<PAGE>

EXHIBIT 13

                               NEFFS BANCORP, INC.

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 2003

<PAGE>

                                    DIRECTORS

                               OF THE CORPORATION

                                    AND BANK

Robert B. Heintzelman                             John J. Remaley

     John F. Simock                               Herman P. Snyder

                                 Mary Ann Wagner

                           OFFICERS OF THE CORPORATION

     John J. Remaley                              Herman P. Snyder
       President                                        Vice President

                              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

Duane J. Costenbader                              Carol L. Jones
        Cashier and                                     Assistant Cashier and
    Chief Operations Officer                              Operations Officer
<PAGE>

April 12, 2004

Dear Shareholder:

         In reviewing my comments in last year's Annual Report, I believe I
could begin my message for the year recently ended with similar statements. I
alluded to "uncertainty;" "the spiraling economy;" and "business and leadership
scars of decisions." Indeed, the year proved to be one of uncertainties in the
economy, as interest rates were reduced to their lowest levels in a long, long
time. Many economists predicted that the economy would be regaining the lofty
position it had previously held, but the recovery was slow to respond until late
in the year. And, the decision-making process became much more difficult, as
leadership had to be prepared for any sudden change in the markets.

         As your board of directors and management attempted to foresee the near
and longer-term future, the obligation of operating a conservative, safe and
growth-oriented organization - filled with uncertainties - became even more
challenging. While still enjoying earlier planning decisions, it soon became
evident that the business strategy of the day required continual attention.

         We note, with sadness, the passing of our director, associate, and
long-time friend, Robert L. Wagner. Bob served with interest and dedication, and
held high esteem for the organization. He is dearly missed.

         We welcome Mary Ann Wagner to the Board of Directors, named to fill a
vacancy. Mary Ann provides a new prospective to the board, and adds the
opportunity to attract new individuals and businesses to the organization.
Welcome, Mary Ann!

         Duane J. Costenbader, an officer who served a long period of time and
provided a solid background in banking, retired at the end of the year. We wish
him good health and extend our best wishes in his retirement.

         And, to Michael J. Bailey, a hearty welcome as he assumes the duties
and responsibilities of Cashier and Chief Operations Officer. His positions
within the organization place him in direct relationship with the board of
directors, the shareholders and the patrons. We look forward to his new ideas,
experience and talent.

         We cannot overlook the labors of the staff and management. Working as a
team, the results of their combined effort in the accompanying report are
satisfying. And, as the members of the board continue to dedicate themselves in
their tireless effort to improve and expand the organization, their results too,
will be evident in the months and years ahead.

         And, we always need to recognize the confidence and patronage of our
shareholders and clientele who form the foundation of the organization.

Cordially yours,
John J. Remaley
President & Chief
Executive Officer

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

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, 2003 and
2002, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2003. These financial statements are the responsibility of the Corporation'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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Neffs
Bancorp, Inc. and subsidiary as of December 31, 2003 and 2002, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.

                                             /s/ Beard Miller Company LLP

Allentown, Pennsylvania
January 9, 2004

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

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                            ---------------------------------
                                                                                 2003               2002
                                                                            --------------      -------------
                                                                            (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                                         <C>                 <C>
                               ASSETS

 Cash and due from banks                                                    $        4,806      $       2,732
 Interest bearing deposits with banks                                                   46                 18
 Federal funds sold                                                                  9,390             10,475
 Securities available for sale                                                      27,382             10,044
 Securities held to maturity, fair value 2003 $84,880; 2002 $85,914                 82,705             84,353
 Loans receivable, net of allowance for loan losses 2003 $637; 2002 $564            70,249             69,034
 Premises and equipment, net                                                         2,355              2,396
 Other assets                                                                        1,637              1,241
                                                                            --------------      -------------

      TOTAL ASSETS                                                          $      198,570      $     180,293
                                                                            ==============      =============

                LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
      Deposits:

            Non-interest bearing                                            $       13,107      $      11,934
            Interest bearing                                                       149,587            134,601
                                                                            --------------      -------------

      Total Deposits                                                               162,694            146,535

Other liabilities                                                                      821                933
                                                                            --------------      -------------

      TOTAL LIABILITIES                                                            163,515            147,468
                                                                            --------------      -------------

Stockholders' equity:

      Common stock, $1 par value; authorized 2,500,000 shares;
            issued 200,000 shares; outstanding 2003 197,091 shares; 2002
            196,431 shares                                                             200                200
      Paid-in capital                                                                  690                609
      Retained earnings                                                             34,853             32,610
      Accumulated other comprehensive income (loss)                                   (126)                21
      Treasury stock, at cost 2003 2,909 shares; 2002 3,569 shares                    (562)              (615)
                                                                            --------------      -------------

      TOTAL STOCKHOLDERS' EQUITY                                                    35,055             32,825
                                                                            --------------      -------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $      198,570      $     180,293
                                                                            ==============      =============
</TABLE>

See notes to consolidated financial statements.

                                       2

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                                                    ----------------------------------------------
                                                                        2003             2002             2001
                                                                    ------------     ------------     ------------
                                                                    (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                 <C>              <C>              <C>
INTEREST INCOME
      Interest and fees on loans                                    $      5,044     $      5,470     $      5,813
      Interest and dividends on investments:
            Taxable                                                        2,193            2,990            3,043
            Exempt from federal income taxes                               2,268            1,709            1,122
      Interest on federal funds sold                                         128              133               98
                                                                    ------------     ------------     ------------

            TOTAL INTEREST INCOME                                          9,633           10,302           10,076
                                                                    ------------     ------------     ------------

INTEREST EXPENSE
      Interest on deposits                                                 4,434            4,977            5,095
      Interest on short-term borrowings                                        -                -                3
                                                                    ------------     ------------     ------------

            TOTAL INTEREST EXPENSE                                         4,434            4,977            5,098
                                                                    ------------     ------------     ------------
            NET INTEREST INCOME                                            5,199            5,325            4,978

PROVISION FOR LOAN LOSSES                                                     88              170               37
                                                                    ------------     ------------     ------------

            NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES            5,111            5,155            4,941
                                                                    ------------     ------------     ------------

OTHER INCOME
      Service charges on deposit accounts                                    178              177              162
      Other service charges and fees                                          54               66               73
      Gain on sale of foreclosed real estate                                   -                -                7
      Other income                                                            41               43               22
      Net security gains                                                       -                1                5
                                                                    ------------     ------------     ------------

            TOTAL OTHER INCOME                                               273              287              269
                                                                    ------------     ------------     ------------

OTHER EXPENSES
      Salaries and employee benefits                                       1,121            1,003              931
      Occupancy                                                              165              119              112
      Furniture and equipment                                                151              120              126
      Pennsylvania shares tax                                                309              283              261
      Other expenses                                                         523              461              560
                                                                    ------------     ------------     ------------

            TOTAL OTHER EXPENSES                                           2,269            1,986            1,990
                                                                    ------------     ------------     ------------

            INCOME BEFORE INCOME TAXES                                     3,115            3,456            3,220
                                                                    ------------     ------------     ------------

INCOME TAX (BENEFIT) EXPENSE
      Current                                                                508              689              731
      Deferred                                                              (167)             (48)             (25)
                                                                    ------------     ------------     ------------

            TOTAL INCOME TAX EXPENSE                                         341              641              706
                                                                    ------------     ------------     ------------

            NET INCOME                                              $      2,774     $      2,815     $      2,514
                                                                    ============     ============     ============

EARNINGS PER SHARE, BASIC                                           $      14.11     $      14.33     $      12.80
                                                                    ============     ============     ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                               196,529          196,431          196,474
                                                                    ============     ============     ============
</TABLE>

See notes to consolidated financial statements.

