          % OF              % OF              % OF
                                         PRETAX            PRETAX            PRETAX
                                AMOUNT   INCOME   AMOUNT   INCOME   AMOUNT   INCOME
                                ------   ------   ------   ------   ------   ------
                                               (DOLLARS IN THOUSANDS)
<S>                             <C>      <C>      <C>      <C>      <C>      <C>
Tax at statutory rate           $1,242     34%    $1,296     34%    $1,059     34%
Increase (decrease) resulting
   from:
   Tax-exempt interest income     (735)   (20)      (756)   (20)      (799)   (26)
   TEFRA interest expense
      disallowance                  70      2         67      2         81      3
                                ------    ---     ------    ---     ------    ---
                                $  577     16%    $  607     16%    $  341     11%
                                ======    ===     ======    ===     ======    ===
</TABLE>


                                       17

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - RELATED PARTY TRANSACTIONS

Some of the Corporation's or the Bank's directors, principal officers, principal
shareholders and their related interests had transactions with the Bank in the
ordinary course of business. All loans and loan commitments were made on
substantially the same terms, including collateral and interest rates, as those
prevailing at the time for comparable transactions. In the opinion of
management, these transactions do not involve more than normal risk of
collectibility or present other unfavorable features. It is anticipated that
further such extensions of credit will be made in the future.

The following is an analysis of loans to these related parties during 2005 (in
thousands):

<TABLE>
<S>                           <C>
Balances, January 1, 2005     $  978
   Advances                    1,295
   Repayments                    298
                              ------
Balances, December 31, 2005   $1,975
                              ======
</TABLE>

NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Corporation 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.
These financial instruments include commitments to extend credit and letters of
credit. These instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the statement of
financial condition. The contract or notional amounts of these instruments
reflect the extent of involvement the Corporation has in particular classes of
financial instruments.

The Corporation's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
letters of credit written is represented by the contract or notional amount of
those instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. The following table identifies the contract or notional amount of
those instruments at December 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                              2005     2004
                                             ------   ------
                                              (IN THOUSANDS)
<S>                                          <C>      <C>
Commitments to grant loans                   $1,934   $3,099
Unfunded commitments under lines of credit    3,714    3,350
Letters of credit                               361      704
                                             ------   ------
                                             $6,009   $7,153
                                             ======   ======
</TABLE>

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. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Corporation evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Corporation upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment and
income-producing commercial properties.


                                       18

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)

Outstanding letters of credit written are conditional commitments issued by the
Corporation to guarantee the performance of a customer to a third party. The
majority of these standby letters of credit expire within the next twelve
months. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending other loan commitments. The Corporation
requires collateral supporting these letters of credit as deemed necessary. The
maximum undiscounted exposure related to these commitments at December 31, 2005
and 2004 was $361,000 and $704,000, respectively. Management believes that the
proceeds obtained through a liquidation of such collateral would be sufficient
to cover the maximum potential amount of future payments required under the
corresponding guarantees. The current amount of the liability as of December 31,
2005 and 2004 for guarantees under standby letters of credit issued is not
material.

NOTE 12 - DIVIDEND RESTRICTIONS

The amount of funds available to a parent from its subsidiary bank is limited
for all national banks by restrictions imposed by the Comptroller of the
Currency. A national bank is required to obtain the approval of the Comptroller
of the Currency if the total of all dividends declared in any calendar year
exceeds the Bank's net profits (as defined) for that year combined with its
retained net profits for the preceding two calendar years. Under this formula,
the Bank can declare dividends in 2006 of approximately $4,919,000 plus an
additional amount equal to the Bank's net profits for 2006, up to the date of
any such dividend declaration.

NOTE 13 - CAPITAL REQUIREMENTS

The Corporation and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the consolidated financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation and the Bank must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk-weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the maintenance of minimum amounts and ratios (set forth in the tables
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 Capital (as defined) to average
assets (as defined). Management believes, as of December 31, 2005, that the
Corporation and the Bank meet all capital adequacy requirements to which they
are subject.

As of December 31, 2005, the most recent notification from the regulatory
agencies categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the Bank
must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage
ratios as set forth in the table below. There are no conditions or events since
that notification that management believes have changed the institution's
category.


                                       19
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - CAPITAL REQUIREMENTS (CONTINUED)

The Corporation and Bank's actual capital ratios as of December 31, 2005 and
2004, and the maximum ratios required for capital adequacy purposes and to be
well capitalized under the prompt corrective action provisions are as follows:

<TABLE>
<CAPTION>
                                                                                                       TO BE WELL
                                                                                                    CAPITALIZED UNDER
                                                                    FOR CAPITAL ADEQUACY            PROMPT CORRECTIVE
                                                    ACTUAL                PURPOSES                  ACTION PROVISIONS
                                               ---------------   --------------------------   ----------------------------
                                                AMOUNT   RATIO       AMOUNT         RATIO         AMOUNT          RATIO
                                               -------   -----   -------------   ----------   --------------   -----------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                            <C>       <C>     <C>             <C>          <C>              <C>
AS OF DECEMBER 31, 2005:
   Total capital (to risk-weighted
      assets):
      Neffs Bancorp, Inc.                      $40,795   41.6%   $> or = 7,840   > or = 8.0%               N/A
      The Neffs National Bank                   40,278   41.2     > or = 7,817   > or = 8.0   $> or =  9,771   > or = 10.0%
   Tier 1 capital (to risk-weighted assets):
      Neffs Bancorp, Inc.                       40,138   41.0     > or = 3,920   > or = 4.0                N/A
      The Neffs National Bank                   39,621   40.6     > or = 3,908   > or = 4.0    > or =  5,862   > or =  6.0
   Tier 1 capital (to average assets):
      Neffs Bancorp, Inc.                       40,138   18.9     > or = 8,493   > or = 4.0                N/A
      The Neffs National Bank                   39,621   18.7     > or = 8,493   > or = 4.0    > or = 10,616   > or =  5.0

AS OF DECEMBER 31, 2004:
   Total capital (to risk-weighted
      assets):
      Neffs Bancorp, Inc.                      $38,310   41.2%   $> or = 7,440   > or = 8.0%               N/A
      The Neffs National Bank                   37,918   40.9     > or = 7,419   > or = 8.0   $> or =  9,273   > or = 10.0%
   Tier 1 capital (to risk-weighted assets):
      Neffs Bancorp, Inc.                       37,647   40.4     > or = 3,720   > or = 4.0                N/A
      The Neffs National Bank                   37,255   40.2     > or = 3,709   > or = 4.0    > or =  5,564   > or =  6.0
   Tier 1 capital (to average assets):
      Neffs Bancorp, Inc.                       37,647   18.0     > or = 8,346   > or = 4.0                N/A
      The Neffs National Bank                   37,255   17.9     > or = 8,346   > or = 4.0    > or = 10,433   > or =  5.0
</TABLE>

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Below are various estimated fair values at December 31, 2005 and 2004, as
required by Statement of Financial Accounting Standards No. 107 ("FAS 107").
Such information, which pertains to the Corporation's financial instruments, is
based on the requirements set forth in FAS 107 and does not purport to represent
the aggregate net fair value of the Corporation. It is the Corporation's general
practice and intent to hold its financial instruments to maturity, except for
certain securities designated as securities available for sale, and not to
engage in trading activities. Many of the financial instruments lack an
available trading market, as characterized by a willing buyer and seller
engaging in an exchange transaction. Therefore, the Corporation had to use
significant estimations and present value calculations to prepare this
disclosure.

Changes in the assumptions or methodologies used to estimate fair values may
materially affect the estimated amounts. Further, the fair value estimates are
based on various assumptions, methodologies and subjective considerations, which
vary widely among different financial institutions and which are subject to
change.


                                       20

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The estimated fair value amounts have been measured as of their respective year
ends, and have not been reevaluated or updated for purposes of these financial
statements subsequent to those respective dates. As such, the estimated fair
values of these financial instruments subsequent to the respective reporting
dates may be different than the amounts reported at year end.

The following methods and assumptions were used by the Corporation in estimating
financial instrument fair values:

CASH AND DUE FROM BANKS, INTEREST BEARING DEPOSITS WITH BANKS AND FEDERAL FUNDS
SOLD

     The statement of financial condition carrying amounts for cash and due from
     banks, interest bearing deposits with banks and federal funds sold
     approximate the estimated fair values of such assets.

SECURITIES

     Fair values for securities held to maturity and securities available for
     sale are based on quoted market prices, if available. If quoted market
     prices are not available, fair values are based on quoted market prices of
     comparable instruments. The carrying amount of restricted equity
     securities, such as Federal Reserve Bank stock, Atlantic Central Bankers
     Bank stock and Federal Home Loan Bank stock, is considered a reasonable
     estimate of fair value.

