SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

     For the transaction period from                    to
                                     ------------------    ------------------


                        Commission File Number:
                                                ---------

                           AMERICAN BANK INCORPORATED
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

         PENNSYLVANIA                                   01-0593266
         ------------                                   ----------
(State or Other Jurisdiction of                       (I.R.S. Employer
 Incorporation or Organization)                     Identification Number)

4029 WEST TILGHMAN STREET, ALLENTOWN, PENNSYLVANIA                18104
--------------------------------------------------                -----
      (Address of Principal Executive Office)                  (Zip Code)

                                 (610) 366-1800
                                 --------------
               (Registrant's Telephone Number including area code)


           Securities Registered Pursuant to Section 12(b) of the Act:

                                      NONE
                                      ----

           Securities Registered Pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $0.10 PER SHARE
                     ---------------------------------------
                                (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file reports) and (2) has been subject to such
requirements for the past 90 days.

(1)  YES  X      NO       .
        -----        -----

(2)  YES         NO    X  .
        -----        -----

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB. [ ]

     As of February 28, 2002, there were 6,012,770 shares issued and outstanding
of the Registrant's Common Stock. The aggregate value of the voting stock held
by non-affiliates of the Registrant, computed by reference to the closing price
of the Common Stock as of February 28, 2002 was $8.7 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of Annual Report to Stockholders (Parts II and IV)

2.   Proxy Statement for the 2002 Annual Meeting of Stockholders (Part III)


<PAGE>

                                     PART I
                                     ------

ITEM 1.  BUSINESS
-----------------

AMERICAN BANK INCORPORATED

     American Bank Incorporated was organized at the direction of the Board of
Directors of American Bank for the purpose of acting as the stock holding
company of American Bank. American Bank Incorporated's assets consist primarily
of its investment in American Bank of $25.5 million. At December 31, 2001,
6,012,770 shares of American Bank Incorporated's common stock, par value $0.10
per share, were held by the public. American Bank Incorporated's principal
business is overseeing and directing the business of American Bank. At December
31, 2001, American Bank Incorporated had total consolidated assets of $368.7
million, total deposits of $258.0 million and stockholders' equity of $25.5
million.

     American Bank Incorporated's office is located at 4029 West Tilghman
Street, Allentown, Pennsylvania 18104. Its telephone number is (610) 366-1800.

AMERICAN BANK

     American Bank commenced full-service banking activities in June 1997, and
operates from a 21,400 square-foot banking center and executive office in
Allentown, Pennsylvania. While American Bank currently services its customers
from a single location, we may, in the future, develop additional branches.
American Bank's local service area primarily includes Lehigh and Northampton
counties, along with portions of Berks, Bucks and Montgomery counties, in
Pennsylvania. American Bank has rapidly established and intends to continue to
develop market recognition, along with growth in both customers and accounts, by
delivering friendly, dedicated and knowledgeable customer service, high-quality
banking products and related financial services, and attractive interest rates.
American Bank's products are strengthened by an absence of many service and
maintenance fees common among other financial institutions.

     Our principal business is attracting deposits from the general public and
using those deposits, together with borrowings and other funds, to originate
loans and to purchase investment securities. We offer a comprehensive menu of
deposit and loan products for consumer, business, institutional and governmental
customers, including interest-bearing checking and money market accounts,
savings accounts, certificates of deposit and individual retirement accounts. We
also engage in mortgage banking activities, which include the origination,
purchase and, in certain instances, subsequent sale of residential mortgage
loans.

     Pcbanker (www.pcbanker.com), the brand name for Internet banking and
financial services provided by American Bank, delivers convenience through
innovative technology, absent the restrictions of time and geography, by
offering an expanding menu of real-time, web-browser based Internet banking and
financial services. As America's first "Nationwide Community Bank", American
Bank offers the convenience of Internet banking with the "old-fashioned" service
expected from a traditional community bank. By incorporating current technology
and the resulting economies of scale, the Bank offers some of the best interest
rates in the country on both deposit and loan products, delivered with a premier
level of service.

     American Bank's office is located at 4029 West Tilghman Street, Allentown,
Pennsylvania 18104. Its telephone number is (610) 366-1800.

LENDING ACTIVITIES

     American Bank concentrates its lending activities on commercial mortgage
loans, commercial business loans, commercial construction loans and consumer
loans, including home equity, home equity lines of credit, and conventional
first mortgage loans secured by one- to four-family properties. A substantial
portion of our loan portfolio is secured by commercial and residential real
estate, either as primary or secondary collateral, located in our local market
area. We also purchase adjustable-rate mortgage loans on a nationwide basis.