                                       3

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<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, 2000                            $    200   $    609   $ 28,322   $          17   $   (488)  $      28,660
                                                                                                                   -------------
Comprehensive income:
     Net income                                               -          -      2,514               -          -           2,514
     Change in unrealized net gains (losses) on
         securities available for sale, net of taxes          -          -          -            (117)         -            (117)
                                                                                                                   -------------

     TOTAL COMPREHENSIVE INCOME                                                                                            2,397
                                                                                                                   -------------

     Cash dividends declared on common stock, $2.20
         per share                                            -          -       (432)              -          -            (432)
     Purchase of treasury stock (653 shares)                  -          -          -               -       (127)           (127)
                                                       --------   --------   --------   -------------   --------   -------------

BALANCE - DECEMBER 31, 2001                                 200        609     30,404            (100)      (615)         30,498
                                                                                                                   -------------
Comprehensive income:
     Net income                                               -          -      2,815               -          -           2,815
     Change in unrealized net gains (losses) on
         securities available for sale, net of taxes          -          -          -             121          -             121
                                                                                                                   -------------

     TOTAL COMPREHENSIVE INCOME                                                                                            2,936
                                                                                                                   -------------

     Cash dividends declared on common stock, $3.10
         per share                                            -          -       (609)              -          -            (609)
                                                       --------   --------   --------   -------------   --------   -------------

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
                                                       ========   ========   ========   =============   ========   =============
</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,
                                                                          ----------------------------------
                                                                            2003         2002         2001
                                                                          --------     --------     --------
                                                                                    (IN THOUSANDS)
<S>                                                                       <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                          $  2,774     $  2,815     $  2,514
      Adjustments to reconcile net income to net cash provided by
            operating activities:
                Depreciation                                                   116          111          107
                Provision for loan losses                                       88          170           37
                Gain on sale of foreclosed real estate                           -            -           (7)
                Net amortization (accretion) of securities                     389         (447)        (431)
                Net security gains                                               -           (1)          (5)
                Deferred income tax (benefit) expense                         (167)         (48)         (25)
                (Increase) decrease in assets:
                     Accrued interest receivable                               (76)          18          186
                     Other assets                                              (77)           2          (11)
                Increase (decrease) in liabilities:
                     Accrued interest payable                                 (104)         (71)         (27)
                     Other liabilities                                          (8)         (15)           4
                                                                          --------     --------     --------

                  NET CASH PROVIDED BY OPERATING ACTIVITIES                  2,935        2,534        2,342
                                                                          --------     --------     --------

CASH FLOWS FROM INVESTING ACTIVITIES
      Net (increase) decrease in interest bearing deposits with banks          (28)          27            4
      Net (increase) decrease in federal funds sold                          1,085       (8,399)      (2,030)
      Purchases of securities available for sale                           (25,100)      (7,881)      (3,583)
      Purchases of securities held to maturity                             (33,881)     (41,852)     (33,357)
      Proceeds from maturities/calls and principal repayments of
            securities available for sale                                    7,295        3,453        1,191
      Proceeds from maturities/calls of securities held to maturity         35,384       28,169       28,382
      Net (increase) decrease in loans                                      (1,303)       2,966       (2,637)
      Proceeds from sale of foreclosed real estate                               -            -          104
      Purchases of premises and equipment                                      (75)        (188)        (322)
                                                                          --------     --------     --------

                  NET CASH USED IN INVESTING ACTIVITIES                    (16,623)     (23,705)     (12,248)
                                                                          --------     --------     --------

CASH FLOWS FROM FINANCING ACTIVITIES
      Net increase in deposits                                              16,159       21,603       11,211
      Dividends paid                                                          (531)        (609)        (432)
      Purchases of treasury stock                                                -            -         (127)
      Sales of treasury stock                                                  134            -            -
                                                                          --------     --------     --------

                  NET CASH PROVIDED BY FINANCING ACTIVITIES                 15,762       20,994       10,652
                                                                          --------     --------     --------

                  NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS       2,074         (177)         746

CASH AND CASH EQUIVALENTS - BEGINNING                                        2,732        2,909        2,163
                                                                          --------     --------     --------

CASH AND CASH EQUIVALENTS - ENDING                                        $  4,806     $  2,732     $  2,909
                                                                          ========     ========     ========
SUPPLEMENTARY CASH FLOWS INFORMATION
      Interest paid                                                       $  4,538     $  5,048     $  5,124
                                                                          ========     ========     ========

      Income taxes paid                                                   $    877     $    687     $    735
                                                                          ========     ========     ========
</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.

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 down turns 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.

     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 change, including the amounts and
     timing of future cash flows expected to be received on impaired loans.

     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.

                                       7

<PAGE>

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

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOWANCE FOR LOAN LOSSES (CONTINUED)

     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.

FORECLOSED REAL ESTATE

     Foreclosed real estate is 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.

PREMISES AND EQUIPMENT

     Premises and equipment are carried at cost less accumulated depreciation
     and amortization. For financial statement reporting and income tax
     purposes, depreciation is computed both on the straight-line and
     accelerated methods 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, 2003, 2002 and 2001 was $26,000, $19,000 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.

                                       8

<PAGE>

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

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 $60,000, $61,000 and $59,000 for 2003,
     2002 and 2001, 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 balance sheet, 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.

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 November 2002, the Financial Accounting Standards Board (FASB) issued
     FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure
     Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
     of Others." This Interpretation expands the disclosures to be made by a
     guarantor in its financial statements about its obligations under certain
     guarantees and requires the guarantor to recognize a liability for the fair
     value of an obligation assumed under certain specified guarantees. Under
     FIN 45, the Corporation does not issue any guarantees that would require
     liability recognition or disclosure, other than its standby letters of
     credit, as discussed in Note 11. Adoption of FIN 45 did not have a
     significant impact on the Corporation's financial condition or results of
     operations.

                                       9

<PAGE>

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

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING STANDARDS (CONTINUED)

     In January 2003, the Financial Accounting Standards Board issued FASB
     Interpretation No. 46, "Consolidation of Variable Interest Entities, an
     Interpretation of ARB No. 51." FIN 46 was revised in December 2003. This
     Interpretation provides new guidance for the consolidation of variable
     interest entities (VIEs) and requires such entities to be consolidated by
     their primary beneficiaries if the entities do not effectively disperse
     risk among parties involved. The Interpretation also adds disclosure
     requirements for investors that are involved with unconsolidated VIEs. The
     disclosure requirements apply to all financial statements issued after
     December 31, 2003. The consolidation requirements apply to companies that
     have interests in special purpose entities for periods ending after
     December 15, 2003. The adoption of this Interpretation did not have and is
     not expected to have an impact on the Corporation's financial condition or
     results of operations.

     In April 2003, the Financial Accounting Standards Board issued Statement
     No. 149, "Amendment of Statement No. 133, Accounting for Derivative
     Instruments and Hedging Activities." This Statement clarifies the
     definition of a derivative and incorporates certain decisions made by the
     Board as part of the Derivatives Implementation Group process. This
     Statement is effective for contracts entered into or modified and for
     hedging relationships designated after June 30, 2003 and should be applied
     prospectively. The provisions of the Statement that relate to
     implementation issues addressed by the Derivatives Implementation Group
     that have been effective should continue to be applied in accordance with
     their respective dates. Adoption of this standard did not have an impact on
     the Corporation's financial condition or results of operations.

     In May 2003, the Financial Accounting Standards Board issued Statement No.
     150, "Accounting for Certain Financial Instruments with Characteristics of
     both Liabilities and Equity." This Statement requires that an issuer
     classify a financial instrument that is within its scope as a liability.
     Many of these instruments were previously classified as equity. This
     Statement was effective for financial instruments entered into or modified
     after May 31, 2003 and otherwise was effective beginning July 1, 2003. The
     adoption of this standard did not have an impact on the Corporation's
     financial condition or results of operations.

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, 2003 and 2002 was $401,000 and
$379,000, respectively.

                                      10

<PAGE>

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

NOTE 3 - SECURITIES

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

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 2003
                                             ----------------------------------------------------
                                                             GROSS         GROSS
                                              AMORTIZED    UNREALIZED    UNREALIZED       FAIR
                                                COST         GAINS         LOSSES         VALUE
                                             ----------    ----------    ----------    ----------
                                                               (IN THOUSANDS)
<S>                                          <C>           <C>           <C>           <C>
SECURITIES AVAILABLE FOR SALE:
      Mortgage-backed securities             $   26,991    $      108    $     (299)   $   26,800
      Equity securities                             582             -             -           582
                                             ----------    ----------    ----------    ----------

                                             $   27,573    $      108    $     (299)   $   27,382
                                             ==========    ==========    ==========    ==========

                                                               DECEMBER 31, 2002
                                             ----------------------------------------------------

      Mortgage-backed securities             $    9,614    $       90    $      (58)   $    9,646
      Equity securities                             398             -             -           398
                                             ----------    ----------    ----------    ----------

                                             $   10,012    $       90    $      (58)   $   10,044
                                             ==========    ==========    ==========    ==========

                                                               DECEMBER 31, 2003
                                             ----------------------------------------------------

SECURITIES HELD TO MATURITY:
      Obligations of U.S. Government
            agencies                         $   21,992    $       90    $     (323)   $   21,759
      Obligations of states and political
            subdivisions                         50,571         2,212           (75)       52,708
      Corporate securities                        4,297            97           (12)        4,382
      Mortgage-backed securities                  5,845           186             -         6,031
                                             ----------    ----------    ----------    ----------

                                             $   82,705    $    2,585    $     (410)   $   84,880
                                             ==========    ==========    ==========    ==========