LOANS RECEIVABLE

     Fair values of variable rate loans subject to frequent repricing and which
     entail no significant credit risk are based on the carrying amounts. The
     estimated fair values of other loans are estimated by discounting the
     future cash flows using interest rates currently offered for loans with
     similar terms to borrowers of similar credit quality.

ACCRUED INTEREST RECEIVABLE

     The carrying amount of accrued interest is considered a reasonable estimate
     of fair value.

DEPOSIT LIABILITIES

     For deposits which are payable on demand, the carrying amount is a
     reasonable estimate of fair value. Fair values of fixed rate time deposits
     are estimated by discounting the future cash flows using interest rates
     currently being offered and a schedule of aggregate expected maturities.

ACCRUED INTEREST PAYABLE

     The carrying amount of accrued interest approximates its fair value.

OFF-BALANCE SHEET INSTRUMENTS

     The fair value of commitments to extend credit and for outstanding letters
     of credit is estimated using the fees currently charged to enter into
     similar agreements, taking into account market interest rates, the
     remaining terms and present credit worthiness of the counterparties.


                                       21

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The estimated fair value of the Corporation's financial instruments at December
31 are as follows:

<TABLE>
<CAPTION>
                                           2005                   2004
                                   --------------------   --------------------
                                              ESTIMATED              ESTIMATED
                                   CARRYING      FAIR     CARRYING      FAIR
                                    AMOUNT      VALUE      AMOUNT      VALUE
                                   --------   ---------   --------   ---------
                                                  (IN THOUSANDS)
<S>                                <C>        <C>         <C>        <C>
Financial assets:
   Cash and short-term
      investments                  $  5,469    $  5,469   $  5,877    $  5,877
   Securities available for sale     42,021      42,021     44,148      44,148
   Securities held to maturity       78,923      79,248     79,319      81,416
   Loans, net                        82,385      81,548     76,315      77,766
   Accrued interest receivable        1,213       1,213      1,185       1,185

Financial liabilities:
   Deposits                         173,276     173,344    171,652     172,669
   Accrued interest payable             902         902        770         770

Off-balance sheet financial
   instruments:
   Commitments to extend credit
      and letters of credit              --          --         --          --
</TABLE>


                                       22

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - CONDENSED FINANCIAL INFORMATION OF NEFFS BANCORP, INC. (PARENT ONLY)

BALANCE SHEETS

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                              -----------------
                                                2005      2004
                                              -------   -------
                                                (IN THOUSANDS)
<S>                                           <C>       <C>
                   ASSETS

Cash                                          $   243   $    32
Investment in subsidiary                       38,778    36,925
Premises and equipment                            260       254
Other assets                                       34       125
                                              -------   -------
   TOTAL ASSETS                               $39,315   $37,336
                                              =======   =======

     LIABILITY AND STOCKHOLDERS' EQUITY

Liability, accounts payable                   $    21   $    20
Stockholders' equity                           39,294    37,316
                                              -------   -------
   TOTAL LIABILITY AND STOCKHOLDERS' EQUITY   $39,315   $37,336
                                              =======   =======
</TABLE>

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                                 ------------------------
                                                  2005     2004     2003
                                                 ------   ------   ------
                                                      (IN THOUSANDS)
<S>                                              <C>      <C>      <C>
Dividends from subsidiary                        $  788   $  739   $  587
Rental income                                         7        8       10
Expenses                                            122      140       68
                                                 ------   ------   ------
   INCOME BEFORE INCOME TAXES AND EQUITY IN
      UNDISTRIBUTED EARNINGS OF SUBSIDIARY          673      607      529
Income tax benefit                                   33       45       20
                                                 ------   ------   ------
                                                    706      652      549
Equity in undistributed earnings of subsidiary    2,366    2,553    2,225
                                                 ------   ------   ------
   NET INCOME                                    $3,072   $3,205   $2,774
                                                 ======   ======   ======
</TABLE>


                                       23
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - CONDENSED FINANCIAL INFORMATION OF NEFFS BANCORP, INC. (PARENT ONLY)
(CONTINUED)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                       ---------------------------
                                                         2005      2004      2003
                                                       -------   -------   -------
                                                              (IN THOUSANDS)
<S>                                                    <C>       <C>       <C>
CASH  FLOWS FROM OPERATING ACTIVITIES
   Net income                                          $ 3,072   $ 3,205   $ 2,774
   Adjustments to reconcile net income to
      net cash provided by operating activities:
      Depreciation                                           9         7         6
      Equity in undistributed earnings of subsidiary    (2,366)   (2,553)   (2,225)
      (Increase) decrease in other assets                   91       (44)      (20)
      Increase in other liabilities                          1        19        --
                                                       -------   -------   -------
      NET CASH PROVIDED BY OPERATING ACTIVITIES            807       634       535
                                                       -------   -------   -------
CASH FLOWS USED IN INVESTING ACTIVITIES
   Purchases of premises and equipment                     (15)       (2)       --
                                                       -------   -------   -------
CASH FLOWS USED IN FINANCING ACTIVITIES
   Dividends paid                                         (788)     (739)     (531)
   Sale of treasury stock                                  207        --       134
                                                       -------   -------   -------
      NET CASH USED IN FINANCIAL ACTIVITIES               (581)     (739)     (397)
                                                       -------   -------   -------
      NET INCREASE (DECREASE) IN CASH                      211      (107)      138
CASH - BEGINNING                                            32       139         1
                                                       -------   -------   -------
CASH - ENDING                                          $   243   $    32   $   139
                                                       =======   =======   =======
</TABLE>


                                       24

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA

The following financial information is not covered by the auditor's report and
must be read in conjunction with the consolidated financial statements and
related notes along with Management's Discussion and Analysis of Financial
Condition and Results of Operations.

<TABLE>
<CAPTION>
                                                   AT OR FOR THE YEAR ENDED DECEMBER 31,
                                           ----------------------------------------------------
                                             2005       2004       2003       2002       2001
                                           --------   --------   --------   --------   --------
                                               (Dollars in Thousands, Except Per Share Data)
<S>                                        <C>        <C>        <C>        <C>        <C>
Interest Income
   Interest and fees on loans              $  5,001   $  4,747   $  5,044   $  5,470   $  5,813
   Interest an dividends on securities        5,371      5,233      4,461      4,699      4,165
   Interest on federal funds sold                82         67        128        133         98
                                           --------   --------   --------   --------   --------
Total interest income                        10,454     10,047      9,633     10,302     10,076
Interest Expense
   Deposits                                   4,469      4,082      4,434      4,977      5,095
   Short-term borrowings                         --         --         --         --          3
                                           --------   --------   --------   --------   --------
Total interest expense                        4,469      4,082      4,434      4,977      5,098
                                           --------   --------   --------   --------   --------
Net interest income                           5,985      5,965      5,199      5,325      4,978
Provision for loan losses                        --         36         88        170         37
                                           --------   --------   --------   --------   --------
Net interest income after provision
   for loan losses                            5,985      5,929      5,111      5,155      4,941
Other operating income                          276        268        273        287        269
Other operating expense                       2,612      2,385      2,269      1,986      1,990
                                           --------   --------   --------   --------   --------
Income before taxes                           3,649      3,812      3,115      3,456      3,220
Applicable income taxes                         577        607        341        641        706
                                           --------   --------   --------   --------   --------
Net income                                 $  3,072   $  3,205   $  2,774   $  2,815   $  2,514
                                           ========   ========   ========   ========   ========
PER SHARE DATA
   Basic earnings                          $  15.58   $  16.26   $  14.11   $  14.33   $  12.80
   Dividends declared                      $   4.00   $   3.75   $   2.70   $   3.10   $   2.20
   Average shares outstanding               197,117    197,091    196,529    196,431    196,474
AT END OF PERIOD
   Total assets                            $213,547   $209,803   $198,570   $180,293   $156,449
   Securities                               120,944    123,467    110,087     94,397     75,654
   Loans, net of unearned income             83,042     76,978     70,886     69,598     72,616
   Allowance for loan losses                    657        663        637        564        445
   Deposits                                 173,276    171,652    162,694    146,535    124,932
   Stockholders' equity                      39,294     37,316     35,055     32,825     30,498
KEY RATIOS
   Return on average assets                    1.46%      1.57%      1.45%      1.67%      1.70%
   Return on average equity                    8.08%      8.89%      8.16%      8.85%      8.49%
   Net loans to deposit ratio                 47.55%     44.46%     43.18%     47.11%     57.77%
   Dividend payout ratio (dividends
      declared divided by net income)         25.66%     23.06%     19.14%     21.63%     17.19%
   Equity to asset ratio (average equity
      divided by average total assets)        17.95%     17.56%     17.73%     18.93%     20.06%
</TABLE>