<PAGE>


     LOAN PORTFOLIO COMPOSITION. The following information details the
composition of our loan portfolio in dollar amounts and in percentages (before
deductions for deferred fees and discounts, and allowance for losses) as of the
dates indicated:

<TABLE>
<CAPTION>

                                                              AT DECEMBER 31,
                                ----------------------------------------------------------------------------
                                         2001                      2000                      1999
                                ----------------------    ----------------------    ----------------------
                                 AMOUNT       PERCENT       AMOUNT      PERCENT       AMOUNT      PERCENT
                                ---------    ---------    ---------    ---------    ---------    ---------
                                                                                       (IN THOUSANDS)
<S>       <C>                   <C>              <C>      <C>              <C>      <C>              <C>
Real Estate Loans:
-----------------
Commercial(1).................. $  40,668        29.50%   $  29,183        23.89%   $  16,726        30.83%
Residential(2).................    64,810        47.01       64,466        52.78       18,475        34.06
                                ---------    ---------    ---------    ---------    ---------    ---------
   Total real estate loans....    105,478        76.51       93,649        76.67       35,201        64.89
                                ---------    ---------    ---------    ---------    ---------    ---------
Other Loans:
-----------
Consumer loans.................    11,237         8.15       10,235         8.38        8,085        14.90
Commercial.....................    21,139        15.34       18,264        14.95       10,959        20.21
                                ---------    ---------    ---------    ---------    ---------    ---------
   Total other loans...........    32,376        23.49       28,499        23.33       19,044        35.11
                                ---------    ---------    ---------    ---------    ---------    ---------

Total loans receivable........    137,854       100.00%     122,148       100.00%      54,245       100.00%
                                ---------    =========    ---------    =========    ---------    =========

Less:
----
Deferred fees and premiums.....      (267)                     (292)                     (165)
Allowance for losses...........    (1,998)                   (1,242)                     (767)
                                ---------                 ---------                 ---------
   Total loans receivable, net  $ 135,589                 $ 120,614                 $  53,313
                                =========                 =========                 =========

</TABLE>


<TABLE>
<CAPTION>

                                                AT DECEMBER 31,
                                ----------------------------------------------
                                         1998                      1997
                                ----------------------    ----------------------
                                  AMOUNT      PERCENT       AMOUNT      PERCENT
                                ---------    ---------    ---------    ---------

<S>       <C>                   <C>              <C>      <C>              <C>
Real Estate Loans:
-----------------
Commercial(1).................. $   7,127        19.88%   $   1,097        19.22%
Residential(2).................    17,417        48.58        3,542        62.04
                                ---------    ---------    ---------    ---------
   Total real estate loans....     24,544        68.46        4,639        81.26
                                ---------    ---------    ---------    ---------
Other Loans:
-----------
Consumer loans.................     4,945        13.79          881        15.43
Commercial.....................     6,360        17.75          189         3.31
                                ---------    ---------    ---------    ---------
   Total other loans...........    11,305        31.54        1,070        18.74
                                ---------    ---------    ---------    ---------

Total loans receivable........     35,849       100.00%       5,709       100.00%
                                ---------    =========    ---------    =========

Less:
----
Deferred fees and premiums.....       (57)                      (91)
Allowance for losses...........      (508)                     (111)
                                ---------                 ---------
   Total loans receivable, net  $  35,284                 $   5,507
                                =========                 =========

</TABLE>

--------------
(1) Commercial real estate loans include multi-family residential real estate
    loans.
(2) Residential real estate loans include one- to four-family real estate loans
    and residential construction loans.


<PAGE>


     LOAN APPROVALS. Loan approvals are made in accordance with a policy that
includes delegated authorities approved by the Board of Directors. Loans are
approved at various management levels up to and including the Board of
Directors, depending on the amount of the loan. Generally, loans of $500,000 or
less may be approved by one or more authorized senior officers, as required by
policy. Loans over $500,000 require approval by a Loan Committee or by the Board
of Directors.

