<PAGE>
                               NEFFS BANCORP, INC.

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 2004
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                    DIRECTORS

                               OF THE CORPORATION

                                    AND BANK

<TABLE>
<S>                                                  <C>
 Robert B. Heintzelman                               John J. Remaley

    Kevin A. Schmidt                                 John F. Simock

    Herman P. Snyder                                 Mary Ann Wagner
</TABLE>

                           OFFICERS OF THE CORPORATION

<TABLE>
<S>                                                  <C>
 John J. Remaley                                         Herman P. Snyder
    President                                             Vice President

 Kevin A. Schmidt                                          Dawn E. Hamm
    Treasurer                                                Secretary
</TABLE>

                              OFFICERS OF THE BANK

                                Herman P. Snyder
                              Chairman of the Board

<TABLE>
<S>                                               <C>
      John J. Remaley                                    Kevin A Schmidt
         President                                Executive Vice President and
                                                     Chief Executive Officer

     Michael J. Bailey                                    Carol L. Jones
        Cashier and                                    Assistant Cashier and
  Chief Operations Officer                               Operations Officer
</TABLE>
<PAGE>
April 11, 2005

Dear Shareholder:

     As we reached the end of calendar year 2004, the board of directors and
management could look back at another successful year of operation for the
corporation. During its short existence, Neffs Bancorp, Inc. has proved its
worthiness, providing a parent company for its subsidiary, The Neffs National
Bank. It's apparent that the allegiance, trust and compatibility of the staff
are the true indicators of performance and are responsible for achieving our
goals. The people of our company have performed admirably, and their efforts
should not go unnoticed. To them we humbly say "Thank You!" for a job well-done.

     As one reflects on corporate accomplishments during the year, uncertainty
enters prominently. The ever-present and serious consequences presented by our
nation's involvement in foreign and domestic unrest, and the constant threat
being imposed upon all of us, requires that we take a renewed look at where
we've been and where we want to be. The attitude assumed by management and your
board of directors in their cautious, yet concentrated style, appear to meet the
new and different challenges of the day.

     The Neffs National Bank is embarking on a new, up-dated and forward-looking
style of operation, involving the use of the Worldwide Web and the Internet,
expanding our services to our clientele. Our hope is that our patrons will
engage and utilize those services as anxiously as our management team is in
presenting them. Become involved as the announcements are made.

     The continuing confidence of the shareholders cannot be over-emphasized.
Their decision to invest in the shares of the corporation forms the basis for
everything that has and will continue to occur. The board of directors continues
to operate as an open board, welcoming your comments and opinions on the many
issues it continually faces. Please feel free to contact any one of them at any
time.

Cordially yours,


-------------------------------------
John J. Remaley
President
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

     We have audited the accompanying consolidated statements of financial
condition of Neffs Bancorp, Inc. and subsidiary as of December 31, 2004 and
2003, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2004. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. 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, 2004 and 2003, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.


                                        /S/ BEARD MILLER COMPANY LLP

Allentown, Pennsylvania
January 7, 2005
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          -------------------
                                                                            2004       2003
                                                                          --------   --------
                                                                             (IN THOUSANDS,
                                                                           EXCEPT SHARE DATA)
<S>                                                                       <C>        <C>
                                     ASSETS
Cash and due from banks                                                   $  4,076   $  4,806
Interest bearing deposits with banks                                            23         46
Federal funds sold                                                           1,778      9,390
Securities available for sale                                               44,148     27,382
Securities held to maturity, fair value 2004 $81,416; 2003 $84,880          79,319     82,705
Loans receivable, net of allowance for loan losses 2004 $663; 2003 $637     76,315     70,249
Premises and equipment, net                                                  2,308      2,355
Other assets                                                                 1,836      1,637
                                                                          --------   --------
   TOTAL ASSETS                                                           $209,803   $198,570
                                                                          ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Deposits:
      Non-interest bearing                                                $ 14,182   $ 13,107
      Interest bearing                                                     157,470    149,587
                                                                          --------   --------
   Total Deposits                                                          171,652    162,694

Other liabilities                                                              835        821
                                                                          --------   --------
    TOTAL LIABILITIES                                                      172,487    163,515
                                                                          --------   --------

Stockholders' equity:
   Common stock, $1 par value; authorized 2,500,000 shares;
      issued 200,000 shares; outstanding 197,091 shares                        200        200
   Paid-in capital                                                             690        690
   Retained earnings                                                        37,319     34,853
   Accumulated other comprehensive loss                                       (331)      (126)
   Treasury stock, at cost 2,909 shares                                       (562)      (562)
                                                                          --------   --------
   TOTAL STOCKHOLDERS' EQUITY                                               37,316     35,055
                                                                          --------   --------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $209,803   $198,570
                                                                          ========   ========
</TABLE>

See notes to consolidated financial statements.


                                        2
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                            ------------------------------
                                                              2004       2003       2002
                                                            --------   --------   --------
                                                                (DOLLARS IN THOUSANDS,
                                                                EXCEPT PER SHARE DATA)
<S>                                                         <C>        <C>        <C>
INTEREST INCOME
   Interest and fees on loans                               $  4,747   $  5,044   $  5,470
   Interest and dividends on investments:
      Taxable                                                  3,075      2,193      2,990
      Exempt from federal income taxes                         2,158      2,268      1,709
Interest on federal funds sold                                    67        128        133
                                                            --------   --------   --------
      TOTAL INTEREST INCOME                                   10,047      9,633     10,302

INTEREST EXPENSE, DEPOSITS                                     4,082      4,434      4,977
                                                            --------   --------   --------
      NET INTEREST INCOME                                      5,965      5,199      5,325

PROVISION FOR LOAN LOSSES                                         36         88        170
                                                            --------   --------   --------
      NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES      5,929      5,111      5,155
                                                            --------   --------   --------

OTHER INCOME
   Service charges on deposit accounts                           177        178        177
   Other service charges and fees                                 44         54         66
   Other income                                                   47         41         43
   Net security gains                                             --         --          1
                                                            --------   --------   --------
      TOTAL OTHER INCOME                                         268        273        287
                                                            --------   --------   --------
OTHER EXPENSES
   Salaries and employee benefits                              1,137      1,121      1,003
   Occupancy                                                     148        165        119
   Furniture and equipment                                       151        151        120
   Pennsylvania shares tax                                       288        309        283
   Other expenses                                                661        523        461
                                                            --------   --------   --------
      TOTAL OTHER EXPENSES                                     2,385      2,269      1,986
                                                            --------   --------   --------
      INCOME BEFORE INCOME TAXES                               3,812      3,115      3,456
                                                            --------   --------   --------

INCOME TAX (BENEFIT) EXPENSE
   Current                                                       710        508        689
   Deferred                                                     (103)      (167)       (48)
                                                            --------   --------   --------
      TOTAL INCOME TAX EXPENSE                                   607        341        641
                                                            --------   --------   --------
      NET INCOME                                            $  3,205   $  2,774   $  2,815
                                                            ========   ========   ========
EARNINGS PER SHARE, BASIC                                   $  16.26   $  14.11   $  14.33
                                                            ========   ========   ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                   197,091    196,529    196,431
                                                            ========   ========   ========
</TABLE>

See notes to consolidated financial statements.