                                       25

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
QUARTERLY SUMMARY OF FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                  2005 Three Months Ended
                                      -----------------------------------------------
                                      March 31   June 30   September 30   December 31
                                      --------   -------   ------------   -----------
                                       (Dollars in Thousands, Except Per Share Data)
<S>                                   <C>        <C>       <C>            <C>
Interest income                        $2,569     $2,600      $2,645         $2,640
Interest expense                        1,036      1,108       1,171          1,154
                                       ------     ------      ------         ------
  Net interest income                   1,533      1,492       1,474          1,486
Provision for loan losses                  --         --          --             --
Other expenses, net of other income       517        584         608            627
                                       ------     ------      ------         ------
  Income before income taxes            1,016        908         866            859
Income tax expense                        178        139         127            133
                                       ------     ------      ------         ------
  Net income                           $  838     $  769      $  739         $  726
                                       ======     ======      ======         ======
Earnings per share-Basic               $ 4.25     $ 3.90      $ 3.75         $ 3.68
</TABLE>

<TABLE>
<CAPTION>
                                                  2004 Three Months Ended
                                      -----------------------------------------------
                                      March 31   June 30   September 30   December 31
                                      --------   -------   ------------   -----------
                                       (Dollars in Thousands, Except Per Share Data)
<S>                                   <C>        <C>       <C>            <C>
Interest income                        $2,456     $2,511      $2,518         $2,562
Interest expense                        1,053        996       1,006          1,027
                                       ------     ------      ------         ------
  Net interest income                   1,403      1,515       1,512          1,535
Provision for loan losses                  15         15           6             --
Other expenses, net of other income       501        582         496            538
                                       ------     ------      ------         ------
  Income before income taxes              887        918       1,010            997
Income tax expense                        123        142         178            164
                                       ------     ------      ------         ------
  Net income                           $  764     $  776      $  832         $  833
                                       ======     ======      ======         ======
Earnings per share-Basic               $ 3.88     $ 3.94      $ 4.22         $ 4.22
</TABLE>


                                       26
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
COMMON STOCK INFORMATION

The Corporation's common stock is currently quoted on the National Quotations
Bureau's Electronic Quotation Service "(Pink Sheets") under the trading symbol
NEFB. The Corporation's common stock is traded over-the-counter from time to
time, primarily in the Corporation's geographic service area, through several
local market makers.

The following table sets forth the high and low bid quotations for the
Corporation's common stock as reported for each quarterly period of the 2005 and
2004 fiscal years. This information is based on monthly reports from Boenning &
Scattergood, Inc. There may have been other bids or transactions not known to
the Corporation. The quotations reflect inter-dealer prices, do not include
retail mark-ups, markdowns or commissions, and may not necessarily represent
actual transactions.

                            Common Stock Information

<TABLE>
<CAPTION>
                                     Cash Dividends
     2005          HIGH      LOW       Per Share
     ----        -------   -------   -------------
<S>              <C>       <C>       <C>
First Quarter    $230.00   $230.00          --
Second Quarter   $235.00   $230.00       $2.00
Third Quarter    $236.00   $235.00          --
Fourth Quarter   $243.00   $240.00       $2.00
</TABLE>

<TABLE>
<CAPTION>
                                     Cash Dividends
     2005          HIGH      LOW       Per Share
     ----        -------   -------   -------------
<S>              <C>       <C>       <C>
First Quarter    $240.00   $225.00          --
Second Quarter   $230.00   $225.00       $1.75
Third Quarter    $225.00   $225.00          --
Fourth Quarter   $230.00   $228.00       $2.00
</TABLE>

As of December 31, 2005, Neffs Bancorp, Inc. had 197,941 outstanding shares and
approximately 615 stockholders, including beneficial owners whose stock is held
in nominee name.


                                       27

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                 Years Ending December 31, 2005, 2004, and 2003

The following is management's discussion and analysis of the significant changes
in the financial condition and results of operations of Neffs Bancorp, Inc. (the
"Corporation") and it's wholly owned subsidiary The Neffs National Bank (the
"Bank"). The consolidated financial condition and results of operations consist
almost entirely of the Bank's financial condition and results of operations.
This discussion should be read in conjunction with the financial tables,
consolidated financial statements and notes to consolidated financial statements
appearing elsewhere in this report. Current performance does not guarantee,
assure or may not be indicative of similar performance in the future.

We have made forward-looking statements in this document and in documents that
we incorporated by reference that are subject to risk and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Corporation and the Bank. When we
use words such as "believes", "expects", "anticipates" or other similar
expressions, we are making forward-looking statements.

Stockholders should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect the future financial results of the Bank and could cause
those results to differ materially from those expressed in our forward-looking
statements contained or incorporated by reference in this document. These
factors include the following:

     -    operating, legal and regulatory risks,

     -    economic, political and competitive forces affecting our Banking
          business, and

     -    the risk that our analysis of these risks and forces could be
          incorrect and/or that the strategies developed to address them could
          be unsuccessful.

The Corporation undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date of this report. Readers should carefully review the risk factors
described in other documents that the Corporation files periodically with the
Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES

Disclosure of the Corporation's significant accounting policies is included in
Note 1 of the consolidated financial statements. Certain of these policies are
particularly sensitive requiring significant judgments, estimates and
assumptions to be made by management. The allowance for loan losses is the
critical accounting policy that requires significant management judgment.

Management, in determining the allowance for loan losses, makes significant
estimates. Consideration is given to a variety of factors in establishing this
estimate. In estimating the allowance for loan losses, management considers
current economic conditions, diversification of the loan portfolio, delinquency
statistics, results of internal loan reviews, borrowers' perceived financial and
managerial strengths, the adequacy of the underlying collateral, if collateral
dependent, or present value of future cash flows and other relevant factors.
Since the sufficiency of the allowance for loan losses is dependent, to a great
extent on conditions that may be beyond our control, it is possible that
management's estimates of the allowance for loan losses and actual results could
differ in the near term. In addition, regulatory authorities, as an integral
part of their examination, periodically review the allowance for loan losses.
They may require additions to the allowance based upon their judgments about


                                       28

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

information available to them at the time of examination. Future increases to
our allowance for loan losses, whether due to unexpected changes in economic
conditions or otherwise, would adversely affect our future results of
operations.

OVERVIEW

2005 brought about exciting new products at The Neffs National Bank. The Bank
added internet banking, which included numerous features such as automatic bill
payment service, online statements that are compatible with personal and
commercial financial software, online check images, capabilities to research all
transactions and standard features such as transfers and stop payments, etc. In
addition to internet banking, the Bank implemented check imaging in place of
mailing the original checks and upgraded the existing telephone banking service.
These services were promoted through an advertising campaign, "I Bank. We Bank",
that also emphasized the Bank's commitment to customer service and
competitiveness as a community bank. Other promotional incentives included
drawings for a free computer and Certificate of Deposit and loan specials.

The Corporation's assets increased by 1.78% to $213,547,000 at December 31, 2005
from $209,803,000 at December 31, 2004. During the same period, net loans
receivable increased $6,070,000 or 7.95% to $82,385,000 from $76,315,000, while
deposits increased $1,624,000 or .95% to $173,276,000 from $171,652,000.
Securities decreased $2,523,000 or 2.04% to $120,944,000 from $123,467,000. In
2005, the Corporation recorded net income of $3,072,000, a decrease of 4.15% as
compared with $3,205,000 in 2004.

RESULTS OF OPERATIONS

NET INTEREST INCOME AND NET INTEREST MARGIN

The single largest component of the Corporation's primary operating income is
net interest income. It is the amount by which interest earned on interest
earning assets exceeds the interest paid on interest bearing liabilities. The
change in interest income from year to year may be due to changes in interest
rates, changes in volumes on interest earning assets and liabilities as well as
changes in the mix of such assets and liabilities. The Corporation's primary
interest earning assets are loans to businesses and individuals and investment
securities. Interest bearing liabilities consist primarily of time deposits, NOW
deposits and savings deposits. Generally, changes in net interest income are
measured by net interest rate spread and net interest margin. Net interest rate
spread is equal to the difference between the average rate earned on interest
earning assets and the average rate incurred on interest bearing liabilities.
Net interest margin represents the difference between interest income (including
net loan fees earned) and interest expense calculated as a percentage of average
earning assets.

2005 COMPARED TO 2004

Total interest income increased by $407,000 or 4.05% to $10,454,000 for the year
ended December 31, 2005 from $10,047,000 at December 31, 2004. This increase is
mostly the result of the loan portfolio increasing by $6.1 million which
generated additional interest and fees on loans throughout 2005.