     COMMERCIAL REAL ESTATE LOANS. American Bank originates mortgage loans for
the acquisition and refinancing of commercial real estate properties. At
December 31, 2001, $40.7 million, or 29.5% of American Bank's total loan
portfolio consisted of loans secured by commercial real estate properties, which
include multi-family residential real estate loans. The majority of our
commercial real estate loans are secured by office buildings, manufacturing
facilities, distribution/warehouse facilities, and retail centers, which are
generally located in our local market area. The interest rates for our
commercial real estate loans generally adjust at one- to five-year intervals,
and are typically renegotiated at the end of such period or automatically
converted to a floating interest rate. The loans generally have a five-year term
with an amortization period of no greater than twenty years. At December 31,
2001, the largest such loan had a balance of $2.3 million. At that date we had
no commercial real estate loans that were delinquent in excess of 30 days.

     American Bank generally requires appraisals of the properties securing
commercial real estate loans. Appraisals are performed by an independent
appraiser designated by American Bank and all appraisals are reviewed by
management. American Bank considers the quality and location of the real estate,
the credit of the borrower, the cash flow of the project and the quality of
management involved with the property.

     Loan-to-value ratios on our commercial real estate loans are generally
limited to 80% of the appraised value of the secured property. As part of the
criteria for underwriting commercial real estate loans, we generally impose a
debt service coverage ratio (the ratio of net operating income before payment of
debt service compared to debt service) of not less than 1.2:1. It is also our
general practice to obtain personal guarantees from the principals of our
corporate borrowers on commercial real estate loans.

     Loans secured by commercial real estate typically have higher balances and
are more difficult to evaluate and monitor and, therefore, involve a greater
degree of credit risk than other types of loans. If the estimate of value proves
to be inaccurate, the property may not provide us with full repayment in the
event of default and foreclosure. Because payments on these loans are often
dependent on the successful development, operation, and management of the
properties, repayment of these loans may be affected by adverse conditions in
the real estate market or the economy. American Bank seeks to minimize these
risks by limiting the maximum loan-to-value ratio and strictly scrutinizing the
financial condition of the borrower, the quality of the collateral and the
management of the property securing the loan. American Bank also generally
obtains loan guarantees from financially capable parties based on a review of
personal financial statements.

     MULTIFAMILY RESIDENTIAL REAL ESTATE LENDING. American Bank originates
mortgage loans secured by multifamily dwelling units (more than four units). At
December 31, 2001, $3.4 million, or 2.5% of our total loan portfolio consisted
of loans secured by multifamily residential real estate (multi-family
residential real estate loans are included in commercial real estate loans in
the loan portfolio composition table above). The majority of our multifamily
residential real estate loans are secured by apartment buildings located in the
Bank's local market area. The interest rates for our multifamily residential
real estate loans generally adjust at one- to five-year intervals, with the rate
to be negotiated at the end of such term or to automatically convert to a
floating interest rate. These loans generally have a five-year term with an
amortization period of no more than twenty years. At December 31, 2001, the
largest such loan had a balance of $964,000. At that date, we had no multifamily
residential real estate loans that were delinquent in excess of 30 days.


<PAGE>


     ONE- TO FOUR-FAMILY REAL ESTATE MORTGAGE LENDING. American Bank originates
loans secured by first mortgages on existing or new construction, one-to-four
family residences located in its local market area. We purchase one-to-four
family real estate loans, primarily adjustable rate mortgages, from other
lenders. The loans purchased are of similar credit quality and meet
substantially similar credit standards as loans we originate. We monitor this
portfolio for geographic concentrations. At December 31, 2001, $64.8 million, or
47.0% of American Bank's total loans receivable, consisted of one- to
four-family residential real estate and construction loans. We originated $18.2
million, $10.6 million, and $14.5 million of one-to-four-family residential
mortgage and construction loans for the years ended December 31, 2001, 2000, and
1999 respectively. We purchased adjustable rate one-to-four family residential
mortgages of $ 24.7 million, $45.8 million, and $0 during the years ended
December 31, 2001, 2000 and 1999, respectively. At December 31, 2001, American
Bank had no mortgage loans secured by one-to-four family real estate that were
delinquent in excess of 30 days.

     Generally, our fixed-rate one-to-four family mortgage loans have maturities
ranging from ten to 30 years and are fully amortizing, with monthly payments
sufficient to repay the total amount of the loan with interest by the end of the
loan term. Due to the inherent interest rate risk associated with holding
long-term assets, we have historically sold a substantial portion of the fixed
rate residential mortgage loans we originate. During the years ended December
31, 2001, 2000 and 1999, we sold $12.3 million, $4.9 million, and $9.8 million
of fixed rate one-to-four family mortgage loans, respectively. However,
depending on interest rates, we may keep fixed-rate mortgages in its portfolio.
Our fixed-rate loans customarily include "due on sale" clauses, which gives us
the right to declare a loan immediately due and payable in the event the
borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan has not been paid in full.