                                        3
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

<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, 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
                                                                                                          -------
Comprehensive income:
   Net income                                    --        --      3,205           --           --          3,205
   Change in unrealized net gains (losses)
      on securities available for sale, net
      of taxes                                   --        --         --         (205)          --           (205)
                                                                                                          -------
   TOTAL COMPREHENSIVE INCOME                                                                               3,000
                                                                                                          -------

   Cash dividends declared on common
      stock, $3.75 per share                     --        --       (739)          --           --           (739)
                                               ----      ----    -------        -----        -----        -------
BALANCE - DECEMBER 31, 2004                    $200      $690    $37,319        $(331)       $(562)       $37,316
                                               ====      ====    =======        =====        =====        =======
</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,
                                                                 ------------------------------
                                                                   2004       2003       2002
                                                                 --------   --------   --------
                                                                         (IN THOUSANDS)
<S>                                                              <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                    $  3,205   $  2,774   $  2,815
   Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation                                                 124        116        111
         Provision for loan losses                                     36         88        170
         Net amortization (accretion) of securities                   193        389       (447)
         Net security gains                                            --         --         (1)
         Deferred income tax benefit                                 (103)      (167)       (48)
         (Increase) decrease in assets:
            Accrued interest receivable                               (47)       (76)        18
            Other assets                                               46        (77)         2
         Increase (decrease) in liabilities:
            Accrued interest payable                                  (19)      (104)       (71)
            Other liabilities                                          33         (8)       (15)
                                                                 --------   --------   --------
         NET CASH PROVIDED BY OPERATING ACTIVITIES                  3,468      2,935      2,534
                                                                 --------   --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net (increase) decrease in interest bearing deposits with
      banks                                                            23        (28)        27
   Net (increase) decrease in federal funds sold                    7,612      1,085     (8,399)
   Purchases of securities available for sale                     (24,647)   (25,100)    (7,881)
   Purchases of securities held to maturity                        (9,623)   (33,881)   (41,852)
   Proceeds from maturities/calls and principal repayments of
      securities available for sale                                 7,370      7,295      3,453
   Proceeds from maturities/calls of securities held to
      maturity                                                     13,017     35,384     28,169
   Net (increase) decrease in loans                                (6,102)    (1,303)     2,966
   Proceeds from sale of foreclosed real estate                        10         --         --
   Purchases of premises and equipment                                (77)       (75)      (188)
                                                                 --------   --------   --------
         NET CASH USED IN INVESTING ACTIVITIES                    (12,417)   (16,623)   (23,705)
                                                                 --------   --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits                                         8,958     16,159     21,603
   Dividends paid                                                    (739)      (531)      (609)
   Sales of treasury stock                                             --        134         --
                                                                 --------   --------   --------
         NET CASH PROVIDED BY FINANCING ACTIVITIES                  8,219     15,762     20,994
                                                                 --------   --------   --------

         NET INCREASE (DECREASE) IN CASH AND CASH                    (730)     2,074       (177)
            EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING                               4,806      2,732      2,909
                                                                 --------   --------   --------
CASH AND CASH EQUIVALENTS - ENDING                               $  4,076   $  4,806   $  2,732
                                                                 ========   ========   ========

SUPPLEMENTARY CASH FLOWS INFORMATION

   Interest paid                                                 $  4,101   $  4,538   $  5,048
                                                                 ========   ========   ========
   Income taxes paid                                             $    645   $    567   $    687
                                                                 ========   ========   ========
</TABLE>

See notes to consolidated financial statemsnts


                                       5
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

NATURE OF OPERATIONS

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

ESTIMATES

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

SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

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

SECURITIES

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

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


                                       6
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SECURITIES (CONTINUED)

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

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

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

LOANS

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

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

ALLOWANCE FOR LOAN LOSSES

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

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


                                       7
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOWANCE FOR LOAN LOSSES (CONTINUED)

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

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

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

FORECLOSED ASSETS

     Foreclosed assets are comprised of property acquired through a foreclosure
     proceeding or acceptance of a deed in lieu of foreclosure and loans
     classified as in-substance foreclosure. The Corporation includes such
     property in other assets. A loan is classified as in-substance foreclosure
     when the Corporation has taken possession of the collateral regardless of
     whether formal foreclosure proceedings take place. Foreclosed assets
     initially are recorded at fair value, net of estimated selling costs, at
     the date of foreclosure establishing a new cost basis. After foreclosure,
     valuations are periodically performed by management and the assets are
     carried at the lower of cost or fair value minus estimated costs to sell.
     Revenues and expenses from operations and changes in the valuation
     allowance are included in other expenses.

TRANSFERS OF FINANCIAL ASSETS

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


                                       8
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PREMISES AND EQUIPMENT

     Premises and equipment are carried at cost less accumulated depreciation
     and amortization. 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, 2004, 2003 and 2002 was $25,000, $26,000, and $19,000, respectively.

INCOME TAXES

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

EARNINGS PER SHARE

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

EMPLOYEE BENEFIT PLAN

     The Bank has a non-contributory defined contribution pension plan covering
     all employees having at least one year of service. Contribution amounts are
     determined annually by the Corporation and are charged to current operating
     expense. The expense amounted to $57,000, $60,000, and $61,000 for 2004,
     2003 and 2002, respectively.

COMPREHENSIVE INCOME

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

CASH AND CASH EQUIVALENTS

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


                                       9
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEGMENT REPORTING

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

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

NEW ACCOUNTING STANDARDS

     In March 2004, the SEC released Staff Accounting Bulletin (SAB) No. 105,
     "Application of Accounting Principles to Loan Commitments." SAB 105
     provides guidance about the measurements of loan commitments recognized at
     fair value under FASB Statement No. 133, "Accounting for Derivative
     Instruments and Hedging Activities." SAB 105 also requires companies to
     disclose their accounting policy for those loan commitments including
     methods and assumptions used to estimate fair value and associated hedging
     strategies. SAB 105 is effective for all loan commitments accounted for as
     derivatives that are entered into after March 31, 2004. The adoption of SAB
     105 did not have an effect on the Corporation's consolidated financial
     statements.

     In December 2003, the Accounting Standards Executive Committee issued
     Statement of Position 03-3 (SOP 03-3), "Accounting for Certain Loans or
     Debt Securities Acquired in a Transfer." SOP 03-3 addresses accounting for
     differences between contractual cash flows and cash flows expected to be
     collected from an investor's initial investment in loans or debt securities
     acquired in a transfer, including business combinations, if those
     differences are attributable, at least in part, to credit quality. SOP 03-3
     is effective for loans or debt securities acquired in fiscal years
     beginning after December 15, 2004. The Corporation adopted the provisions
     of SOP 03-3 effective January 1, 2005, and the initial implementation did
     not have any effect on the Corporation's consolidated financial statements.