Total interest expense increased by $387,000 or 9.48% to $4,469,000 in 2005 from
$4,082,000 in 2004. This increase in interest expense is due mainly in part to
the increasing interest rate environment experienced throughout 2005.

Net interest income increased by $20,000 or .34% to $5,985,000 in 2005 from
$5,965,000 in 2004. The Corporation's net interest rate spread for 2005 was
2.25% as compared to 2.47% for 2004. The net interest margin for 2005 was 2.92%
as compared to 3.03% for 2004.


                                       29

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

2004 COMPARED TO 2003

Total interest income increased by $414,000 or 4.29% to $10,047,000 for the year
ended December 31, 2004 from $9,633,000 for the year ended December 31, 2003.
This increase is the result of an increase in interest earning assets during
2004 which offset a decline in the yield on interest earning assets.

Total interest expense decreased by $352,000 or 7.93% to $4,082,000 in 2004 from
$4,434,000 in 2003. This decrease was the result of a decrease in the yield on
interest bearing liabilities which offset the growth in interest bearing
liabilities.

Net interest income increased by $766,000 or 14.73% to $5,965,000 in 2004 from
$5,199,000 in 2003. The Corporation's net interest rate spread increased to
2.47% in 2004 from 2.15% in 2003. The net interest margin increased from 2.83%
in 2003 to 3.03% in 2004.

Following is a summary of the Bank's average balances, rates, interest income,
and expenses, the interest rate spread and the net interest margin for the years
ended December 31, 2005, 2004, and 2003

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                       ----------------------------------------------------------------------------------------
                                                   2005                          2004                          2003
                                       ----------------------------  ----------------------------  ----------------------------
                                         Average             Yield/    Average             Yield/    Average             Yield/
                                       Balance(1)  Interest   Rate   Balance(1)  Interest   Rate   Balance(1)  Interest  Rate
                                       ----------  --------  ------  ----------  --------  ------  ----------  --------  ------
                                                                        (Dollars in Thousands)
<S>                                    <C>         <C>       <C>     <C>         <C>       <C>     <C>         <C>       <C>
Interest Earning Assets:
   Loan receivable(2)                   $ 79,294    $ 5,001   6.31%   $ 72,744    $ 4,747   6.53%   $ 69,730    $5,044    7.26%
   Investment Securities:
      Taxable                             77,177      3,313   4.29%     71,430      3,075   4.30%     53,471     2,193    4.10%
      Non-taxable(3)                      45,980      2,058   4.48%     47,640      2,158   4.53%     50,269     2,268    4.51%
   Other interest earning assets           2,411         82   3.40%      4,982         67   1.34%     10,234       128    1.25%
                                        --------    -------   ----    --------    -------   ----    --------    ------    ----
   Total interest earning assets         204,862     10,454   5.10%    196,796     10,047   5.11%    183,704     9,633    5.24%
                                                    -------                       -------                       ------
Noninterest earning assets                 7,067                         8,517                         8,084
                                        --------                      --------                      --------
   Total assets                         $211,929                      $205,313                      $191,788
                                        ========                      ========                      ========

Interest Bearing Liabilities:
   NOW                                  $  8,373         87   1.04%   $  8,426         56   0.66%   $  8,495        72    0.85%
   Savings                                62,033      1,000   1.61%     68,955      1,074   1.56%     59,144     1,140    1.93%
   Certificates of Deposit                86,372      3,382   3.92%     77,508      2,952   3.81%     76,063     3,222    4.24%
                                        --------    -------   ----    --------    -------   ----    --------    ------    ----
   Total interest bearing liabilities    156,777      4,469   2.85%    154,889      4,082   2.64%    143,702     4,434    3.09%
                                                    -------                       -------                       ------
Noninterest bearing liabilities:
   Demand deposits                        16,133                        13,565                        13,276
   Other liabilities                         993                           816                           801
Stockholders' Equity                      38,046                        36,043                        34,009
                                        --------                      --------                      --------
   Total liabilities and
      Stockholders' Equity              $211,929                      $205,313                      $191,788
                                        ========                      ========                      ========

Net interest income/spread(4)                       $ 5,985   2.25%               $ 5,965   2.47%               $5,199    2.15%
                                                    =======                       =======                       ======
Net interest margin(5)                                        2.92%                         3.03%                         2.83%
</TABLE>

----------
(1)  Averages are not computed on daily average. Average balances are computed
     based on an average of quarter-end balances.

(2)  Average balances include non-accrual loans.

(3)  There have been no tax equivalent adjustments made to yields.

(4)  Interest rate spread represents the difference between the average yield on
     interest earning assets and the average cost of interest bearing
     liabilities.

(5)  Net interest margin represents net interest income as a percentage of
     average interest earning assets.


                                       30
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

The following table attributes increases and decreases in components of net
interest income either to changes in average volume or to changes in average
rates for interest earning assets and interest bearing liabilities. Numerous and
simultaneous balance and rate changes occur during the year. The amount of
change that is not due solely to volume or rate is allocated proportionally to
each.

<TABLE>
<CAPTION>
                                                     FOR YEAR ENDED DECEMBER 31,
                                           -----------------------------------------------
                                                  2005/2004                2004/2003
                                             INCREASE/(DECREASE)      INCREASE/(DECREASE)
                                           ----------------------   ----------------------
                                              DUE TO CHANGE IN         DUE TO CHANGE IN
                                           VOLUME    RATE    NET    VOLUME    RATE    NET
                                           ------   -----   -----   ------   -----   -----
                                                          (In Thousands)
<S>                                        <C>      <C>     <C>     <C>      <C>     <C>
Interest Income:
   Loans receivable                        $ 417    $(163)   $254    $211    $(508)  $(297)
   Securities                                178      (40)    138     672      100     772
   Other interest earning assets             (48)      63      15     (70)       9     (61)
                                           -----    -----    ----    ----    -----   -----
   Total interest earning assets             547     (140)    407     813     (399)    414
Interest Expense:
   NOW                                        --       31      31      (1)     (15)    (16)
   Savings                                  (111)      37     (74)    172     (238)    (66)
   Certificates of Deposit                   345       85     430      60     (330)   (270)
                                           -----    -----    ----    ----    -----   -----
      Total interest bearing liabilities     234      153     387     231     (583)   (352)
                                           -----    -----    ----    ----    -----   -----
Net change in net interest income          $ 313    $(293)   $ 20    $582    $ 184   $ 766
                                           =====    =====    ====    ====    =====   =====
</TABLE>

PROVISION FOR LOAN LOSSES

Although the Corporation maintains sound credit practices, loan deterioration
may occur resulting in the eventual charge off of the loans as losses. The
provision for loan losses and the allowance for loan losses are based upon
management's ongoing assessment of the Bank's credit exposure and consideration
of other relevant factors. The allowance for loan losses is a valuation that is
available to absorb potential yet undetermined future charge offs. The provision
for loan losses is the amount charged against the Bank's earnings. Its
appropriateness and adequacy are determined based upon several factors
including:

     -    a continuing review of delinquent, classified and non-accrual loans,
          large loans and overall portfolio quality,

     -    analytical review of loan charge-off experience, delinquency rates and
          other relevant historical and peer statistical ratios,

     -    management's judgment with respect to the nature of the portfolio,
          concentrations of credit and current and projected economic and
          business conditions and their impact on the existing portfolio, and

     -    regular examinations and review of the portfolio by regulatory
          authorities.

The allowance is allocated to specific loan categories based upon management's
classification of loans under the Corporation's internal loan grading system and
to pools of other loans that are not individually analyzed. Management makes
allocations to specific loans based on the present value of expected future cash
flows or the fair value of the underlying collateral for impaired loans and to
other classified loans based on various credit risk factors. These factors
include collateral values, the financial condition of the borrower and industry
and current economic trends.

Allocation to commercial loan pools are developed by internal risk ratings and
are based on management's judgment concerning historical loss trends and other
relevant factors. Installment and residential mortgage loan allocations are made
at a portfolio level based on historical loss experience adjusted for portfolio
activity and current conditions. Estimated credit losses are based on the
average annual rate of net charge-offs experienced


                                       31

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

over the previous two or three years on similar loans, adjusted for current
condition and trends. While allocations are made to specific loans and pools of
loans, the allowance is available for all loan losses.

There was no provision for loan losses made during 2005 as compared to $36,000
for 2004 and $88,000 for 2003. Management has concluded that the Allowance for
Loan Losses had an adequate balance to justify no provision being made during
2005.

The Allowance for Loan Losses represented .79% of total loans receivable at
December 31, 2005 as compared with .86% and .90% at December 31, 2004, and 2003,
respectively. Management regularly assesses the appropriateness and adequacy of
the allowance for loan losses in relation to credit exposure associated with
individual borrowers, overall trends in the loan portfolio and other relevant
factors, and believes the allowance is reasonable and adequate for each of the
periods presented. The Corporation has no credit exposure to foreign countries
or foreign borrowers.