                                                               DECEMBER 31, 2002
                                             ----------------------------------------------------

      Obligations of U.S. Government
            agencies                         $   21,033    $      210    $      (25)   $   21,218
      Obligations of states and political
            subdivisions                         43,323         1,460          (110)       44,673
      Corporate securities                        6,320            86          (313)        6,093
      Mortgage-backed securities                 13,677           260            (7)       13,930
                                             ----------    ----------    ----------    ----------

                                             $   84,353    $    2,016    $     (455)   $   85,914
                                             ==========    ==========    ==========    ==========
</TABLE>

                                      11

<PAGE>

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

NOTE 3 - SECURITIES (CONTINUED)

The amortized cost and fair values of securities at December 31, 2003, 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                   $       -    $       -    $   1,230    $   1,247
Due after one year through five years             -            -        2,864        2,905
Due after five years through ten years            -            -       23,765       24,327
Due after ten years                               -            -       49,001       50,370
                                          ---------    ---------    ---------    ---------

                                                  -            -       76,860       78,849
Mortgage-backed securities                   26,991       26,800        5,845        6,031
Equity securities                               582          582            -            -
                                          ---------    ---------    ---------    ---------

                                          $  27,573    $  27,382    $  82,705    $  84,880
                                          =========    =========    =========    =========
</TABLE>

Gross gains of $-0-, $1,000 and $5,000 were realized on calls of securities
during 2003, 2002 and 2001, respectively. There were no gross realized losses
during 2003, 2002 and 2001.

The changes in net unrealized holding gains (losses) on securities available for
sale that has been included in other comprehensive income (loss) for the years
ended December 31, 2003, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                       2003        2002        2001
                                                     --------    --------    --------
                                                              (IN THOUSANDS)
<S>                                                  <C>         <C>         <C>
Gross change in unrealized gains (losses) on
      securities available for sale                  $   (223)   $    185    $   (172)
Reclassification adjustment for gains realized in
      income                                                -          (1)         (5)
                                                     --------    --------    --------

         NET UNREALIZED GAINS (LOSSES)                   (223)        184        (177)

Tax effect                                                 76          63         (60)
                                                     --------    --------    --------

         NET OF TAX AMOUNT                           $   (147)   $    121    $   (117)
                                                     ========    ========    ========
</TABLE>

Securities with an amortized cost and fair value of approximately $3,450,000 and
$3,469,000 at December 31, 2003 and $3,046,000 and $3,108,000 at December 31,
2002 were pledged to secure public deposits and for other purposes required or
permitted by law.

                                      12
<PAGE>

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

NOTE 3 - SECURITIES (CONTINUED)

The following table shows 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, 2003:

<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>
SECURITIES AVAILABLE FOR SALE:
     Mortgage-backed
         securities                  $18,776  $      297   $   998  $        2   $19,774  $      299

SECURITIES HELD TO MATURITY:
     Obligations of U.S.
         Government agencies          13,838         323                          13,838         323
     Obligations of states and
         political subdivisions        3,626          75         -           -     3,626          75
     Corporate securities                  -           -       638          12       638          12
                                     -------  ----------   -------  ----------   -------  ----------
       TOTAL TEMPORARILY
           IMPAIRED SECURITIES       $36,240  $      695   $ 1,636  $       14   $37,876  $      709
                                     =======  ==========   =======  ==========   =======  ==========
</TABLE>

Unrealized losses detailed above relate primarily to U.S. Government agency,
mortgage-backed and municipal securities. The Corporation has 66 securities in
an unrealized loss position. The decline in fair value is due only to interest
rate fluctuations. The Corporation has the intent and ability to hold such
investments until maturity or market price recovery. None of the individual
unrealized losses are significant.

NOTE 4 - LOANS

The composition of the Corporation's loan portfolio at December 31, 2003 and
2002 is as follows:

<TABLE>
<CAPTION>
                              2003       2002
                            --------   --------
                              (IN THOUSANDS)
<S>                         <C>        <C>
Commercial                  $  2,832   $  3,490
Commercial real estate        11,615     11,300
Residential real estate       35,239     35,046
Real estate construction         350        657
Home equity                   14,136     12,493
Other consumer                 6,714      6,612
                            --------   --------
                              70,886     69,598
Allowance for loan losses       (637)      (564)
                            --------   --------
                            $ 70,249   $ 69,034
                            ========   ========
</TABLE>

                                       13
<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>
                                                  2003   2002   2001
                                                  ----   ----   ----
                                                    (IN THOUSANDS)
<S>                                               <C>    <C>    <C>
Balance, beginning                                $564   $445   $440
     Provisions for loan losses                     88    170     37
     Recoveries on loans previously charged off     18      6      5
     Loans charged off                             (33)   (57)   (37)
                                                  ----   ----   ----
Balance, ending                                   $637   $564   $445
                                                  ====   ====   ====
</TABLE>

Loans on which the accrual of interest has been discontinued amounted to
$148,000 and $227,000 at December 31, 2003 and 2002, 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 $327,000 and $203,000 at
December 31, 2003 and 2002, respectively.

There were no impaired loans as of December 31, 2003 and 2002. The average
recorded investment in impaired loans during 2003, 2002 and 2001 was $-0-,
$116,000 and $599,000, respectively. Interest income on impaired loans of $-0-,
$14,000 and $42,000 was recognized for cash payments received in 2003, 2002 and
2001, respectively.

NOTE 6 - PREMISES AND EQUIPMENT

The following summarizes premises and equipment at December 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                      2003       2002
                                    --------   --------
                                      (IN THOUSANDS)
<S>                                 <C>        <C>
Premises                            $  2,593   $  2,593
Furniture, fixtures and equipment      1,511      1,431
                                    --------   --------
                                       4,104      4,024
Accumulated depreciation              (1,987)    (1,866)
                                    --------   --------
                                       2,117      2,158
Land                                     238        238
                                    --------   --------
                                    $  2,355   $  2,396
                                    ========   ========
</TABLE>

                                       14
<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 $21,936,000 and
$19,358,000 at December 31, 2003 and 2002, respectively.

Interest bearing deposits at December 31, 2003 and 2002 are further detailed as
follows:

<TABLE>
<CAPTION>
                                         2003        2002
                                       ---------   ---------
                                          (IN THOUSANDS)
<S>                                    <C>         <C>
Savings accounts                       $  64,434   $  53,331
NOW accounts                               9,219       8,190
Certificates and other time deposits      75,934      73,080
                                       ---------   ---------
                                       $ 149,587   $ 134,601
                                       =========   =========
</TABLE>

Time deposits at December 31, 2003 had the following scheduled maturities (in
thousands):

<TABLE>
<S>     <C>
2004    $27,594
2005     23,831
2006      9,378
2007      7,401
2008      7,730
        -------
        $75,934
        =======
</TABLE>

NOTE 8 - BORROWINGS

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, 2003 and 2002.

The Bank's maximum borrowing capacity with the Federal Home Loan Bank was
$77,536,000. There were no borrowings outstanding at December 31, 2003 and 2002.
Advances from the Federal Home Loan Bank are secured by qualifying assets of the
Bank.

                                       15
<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, 2003 and 2002 are
as follows:

<TABLE>
<CAPTION>
                                                      2003    2002
                                                      -----  -------
                                                      (IN THOUSANDS)
<S>                                                   <C>    <C>
AMT credit carryforward                               $ 153  $     -
Unrealized losses on securities available for sale       65        -
Allowance for loan losses                               166      141
Accrued benefits                                          8        9
                                                      -----  -------
       TOTAL DEFERRED TAX ASSETS                        392      150
                                                      -----  -------
Securities accretion                                     17       16
Unrealized gains on securities available for sale         -       11
Depreciation                                             21       12
                                                      -----  -------
       TOTAL DEFERRED TAX LIABILITIES                    38       39
                                                      -----  -------
       NET DEFERRED TAX ASSET                         $ 354  $   111
                                                      =====  =======
</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, 2003, 2002 and
2001 are as follows:

<TABLE>
<CAPTION>
                                     2003                 2002                   2001
                                --------------   ----------------------    ---------------
                                         % 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           $1,059     34%   $1,175             34%   $ 1,095     34%
Increase (decrease) resulting
     from:
     Nontaxable interest
         income                   (799)   (26)     (613)           (17)      (453)   (14)
     TEFRA interest expense
         disallowance               81      3        79              2         64      2
                                ------  -----    ------           ----     ------   ----
                                $  341     11%   $  641             19%    $  706     22%
                                ======  =====    ======           ====     ======   ====
</TABLE>

                                       16
<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 parties during 2003 (in
thousands):

<TABLE>
<S>                            <C>
Balances, January 1, 2003      $  789
     Advances                     319
     Repayments                  (188)
                               ------
Balances, December 31, 2003    $  920
                               ======
</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, 2003 and 2002:

<TABLE>
<CAPTION>
                                               2003      2002
                                              -------   -------
                                               (IN THOUSANDS)
<S>                                           <C>       <C>
Commitments to grant loans                    $ 5,512   $ 2,159
Unfunded commitments under lines of credit      2,342     1,319
Letters of credit                                 683       298
                                              -------   -------
                                              $ 8,537   $ 3,776
                                              =======   =======
</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.