NOTE 2 - CASH AND DUE FROM BANKS

Regulations of the Board of Governors of the Federal Reserve System impose
uniform reserve requirements on all depository institutions with transaction
accounts (checking accounts, NOW accounts, etc.). Reserves are maintained in the
form of vault cash or a non-interest bearing balance held with the Federal
Reserve Bank. The Bank also, from time to time, maintains deposits with the
Federal Reserve Bank and other banks for various services such as check
clearing. The reserve requirement at December 31, 2004 and 2003 was $454,000 and
$401,000, 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, 2004
                                         ---------------------------------------------
                                                        GROSS        GROSS
                                         AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                            COST        GAINS       LOSSES      VALUE
                                         ---------   ----------   ----------   -------
                                                          (IN THOUSANDS)
<S>                                      <C>         <C>          <C>          <C>
SECURITIES AVAILABLE FOR SALE:
   Mortgage-backed securities             $43,976       $92          $(593)    $43,475
   Equity securities                          673        --             --         673
                                          -------       ---          -----     -------
                                          $44,649       $92          $(593)    $44,148
                                          =======       ===          =====     =======
</TABLE>

<TABLE>
<CAPTION>
                                                 DECEMBER 31, 2003
                                         --------------------------------
<S>                                      <C>       <C>    <C>     <C>
   Mortgage-backed securities            $26,991   $108   $(299)  $26,800
   Equity securities                         582     --      --       582
                                         -------   ----   -----   -------
                                         $27,573   $108   $(299)  $27,382
                                         =======   ====   =====   =======
</TABLE>

<TABLE>
<CAPTION>
                                                  DECEMBER 31, 2004
                                         ----------------------------------
<S>                                      <C>       <C>      <C>     <C>
SECURITIES HELD TO MATURITY:
   Obligations of U.S. Government
      agencies                           $27,162   $   53   $(124)  $27,091
   Obligations of states and political
      subdivisions                        46,425    2,039     (42)   48,422
   Corporate securities                    2,597       84      (9)    2,672
   Mortgage-backed securities              3,135       96      --     3,231
                                         -------   ------   -----   -------
                                         $79,319   $2,272   $(175)  $81,416
                                         =======   ======   =====   =======
</TABLE>

<TABLE>
<CAPTION>
                                                  DECEMBER 31, 2003
                                         ----------------------------------
<S>                                      <C>       <C>      <C>     <C>
   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
                                         =======   ======   =====   =======
</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, 2004, 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                   $    --    $    --    $   100    $   100
Due after one year through five years          --         --      4,095      4,185
Due after five years through ten years         --         --     24,814     25,371
Due after ten years                            --         --     47,175     48,529
                                          -------    -------    -------    -------
                                               --         --     76,184     78,185
Mortgage-backed securities                 43,976     43,475      3,135      3,231
Equity securities                             673        673         --         --
                                          -------    -------    -------    -------
                                          $44,649    $44,148    $79,319    $81,416
                                          =======    =======    =======    =======
</TABLE>

Gross gains of $-0-, $-0-, and $1,000 were realized on calls of securities
during 2004, 2003 and 2002, respectively. There were no gross realized losses
during 2004, 2003 and 2002.

The changes in net unrealized holding gains (losses) on securities available for
sale that have been included in other comprehensive income (loss) for the years
ended December 31, 2004, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                     2004    2003    2002
                                                    -----   -----   -----
                                                        (IN THOUSANDS)
<S>                                                 <C>     <C>     <C>
Gross change in unrealized gains (losses) on
   securities available for sale                    $(310)  $(223)  $185
Reclassification adjustment for gains realized in
   income                                              --      --     (1)
                                                    -----   -----   ----
   NET UNREALIZED GAINS (LOSSES)                     (310)   (223)   184
Tax effect                                            105      76     63
                                                    -----   -----   ----
   NET OF TAX AMOUNT                                $(205)  $(147)  $121
                                                    =====   =====   ====
</TABLE>

Securities with an amortized cost and fair value of approximately $3,450,000 and
$3,442,000 at December 31, 2004 and $3,450,000 and $3,469,000 at December 31,
2003 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, 2004:

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

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

NOTE 4 - LOANS

The composition of the Corporation's loan portfolio at December 31, 2004 and
2003 is as follows:

<TABLE>
<CAPTION>
                              2004       2003
                            --------   -------
                              (IN THOUSANDS)
<S>                         <C>        <C>
Commercial                  $ 4,095    $ 2,832
Commercial real estate       13,925     11,615
Residential real estate      36,115     35,239
Real estate construction      1,376        350
Home equity                  14,560     14,136
Other consumer                6,907      6,714
                            -------    -------
                             76,978     70,886
Allowance for loan losses      (663)      (637)
                            -------    -------
                            $76,315    $70,249
                            =======    =======
</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>
                                                2004   2003   2002
                                                ----   ----   ----
                                                  (IN THOUSANDS)
<S>                                             <C>    <C>    <C>
Balance, beginning                              $637   $564   $445
   Provisions for loan losses                     36     88    170
   Recoveries on loans previously charged off     15     18      6
   Loans charged off                             (25)   (33)   (57)
                                                ----   ----   ----
Balance, ending                                 $663   $637   $564
                                                ====   ====   ====
</TABLE>

Loans on which the accrual of interest has been discontinued amounted to
$126,000 and $148,000 at December 31, 2004 and 2003, 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 $63,000 and $327,000 at
December 31, 2004 and 2003, respectively.

There were no impaired loans as of December 31, 2004 and 2003. The average
recorded investment in impaired loans during 2004, 2003 and 2002 was $-0-, $-0-,
and $116,000, respectively. Interest income on impaired loans of $-0-, $-0-, and
$14,000 was recognized for cash payments received in 2004, 2003 and 2002,
respectively.

NOTE 6 - PREMISES AND EQUIPMENT

The following summarizes premises and equipment at December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                      2004      2003
                                    -------   -------
                                      (IN THOUSANDS)
<S>                                 <C>       <C>
Premises                            $ 2,607   $ 2,593
Furniture, fixtures and equipment     1,574     1,511
                                    -------   -------

                                      4,181     4,104
Accumulated depreciation             (2,111)   (1,987)
                                    -------   -------

                                      2,070     2,117
Land                                    238       238
                                    -------   -------
                                    $ 2,308   $ 2,355
                                    =======   =======
</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 $25,191,000 and
$21,936,000 at December 31, 2004 and 2003, respectively.

Interest bearing deposits at December 31, 2004 and 2003 are further detailed as
follows:

<TABLE>
<CAPTION>
                                         2004       2003
                                       --------   --------
                                          (IN THOUSANDS)
<S>                                    <C>        <C>
Savings accounts                       $ 67,703   $ 64,434
NOW accounts                              9,174      9,219
Certificates and other time deposits     80,593     75,934
                                       --------   --------
                                       $157,470   $149,587
                                       ========   ========
</TABLE>

Time deposits at December 31, 2004 had the following scheduled maturities (in
thousands):

<TABLE>
<S>    <C>
2005   $36,244
2006    18,408
2007     8,518
2008     6,950
2009    10,473
       -------
       $80,593
       =======
</TABLE>

NOTE 8 - BORROWING CAPACITY

The Bank has a line of credit commitment available from Atlantic Central Bankers
Bank for borrowings up to $4,000,000 in federal funds. Borrowings on this line
are repaid on a daily basis. There were no borrowings under this line of credit
as of December 31, 2004 and 2003.