The Bank's loan loss experience for each of the five years ended December 31 is
presented below.

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31
                                            -----------------------------------------------
                                              2005      2004      2003      2002      2001
                                            -------   -------   -------   -------   -------
                                                         (Dollars in Thousands)
<S>                                         <C>       <C>       <C>       <C>       <C>
Average loans outstanding                   $79,294   $72,744   $69,730   $71,337   $71,928
                                            =======   =======   =======   =======   =======
Total gross loans at year end               $83,042   $76,978   $70,886   $69,598   $72,615
                                            =======   =======   =======   =======   =======

Allowance for loan losses at January 1      $   663   $   637   $   564   $   445   $   440
Losses charge to allowance
   Commercial                                    --        --        --        27         7
   Real estate                                   --        --        28        --         6
   Consumer                                      13        25         5        30        24
                                            -------   -------   -------   -------   -------
   Total losses charged to allowance             13        25        33        57        37
Recoveries credited to allowance
   Commercial                                    --        --         9        --        --
   Real estate                                   --        --        --        --        --
   Consumer                                       7        15         9         6         5
                                            -------   -------   -------   -------   -------
   Total recoveries credit to allowance           7        15        18         6         5
                                            -------   -------   -------   -------   -------
Net charge-offs                                   6        10        15        51        32
Provision for loan losses                        --        36        88       170        37
                                            -------   -------   -------   -------   -------
Allowance for loan losses at December 31    $   657   $   663   $   637   $   564   $   445
                                            =======   =======   =======   =======   =======

Ratio of net charge offs to average loans
   outstanding                                 0.01%     0.01%     0.02%     0.07%     0.04%
Allowance as a percentage of total
   gross loans                                 0.79%     0.86%     0.90%     0.81%     0.61%
</TABLE>


                                       32

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

The amount charged to operations and the related balance in the allowance for
loan losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior loan
loss experience and management's estimates of potential losses.

Management maintains an allowance for loan losses that it considers adequate
based on the evaluation process that is performed on a quarterly basis. As part
of this process, management considers it appropriate to maintain a portion of
the allowance that is based on credit quality trends, loan volume, current
economic trends and other uncertainties. This portion of the allowance for loan
losses is reflected as the unallocated portion in the table below that indicates
the distribution of the allowance as of the end of each of the last five years.

<TABLE>
<CAPTION>
                   2005             2004             2003             2002             2001
              --------------   --------------   --------------   --------------   --------------
                        % of             % of             % of             % of             % of
              Amount    Loan   Amount    Loan   Amount    Loan   Amount    Loan   Amount    Loan
              ------   -----   ------   -----   ------   -----   ------   -----   ------   -----
                                            (Dollars in Thousands)
<S>           <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>
Commercial     $122    25.62%   $130    23.41%   $115    20.39%   $108    21.25%   $ 92    20.47%
Real estate     271    45.08%    256    48.71%    246    50.20%    235    69.25%    262    70.87%
Consumer        125    29.30%    135    27.88%    167    29.41%    126     9.50%     83     8.66%
Unallocated     139              142              109               95                8
               ----    -----    ----    -----    ----    -----    ----    -----    ----    -----
Total          $657      100%   $663      100%   $637      100%   $564      100%   $445      100%
               ====    =====    ====    =====    ====    =====    ====    =====    ====    =====
</TABLE>

NON-INTEREST INCOME

2005 COMPARED TO 2004

Non-interest income consists primarily of service charges. Non interest income
for 2005 had an increase of $8,000 or 2.99% over 2004. Service charges on
deposit accounts declined slightly; however, this decrease was offset by an
increase in fees derived from the sale of loan related insurance and ATM fees.

2004 COMPARED TO 2003

Non-interest income consists primarily of service charges. Non-interest income
for 2004 decreased $5,000 or 1.83% to $268,000 from $273,000 in 2003. The
decrease was mainly the result of a slight reduction in other service charges
and fees.

NON-INTEREST EXPENSE

Salary expense and employee benefits represent the largest component, or 47.55%
of non-interest expenses. Non-interest expenses also include an array of other
expenses such as:

     -    occupancy and equipment expenses,

     -    stationery, printing and Bank supplies,

     -    advertising,

     -    outside service providers, relating to data processing and ATM
          services,

     -    professional fees for legal, accounting, and consulting services,

     -    cost associated with the due diligence process of extending and
          maintaining loans and the collection process,

     -    Pennsylvania shares tax and FDIC assessment, and

     -    other types of expenses incurred as part of the normal course of
          operation of the Bank.


                                       33
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

2005 COMPARED TO 2004

Non-interest expenses for 2005 were $2,612,000, an increase of $227,000 or 9.52%
as compared to non-interest expense of $2,385,000 for 2004.

Salary and employee benefits represent the largest portion of non-interest
expense. For 2005, salary and employee benefits increased by 9.23%; due to the
constant increasing costs associated with health care coverage and normal salary
increases paid to employees. At December 31, 2005, the Bank employed 32
full-time equivalent employees as compared to 31 at December 31, 2004.

Occupancy and equipment expenses increased by $65,000 or 21.74% to $364,000 as
compared to $299,000 at December 31, 2004. The implementation of internet
banking, bill pay and imaging resulted in additional maintenance, repair and
depreciation expenses over those reported in 2004.

2004 COMPARED TO 2003

Non-interest expenses for 2004 were $2,385,000, representing an increase of
$116,000 or 5.11%, compared to $2,269,000 for 2003.

Salary expenses and related employee benefits increased by $16,000 or 1.42%, to
$1,137,000 for 2004 from $1,121,000 for 2003. The slight increase was mainly the
result of an officer retiring at December 31, 2004; offset by the hiring of
additional personnel; normal salary increases paid to employees and increased
premium costs associated with group medical insurance. At December 31, 2004,
there were 31 full-time equivalent employees as compared to 29 at December 31,
2003.

Occupancy and equipment expenses decreased by $17,000 or 5.37% to $299,000 from
2004 from $316,000 for 2003. The $17,000 decrease was the result of reduced
occupancy expenses for 2004.

Other expenses increased $138,000 or 26.38% to $661,000 in 2004 from $523,000 in
2003. This increase mainly resulted from a $50,000 donation made to Northern
Lehigh School District Education Foundation and legal and audit fees incurred
for Securities and Exchange Commission filings.

INCOME TAXES

Income tax expense was $577,000 for 2005 as compared to $607,000 for 2004 and
$341,000 for 2003. The 4.94% decrease experienced during 2005 resulted from the
decline in pre-tax income. The 78.00% increase during 2004 was caused by a
decline in tax-free interest income and an increase in pre-tax income. The
Corporation's effective income tax rate for 2005, 2004 and 2003 was 16%, 16% and
11%, respectively.

NET INCOME

2005 COMPARED TO 2004

Net income for 2005 was $3,072,000, which is a decline of $133,000 or 4.15% as
compared to 2004. During 2005 the Bank offered online banking and imaging to all
its customers, in order to remain competitive amongst other financial
institutions. The costs associated with implementing these new services and the
advertising to promote the services, had a negative impact on the net income.
However, the bank anticipates continued growth from providing these new
services. The Bank's net interest income growth was relatively flat for 2005
over 2004 due to a decrease in the Bank's net interest spread and margin as the
cost of interest-bearing deposits increased more than the yield on
interest-bearing assets.

Basic Earning per share for 2005 decreased to $15.58 from $16.26 in 2004, due to
the decline in the net income for 2005.


                                       34

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

2004 COMPARED TO 2003

Net income for 2004 was $3,205,000, an increase of $431,000 or 15.53% from
$2,774,000 for 2003. This increase is primarily the result of increased net
interest income due to growth of the Bank and an improved net interest margin.

Basic Earnings per share for 2004 increased to $16.26 from $14.11 in 2003, due
to the increase in net income for 2004.

FINANCIAL CONDITION

SECURITIES

The Corporation's securities portfolio is composed of investments that not only
provide interest income, including tax-exempt income, but also provide a source
of liquidity. The portfolio allows management to better respond to the Bank's
interest sensitivity position, to diversify the earning asset portfolio and
provide collateral for public fund deposits. Established policies are in place
that address various aspects in managing the portfolio, including but not
limited to, concentrations, liquidity, credit quality, interest rate sensitivity
and regulatory guidelines.

Although the Bank generally intends to hold its securities portfolio until
maturity, a portion of the portfolio is classified as available-for-sale.
Securities in the held to maturity category are accounted for at amortized cost.
Available for sale securities are accounted for at fair value with unrealized
gains or losses, net of income taxes, reported as a separate component of
stockholder's equity. The Bank invests in securities for the yield they produce
and not to profit from trading. The Bank holds no trading securities in its
portfolio.