     American Bank originates and purchases adjustable-rate mortgage ("ARM")
loans at rates and terms competitive with market conditions. At December 31,
2001, $47.4 million, or 34.4% of our total loan portfolio, was comprised of
residential ARM loans and subject to periodic interest rate adjustments. We
typically originate and purchase ARM loans primarily for our own portfolio. Our
ARM loans provide for an initial interest rate, which may adjust every one to
ten years. After the initial interest rate period the loans adjust every year
and are based on the one-year U.S. Treasury constant maturity index. Our ARM
loans are typically based on up to a 30-year amortization schedule. For one-year
ARM loans, we qualify the borrowers at the initial rate plus two percent. For
all other ARM loans, we qualify the borrowers at the initial rate. Our current
ARM loans do not provide for negative amortization. American Bank's ARM loans
generally provide for initial, ongoing, and lifetime interest rate adjustments,
and may offer discounted or "teaser" initial interest rates that may be more
than 2% below the interest rate to which the loan would adjust at the first
interest adjustment date, based on the market rates of interest at the time the
loan was originated or purchased. The retention of ARM loans in our loan
portfolio helps reduce our exposure to changes in interest rates.

     RESIDENTIAL CONSTRUCTION LENDING. American Bank originates residential
construction loans to individuals who have a contract with an approved builder
for the construction of their residence. As of December 31, 2001, $1.1 million,
or 0.8%, of our total loan portfolio consisted of residential construction
loans. Our construction loans are generally secured by property located in our
primary market area. Construction loans to individuals are generally originated
pursuant to the same policy regarding loan-to-value ratios as are used in
connection with loans secured by one- to four-family residential real estate. At
December 31, 2001, we had no residential construction loans that were delinquent
in excess of 30 days.


<PAGE>


     CONSUMER LENDING. American Bank originates a variety of consumer loans
primarily on a secured basis. The loans are generally originated in our local
market area, however, we currently originate consumer loans, primarily home
equity loans, throughout the Commonwealth of Pennsylvania through pcbanker.com.
Our business plan provides for continued growth in originating and closing home
equity loan products throughout the Commonwealth of Pennsylvania. Consumer loans
include home equity loans, home equity lines of credit, loans secured by
certificates of deposit, savings accounts, automobiles, and unsecured personal
loans. Our home equity loans are typically secured by a first or second mortgage
on residential property, and have repayment terms ranging from one year to 15
years. American Bank's home equity lines of credit are also secured, typically
by a first or second mortgage on residential property and have variable interest
rates that are tied to The Wall Street Journal prime lending rate (the "Prime
Rate"), which may adjust daily. These loans generally mature in 15 years or
less. Other consumer loans are made with fixed interest rates and have terms
that generally do not exceed five years. At December 31, 2001, consumer loans
amounted to $11.2 million, or 8.2% of the total loan portfolio. At that date, we
had no consumer loans that were delinquent in excess of 30 days.

     At December 31, 2001, the largest component of the consumer loan portfolio
consisted of fixed-rate home equity loans, which totaled $8.2 million, or 6.0%
of the total loan portfolio. At December 31, 2001, outstanding balances of
variable-rate home equity lines of credit totaled $2.1 million with total unused
commitments of $2.2 million.

     American Bank views consumer lending as an important part of its business,
as consumer loans generally have shorter terms and higher yields than fixed rate
residential mortgage loans, thus reducing exposure to changes in interest rates.
In addition, we believe that offering consumer loans helps to expand and create
stronger ties to our customer base. Subject to market conditions, we intend to
continue emphasizing consumer lending. Consumer loans entail greater credit risk
than one- to four-family residential mortgage loans, particularly in the case of
consumer loans that are unsecured or secured by rapidly depreciating assets. In
such cases, any repossessed collateral for a defaulted consumer loan may not
provide an adequate source of repayment of the outstanding loan balance as a
result of the greater likelihood of damage, loss, or depreciation. The remaining
deficiency often does not warrant further substantial collection efforts against
the borrower, beyond obtaining a deficiency judgment. In addition, consumer loan
collections are dependent on the borrower's financial stability, and may be
adversely affected by job loss, divorce, illness, or personal bankruptcy.
Furthermore, the application of various Federal and state laws, including
Federal and state bankruptcy and insolvency laws, may limit the amount that can
be recovered on such loans. In addition, home equity loans have greater credit
risk than one- to four-family residential mortgage loans because they often are
secured by mortgages subordinated to the existing first mortgage on the
property, which we may or may not hold.