The Bank's maximum borrowing capacity with the Federal Home Loan Bank was
$94,126,000. There were no borrowings outstanding at December 31, 2004 and 2003.
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, 2004 and 2003 are
as follows:

<TABLE>
<CAPTION>
                                                       2004   2003
                                                       ----   ----
                                                           (IN
                                                        THOUSANDS)
<S>                                                    <C>    <C>
AMT credit carryforward                                $247   $153
Unrealized losses on securities available for sale      171     65
Allowance for loan losses                               174    166
Accrued benefits                                         10      8
                                                       ----   ----
   TOTAL DEFERRED TAX ASSETS                            602    392
                                                       ----   ----

Securities accretion                                     16     17
Depreciation                                             23     21
                                                       ----   ----
   TOTAL DEFERRED TAX LIABILITIES                        39     38
                                                       ----   ----
   NET DEFERRED TAX ASSET                              $563   $354
                                                       ====   ====
</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, 2004, 2003 and
2002 are as follows:

<TABLE>
<CAPTION>
                                      2004              2003              2002
                                ---------------   ---------------   ---------------
                                          % 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           $1,296     34%    $1,059     34%    $1,175     34%
Increase (decrease) resulting
   from:
   Nontaxable interest
      income                      (756)   (20)      (799)   (26)      (613)   (17)
   TEFRA interest expense
      disallowance                  67      2         81      3         79      2
                                ------    ---     ------    ---     ------    ---
                                $  607     16%    $  341     11%    $  641     19%
                                ======    ===     ======    ===     ======    ===
</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 related parties during 2004 (in
thousands):

<TABLE>
<S>                           <C>
Balances, January 1, 2004     $920
   Advances                    293
   Repayments                  235
                              ----
Balances, December 31, 2004   $978
                              ====
</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, 2004 and 2003:

<TABLE>
<CAPTION>
                                              2004     2003
                                             ------   ------
                                              (IN THOUSANDS)
<S>                                          <C>      <C>
Commitments to grant loans                   $3,099   $5,512
Unfunded commitments under lines of credit    3,350    2,342
Letters of credit                               704      683
                                             ------   ------
                                             $7,153   $8,537
                                             ======   ======
</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
maximum undiscounted exposure related to these commitments at December 31, 2004
and 2003 was $704,000 and $683,000, respectively. Management believes that the
proceeds obtained through a liquidation of such collateral would be sufficient
to cover the maximum potential amount of future payments required under the
corresponding guarantees. The current amount of the liability as of December 31,
2004 and 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 2005 of approximately $4,778,000 plus an
additional amount equal to the Bank's net profits for 2005, 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, 2004, that the
Corporation and the Bank meet all capital adequacy requirements to which they
are subject.

As of December 31, 2004, 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, 2004 and
2003, 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 PROMPT
                                                                    FOR CAPITAL ADEQUACY           CORRECTIVE ACTION
                                                    ACTUAL                PURPOSES                     PROVISIONS
                                               ---------------   --------------------------   ---------------------------
                                                AMOUNT   RATIO       AMOUNT         RATIO         AMOUNT         RATIO
                                               -------   -----   -------------   ----------   --------------  -----------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                            <C>       <C>     <C>             <C>          <C>              <C>
AS OF DECEMBER 31, 2004:
   Total capital (to risk-weighted assets):
      Neffs Bancorp, Inc.                      $38,310   41.2%   $> or = 7,440   > or = 8.0%                N/A
      The Neffs National Bank                   37,918   40.9     > or = 7,419   > or = 8.0   $> or = 9,273    > or = 10.0%
   Tier 1 capital (to risk-weighted assets):
      Neffs Bancorp, Inc.                       37,647   40.4     > or = 3,720   > or = 4.0                 N/A
      The Neffs National Bank                   37,255   40.2     > or = 3,709   > or = 4.0    > or = 5,564    > or =  6.0
   Tier 1 capital (to average assets):
      Neffs Bancorp, Inc.                       37,647   18.0     > or = 8,346   > or = 4.0                 N/A
      The Neffs National Bank                   37,255   17.9     > or = 8,346   > or = 4.0    > or = 10,433   > or =  5.0

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
</TABLE>

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Below are various estimated fair values at December 31, 2004 and 2003, 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>
                                                                2004                   2003
                                                        --------------------   --------------------
                                                                   ESTIMATED              ESTIMATED
                                                        CARRYING      FAIR     CARRYING      FAIR
                                                         AMOUNT      VALUE      AMOUNT      VALUE
                                                        --------   ---------   --------   ---------
                                                                       (IN THOUSANDS)
<S>                                                     <C>        <C>         <C>        <C>
Financial assets:
   Cash and short-term investments                      $  5,877    $  5,877   $ 14,242   $ 14,242
   Securities available for sale                          44,148      44,148     27,382     27,382
   Securities held to maturity                            79,319      81,416     82,705     84,880
   Loans, net                                             76,315      77,766     70,249     73,102
   Accrued interest receivable                             1,185       1,185      1,138      1,138

Financial liabilities:
   Deposits                                              171,652     172,669    162,694    165,175
   Accrued interest payable                                  770         770        789        789

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,
                                              -----------------
                                                2004      2003
                                              -------   -------
                                                (IN THOUSANDS)
<S>                                           <C>       <C>
                   ASSETS

Cash                                          $    32   $   139
Investment in subsidiary                       36,925    34,577
Premises and equipment                            254       259
Other assets                                      125        81
                                              -------   -------
   TOTAL ASSETS                               $37,336   $35,056
                                              =======   =======

     LIABILITY AND STOCKHOLDERS' EQUITY

Liability, accounts payable                   $    20   $     1
Stockholders' equity                           37,316    35,055
                                              -------   -------
   TOTAL LIABILITY AND STOCKHOLDERS' EQUITY   $37,336   $35,056
                                              =======   =======
</TABLE>

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                                 ------------------------
                                                  2004     2003     2002
                                                 ------   ------   ------
                                                      (IN THOUSANDS)
<S>                                              <C>      <C>      <C>
Dividends from subsidiary                        $  739   $  587   $  695
Rental income                                         8       10        8
Expenses                                            140       68       62
                                                 ------   ------   ------

   INCOME BEFORE INCOME TAXES AND EQUITY IN
      UNDISTRIBUTED EARNINGS OF SUBSIDIARY          607      529      641

Income tax benefit                                   45       20       18
                                                 ------   ------   ------
                                                    652      549      659
Equity in undistributed earnings of subsidiary    2,553    2,225    2,156
                                                 ------   ------   ------
   NET INCOME                                    $3,205   $2,774   $2,815
                                                 ======   ======   ======
</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,
                                               ---------------------------
                                                 2004      2003      2002
                                               -------   -------   -------
                                                      (IN THOUSANDS)
<S>                                            <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES

   Net income                                  $ 3,205   $ 2,774   $ 2,815
   Adjustments to reconcile net income to
      net cash provided by operating
      activities:

      Depreciation                                   7         6         7
      Equity in undistributed earnings of
         subsidiary                             (2,553)   (2,225)   (2,156)
      Increase in other assets                     (44)      (20)      (18)
      Increase in other liabilities                 19        --         1
                                               -------   -------   -------
   NET CASH PROVIDED BY OPERATING ACTIVITIES       634       535       649
                                               -------   -------   -------

CASH FLOWS USED IN INVESTING ACTIVITIES

   Purchases of premises and equipment              (2)       --       (39)
                                               -------   -------   -------

CASH FLOWS FROM FINANCING ACTIVITIES

   Dividends paid                                 (739)     (531)     (609)
   Sale of treasury stock                           --       134        --
                                               -------   -------   -------
      NET CASH USED IN FINANCIAL ACTIVITIES       (739)     (397)     (609)
                                               -------   -------   -------

      NET INCREASE(DECREASE) IN CASH              (107)      138         1

CASH - BEGINNING                                   139         1        --
                                               -------   -------   -------
CASH - ENDING                                  $    32   $   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>
                                                             AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)                     2004       2003       2002       2001       2000
------------------------------------                   --------   --------   --------   --------   --------
<S>                                                    <C>        <C>        <C>        <C>        <C>
Interest Income
   Interest and fees on loans                          $  4,747   $  5,044   $  5,470   $  5,813   $  5,480
   Interest and dividends on securities                   5,233      4,461      4,699      4,165      4,209
   Interest on federal funds sold                            67        128        133         98         13
                                                       --------   --------   --------   --------   --------
Total interest income                                    10,047      9,633     10,302     10,076      9,702
Interest Expense
   Deposits                                               4,082      4,434      4,977      5,095      4,669
   Short-term borrowings                                     --         --         --          3         47
                                                       --------   --------   --------   --------   --------
Total interest expense                                    4,082      4,434      4,977      5,098      4,716
                                                       --------   --------   --------   --------   --------
Net interest income                                       5,965      5,199      5,325      4,978      4,986
Provision for loan losses                                    36         88        170         37         --
                                                       --------   --------   --------   --------   --------
Net interest income after provision
   for loan losses                                        5,929      5,111      5,155      4,941      4,986
Other operating income                                      268        273        287        269        301
Other operating expenses                                  2,385      2,269      1,986      1,990      1,785
                                                       --------   --------   --------   --------   --------
Income before taxes                                       3,812      3,115      3,456      3,220      3,502
Applicable income taxes                                     607        341        641        706        843
                                                       --------   --------   --------   --------   --------
Net income                                             $  3,205   $  2,774   $  2,815   $  2,514   $  2,659
                                                       ========   ========   ========   ========   ========
Per Share Data
   Basic earnings                                      $  16.26   $  14.11   $  14.33   $  12.80   $  13.43
   Dividends declared                                  $   3.75   $   2.70   $   3.10   $   2.20   $   2.10
   Average shares outstanding                           197,091    196,529    196,431    196,474    197,940

At End of Period
   Total assets                                        $209,803   $198,570   $180,293   $156,449   $143,415
   Securities                                           123,467    110,087     94,397     75,654     68,029
   Loans, net of unearned income                         76,978     70,886     69,598     72,616     70,010
   Allowance for loan losses                                663        637        564        445        440
   Deposits                                             171,652    162,694    146,535    124,932    113,721
   Stockholders' Equity                                  37,316     35,055     32,825     30,498     28,660

Key Ratios
   Return on average assets                                1.57%      1.45%      1.67%      1.70%      1.90%
   Return on average equity                                8.89%      8.16%      8.85%      8.49%      9.54%
   Net loans to deposit ratio                             44.46%     43.18%     47.11%     57.77%     61.18%
   Dividend payout ratio (dividends declared
      divided by net income)                              23.06%     19.14%     21.63%     17.19%     15.63%
   Equity to asset ratio (average equity divided by
      average total assets)                               17.56%     17.73%     18.93%     20.06%     19.96%
</TABLE>


                                       24
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
QUARTERLY SUMMARY OF FINANCIAL DATA (unaudited)

                                      2004

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                      -----------------------------------------------
(DOLLARS IN THOUSANDS)                March 31   June 30   September 30   December 31
----------------------                --------   -------   ------------   -----------
<S>                                   <C>        <C>       <C>            <C>
Interest income                        $2,456     $2,511      $2,518         $2,562
Interest expense                        1,053        996       1,006          1,027
                                       ------     ------      ------         ------
   Net interest income                  1,403      1,515       1,512          1,535

Provision for loan losses                  15         15           6             --
Other expenses, net of other income       501        582         496            538
                                       ------     ------      ------         ------
   Income before income taxes             887        918       1,010            997

Income tax expense                        123        142         178            164
                                       ------     ------      ------         ------
   Net income                          $  764     $  776      $  832         $  833
                                       ======     ======      ======         ======
Earnings per share - Basic             $ 3.88     $ 3.94      $ 4.22         $ 4.22
                                       ======     ======      ======         ======
</TABLE>

                                      2003

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                      -----------------------------------------------
(DOLLARS IN THOUSANDS)                March 31   June 30   September 30   December 31
----------------------                --------   -------   ------------   -----------
<S>                                   <C>        <C>       <C>            <C>
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>


                                       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 2004 and
2003 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
     2004          HIGH      LOW        Per Share
     ----        -------   -------   --------------
<S>              <C>       <C>       <C>
First Quarter    $240.00   $225.00           --

Second Quarter    230.00    225.00        $1.75

Third Quarter     225.00    225.00           --

Fourth Quarter    230.00    228.00         2.00
</TABLE>

<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>

As of December 31, 2004, Neffs Bancorp, Inc. had 197,091 outstanding shares and
approximately 615 stockholders, 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, 2004, 2003, AND 2002

     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.

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

     -    operating, legal and regulatory risks,

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

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

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

CRITICAL ACCOUNTING POLICIES

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

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


                                       27
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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

OVERVIEW

     The Corporation's assets increased by 5.65% to $209,803 at December 31,
2004 from $198,570 at December 31, 2003. During the same period, net loans
receivable increased $6,066, or 8.63% to $76,315 from $70,249, while deposits
increased $8,958 or 5.50% to $171,652 from $162,694. Securities increased
$13,380 or 12.15% to $123,467 from $110,087. In 2004, the Corporation recorded
net income of $3,205 an increase of 15.53% as compared with $2,774 in 2003.

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.

2004 COMPARED TO 2003

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

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

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

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.


                                       28
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     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.

     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, 2004, 2003 and 2002.