The securities portfolio at December 31, 2005 totaled $120,944,000 as compared
to $123,467,000 at December 31, 2004, a decrease of $2,523,000, or 2.04%.
Securities available-for-sale decreased to $42,021,000 at December 31, 2005
compared to $44,148,000 at December 31, 2004. In addition, securities held to
maturity decreased to $78,923,000 at December 31, 2005 from $79,319,000 at
December 31, 2004. Other than the U.S. Government and its agencies, the Bank
holds no other securities of a single issuer whose aggregate carrying value
exceeds 10% of stockholders equity.

The carrying value of the available-for-sale securities portfolio as of December
31, 2005, includes net unrealized losses of $1,279,000 (reflected as accumulated
other comprehensive loss of $844,000 in stockholders' equity, net of deferred
income taxes of $435,000) compared to net unrealized losses of $502,000
(reflected as accumulated other comprehensive loss of $331,000 in stockholders'
equity, net of deferred income taxes of $171,000) as of December 31, 2004.

The Corporation has total unrealized losses of $2,263,000 at December 31, 2005
on the securities portfolio with an aggregate fair value of $74,356,000. The
unrealized losses are attributed to the current interest rate environment. The
unrealized losses are temporary and management has the intent and ability to
hold them until maturity or market price recovery. All securities are rated
investment grade or better according to the Corporation's policy.


                                       35

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

The composition of the securities portfolio for the periods ending December 31,
2005, 2004 and 2003 are presently below.

<TABLE>
<CAPTION>
                                                         December 31
                                               ------------------------------
                                                 2005       2004       2003
                                               --------   --------   --------
                                                   (Dollars in Thousands)
<S>                                            <C>        <C>        <C>
Held to maturity securities:
   U.S. Government agencies and corporations   $ 29,683   $ 27,162   $ 21,992
   State and political subdivisions              45,424     46,425     50,571
   Mortgage-backed securities                     1,968      3,135      5,845
   Corporate securities                           1,848      2,597      4,297
Available for sale securities:
   Mortgage-backed securities                    41,452     43,475     26,800
   Equity securities                                569        673        582
                                               --------   --------   --------
      Total securities                         $120,944   $123,467   $110,087
                                               ========   ========   ========
</TABLE>

The following table presents the maturities and average weighted yields of the
debt securities portfolio as of December 31, 2005.

<TABLE>
<CAPTION>
                                                    After one but      After five but
                                Within one year   within five years   within ten years   After ten years
                                ---------------   -----------------   ----------------   ---------------
                                Amount    Yield    Amount     Yield    Amount    Yield    Amount   Yield
                                ------   ------   --------   ------   -------   ------   -------   -----
                                                         (Dollars in Thousands)
<S>                             <C>      <C>      <C>        <C>      <C>       <C>      <C>       <C>
Available for sale:
   Mortgage-backed securities    $ --       --      $2,662    3.70%   $11,383    4.25%   $27,407   4.84%
Held to maturity:
   U.S. Government agencies        --       --       2,500    3.80%    14,148    4.39%    13,035   4.47%
   State and political
      subdivisions(1)             200     7.33%      2,357    6.64%    16,143    6.93%    26,724   7.40%
   Mortgage-backed securities      --       --          --      --          2   11.91%     1,966   6.30%
   Other securities                --       --         398    6.24%     1,100    6.44%       350   7.19%
                                 ----               ------            -------
                                  200                5,255             31,393             42,075
                                 ----               ------            -------            -------
      Total                      $200               $7,917            $42,776            $69,482
                                 ====               ======            =======            =======
</TABLE>

----------
(1)  Yields on tax-exempt debt securities have been computed on a fully
     tax-equivalent basis.


                                       36

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

LOANS

The loan portfolio comprises a major component of the Corporation's earning
assets. Net loans receivable increased $6,070,000 or 7.95% to $82,385,000 as of
December 31, 2005 from $76,315,000 at December 31, 2004. Net loans receivable
represent 38.58% of total assets and 47.55% of total deposits as of December 31,
2005 as compared to 36.37% and 44.45%, respectively, at December 31, 2004. All
of the Corporation's loans are to domestic borrowers.

Loan concentrations are considered to exist when the total amount of loans to
any one or a multiple number of borrowers engaged in similar activities or have
similar economic characteristics exceeds 10% of loans outstanding in any one
category. At December 31, 2005, real estate loans amounted to $70,953,000 or
85.44% of total loans, and commercial and industrial loans amounted to
$4,832,000 or 5.82% of total loans. Although such loans were not made to one
specific borrower or industry, it is important to note that the quality of these
loans is affected by the region's economy and real estate market. Management
does not believe such a concentration poses a problem to the Bank at this time.

Other than as described herein, management does not believe there are any
trends, events, or uncertainties which are reasonably expected to have a
material adverse impact on future results of operations, liquidity, or capital
resources.

The composition of the total loan portfolio is shown in the table below for the
periods presented.

<TABLE>
<CAPTION>
                                                           December 31,
                                                        (Dollars in Thousand)
                    --------------------------------------------------------------------------------------------
                          2005               2004               2003               2002               2001
                    ----------------   ----------------   ----------------   ----------------   ----------------
                               % of               % of               % of               % of               % of
                     Amount    Total    Amount    Total    Amount    Total    Amount    Total    Amount    Total
                    -------   ------   -------   ------   -------   ------   -------   ------   -------   ------
<S>                 <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>
Commercial          $ 4,832     5.82%  $ 4,095     5.32%  $ 2,832     4.00%  $ 3,490     5.01%  $ 4,579     6.31%
Commercial
   real estate       16,440    19.80%   13,925    18.09%   11,615    16.39%   11,300    16.24%   10,281    14.16%
Residential
   real estate       37,057    44.62%   36,115    46.92%   35,239    49.71%   35,046    50.35%   39,490    54.37%
Real estate
   construction         384     0.46%    1,376     1.79%      350     0.49%      657     0.94%    1,095     1.51%
Home equity          17,072    20.56%   14,560    18.91%   14,136    19.94%   12,493    17.96%   10,882    14.99%
Other
   consumer           7,257     8.74%    6,907     8.97%    6,714     9.47%    6,612     9.50%    6,288     8.66%
                    -------   ------   -------   ------   -------   ------   -------   ------   -------   ------
   Total loans
      outstanding   $83,042   100.00%  $76,978   100.00%  $70,886   100.00%  $69,598   100.00%  $72,615   100.00%
                    =======   ======   =======   ======   =======   ======   =======   ======   =======   ======
</TABLE>


                                       37
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

The loan maturities and interest sensitivity for a segment of the loan portfolio
is reflected in the table below.

<TABLE>
<CAPTION>
                                                     As of December 31, 2005
                                           -------------------------------------------
                                           Due Under   Due 1- 5    Due Over
                                            One Year     Years    Five Years    Total
                                           ---------   --------   ----------   -------
                                                          (In Thousands)
<S>                                        <C>         <C>        <C>          <C>
Maturity of loans receivable:
   Commercial and commercial real estate     $6,850     $5,837      $8,585     $21,272
   Real estate construction                                            384         384
                                             ------     ------      ------     -------
      Total                                  $6,850     $5,837      $8,969     $21,656
                                             ======     ======      ======     =======
</TABLE>

<TABLE>
<CAPTION>
                                        Due 1-5    Due Over
                                         Years    Five Years
                                        -------   ----------
<S>                                     <C>       <C>
Fixed interest rates                     $1,715     $3,324
Floating or adjustable interest rates     4,122      5,645
                                         ------     ------
   Total                                 $5,837     $8,969
                                         ======     ======
</TABLE>

CREDIT RISK AND LOAN QUALITY

The Corporation continues to strive to minimize credit risk. The Bank's written
lending policy requires underwriting, loan documentation and credit analysis
standards to be met prior to the approval and funding of any loan. In accordance
with that policy, internal loan review monitors the loan portfolio on an ongoing
basis. The loan committee then prepares an analysis each quarter of the
allowance for loan losses, which is then submitted to the Board of Directors for
its assessment as to the adequacy of the allowance.

The lending policy is executed through the tiered assignment of loan limit
authorities (secured and unsecured), to individual officers of the Bank, the
Loan Committee and the Board of Directors. Although the Corporation maintains
sound credit policies, certain loans may deteriorate for a variety of reasons.
The Corporation's policy is to place all loans on a non-accrual status upon
becoming 90 days delinquent in their payments, unless there is a documented,
reasonable expectation of the collection of the delinquent amount. Loans are
reviewed monthly as to their delinquency status, and on a quarterly basis
through review and preparation of a troubled loans report, which is presented to
the Board of Directors.