                                       17
<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
current amount of the liability as of December 31, 2003 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 2004 of approximately $4,381,000 plus an
additional amount equal to the Bank's net profits for 2004, 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, 2003, that the
Corporation and the Bank meet all capital adequacy requirements to which they
are subject.

As of December 31, 2003, 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.

                                       18
<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, 2003 and
2002, 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, 2003:
     Total capital (to risk-weighted assets):
         Neffs Bancorp, Inc.                     $  35,818    41.1%   $ > or = 6,967  > or = 8.0%            N/A
         The Neffs National Bank                    35,340    40.7      > or = 6,940  > or = 8.0   $ > or = 8,675   > or = 10.0%
     Tier 1 capital (to risk-weighted assets):
         Neffs Bancorp, Inc.                        35,181    40.4      > or = 3,484  > or = 4.0              N/A
         The Neffs National Bank                    34,703    40.0      > or = 3,470  > or = 4.0     > or = 5,205   > or =  6.0
     Tier 1 capital (to average assets):
         Neffs Bancorp, Inc.                        35,181    18.0      > or = 7,806  > or = 4.0              N/A
         The Neffs National Bank                    34,703    17.8      > or = 7,806  > or = 4.0     > or = 9,757   > or =  5.0
AS OF DECEMBER 31, 2002:
     Total capital (to risk-weighted assets):
         Neffs Bancorp, Inc.                     $  33,368    40.9%   $ > or = 6,530  > or = 8.0%             N/A
         The Neffs National Bank                    33,042    40.6      > or = 6,509  > or = 8.0   $ > or = 8,136   > or = 10.0%
     Tier 1 capital (to risk-weighted assets):
         Neffs Bancorp, Inc.                        32,804    40.2      > or = 3,265  > or = 4.0              N/A
         The Neffs National Bank                    32,478    39.9      > or = 3,255  > or = 4.0     > or = 4,882   > or =  6.0
     Tier 1 capital (to average assets):
         Neffs Bancorp, Inc.                        32,804    18.5      > or = 7,098  > or = 4.0              N/A
         The Neffs National Bank                    32,478    18.3      > or = 7,098  > or = 4.0     > or = 8,873   > or =  5.0
</TABLE>

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Below are various estimated fair values at December 31, 2003 and 2002, 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.

                                       19
<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.

                                       20
<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>
                                             2003                    2002
                                     ---------------------   ---------------------
                                                 ESTIMATED               ESTIMATED
                                     CARRYING      FAIR      CARRYING      FAIR
                                      AMOUNT       VALUE       AMOUNT      VALUE
                                     ---------   ---------   ---------   ---------
                                                     (IN THOUSANDS)
<S>                                  <C>         <C>         <C>         <C>
Financial assets:
     Cash and short-term
         investments                 $  14,242   $  14,242   $  13,225   $  13,225
     Securities available for sale      27,382      27,382      10,044      10,044
     Securities held to maturity        82,705      84,880      84,353      85,914
     Loans, net                         70,249      73,102      69,034      73,288
     Accrued interest receivable         1,138       1,138       1,062       1,062

Financial liabilities:
     Deposits                          162,694     165,175     146,535     149,034
     Accrued interest payable              789         789         893         893

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

                                       21
<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,
                                                   ----------------------
                                                     2003         2002
                                                   ---------   ----------
                                                       (IN THOUSANDS)
<S>                                                <C>         <C>
         ASSETS
Cash                                               $     139   $        1
Investment in subsidiary                              34,577       32,499
Premises and equipment                                   259          265
Other assets                                              81           61
                                                   ---------   ----------
       TOTAL ASSETS                                  $35,056   $   32,826
                                                   =========   ==========
     LIABILITY AND STOCKHOLDERS' EQUITY

Liability, accounts payable                        $       1   $        1
Stockholders' equity                                  35,055       32,825
                                                   ---------   ----------
       TOTAL LIABILITY AND STOCKHOLDERS' EQUITY    $  35,056   $   32,826
                                                   =========   ==========
</TABLE>

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                                  --------------------------
                                                    2003     2002      2001
                                                  -------   ------   -------
                                                        (IN THOUSANDS)
<S>                                               <C>       <C>      <C>
Dividends from subsidiary                         $   587   $  695   $   669
Rental income                                          10        8         -
Expenses                                               68       62       110
                                                  -------   ------   -------
       INCOME BEFORE INCOME TAXES AND EQUITY IN
           UNDISTRIBUTED EARNINGS OF SUBSIDIARY       529      641       559
Income tax benefit                                     20       18        37
                                                  -------   ------   -------
                                                      549      659       596
Equity in undistributed earnings of subsidiary      2,225    2,156     1,918
                                                  -------   ------   -------
       NET INCOME                                 $ 2,774   $2,815   $ 2,514
                                                  =======   ======   =======
</TABLE>

                                       22
<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,
                                                  -----------------------------
                                                   2003      2002        2001
                                                  -------   -------    --------
                                                        (IN THOUSANDS)
<S>                                               <C>       <C>        <C>
CASH FLOWS FROM OPERATING
   ACTIVITIES
   Net income                                     $ 2,774   $ 2,815    $  2,514
   Adjustments to reconcile net income to
      net cash provided by operating
      activities:
      Depreciation                                      6         7           6
      Equity in undistributed earnings of
      subsidiary                                   (2,225)   (2,156)     (1,918)
       (Increase) in other assets                     (20)      (18)        (37)
      Increase (decrease) in accounts payable           -         1          (3)
                                                  -------   -------    --------
   NET CASH PROVIDED BY OPERATING
      ACTIVITIES                                      535       649         562
                                                  -------   -------    --------
CASH FLOWS USED IN INVESTING
   ACTIVITIES
   Purchases of premises and equipment                  -       (39)         (3)
                                                  -------   -------    --------
CASH FLOWS FROM FINANCING
   ACTIVITIES
   Dividends paid                                    (531)     (609)       (432)
   Purchase of treasury stock                           -         -        (127)
   Sale of treasury stock                             134         -           -
                                                  -------   -------    --------
      NET CASH USED IN FINANCIAL ACTIVITIES          (397)     (609)       (559)
                                                  -------   -------    --------
      NET INCREASE IN CASH                            138         1           -
CASH - BEGINNING                                        1         -           -
                                                  -------   -------    --------
CASH - ENDING                                     $   139   $     1    $      -
                                                  =======   =======    ========
</TABLE>

                                       23

<PAGE>

NEFFS BANCORP, INC AND SUBSIDIARY
SELECTED FINANCIAL DATA

                       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>
                                                                          DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)                   2003       2002       2001       2000       1999
----------------------------------------------------------------------------------------------------------
<S>                                                   <C>        <C>        <C>        <C>        <C>
Interest Income
   Interest and fees on loans                         $  5,044   $  5,470   $  5,813   $  5,480   $  5,106
   Interest and dividends on securities                  4,461      4,699      4,165      4,209      4,079
   Interest on federal funds sold                          128        133         98         13        132
                                                      --------   --------   --------   --------   --------
Total interest income                                    9,633     10,302     10,076      9,702      9,317
Interest Expense
   Deposits                                              4,434      4,977      5,095      4,669      4,584
   Short-term borrowings                                     -          -          3         47          3
                                                      --------   --------   --------   --------   --------
Total interest expense                                   4,434      4,977      5,098      4,716      4,587
                                                      --------   --------   --------   --------   --------
Net interest income                                      5,199      5,325      4,978      4,986      4,730
Provision for loan losses                                   88        170         37          -          -
                                                      --------   --------   --------   --------   --------
Net interest income after provision
 for loan losses                                         5,111      5,155      4,941      4,986      4,730
Other operating income                                     273        287        269        301        442
Other operating expenses                                 2,269      1,986      1,990      1,785      1,697
                                                      --------   --------   --------   --------   --------
Income before taxes                                      3,115      3,456      3,220      3,502      3,475
Applicable income taxes                                    341        641        706        843        843
                                                      --------   --------   --------   --------   --------
Net income                                            $  2,774   $  2,815   $  2,514   $  2,659   $  2,632
                                                      ========   ========   ========   ========   ========