     American Bank's underwriting procedures for consumer loans include an
assessment of the applicant's credit history and the ability to meet existing
and proposed debt obligations. Although the applicant's creditworthiness is the
primary consideration, the underwriting process also includes a comparison of
the value of the collateral, if any, to the proposed loan amount. We generally
underwrite and originate our consumer loans internally, which we believe limits
our exposure to credit risks associated with loans underwritten or purchased
from brokers and other external sources.

     COMMERCIAL LOANS. American Bank originates commercial loans, which are
frequently secured by real estate, although the decision to grant a commercial
loan depends primarily on the creditworthiness and cash flow of the borrower,
and secondarily on the value of and ability to liquidate the collateral. We
generally require annual financial statements and Federal tax returns from our
corporate borrowers, and personal guarantees from the business principals. We
also generally require an appraisal of any real estate that secures the loan.
Our portfolio of commercial business loans as of December 31, 2001, had a
balance of $21.1 million, which represented 15.3% of the total loan portfolio.
On that date, the largest such loan had a balance of $1.1 million. As of
December 31, 2001, American Bank had no commercial business loans that were
delinquent in excess of 30 days.

     Commercial lending generally involves greater credit risk than residential
mortgage or consumer lending, and involves risks that are different from those
associated with commercial real estate lending. Although commercial loans may be
collateralized by equipment or other business assets, the liquidation of
collateral in the event of a borrower default may represent an insufficient
source of repayment because equipment and other business assets may, among other
things, be obsolete or of limited use. Accordingly, the repayment of a
commercial loan depends primarily on the creditworthiness and projected cash
flow of the borrower (and any guarantors), while liquidation of collateral is
considered a secondary source of repayment.


<PAGE>


     MATURITY OF LOAN PORTFOLIO. The following table sets forth certain
information at December 31, 2001, regarding the dollar amount of loans maturing
in our portfolio based on their contractual terms to maturity, but does not
include scheduled payments or potential prepayments. Demand loans, and loans
having no stated schedule of repayments and no stated maturity, are reported as
becoming due within one year. Loan balances do not include undisbursed loan
proceeds, unearned discounts, unearned income, and allowance for loans losses.
Mortgages that have adjustable or renegotiable interest rates are shown as
maturing in the period during which the interest rate adjusts. The table does
not reflect the effects of possible prepayments or enforcement of due-on-sale
clauses.

<TABLE>
<CAPTION>

                                                                MULTI-FAMILY AND         CONSTRUCTION OR
                                       ONE- TO FOUR-FAMILY   COMMERCIAL REAL ESTATE        DEVELOPMENT             CONSUMER
                                      ---------------------  ----------------------   --------------------     --------------------
                                                   WEIGHTED               WEIGHTED                WEIGHTED                WEIGHTED
                                                   AVERAGE                AVERAGE                 AVERAGE                 AVERAGE
                                        AMOUNT       RATE      AMOUNT       RATE      AMOUNT        RATE       AMOUNT       RATE
                                      ---------      ----    ---------      ----    ---------       ----      --------      ----
                                                                                    (DOLLARS IN THOUSANDS)
Due During Years Ending December 31,
------------------------------------

<S>                                   <C>            <C>     <C>            <C>     <C>             <C>       <C>           <C>
2002(1) .......................       $  13,494      6.79%   $   7,692      7.41%   $   1,085       7.12%     $    411      5.20%
2003 to 2006 ..................          34,385      6.83       30,635      7.99           --         --         3,517      7.46
2007 and beyond................          15,846      7.15        2,341      7.18           --         --         7,309      6.93
                                      ---------      ----    ---------      ----    ---------       ----      --------      ----
Total .........................       $  63,725      6.90%   $  40,668      7.84%   $   1,085       7.12%     $ 11,237      7.04%
                                      =========      ====    =========      ====    =========       ====      ========      ====
</TABLE>



<TABLE>
<CAPTION>
                                       COMMERCIAL BUSINESS        TOTAL
                                      --------------------   ------------------
                                                  WEIGHTED             WEIGHTED
                                                  AVERAGE             AVERAGE
                                       AMOUNT       RATE     AMOUNT     RATE
                                      --------      ----    --------    ----

Due During Years Ending December 31,
------------------------------------

<S>                                   <C>           <C>     <C>         <C>
2002(1) .......................       $  8,660      5.97%   $ 31,342    6.71%
2003 to 2006 ..................          9,545      8.14      78,082    7.47
2007 and beyond................          2,934      6.51      28,430    7.03
                                      --------      ----    --------    ----
Total .........................       $ 21,139      7.02%   $137,854    7.21%
                                      ========      ====    ========    ====
</TABLE>
------------------

(1) Includes demand loans, loans having no stated maturity and overdraft loans.