Total nonperforming loans (comprised of non-accruing loans and loans past due
for more than 90 days) as of December 31, 2005 were $67,000 compared to $189,000
as of December 31, 2004. Total nonperforming loans as a percentage of total
loans were .08% at December 31, 2005 as compared to .25% at December 31, 2004.
At December 31, 2005 and 2004 there was no foreclosed real estate. Lenders
continue to work with customers to minimize losses associated with non-accrual
and delinquent accounts. In addition, management is not aware of any material
potential loan problems that have not been disclosed herein.


                                       38

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

Detailed information about the Corporation's nonperforming loans and
nonperforming assets for the last five years is shown in the table below.

<TABLE>
<CAPTION>
                                                                December 31,
                                              -----------------------------------------------
                                                2005      2004      2003      2002      2001
                                              -------   -------   -------   -------   -------
                                                         (Dollars in Thousands)
<S>                                           <C>       <C>       <C>       <C>       <C>
Non-accruing loans                            $    --   $   126   $   148   $   227   $   298
Accruing loans past due 90 days or more            67        63       327       203        71
                                              -------   -------   -------   -------   -------
   Total nonperforming loans                       67       189       475       430       369
Foreclosed real estate                             --        --        10        --        --
                                              -------   -------   -------   -------   -------
   Total nonperforming assets                 $    67   $   189   $   485   $   430      $369
                                              =======   =======   =======   =======   =======
Non-accrual loans:
   Interest income that would have been
      recorded on non-accrual loans           $    --   $    11   $    15   $    18   $    17
Interest income for above loans included in
      net income for the period               $    --   $    --   $    10   $    20   $     7

Ratios:
   Nonperforming loans to total loans            0.08%     0.25%     0.67%     0.62%     0.51%
   Allowance for loan losses to
      nonperforming loans                      980.60%   350.79%   134.11%   131.16%   120.60%
   Nonperforming assets to total assets          0.03%     0.09%     0.24%     0.24%     0.24%
   Commitments to lend additional funds to
      Nonperforming loan customers                 --        --        --        --        --
</TABLE>

DEPOSITS

Deposits are the major source of the Corporation's funds for lending and other
investment purposes. Total deposits at December 31, 2005 were $173,276,000, and
increase of $1,624,000 or 0.95%, over total deposits of $171,652,000 as of
December 31, 2004. The Corporation experienced the following
increases/(decreases) for the year 2005 as compared to 2004.

<TABLE>
<S>                                    <C>
Non-interest bearing demand deposits    19.25%
Interest-bearing demand deposits         (.74%)
Savings deposits                       (17.98%)
Time deposits                           13.82%
</TABLE>


                                       39
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

The following table displays the maturities of time deposits issued in
denominations of $100,000 or more at December 31, 2005.

<TABLE>
<CAPTION>
                                               Time
                                           Certificates
                                           ------------
(In Thousands)
<S>                                        <C>
Three months or less                          $ 1,370
Over three months but within six months       $ 1,923
Over six months but within twelve months      $ 6,705
Over twelve months                            $20,854
                                              -------
   Total                                      $30,852
                                              =======
</TABLE>

LIQUIDITY

Liquidity represents the Corporation's ability to efficiently manage cash flows
at reasonable rates to support possible commitments to borrowers or the demands
of depositors. Liquidity is essential to compensate for fluctuations in the
balance sheet and provide funds for growth and normal operating expenditures.
Liquidity needs may be met by converting assets into cash or obtaining sources
of additional funding.

Sources of asset liquidity are provided through cash, amounts due from banks,
interest-bearing deposits with banks and federal funds sold, which totaled
$5,469,000 at December 31, 2005 as compared to $5,877,000 at December 31, 2004.
Additional liquidity sources include principal payments on securities in the
Bank's securities portfolio and cash flow from its amortizing loan portfolio.
Selling securities available-for-sale, selling loans or raising additional
capital may be used to meet longer-term liquidity needs. At December 31, 2005,
available-for-sale securities totaling $42,021,000 were available for liquidity
purposes as compared with $44,148,000 at December 31. 2004.

Liability liquidity sources include attracting deposits at competitive rates.
Core deposits at December 31, 2005 totaled $131,690,000 as compared to
$130,456,000 at December 31, 2004. The Bank has a $4 million federal fund line
of credit with its main correspondent bank, Atlantic Central Bankers Bank. The
Bank had no federal funds purchased under this line at December 31, 2005 and
2004. The Bank also has established a line of credit and other credit facilities
with the Federal Home Loan Bank, which are reliable sources for short and
long-term funds. Maximum borrowing capacity with the Federal Home Loan Bank is
approximately $100,709,000.

Management is not aware of any demands, trends, commitments, or events that
would result in the Bank's inability to meet anticipated or unexpected needs.

CONTRACTUAL OBLIGATIONS

The following table represents the aggregate contractual obligations to make
future payments as of December 31, 2005.

<TABLE>
<CAPTION>
                 Less than     1-3       3-5     Over 5
                   1 Year     Years     Years     Years    Total
                 ---------   -------   -------   ------   -------
(In Thousands)
<S>              <C>         <C>       <C>       <C>      <C>
Time Deposits     $35,894    $30,044   $25,789      --    $91,727
                  =======    =======   =======     ===    =======
</TABLE>


                                       40
<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

OFF-BALANCE SHEET ARRANGEMENTS

The Corporation's financial statements do not reflect off-balance sheet
arrangements that are made in the normal course of business. Those off-balance
sheet arrangements consist of unfunded loans and letters of credit made under
the same standards as on-balance sheet instruments. These commitments, at
December 31, 2005 totaled $6,009,000. This consisted of $1,350,000 in tax-exempt
loans, commercial real estate, construction, and land development loans,
$3,714,000 in home equity lines of credit, $361,000 in standby letters of credit
and the remainder in other unused commitments. Because these instruments have
fixed maturity dates, and because many of them will expire without being drawn
upon, they do not generally present any significant liquidity risk to the
Corporation.

Management believes that any amounts actually drawn upon can be funded in the
normal course of operations. The Corporation has no investment in or financial
relationship with any unconsolidated entities that are reasonably likely to have
a material effect on liquidity or the availability of capital resources.

STOCKHOLDERS' EQUITY AND CAPITAL REQUIREMENTS/RATIOS

The net effect of the activity in stockholders' equity resulted in an increase
of $1,978,000 in total stockholders' equity to $39,294,000 at December 31, 2005
from $37,316,000 at December 31, 2004. Stockholders' equity increased in 2005 as
a result of retained earnings of $2,284,000, plus a treasury stock sale of
$207,000, less a decrease in accumulated other comprehensive income of $513,000
at December 31, 2005, the Bank had $844,000 in net unrealized losses on
available-for-sale securities, as compared to the $331,000 loss at December 31,
2004. FAS 115 requires banks to report securities classified as
"available-for-sale" at fair value, with unrealized gains or losses, net of
deferred income taxes, reported as a separate component of stockholder's equity.
The FAS 115 adjustment is not included in the Corporation's calculations of
regulatory capital ratios.

The Corporation places a significant emphasis on maintaining a strong capital
base. The goals for capital planning are to build a strong capital base to allow
for future growth, to support risks inherent in the banking industry, to retain
earnings to meet regulatory requirements and to provide an adequate return to
stockholders.

Current capital guidelines issued by federal regulatory authorities require the
Corporation and the Bank to meet minimum risk-based capital ratios in an effort
to make regulatory capital more responsive to the risk exposure related to on
and off-balance sheet items.

Risk-based capital provides the basis for which all banks are evaluated in terms
of capital adequacy. Risk-based capital guidelines redefine the components of
capital, categorize assets into risk classes and include certain off-balance
sheet items in the calculation of capital requirements. The components of
risk-based capital are segregated as Tier I and Tier II capital. Tier I capital
is composed of total stockholders' equity reduced by goodwill and other
intangible assets. Tier II capital is comprised of the allowance for loan losses
and any qualifying debt obligations. Risk-based capital standards require the
Corporation and the Bank to have Tier I capital of at least 4% and total capital
(including Tier I capital) of at least 8% of risk-weighted assets.

The Corporation and the Bank are also subject to leverage capital requirements.
This requirement compares capital (using the definition of Tier I capital) to
average balance sheet assets and is intended to supplement the risk-based
capital ratio in measuring capital adequacy. The guidelines set a minimum
leverage ratio of 3% for institutions that are highly rated in terms of safety
and soundness, and which are not experiencing or anticipating any significant
growth. Other institutions are expected to maintain capital levels of at least
1% or 2% above the minimum. As of December 31, 2005, the Bank has a Tier I
leverage ratio of 18.7%.