Per Share Data
   Basic earnings                                     $  14.11   $  14.33   $  12.80   $  13.43   $  13.26
   Dividends declared                                 $   2.70   $   3.10   $   2.20   $   2.10   $   2.00
   Average shares outstanding                          196,529    196,431    196,474    197,940    198,563

At End of Period
   Total assets                                       $198,570   $180,293   $156,449   $143,415   $137,397
   Securities                                          110,087     94,397     75,654     68,029     68,078
   Loans, net of unearned income                        70,886     69,598     72,616     70,010     64,179
   Allowance for loan losses                               637        564        445        440        461
   Deposits                                            162,694    146,535    124,932    113,721    109,214
   Stockholders' Equity                                 35,055     32,825     30,498     28,660     26,793

Key Ratios
   Return on average assets                               1.45%      1.67%      1.70%      1.90%      1.94%
   Return on average equity                               8.16%      8.85%      8.49%      9.54%     10.18%
   Net loans to deposit ratio                            43.18%     47.11%     57.77%     61.18%     58.34%
   Dividend payout ratio (dividends declared
     divided by net income)                              19.14%     21.63%     17.19%     15.63%     15.09%
   Equity to asset ratio (average equity divided by
     average total assets)                               17.73%     18.93%     20.06%     19.96%     19.03%
</TABLE>

                                       24

<PAGE>

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

<TABLE>
<CAPTION>
                                               2003
                                                          Three Months Ended
                                         March 31       June 30      September 30    December 31
                                        ----------    -----------    ------------    -----------
<S>                                     <C>           <C>            <C>             <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income                         $    2,516    $     2,488    $      2,373    $     2,256
Interest expense                             1,116          1,115           1,112          1,091
                                        ----------    -----------    ------------    -----------
   Net interest income                       1,400          1,373           1,261          1,165
Provision for loan losses                       15             15              15             43
Other expenses, net of other income            479            489             500            528
                                        ----------    -----------    ------------    -----------
   Income before income taxes                  906            869             746            594
Income tax expense                             136            114              79             12
                                        ----------    -----------    ------------    -----------
   Net income                           $      770    $       755    $        667    $       582
                                        ==========    ===========    ============    ===========
Earnings per share - Basic              $     3.92    $      3.84    $       3.40    $      2.95
                                        ==========    ===========    ============    ===========
</TABLE>

<TABLE>
<CAPTION>

                                                2002
                                                          Three Months Ended
                                         March 31       June 30      September 30    December 31
                                        ----------    -----------    ------------    -----------
<S>                                     <C>           <C>            <C>             <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income                         $    2,523    $     2,602    $     2,605     $     2,572
Interest expense                             1,216          1,244          1,277           1,240
                                        ----------    -----------    ------------    -----------
   Net interest income                       1,307          1,358          1,328           1,332

Provision for loan losses                       20             45             45              60
Other expenses, net of other income            409            461            418             411
                                        ----------    -----------    ------------    -----------
   Income before income taxes                  878            852            865             861

Income tax expense                             167            153            167             154
                                        ----------    -----------    ------------    -----------
   Net income                           $      711    $       699    $       698     $       707
                                        ==========    ===========    ============    ===========
Earnings per share - Basic              $     3.62    $      3.56    $      3.55     $      3.60
                                        ==========    ===========    ============    ===========
</TABLE>

                                       25

<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 2003 and
2002 fiscal years. This information is based on monthly reports from Boenning &
Scattergood, Inc. (formerly known as F. J. Morrissey & Company, 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
   2003           HIGH       LOW         Per Share
--------------   -------   --------   --------------
<S>              <C>       <C>        <C>
First Quarter    $195.00   $ 194.00                -
Second Quarter    197.00     197.00   $         1.20
Third Quarter     199.00     197.00                -
Fourth Quarter    216.00     210.00             1.50
</TABLE>

<TABLE>
<CAPTION>
                                      Cash Dividends
    2002          HIGH       LOW         Per Share
--------------   -------   --------   --------------
<S>              <C>       <C>        <C>
First Quarter    $226.00   $ 182.00
Second Quarter    205.00     188.00   $         1.10
Third Quarter     205.00     192.00                -
Fourth Quarter    205.00     192.00             2.00
</TABLE>

As of December 31, 2003, Neffs Bancorp, Inc. had 197,091 outstanding shares and
approximately 612 shareholders, including beneficial owners whose stock is held
in nominee name.

                                       26

<PAGE>

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

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
                 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

         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 its 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.

         Shareholders 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.

                                       27

<PAGE>

NEFFS BANCORP, INC. AND SUBSIDIARY

MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

OVERVIEW

         The Corporation's assets increased by 10.14% to $198,570 at December
31, 2003 from $180,293 at December 31, 2002. During the same period, net loans
receivable increased $1,215, or 1.76% to $70,249 from $69,034, while deposits
increased $16,159 or 11.03% to $162,694 from 146,535. Due to the slow loan
growth, the increase in deposits was used to fund investments. Securities
increased $15,690 or 16.6% to $110,087 from $94,397. In 2003, the Corporation
recorded net income of $2,774 a decrease of 1.46% as compared with $2,815 in
2002.

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.

2003 COMPARED TO 2002

         Total interest income decreased by $669 or 6.49% to $9,633 for the year
ended December 31, 2003 from $10,302 for the year ended December 31, 2002. This
decrease is the result of the declining interest rate environment during 2003
and low loan growth.

         Total interest expense decreased by $543 or 10.91% to $4,434 in 2003
from $4,977 in 2002. This decrease was the result of the declining rate
environment during 2003, which offset the increase in interest bearing
liabilities.

         Net interest income decreased by $126 or 2.37% to $5,199 in 2003 from
$5,325 in 2002. The Corporation's net interest rate spread decreased to 2.15% in
2003 from 2.33% in 2002, as the decrease in yields on earning assets outpaced
the decrease in funding costs. The net interest margin decreased from 3.28% in
2002 to 2.83% in 2003. This decrease was due mainly to the decrease in net
interest income compared to the growth of average earning assets.

2002 COMPARED TO 2001

         Total interest income increased by $226 or 2.24% to $10,302 for the
year ended December 31, 2002 from $10,076 for the year ended December 31, 2001.
This increase is the result of strong growth in the investment portfolio, which
offset the decline in the yield on interest earning assets.

         Total interest expense decreased by $121 or 2.37%, to $4,977 in 2002
from $5,098 in 2001. This decrease was the result of the declining rate
environment during 2002, which offset the growth in deposits.

                                       28

<PAGE>

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

         Net interest income increased by $347 or 6.97% to $5,325 in 2002 from
$4,978 in 2001. Even as interest rates were declining during 2002, the
Corporation's net interest rate spread increased to 2.33% in 2002 from 2.26% in
2001, as decreased funding costs outpaced the decrease of earning asset yields.
Net interest margin decreased from 3.50% in 2001 to 3.28% in 2002. This decrease
was due mainly to a slower increase in net interest income compared to the
growth of average earning assets. Although the average earning assets increased
by 14% over 2001, the net interest income only increased by 7% over 2001.

                                       29

<PAGE>

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

TABLE 1 presents a summary of the Bank's average balances; rates, interest
income and expense, the interest rate spread and the net interest margin for the
years ended December 31, 2003, 2002, and 2001.

                                     TABLE 1
            AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE

<TABLE>
<CAPTION>
Year Ended December 31,                              2003                             2002                             2001
                                       -----------------------------   -----------------------------   ----------------------------
                                         Average              Yield/    Average               Yield/   Average               Yield/
(DOLLARS IN THOUSANDS)                 Balance(5)  Interest    Rate    Balance(5)   Interest  Rate     Balance(5)  Interest  Rate
                                       ----------  ---------  ------   ----------   --------  ------   ----------  --------  ------
<S>                                    <C>         <C>        <C>      <C>          <C>       <C>      <C>         <C>       <C>
Interest earning assets:
   Loans receivable(1)                 $   69,730  $   5,044    7.26%  $   71,337   $  5,470    7.67%  $   71,928  $  5,813    8.08%
   Investment securities:
      Taxable                              53,471      2,193    4.10%      46,817      2,958    6.32%      43,516     3,043    6.99%
      Non-taxable(4)                       50,269      2,268    4.51%      36,212      1,716    4.74%      23,552     1,122    4.76%
   Other interest earning assets           10,234        128    1.25%       8,070        158    1.96%       3,350        98    2.93%
                                       ----------  ---------           ----------   --------  ------   ----------  --------  ------
   Total interest earning assets       $  183,704  $   9,633    5.24%  $  162,436   $ 10,302    6.34%  $  142,346  $ 10,076    7.08%
                                                   ---------                        --------  ------               --------  ------
Noninterest earning assets                  8,084                           5,713                           5,229
                                       ----------                      ----------                      ----------
   Total assets                        $  191,788                      $  168,149                      $  147,575
                                       ==========                      ==========                      ==========