                                     TABLE 1
             AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE

<TABLE>
<CAPTION>
                                                    2004                           2003                           2002
                                       -----------------------------  -----------------------------  -----------------------------
Year Ended December 31,                  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)                   $ 72,744    $ 4,747   6.53%    $ 69,730    $5,044    7.26%    $ 71,337    $ 5,470   7.67%
   Investment securities:
      Taxable                              71,430      3,075   4.30%      53,471     2,193    4.10%      46,817      2,958   6.32%
      Non-taxable(4)                       47,640      2,158   4.53%      50,269     2,268    4.51%      36,212      1,716   4.74%
   Other interest earning assets            4,982         67   1.34%      10,234       128    1.25%       8,070        158   1.96%
                                         --------    -------   ----     --------    ------    ----     --------    -------   ----
   Total interest earning assets          196,796     10,047   5.11%     183,704     9,633    5.24%     162,436     10,302   6.34%
                                                     -------                                                       -------   ----
Noninterest earning assets                  8,517                          8,084                          5,713
                                         --------                       --------                       --------
   Total assets                          $205,313                       $191,788                       $168,149
                                         ========                       ========                       ========

Interest bearing liabilities:
   NOW                                   $  8,426    $    56   0.66%    $  8,495    $   72    0.85%    $  7,798    $   100   1.28%
   Savings                                 68,955      1,074   1.56%      59,144     1,140    1.93%      44,108      1,245   2.82%
   Certificates of deposit                 77,508      2,952   3.81%      76,063     3,222    4.24%      72,182      3,632   5.03%
                                         --------    -------   ----     --------    ------    ----                 -------   ----
   Total interest bearing liabilities     154,889      4,082   2.64%     143,702     4,434    3.09%     124,088      4,977   4.01%
                                                     -------                        ------                         -------
Noninterest bearing liabilities:
   Demand deposits                         13,565                         13,276                         11,831
   Other liabilities                          816                            801                            405
Stockholders' Equity                       36,043                         34,009                         31,825
                                         --------                       --------                       --------
   Total Liabilities and
      Stockholders' Equity               $205,313                       $191,788                       $168,149
                                         ========                       ========                       ========
Net interest income/spread(2)                        $ 5,965   2.47%                $5,199    2.15%                $ 5,325   2.33%
                                                     -------   ----                 ------    ----                 -------   ----
Net interest margin(3)                                         3.03%                          2.83%                          3.28%
</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.


                                       29
<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>
                                           2004/2003 Increase (Decrease)   2003/2002 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                           $211    $(508)   $(297)       $ (121)   $  (305)   $(426)
   Securities                                  672      100      772         1,024     (1,237)    (213)
   Other interest earning assets               (70)       9      (61)           36        (66)     (30)
                                              ----    -----    -----        ------    -------    -----
   Total interest earning assets               813     (399)     414           939     (1,608)    (669)

Interest expense:
   NOW                                          (1)     (15)     (16)            8        (36)     (28)
   Savings                                     172     (238)     (66)          355       (460)    (105)
   Certificates of deposits                     60     (330)    (270)          187       (597)    (410)
                                              ----    -----    -----        ------    -------    -----
      Total interest bearing liabilities       231     (583)    (352)          550     (1,093)    (543)
                                              ----    -----    -----        ------    -------    -----
Net change in net interest income             $582    $ 184    $ 766        $  389    $  (515)   $(126)
                                              ====    =====    =====        ======    =======    =====
</TABLE>


                                       30
<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 $36 for 2004, $88 for 2003 and $170 for
2002. The provision for loan losses was decreased in 2004 and 2003 due to
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 .86% of total loans receivable at
December 31, 2004 as compared with .90% and .81% at December 31, 2003 and 2002,
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.


                                       31
<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)                        2004      2003      2002      2001      2000
----------------------                      -------   -------   -------   -------   -------
<S>                                         <C>       <C>       <C>       <C>       <C>
Average loans outstanding                   $72,744   $69,730   $71,337   $71,928   $66,870
                                            =======   =======   =======   =======   =======
Total gross loans at end of year            $76,978   $70,886   $69,598   $72,615   $70,010
                                            =======   =======   =======   =======   =======

Allowance for loan losses at January 1      $   637   $   564   $   445   $   440   $   461
Losses charged to allowance
   Commercial                                    --        --        27         7        13
   Real estate                                   --        28        --         6        --
   Consumer                                      25         5        30        24        12
                                            -------   -------   -------   -------   -------
                                                 25        33        57        37        25
                                            -------   -------   -------   -------   -------
Recoveries credited to allowance
   Commercial                                    --         9        --        --        --
   Real estate                                   --        --        --        --        --
   Consumer                                      15         9         6         5         4
                                            -------   -------   -------   -------   -------
                                                 15        18         6         5         4
                                            -------   -------   -------   -------   -------
Net charge-offs                                  10        15        51        32        21

Provision for loan losses                        36        88       170        37        --
                                            -------   -------   -------   -------   -------
Allowance for loan losses at December 31    $   663   $   637   $   564   $   445   $   440
                                            =======   =======   =======   =======   =======
Ratio of net charge-offs to average loans
   outstanding                                 0.01%     0.02%     0.07%     0.04%     0.03%
Allowance as a percentage of total
   gross loans                                 0.86%     0.90%     0.81%     0.61%     0.62%
</TABLE>


                                       32
<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>
                     2004                 2003                 2002                  2001                2000
              ------------------   ------------------   ------------------   ------------------   ------------------
              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     $130      23.41%     $115      20.39%     $108      21.25%     $ 92      20.47%     $ 70      19.07%
Real estate     256      48.71%      246      50.20%      235      69.25%      262      70.87%      257      72.10%
Consumer        135      27.88%      167      29.41%      126       9.50%       83       8.66%       86       8.83%
Unallocated     142         --       109         --        95         --         8         --        27         --
               ----     ------      ----     ------      ----     ------      ----     ------      ----     ------
   Total       $663     100.00%     $637     100.00%     $564     100.00%     $445     100.00%     $440     100.00%
               ====     ======      ====     ======      ====     ======      ====     ======      ====     ======
</TABLE>

NON-INTEREST INCOME

2004 COMPARED TO 2003

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

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.

NON-INTEREST EXPENSE

     Salary expense and employee benefits represent the largest component, or
47.67% 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,


                                       33
<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.

2004 COMPARED TO 2003

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

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

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

     Other expenses increased $138 or 26.38% to $661 in 2004 from $523 in 2003.
This increase mainly resulted from increased legal and audit fees incurred for
Securities and Exchange Commission filings and a $50,000 donation made to
Northern Lehigh School District Education Foundation. The bank received a 90% or
$45,000 state tax credit to offset this donation.

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.

INCOME TAXES

     Income tax expense was $607 for 2004 as compared to $341 for 2003 and $641
for 2002. The 78.00% increase in tax expense in 2004 as compared to 2003 was
mainly the result of a decrease of tax-free interest income and an increase in
pre-tax income. The decrease of 46.80% in 2003 as compared to 2002 was the
result of an increase in income from tax-free loans and securities.