                                       41

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

A comparison of the Bank's risk-based capital ratios and leverage ratios is
shown in the following table. The Corporation's ratios are not significantly
different.

<TABLE>
<CAPTION>
                                                          December 31,   December 31,
                                                              2005           2004
                                                          ------------   ------------
                                                             (Dollars in Thousands)
<S>                                                       <C>            <C>
Tier I, common stockholder's equity                          $39,621        $37,255
Tier II, allowable portion of allowance for loan losses          657            663
                                                             -------        -------
   Total capital                                             $40,278        $37,918
                                                             =======        =======
Tier I risk-based capital ratio                                40.60%         40.17%
Tier II risk-based capital ratio                               41.20%         40.89%
</TABLE>

At December 31, 2005 and 2004, the Bank exceeded the minimum regulatory capital
requirements to be considered a "well capitalized" financial institution under
applicable federal regulations.

Banking laws and regulations limit the amount of dividends that may be paid by
the Bank to the Corporation without prior approval of the Bank's regulatory
agency. These restrictions have not had, and are not expected to have, a
significant impact on the Corporation's ability to pay dividends.

EFFECT OF INFLATION

The majority of assets and liabilities of the Corporation are monetary in
nature, and therefore, differ greatly from most commercial and industrial
companies that have significant investments in fixed assets or inventories. The
precise impact of inflation upon the Bank is difficult to measure. Inflation may
affect the borrowing needs of consumers, thereby impacting the growth rate of
the Corporation's assets. Inflation may also affect the general level of
interest rates, which can have a direct bearing on the Corporation.

Management believes the most significant impact on the financial results is the
Corporation's ability and timing to react to changes in interest rates. On an
ongoing basis, management attempts to maintain an essentially balanced position
between interest sensitive assets and liabilities, where such balancing is
dependent on whether there is a rising or falling interest rate environment.

INTEREST RATE SENSITIVITY AND MARKET RISK

In the normal course of conducting business activities, the Corporation is
exposed to market risk, principally interest rate risk. Interest rate risk
arises from market driven fluctuations in interest rates that may affect cash
flows, income, expenses and the values of financial instruments. The
Asset/Liability Committee manages interest rate risk.

The operations of the Corporation do not expose it to foreign currency exchange
or commodity price risks. Also, the Corporation does not utilize interest rate
swaps, caps or other hedging transactions. The Corporation does not own any
trading assets.

The principal objective of the asset/liability management activities is to
provide consistently higher levels of net interest income while maintaining
acceptable levels of interest rate and liquidity risk and facilitating the
funding needs of the Corporation. The Corporation utilizes an interest rate
sensitivity model as the primary quantitative tool in measuring the amount of
interest rate risk that is present. The traditional maturity "gap" analysis,
which reflects the volume difference between interest rate sensitive assets and
liabilities during a given time period, is


                                       42

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

reviewed quarterly by management and the Asset Liability Committee (ALCO) of the
Bank. A positive gap occurs when the amount of interest sensitive assets exceeds
interest sensitive liabilities. This position would contribute positively to net
income in a rising rate environment. Conversely, if the balance sheet is
liability sensitive or negatively gapped. This position would contribute
positively to net income in a falling rate environment. Management continues to
monitor sensitivity in order to avoid overexposure to changing interest rates,
while maintaining adequate capital and liquidity levels. Adjustments to the mix
of assets and liabilities are made periodically in an effort to give the Bank
dependable and steady growth in net interest income regardless of the behavior
of interest rates in general.

Another method used by management to review its interest sensitive position is
through "simulation". In simulation, the Bank projects the future net interest
streams in light of the current gap position. Various interest rate scenarios
are used to measure levels of interest income associated with potential changes
in our operating environment. Management cannot measure levels of interest
income associated with potential changes in the Bank's operating environment.
Nor can it predict the direction of interest rates or how the mix of assets and
liabilities will change. The use of this information will help formulate
strategies to minimize the unfavorable effect on net interest income caused by
interest rate changes.

A simple rate "gap" analysis by itself may not be an accurate indicator of how
net interest income will be affected by changes in interest rates. Income
associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. Interest rates on certain types of assets and
liabilities fluctuate in advance of changes in general market rates. In the
event of a change in interest rates, prepayments and early withdrawal levels
also could deviate significantly from those assumed in calculating the interest
rate gap. Because of uncertainties, the Corporation utilizes more than one
measurement tool in assessing interest rate sensitivity and market risk.

As of December 31, 2005 the Corporation was more positively gapped than December
31, 2004 in terms of its "One Year" gap position. A positive gap position
reflects the volume of interest rate sensitive assets to be greater than the
volume of interest rate sensitive liabilities. In consideration of interest
rates increasing, it is preferable to be in a positively gapped position since
there are more interest rate sensitive assets that are either maturing or whose
interest rates will be repricing upward, quicker than the maturity/repricing of
the interest rate sensitive liabilities. This will enhance the Corporation's
bottom line by improving the Corporation's net interest rate spread since it is
expected that interest income will increase faster than interest expense.

The Corporation's overall sensitivity to interest rate risk is low due to its
non-complex balance sheet. The Corporation has the ability to expedite several
strategies to manage interest rate risk, which include but are not limited to
selling of residential mortgages, increasing/decreasing deposits via interest
rate changes, borrowing from the Federal Home Loan Bank of Pittsburgh, and
buying/selling investments.


                                       43

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

The following table represents the gap position for the Bank at December 31,
2005. This schedule summarizes how many fixed rate assets and liabilities will
pay down over the periods of time defined in the table.

<TABLE>
<CAPTION>
                                                       Maturity/Repricing Intervals
                                       ------------------------------------------------------------
                                         1-3       3-12       1-3        3-5      Over 5
                                        Months    Months     Years      Years      Years     Total
                                       -------   -------   --------   --------   --------   -------
                                                              (In Thousands)
<S>                                    <C>       <C>       <C>        <C>        <C>        <C>
Federal funds sold                     $ 2,348        --         --         --         --   $  2,348
Interest bearing deposits with banks        --       163         --         --         --        163
Other securities                            --       200      1,700      3,555     71,499     76,954
Mortgage-backed securities               2,456     7,437      5,491      5,546     22,490     43,420
                                       -------   -------   --------   --------   --------   --------
Total securities                         2,456     7,637      7,191      9,101     93,989    120,374
Total loans                             29,375    18,411     13,457      6,780     15,019     83,042
                                       -------   -------   --------   --------   --------   --------
Total interest earning assets           34,179    26,211     20,648     15,881    109,008    205,927
NOW Accounts                             1,912        --      7,194         --         --      9,106
Savings                                 10,551        --     44,980         --         --     55,531
                                       -------   -------   --------   --------   --------   --------
Total savings deposits                  12,463        --     52,174         --         --     64,637
CDs<$100,000                             7,262    18,642     23,549     11,423         --     60,876
CDs>$100,000                             1,370     8,628      6,496     14,358         --     30,852
                                       -------   -------   --------   --------   --------   --------
Total time deposits                      8,632    27,270     30,045     25,781         --     91,728
                                       -------   -------   --------   --------   --------   --------
Total interest bearing liabilities      21,095    27,270     82,219     25,781         --    156,365
                                       -------   -------   --------   --------   --------   --------
Rate sensitive gap                     $13,084   $(1,059)  $(61,571)  $ (9,900)  $109,008   $ 49,562
Cumulative gap                         $13,084   $12,025   $(49,546)  $(59,446)  $ 49,562         --
</TABLE>


                                       44

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS

REGULATORY ACTIVITY

From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of the Corporation. It cannot be predicted whether such legislation
will be adopted or, if adopted, how such legislation would affect the business
of the Corporation. As a consequence of the extensive regulation of commercial
Banking activities in the United States, the Bank's business is particularly
susceptible to being affected by federal regulation and regulations that may
increase the cost of doing business. Except as specifically described above,
management believes that the effect of the provisions of the aforementioned
legislation on the liquidity, capital resources, and the results of operations
of the Bank will be immaterial. Management is not aware of any other current
specific recommendations by regulatory authorities or proposed of operations,
although the general cost of compliance with numerous and multiple federal and
state laws and regulations does have, and in the future may have a negative
impact on the Corporation's results of operations.

Further, the business of the Corporation is also affected by the state of the
financial services industry in general. As a result of legal and industry
changes, management predicts that the industry will continue to experience a
certain amount of consolidations and mergers. Management believes that such
consolidations and mergers may enhance it competitive position as a community
bank.

FORM 10-K

The Corporation will provide, without charge to any stockholder, a copy of its
2005 Annual Report on Form 10-K as required to be filed with the Securities and
Exchange Commission. Requests should be made in writing to:

                                        Neffs Bancorp, Inc.
                                        P.O. Box 10
                                        Neffs, PA 18065


                                       45