Interest bearing liabilities:
   NOW                                 $    8,495  $      72    0.85%  $    7,798   $    100    1.28%  $    6,975  $    149    2.14%
   Savings                                 59,144      1,140    1.93%      44,108      1,245    2.82%      29,386       916    3.12%
   Certificates of deposit                 76,063      3,222    4.24%      72,182      3,632    5.03%      69,353     4,030    5.81%
Short term borrowings                                                           -          -    0.00%          37         3    8.11%
                                       ----------  ---------           ----------   --------  ------   ----------  --------  ------
   Total interest bearing liabilities  $  143,702  $   4,434    3.09%  $  124,088   $  4,977    4.01%  $  105,751  $  5,098    4.82%
                                                   ---------                        --------                       --------
Noninterest bearing liabilities:
   Demand deposits                         13,276                          11,831                          11,453
   Other liabilities                          801                             405                             764
Stockholders' Equity                       34,009                          31,825                          29,607
                                       ----------                      ----------                      ----------
   Total Liabilities and
      Stockholders' Equity             $  191,788                      $  168,149                      $  147,575
                                       ==========                      ==========                      ==========

Net interest income/spread(2)                      $   5,199    2.15%               $  5,325    2.33%              $  4,978    2.26%
                                                   ---------  ------                --------  ------               --------  ------
Net interest margin(3)                                          2.83%                           3.28%                          3.50%
                                                                                              ------                         ------
</TABLE>

(1)      Average balances include non-accrual loans.

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

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

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

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

                                       30

<PAGE>

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

TABLE 2 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 2
                  RATE VOLUME ANALYSIS OF NET INTEREST INCOME
                        FOR THE YEAR ENDED, DECEMBER 31,

<TABLE>
<CAPTION>
                                            2003/2002 Increase (Decrease)    2002/2001 Increase (Decrease)
                                            -----------------------------    -----------------------------
(DOLLARS IN THOUSANDS)                             Due to Change in                Due to Change in
                                             Volume      Rate       Net      Volume       Rate      Net
                                            -------    -------    -------    -------    -------   --------
<S>                                         <C>        <C>        <C>        <C>        <C>       <C>
Interest income:
   Loans receivable                         $  (121)   $  (305)   $  (426)   $   (48)   $  (295)  $   (343)
   Securities                                 1,024     (1,237)      (213)       819       (285)       534
   Other interest earning assets                 36        (66)       (30)        92        (57)        35
                                            -------    -------    -------    -------    -------   --------
   Total interest earning assets            $   939    $(1,608)   $  (669)   $   863    $  (637)  $    226
Interest expense:
   NOW/Money market                         $     8    $   (36)   $   (28)   $    16    $   (65)  $    (49)
   Savings                                      355       (460)      (105)       423        (94)       329
   Certificates of deposits                     187       (597)      (410)       159       (557)      (398)
   Other liabilities                              -          -          -         (1)        (2)        (3)
                                            -------    -------    -------    -------    -------   --------
      Total interest bearing liabilities    $   550    $(1,093)   $  (543)   $   597    $  (718)  $   (121)
                                            -------    -------    -------    -------    -------   --------
Net change in net interest income           $   389    $  (515)   $  (126)   $   266    $    81   $    347
                                            =======    =======    =======    =======    =======   ========
</TABLE>

                                       31

<PAGE>


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

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.

         Allocations 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 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.

         The provision for loan losses was $88 for 2003, $170 for 2002 and $37
for 2001. The provision for loan losses was decreased in 2003 due to low loan
growth, historical loan experience and favorable projections. The provision for
loan losses was increased in 2002 due to historical loan experience and
unfavorable economic conditions and projections.

         The allowance for loan losses represented .90% of total loans
receivable at December 31, 2003 as compared with .81% and .61% at December 31,
2002 and 2001, 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.

                                       32

<PAGE>

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

         TABLE 3 summarizes the Bank's loan loss experience for each of the five
years ended December 31.

                                     TABLE 3
                         SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>
                                                         Years Ended December 31

(DOLLARS IN THOUSANDS)                        2003       2002       2001       2000      1999
                                              ----       ----       ----       ----      ----
<S>                                         <C>        <C>        <C>        <C>        <C>
Average Loans Outstanding                   $69,730    $71,337    $71,928    $66,870    $62,036
                                            =======    =======    =======    =======    =======

Allowance for loan losses at January 1      $   564    $   445    $   440    $   461    $   471
Losses charged to allowance
     Commercial                                   -         27          7         13          -
     Real estate                                 28          -          6          -          -
     Consumer                                     5         30         24         12         11
                                            -------    -------    -------    -------    -------
                                                 33         57         37         25         11
                                            -------    -------    -------    -------    -------
Recoveries credited to allowance
     Commercial                                   9          -          -          -          -
     Real estate                                  -          -          -          -          -
     Consumer                                     9          6          5          4          1
                                            -------    -------    -------    -------    -------
                                                 18          6          5          4          1
                                            -------    -------    -------    -------    -------
Net charge-offs                                  15         51         32         21         10

Provision for loan losses                        88        170         37          -          -
                                            -------    -------    -------    -------    -------
Allowance for loan losses at December 31    $   637    $   564    $   445    $   440    $   461
                                            =======    =======    =======    =======    =======

Ratio of net charge-offs to average loans
   outstanding                                 0.02%      0.07%      0.04%      0.03%      0.02%
</TABLE>

                                       33
<PAGE>

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

                  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 estimate 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>
                      2003                 2002                 2001                 2000                 1999
                Amount   % of Loan   Amount   % of Loan   Amount   % of Loan   Amount   % of Loan   Amount   % of Loan
                ------------------   ------------------   ------------------   ------------------   ------------------
<S>             <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>
Commercial        $115      20.39%     $108      21.25%     $ 92      20.47%     $ 70      19.07%     $ 64      19.50%
Real estate        246      50.20%      235      69.25%      262      70.87%      257      72.10%      234      73.07%
Consumer           167      29.41%      126       9.50%       83       8.66%       86       8.83%       57       7.43%
Unallocated        109          -        95          -         8          -        27          -       106          -
                ------------------   ------------------   ------------------   ------------------   ------------------
   Total          $637     100.00%     $564     100.00%     $445     100.00%     $440     100.00%     $461     100.00%
</TABLE>

NON-INTEREST INCOME

2003 COMPARED TO 2002

         Non-interest income consists primarily of service charges. Non-interest
income for 2003 decreased $14 or 4.88%, to $273 from $287 in 2002. The decrease
was primarily attributable to a change in the method of receiving commissions on
loan insurance premiums.

2002 COMPARED TO 2001

         Non-interest income consists primarily of service charges. Non-interest
income for 2002 increased $18 or 6.69%, to $287 from $269 in 2001. The increase
was primarily attributable to service charges and fees associated with servicing
a higher volume of deposit accounts, increased rental income, and increased
income generated through safe deposit box rentals and MasterCard/Visa
commissions.

NON-INTEREST EXPENSE

         Salary expense and employee benefits represent the largest component,
or 49.41% 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,

                                       34
<PAGE>

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

-        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.

2003 COMPARED TO 2002

         Non-interest expenses for 2003 were $2,269, representing an increase of
$283 or 14.25%, compared to $1,986 for 2002.

         Salary expenses and related employee benefits increased by $118 or
11.76%, to $1,121 for 2003 from $1,003 for 2002. This increase was due to the
hiring of additional personnel; normal salary increases paid to employees and
increased premium costs associated with group medical insurance. At December 31,
2003, there were 29 full-time equivalent employees as compared to 28 at December
31, 2002.

         Occupancy and equipment expenses increased by $77 or 32.22%, to $316
for 2003 from $239 for 2002. This increase was mainly due to maintenance and
repairs made to the building throughout the year.

         Other expenses increased $62 or 13.45%, to $523 in 2003 from $461 in
2002. This increase is mostly related increases in Travel/Education Expenses,
Stationary Expense, Loan and Collections, and Legal Fees.

2002 COMPARED TO 2001

         Non-interest expenses for 2002 were $1,986, representing a decrease of
$4, or .20%, compared to $1,990 for 2001.

         Salary expenses and related employee benefits increased by $72, or
7.73%, to $1,003 for 2002 from $931 for 2001. This increase was due to the
hiring of additional personnel; normal salary increases paid to employees and
increased premium costs associated with group medical insurance. At December 31,
2002, there were 28 full-time equivalent employees as compared to 27 at December
31, 2001.

         Occupancy and equipment expenses remained relatively the same for 2002
as compared to 2001.