                                       34
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NET INCOME

2004 COMPARED TO 2003

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

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

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, which resulted in a decrease in net interest income and
a lower net interest margin.

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

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
stockholders' 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, 2004 totaled $123,467 as compared
to $110,087 at December 31, 2003, an increase of $13,380, or 12.15%. Securities
available-for-sale increased to $44,148 at December 31, 2004 compared to $27,382
at December 31, 2003, whereas securities held to maturity decreased to $79,319
at December 31, 2004, from $82,705 at December 31, 2003. Other than the U.S.
Government and its agencies, the Bank holds no other securities of a single
issuer whose aggregate carrying value exceeds 10% of stockholders' equity.

     The carrying value of the available-for-sale securities portfolio as of
December 31, 2004 includes net unrealized losses of $502 (reflected as
accumulated other comprehensive loss of $331 in stockholders' equity, net of
deferred income taxes of $171) compared to net unrealized loss of $191
(reflected as accumulated other comprehensive loss of $126 in stockholders'
equity, net of deferred income taxes of $65) as of December 31, 2003.


                                       35
<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)                           2004       2003       2002
----------------------                         --------   --------   -------
<S>                                            <C>        <C>        <C>
Held to maturity securities:
   U.S. Government agencies and corporations   $ 27,162   $ 21,992   $21,033
   State and political subdivisions              46,425     50,571    43,323
   Mortgage-backed securities                     3,135      5,845    13,677
   Corporate securities                           2,597      4,297     6,320

Available-for-sale securities:
   Mortgage-backed securities                    43,475     26,800     9,646
   Equity                                           673        582       398
                                               --------   --------   -------
      Total securities                         $123,467   $110,087   $94,397
                                               ========   ========   =======
</TABLE>

     TABLE 5 presents the maturities and average weighted yields of the debt
securities portfolio as of December 31, 2004.

                                     TABLE 5
              MATURITIES AND WEIGHTED AVERAGE YIELDS OF SECURITIES

<TABLE>
<CAPTION>
                                                           After one but within   After five but within
                                         Within one year        five years              ten years         After ten 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%      $   40   5.93%         $14,391    4.03%     $29,044   4.81%

Held to maturity:
   U.S. Government agencies                  --    0.00%       2,000   3.37%          10,166    3.25%      14,996   4.16%
   State and political subdivisions(1)      100    8.05%       1,698   6.71%          13,298    6.86%      31,329   7.38%
   Mortgage-backed securities                --    0.00%          --   0.00%               2   11.92%       3,133   6.30%
   Other securities                          --    0.00%         397   6.24%           1,350    6.59%         850   6.97%
                                           ----    ----       ------                 -------   -----      -------   ----
                                            100                4,095                  24,816               50,308
                                           ----               ------                 -------              -------
      Total                                $100               $4,135                 $39,207              $79,352
                                           ====               ======                 =======              =======
</TABLE>

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


                                       36
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(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 $6,066, or 8.63% to $ 76,315 as of
December 31, 2004 from $70,249 as of December 31, 2003. Net loans receivable
represent 36.37% of total assets and 44.45% of total deposits as December 31,
2004 as compared to 35.37% and 43.17%, respectively, at December 31, 2003. 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, 2004, real estate loans amounted to $ 65,976 or
85.70% of total loans, and commercial and industrial loans amounted to $4,095,
or 5.32% 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)
                             --------------------------------------------------------------------------------------------------
                                    2004                2003                2002                2001                2000
                             ------------------  ------------------  ------------------  ------------------  ------------------
                              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                   $ 4,095     5.32%   $ 2,832     4.00%   $ 3,490     5.01%   $ 4,579     6.31%   $ 5,969     8.53%
Commercial real estate        13,925    18.09%    11,615    16.39%    11,300    16.24%    10,281    14.16%     7,378    10.54%
Residential real estate       36,115    46.92%    35,239    49.71%    35,046    50.35%    39,490    54.37%    34,710    49.58%
Real estate construction       1,376     1.79%       350     0.49%       657     0.94%     1,095     1.51%     3,690     5.27%
Home equity                   14,560    18.91%    14,136    19.94%    12,493    17.96%    10,882    14.99%    12,078    17.25%
Other consumer                 6,907     8.97%     6,714     9.47%     6,612     9.50%     6,288     8.66%     6,185     8.83%
                             -------   ------    -------   ------    -------   ------    -------   ------    -------   ------
   Total Loans Outstanding   $76,978   100.00%   $70,886   100.00%   $69,598   100.00%   $72,615   100.00%   $70,010   100.00%
                             =======   ======    =======   ======    =======   ======    =======   ======    =======   ======
</TABLE>


                                       37
<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, 2004

<TABLE>
<CAPTION>
                                           Due Under   Due 1-5    Due Over
(DOLLARS IN THOUSANDS)                      One Year    Years    Five Year    Total
----------------------                     ---------   -------   ---------   -------
<S>                                        <C>         <C>       <C>         <C>
Maturity of loans receivable:
   Commercial and commerical real estate     $4,158     $7,397     $6,465    $18,020
   Real estate construction                                         1,376      1,376
                                             ------     ------     ------    -------
      Total                                  $4,158     $7,397     $7,841    $19,396
                                             ======     ======     ======    =======
</TABLE>

<TABLE>
<CAPTION>
                                        Due 1-5    Due Over
                                         Years    Five Years
                                        -------   ----------
<S>                                     <C>       <C>
Fixed interest rates                     $3,027     $2,064
Floating or adjustable interest rates     4,370      5,777
                                         ------     ------
   Total                                 $7,397     $7,841
                                         ======     ======
</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.


                                       38
<PAGE>
NEFFS BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     Total non-performing loans (comprised of non-accruing loans and loans past
due for more than 90 days) as of December 31, 2004 were $189 compared to $475 as
of December 31, 2003. Total nonperforming loans as a percentage of total loans
were .24% at December 31, 2004 as compared to .67% at December 31, 2003. At
December 31, 2004 there was no foreclosed real estate. As of December 31, 2003
there was foreclosed real estate of $10. 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.

     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)                                 2004     2003     2002     2001     2000
----------------------                                ------   ------   ------   ------   ------
<S>                                                   <C>      <C>      <C>      <C>      <C>
Non-accruing loans                                      $126     $148     $227     $298     $  4
Accruing loans past due 90 days or more                   63      327      203       71      263
                                                        ----     ----     ----     ----     ----
   Total nonperforming loans                            $189     $475     $430     $369     $267
Foreclosed real estate                                    --       10       --       --       97
                                                        ----     ----     ----     ----     ----
   Total nonperforming assets                           $189     $485     $430     $369     $364
                                                        ====     ====     ====     ====     ====
Non-accrual loans:
   Interest income that would have been recorded on
      non-accrual loans                                   11       15       18       17       --

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

Ratios:
   Nonperforming loans to total loans                   0.25%    0.67%    0.62%    0.51%    0.38%
   Allowance for loan losses to nonperforming loans   350.79%  134.11%  131.16%  120.60%  164.79%
   Nonperforming assets to total assets                 0.09%    0.24%    0.24%    0.24%    0.25%

   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, 2004 were $171,652, an
increase of $8,958, or 5.50%, over total deposits of $162,694 as of December 31,
2003. The Corporation experienced the following increases/(decreases) for the
year 2004 as compared to 2003.

<TABLE>
<S>                                    <C>
Non-interest bearing demand deposits   8.20%
Interest-bearing demand deposits       (.49%)
Savings Deposits                       5.07%
Time Deposits                          6.14%
</TABLE>


                                       39
<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, 2004.

                                     TABLE 9
                               DEPOSIT MATURITIES

<TABLE>
<CAPTION>
                                  Time
(DOLLARS IN THOUSANDS)        Certificates
----------------------        ------------
<S>                           <C>
Three months or less             $ 2,595
Over three months
   but within six months           2,884
Over six months
   but within twelve months        3,314
Over twelve months                16,398
                                 -------
      Total                      $25,191
                                 =======
</TABLE>

LIQUIDITY

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

     Sources of asset liquidity are provided through cash, amounts due from
banks, interest-bearing deposits with banks and federal funds sold, which
totaled $5,877 at December 31, 2004 as compared to $14,242 at December 31, 2003.
The decrease in federal funds sold was used to fund increases in the
Corporation's securities portfolio. 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, 2004, available-for-sale securities totaling
$44,148 were available for liquidity purposes as compared with $27,382 at
December 31, 2003.

     Liability liquidity sources include attracting deposits at competitive
rates. Core deposits at December 31, 2004 totaled $130,456 as compared to
$123,647 at December 31, 2003. 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,
2004 and 2003. 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. Maximum borrowing capacity with the Federal Home
Loan Bank is approximately $94,126.

     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.


                                       40
<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, 2004:

<TABLE>
<CAPTION>
                LESS THAN     1-3       3-5     OVER 5
                  1 YEAR     YEARS     YEARS     YEARS    TOTAL
                ---------   -------   -------   ------   -------
<S>             <C>         <C>       <C>       <C>      <C>
Time Deposits    $36,244    $26,926   $17,423     --     $80,593
</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, 2004 totaled $7,153. This consisted of $1,810 in tax-exempt loans,
commercial real estate, construction, and land development loans, $3,350 in home
equity lines of credit, $704 in standby letters of credit and the remainder in
other unused commitments. Because these instruments have fixed maturity dates,
and because many of them will expire without being drawn upon, they do not
generally present any significant liquidity risk to the Corporation.

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

STOCKHOLDERS' EQUITY AND CAPITAL REQUIREMENTS/RATIOS

     The net effect of the activity in stockholders' equity resulted in an
increase of $2,261 in total stockholders' equity to $37,316 at December 31, 2004
from $35,055 at December 31, 2003. Stockholders' equity increased in 2004 as a
result of retained earnings of $2,466 less a decrease in accumulated other
comprehensive income of $205. At December 31, 2004, the Bank had $331 in net
unrealized losses on available-for-sale securities, as compared with $126 in net
unrealized losses at December 31, 2003. Unrealized losses in 2004 of $331 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 stockholders' 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 stockholders.

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


                                       41
<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 stockholders' equity reduced by goodwill and other
intangible assets. Tier II capital is comprised of the allowance for loan losses
and any qualifying debt obligations. Risk-based capital standards require the
Corporation and the Bank to have Tier I capital of at least 4% and total capital
(including Tier I capital) of at least 8% of risk-weighted assets.

     The Corporation and the Bank are also subject to leverage capital
requirements. This requirement compares capital (using the definition of Tier I
capital) to average balance sheet assets and is intended to supplement the
risk-based capital ratio in measuring capital adequacy. The guidelines set a
minimum leverage ratio of 3% for institutions that are highly rated in terms of
safety and soundness, and which are not experiencing or anticipating any
significant growth. Other institutions are expected to maintain capital levels
of at least 1% or 2% above the minimum. As of December 31, 2004, the Bank has a
Tier I leverage ratio of 17.9%.

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

                                    TABLE 10
                                 CAPITAL RATIOS

<TABLE>
<CAPTION>
                                                          December 31,   December 31,
(DOLLARS IN THOUSANDS)                                        2004           2003
----------------------                                    ------------   ------------
<S>                                                       <C>            <C>
Tier I, common stockholder's equity                          $37,255        $34,703
Tier II, allowable portion of allowance for loan losses          663            637
                                                             -------        -------
   Total capital                                             $37,918        $35,340
                                                             =======        =======
Tier I risk-based capital ratio                                40.17%         40.00%
Tier II risk-based capital ratio                               40.89%         40.74%
</TABLE>

     At December 31, 2004 and 2003, the Bank exceeded the minimum regulatory
capital requirements to be considered a "well capitalized" financial institution
under applicable federal regulations.

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


                                       42
<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.


                                       43
<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, 2004 the Corporation was more positively gapped than
December 31, 2003 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.


                                       44
<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, 2004. 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                     $ 1,778   $    --   $     --   $     --   $    --   $  1,778
Interest bearing deposits with banks        --        23         --         --        --         23
                                                                                                 --
Other securities                        13,581        82        164        297    62,060     76,184
Mortgage-backed securities               2,975     8,989      4,785      5,418    24,442     46,609
                                       -------   -------   --------   --------   -------   --------
Total securities                        16,556     9,071      4,949      5,715    86,502    122,793
                                                                                                 --
Total loans                             26,717    19,330     13,656      5,897    11,378     76,978
                                       -------   -------   --------   --------   -------   --------
Total interest earning assets           45,051    28,424     18,605     11,612    97,880    201,572
                                       -------   -------   --------   --------   -------   --------
                                                                                                 --
NOW accounts                             2,110                7,064                   --      9,174
Savings                                 10,832               56,871                   --     67,703
                                       -------   -------   --------   --------   -------   --------
Total savings deposits                  12,942        --     63,935         --        --     76,877
                                                                                                 --
CDs<$100,000                             7,848    19,637     17,643     10,309        --     55,437
CDs>$100,000                             2,595     6,198      9,284      7,114        --     25,191
                                       -------   -------   --------   --------   -------   --------
Total time deposits                     10,443    25,835     26,927     17,423        --     80,628
                                       -------   -------   --------   --------   -------   --------
                                                                                                 --

Total interest bearing liabilities      23,385    25,835     90,862     17,423        --    157,505
                                       -------   -------   --------   --------   -------   --------
                                                                                                 --
Rate sensitive gap                     $21,666   $ 2,589   $(72,257)  $ (5,811)  $97,880   $ 44,067

Cumulative gap                         $28,184   $24,254   $(48,002)  $(53,814)  $44,067
</TABLE>


                                       45
<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.


                                       46
<PAGE>
FORM 10-K

The Corporation will provide, without charge to any stockholder, a copy of its
2004 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