         Other expenses decreased $99 or 17.68%, to $461 in 2002 from $560 in
2001. The major components of this decrease consist of fees associated with
initial Securities and Exchange Commission filings which occurred in 2001. Due
to the loss of two directors, expenses for director's fees have declined. The
decreases in ATM transaction fees were offset by increasing fees charged to
non-Bank customers, which lowered the ATM transaction fees

INCOME TAXES

         Income tax expense was $341 for 2003 as compared to $641 for 2002 and
$706 for 2001. The 46.80% decrease in tax expense in 2003 as compared to 2002
was mainly the result of an increase of tax-free interest income and a decrease
in pre-tax income. The decrease of 9.21% in 2002 as compared to 2001 was also
the result of an increase in income from tax-free loans and securities.

                                       35
<PAGE>

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

NET INCOME

2003 COMPARED TO 2002

         Net income for 2003 was $ 2,774, a decrease of $41 or 1.46%, from
$2,815 for 2002. This decrease is the result of the declining interest rate
environment experienced during 2003.

         Basic Earnings per share for 2003 declined to $14.11 from $14.33 in
2002 due to the decrease in net income for 2003.

2002 COMPARED TO 2001

         Net income for 2002 was $ 2,815, an increase of $301 or 11.97%, from
$2,514 for 2001. The increase in 2002 net income was the result of a $347
increase in net interest income, an increase in the provision for loan losses of
$133, an increase of $18 in other income, a decrease of $4 in other expense and
a decrease in income tax expense of $65.

         Basic Earnings per share for 2002 increased to $14.33 from 12.80 in
2001 due to the increase in net income.

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 and cash management/repurchase
agreements. 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
shareholders' 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, 2003 totaled $110,087 as
compared to $94,397 at December 31, 2002, an increase of $15,690, or 16.62%.
Securities available-for-sale increased to $27,382 at December 31, 2003 compared
to $10,044 at December 31, 2002, whereas securities held to maturity decreased
to $82,705 at December 31, 2003, from $84,353 at December 31, 2002. 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 shareholders'
equity.

         The carrying value of the available-for-sale securities portfolio as of
December 31, 2003 includes net unrealized losses of $191 (reflected as
accumulated other comprehensive income of $126 in shareholders' equity, net of
deferred income taxes of $65) compared to net unrealized gains of $32 (reflected
as accumulated other comprehensive income of $21 in shareholders' equity, net of
deferred income taxes of $11) as of December 31, 2002.

                                       36
<PAGE>

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

         TABLE 4 illustrates the composition of the securities portfolio for the
periods presented.

                                     TABLE 4
                                   SECURITIES

<TABLE>
<CAPTION>
                                                       December 31,
(DOLLARS IN THOUSANDS)                           2003        2002      2001
                                                 ----        ----      ----
<S>                                            <C>        <C>        <C>
Held to maturity securities:
   U.S. Government agencies and corporations   $ 21,992   $ 21,033   $ 17,807
   State and political subdivisions              50,571     43,323     30,804
   Mortgage-backed securities                     5,845     13,677      9,674
   Corporate securities                           4,297      6,320     11,936

Available-for-sale securities:
   Mortgage-backed securities                    26,800      9,646      3,892
   US Treasury                                        -          -      1,018
   Equity                                           582        398        523
                                               --------   --------   --------
      Total securities                         $110,087   $ 94,397   $ 75,654
                                               ========   ========   ========
</TABLE>

TABLE 5 presents the maturities and average weighted yields of the debt
securities portfolio as of December 31, 2003.

                                     TABLE 5
              MATURITIES AND WEIGHTED AVERAGE YIELDS OF SECURITIES

<TABLE>
<CAPTION>
                                                              After one but       After five but
                                         Within one year    within five years  within fifteen years  After fifteen years
                                         ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)                   Amount     Yield    Amount     Yield    Amount     Yield      Amount     Yield
<S>                                      <C>        <C>     <C>         <C>     <C>         <C>       <C>         <C>
Available for sale:
      Mortgage-backed securities         $     -    0.00%   $     56    6.04%   $ 14,109     4.38%    $ 12,635    5.28%

Held to maturity:
     U.S. government agencies                  -               1,500    3.00%     18,921     4.19%       1,571    7.01%
     State and political subdivisions(1)     630    9.83%      1,114    6.79%     34,949     7.12%      13,878    7.70%
     Mortgage-backed securities                -                   -                   2    12.00%       5,843    6.37%
     Other securities                        600    6.42%        250    6.20%      3,097     6.73%         350    6.75%
                                         -------    ----    --------    ----    --------     ----     --------    ----
                                           1,230               2,864              56,969                21,642
                                         -------            --------            --------              --------
                     Total               $ 1,230            $  2,920            $ 71,078              $ 34,277
                                         =======            ========            ========              ========
</TABLE>

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

                                       37
<PAGE>

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

LOANS

         The loan portfolio comprises a major component of the Corporation's
earning assets. Net loans receivable increased $1,215, or 1.76% to $ 70,249 as
of December 31, 2003 from $69,034 as of December 31, 2002. Net loans receivable
represent 35.38% of total assets and 43.18% of total deposits as December 31,
2003 as compared to 38.29% and 47.11%, respectively, at December 31, 2002. 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, 2003, real estate loans amounted to $ 61,340 or
86.53% of total loans, and commercial and industrial loans amounted to $2,832,
or 4.00% 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.

         TABLE 6 presents the composition of the total loan portfolio for the
periods presented.

                                     TABLE 6
                             TOTAL LOANS OUTSTANDING

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                    (Dollars in thousands)
                                    2003                 2002                 2001               2000                1999
                               Amount  %of total   Amount   %of total  Amount   %of total  Amount  %of total   Amount   %of total
                              ---------------------------------------------------------------------------------------------------
<S>                           <C>      <C>        <C>       <C>       <C>       <C>       <C>      <C>        <C>       <C>
Commercial                    $ 2,832     4.00%   $ 3,490     5.01%   $ 4,579     6.31%   $ 5,969     8.53%   $ 5,321     8.29%
Commercial real estate         11,615    16.39%    11,300    16.24%    10,281    14.16%     7,378    10.54%     7,192    11.21%
Residential real estate        35,239    49.71%    35,046    50.35%    39,490    54.37%    34,710    49.58%    35,456    55.25%
Real estate construction          350     0.49%       657     0.94%     1,095     1.51%     3,690     5.27%       772     1.20%
Home equity                    14,136    19.94%    12,493    17.96%    10,882    14.99%    12,078    17.25%    10,666    16.62%
Other consumer                  6,714     9.47%     6,612     9.50%     6,288     8.66%     6,185     8.83%     4,772     7.43%
                              -------   ------    -------   ------    -------   ------    -------   ------    -------   ------
    Total Loans Outstanding   $70,886   100.00%   $69,598   100.00%   $72,615   100.00%   $70,010   100.00%   $64,179   100.00%
                              =======   ======    =======   ======    =======   ======    =======   ======    =======   ======
</TABLE>

                                       38
<PAGE>

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

         TABLE 7 summarizes the loan maturities and interest sensitivity for a
segment of the loan portfolio.

                                     TABLE 7
          LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
                        COMMERCIAL AND CONSTRUCTION LOANS
                                December 31, 2003

<TABLE>
<CAPTION>
                                             1 year     1 year thru   After 5
(DOLLARS IN THOUSANDS)                      or less       5 years      years     Total
<S>                                         <C>        <C>            <C>       <C>
Maturity of loans receivable:
   Commercial                               $ 4,629    $  7,824       $ 1,994   $ 14,447
   Real estate-construction                       -           -           350   $    350
                                            -------    --------       -------   --------
      Total                                 $ 4,629    $  7,824       $ 2,344   $ 14,797
                                            =======    ========       =======   ========
</TABLE>

<TABLE>
<CAPTION>
                                                   1 year thru       After 5
                                                    5 years           years
                                                    -------           -----
<S>                                                <C>               <C>
Fixed interest rates                                $  2,333         $ 1,223
Floating or adjustable interest rates                  5,491           1,121
                                                    --------         -------
    Total                                           $  7,824         $ 2,344
                                                    ========         =======
</TABLE>

CREDIT RISK AND LOAN QUALITY

         The Corporation continues to strive to minimize credit risk. The
Corporation'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 non-performing loans (comprised of non-accruing loans and loans
past due for more than 90 days) as of December 31, 2003 were $475 as compared to
$430 as of December 31, 2002. Total nonperforming loans as a percentage of total
loans were .67% at December 31, 2003 as compared to .62% at December 31, 2002.
At December 31, 2003 there was foreclosed real estate of $10. As of December 31,
2002 and December 31, 2001, 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.

                                       39
<PAGE>

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

         TABLE 8 presents detailed information about the Corporation's
non-performing loans and non-performing assets for the period presented.

<TABLE>
<CAPTION>
                                                                          December 31,
                                                         ------------------------------------------------
                (DOLLARS IN THOUSANDS)                   2003       2002       2001       2000       1999
                                                         ----       ----       ----       ----       ----
<S>                                                      <C>        <C>        <C>        <C>        <C>
Non-accruing loans                                       $148       $227       $298       $  4       $136
Accruing loans past due 90 days or more                   327        203         71        263        337
                                                         ----       ----       ----       ----       ----
   Total nonperforming loans                             $475       $430       $369       $267       $473
Other real estate                                          10          -          -         97          -
                                                         ----       ----       ----       ----       ----
   Total nonperforming assets                            $485       $430       $369       $364       $473
                                                         ====       ====       ====       ====       ====
Non-accrual loans:
   Interest income that would have been recorded on
     non-accrual loans                                     15         18         17          -         12

   Interest income for above loans included in net
     income for the period                                 10         20          7          2          -

Ratios:
   Nonperforming loans to total loans                    0.67%      0.62%      0.51%      0.38%      0.74%
   Allowance for loan losses to nonperforming loans    134.11%    131.16%    120.60%    164.79%     97.46%
   Nonperforming assets to total assets                  0.24%      0.24%      0.24%      0.25%      0.34%

   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, 2003 were
$162,694, an increase of $16,159, or 11.03%, over total deposits of $146,535 as
of December 31, 2002. The Corporation experienced the following
increases/(decreases) for the year 2003 as compared to 2002.

<TABLE>
<S>                                                 <C>
Non-interest bearing demand deposits                 9.83%
Interest-bearing demand deposits                    12.56%
Savings Deposits                                    20.82%
Time Deposits                                        3.91%
</TABLE>

         The increase in savings deposits is due to favorable rates offered on
these accounts as compared to the recent returns on NOW deposit investments in
the marketplace.

                                       40
<PAGE>

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

         TABLE 9 displays the maturities of time deposits issued in
denominations of $100 or more at December 31, 2003.

                                     TABLE 9
                               DEPOSIT MATURITIES

<TABLE>
<CAPTION>
                                   Time
(DOLLARS IN THOUSANDS)         Certificates
                               ------------
<S>                            <C>
Three months or less             $ 1,565
Over three months
   but within six months           1,379
Over six months
   but within twelve months        3,108
Over twelve months                15,884
                                 -------
      Total                      $21,936
                                 =======
</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 $14,242 at December 31, 2003 as compared to $13,225 at December 31,
2002. 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, 2003, available-for-sale securities totaling $27,382 were available for
liquidity purposes as compared with $10,044 at December 31, 2002.

         Liability liquidity sources include attracting deposits at competitive
rates. Core deposits at December 31, 2003 totaled $123,647 as compared to
$111,366 at December 31, 2002. The Corporation has a $4 million federal fund
line of credit with its main correspondent bank, Atlantic Central Bankers Bank.
The Corporation had no federal funds purchased under this line at December 31,
2003 and 2002. The Corporation 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.

         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.

         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.

                                       41
<PAGE>

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

CONTRACTUAL OBLIGATIONS

         The following table represents the aggregate contractual obligations to
make future payments as of December 31, 2003:

<TABLE>
<CAPTION>
                         LESS THAN          1-3           3-5          OVER 5
                           1 YEAR          YEARS         YEARS         YEARS         TOTAL
                           ------          -----         -----         -----         -----
<S>                      <C>             <C>           <C>             <C>         <C>
Time Deposits             $27,594        $33,209       $15,131           -         $75,934
                          =======        =======       =======           =         =======
</TABLE>

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, 2003 totaled $8,537. This consisted of $5,512 in tax-exempt loans,
commercial real estate, construction, and land development loans, $2,342 in home
equity lines of credit, $683 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.

SHAREHOLDERS' EQUITY AND CAPITAL REQUIREMENTS/RATIOS

         The net effect of the activity in shareholders' equity resulted in an
increase of $2,230 in total shareholders' equity to $35,055 at December 31, 2003
from $32,825 at December 31, 2002. Shareholders' equity increased in 2003 as a
result of retained earnings of $2,243, plus treasury stock sale of $134 less a
decrease in accumulated other comprehensive income of $147. At December 31,
2003, the Bank had $126 in net unrealized losses on available-for-sale
securities, as compared with $21 in net unrealized gains at December 31, 2002.
Unrealized losses in 2003 of $ 126 were due mainly to decreased market value of
mortgage-backed securities. 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
shareholders' equity. The FAS 115 adjustment is not included in the
Corporation's calculation 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 shareholders.

         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.

                                       42
<PAGE>

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

         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 shareholders' 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, 2003, the Bank has a
Tier I leverage ratio of 17.8%.

         TABLE 10 provides a comparison of the Bank's risk-based capital ratios
and leverage ratios. The Coporation's ratios are not significantly different.

                                    TABLE 10
                                 CAPITAL RATIOS

<TABLE>
<CAPTION>
                                                         December 31,  December 31,
(DOLLARS IN THOUSANDS)                                       2003         2002
                                                         ------------  ------------
<S>                                                      <C>           <C>
Tier I, common stockholder's equity                         $34,704      $32,478
Tier II, allowable portion of allowance for loan losses         637          564
                                                            -------      -------
      Total capital                                         $35,341      $33,042
                                                            =======      =======
Tier I risk-based capital ratio                               40.00%       39.93%
Tier II risk-based capital ratio                              40.74%       40.62%
</TABLE>

         At December 31, 2003 and 2002, 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 without prior approval of the Bank's regulatory agency. At December 31,
2003, dividends were restricted not to exceed $4.4 million. These restrictions
have not had, and are not expected to have, a significant impact on the
Corporation's ability to meet its cash obligations.

                                       43

<PAGE>

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

EFFECTS 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 Corporation's 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 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 has more interest sensitive
liabilities maturing/repricing than interest sensitive assets, 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 sensitivity
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.

                                       44

<PAGE>

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

         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 the uncertainties, the Corporation utilizes more than one
measurement tool in assessing interest rate sensitivity and market risk.

         As of December 31, 2003 the Corporation was more positively gapped than
December 31, 2002 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 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.

                                       45

<PAGE>

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

         TABLE 11 presents the gap position for the Bank at December 31, 2003.
This schedule summarizes how many fixed rate assets and liabilities will pay
down over the periods of time defined in the table.

                          INTEREST RATE SENSITIVITY GAP

<TABLE>
<CAPTION>
                                                Maturity/Repricing Intervals
                                      -----------------------------------------------
                                        1-3      3-12      1-3        3-5     Over 5
(DOLLARS IN THOUSANDS)                 Months   Months    Years      Years    Years      Total
                                      -------   ------   --------   -------  --------   --------
<S>                                   <C>       <C>      <C>        <C>      <C>        <C>
Federal funds sold                    $ 9,390   $    -   $      -   $     -  $      -   $  9,390
Int. bearing deposits in the bank           -       46          -         -         -         46
                                                                                               -
Other Securities                       11,467      583        257     2,197    62,356     76,860
MBS & CMO's                             1,005    3,054      3,207     3,660    21,719     32,645
                                      -------   ------   --------   -------  --------   --------
Total Interest Earning Securities      12,472    3,637      3,464     5,857    84,075    109,505
                                                                                               -
Total Loans                            24,005   16,816     17,689     5,015     7,361     70,886
                                      -------   ------   --------   -------  --------   --------
Total interest bearing assets          45,867   20,499     21,153    10,872    91,436    189,827
                                      -------   ------   --------   -------  --------   --------
                                                                                               -
NOW accounts                            1,475        -      7,744         -         -      9,219
Savings                                 7,732        -     56,702         -         -     64,434
                                      -------   ------   --------   -------  --------   --------
Total savings deposits                  9,207        -     64,446         -         -     73,653
                                                                                               -
CDs<$100,000                            6,911   14,631     22,343    10,113         -     53,998
CDs>$100,000                            1,565    4,487     10,866     5,018         -     21,936
                                      -------   ------   --------   -------  --------   --------
Total time deposits                     8,476   19,118     33,209    15,131         -     75,934
                                                                                               -
Total Int. Bearing Liabilities         17,683   19,118     97,655    15,131         -    149,587
                                                                                               -
Rate-Sensitive Gap                     28,184    1,381    (76,502)   (4,259)   91,436     40,240

Cumulative Gap                         28,184   29,565    (46,937)  (51,196)   40,240
</TABLE>

                                       46

<PAGE>

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

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 its competitive position as a community
Bank.

                                       47

<PAGE>

                                    FORM 10-K

The Corporation will provide, without charge to any shareholder, a copy of its
2003 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