     The total amount of loans due after December 31, 2002, that have
predetermined interest rates is $40.9 million, while the total amount of loans
due after this date that have floating or adjustable interest rates is $65.6
million.


<PAGE>


PROBLEM ASSET CLASSIFICATION PROCEDURES

     NON-PERFORMING ASSETS AND DELINQUENCIES. When a borrower fails to make a
required payment on a loan, we attempt to cure the deficiency by contacting the
borrower and seeking the payment. Late notices are mailed no more than 16 days
after the payment is due. In most cases, deficiencies are cured promptly. If a
delinquency continues, additional contact is made through written notice and
direct contact from an assigned account officer. American Bank will remain in
continual contact with the borrower and, if needed, will attempt to work out a
payment schedule acceptable to us and the borrower. While we generally prefer to
work with borrowers to resolve such problems, we will institute foreclosure or
other proceedings, as necessary, to minimize any potential loss.

     Loans are generally placed on non-accrual status if, in the opinion of
management, principal or interest payments are not likely to be made in
accordance with the terms of the loan agreement, or when principal or interest
is past due more than 90 days. Interest accrued but not collected at the date
the loan is placed on non-accrual status is reversed against income in the
current period. Loans may be reinstated to accrual status when payments are less
than 90 days past due and, in the opinion of management, collection of the
remaining balance can be reasonably expected. The Board of Directors is informed
monthly of the status of all loans delinquent more than 15 days.

     At December 31, 2001, we had no loans delinquent more than 30 days, no
loans classified as non-performing or non-accrual, and no assets acquired in
settlement of loans. During the years ended December 31, 2001, 2000 and 1999 we
did not foreclose on any loans, nor were any loans classified as nonperforming
or nonaccrual.

     Subsequent to December 31, 2001, a commercial business loan exhibited
characteristics that lead management to classify it as nonperforming, even
though it was delinquent less than 90 days. Management is currently negotiating
a workout on this loan.

     REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS. Real estate acquired by
American Bank as a result of foreclosure or by deed in lieu of foreclosure would
be classified as real estate acquired in settlement of loans until sold. At
December 31, 2001 we had no real estate acquired in settlement of loans.

     RESTRUCTURED LOANS. Under Generally Accepted Accounting Principles,
American Bank is required to account for certain loan modifications or
restructurings as "troubled debt restructurings." In general, the modification
or restructuring of a debt constitutes a troubled debt restructuring if American
Bank, for economic or legal reasons related to the borrower's financial
difficulties, grants a concession to the borrower that we would not otherwise
consider. Debt restructurings or loan modifications for a borrower do not
necessarily always constitute troubled debt restructurings, and troubled debt
restructurings do not necessarily result in non-accrual loans. We had no
restructured loans as of December 31, 2001.

     ASSET CLASSIFICATION. The Pennsylvania Department of Banking and Board of
Governors of the Federal Reserve System have adopted various regulations
regarding problem assets of banking institutions. The regulations require that
each insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, regulatory
examiners have authority to identify problem assets and, if appropriate, require
them to be classified. There are three classifications for problem assets:
"Substandard," "Doubtful," and "Loss." "Substandard" assets have one or more
defined weaknesses and are characterized by the distinct possibility that
American Bank will sustain some loss if the deficiencies are not corrected.
"Doubtful" assets have the weaknesses of "Substandard" assets with the
additional characteristic that the weaknesses make collection or liquidation in
full on the basis of currently existing facts, conditions, and values
questionable, and there is a high probability of loss, although the amount of
such loss may not be determinable at such time. An asset classified as "Loss" is
considered uncollectible and of such little value that continuance as an asset
of American Bank is not warranted. If an asset or portion thereof is classified
as "Loss", we must establish a specific allowance for loss for the amount of the
portion of the asset classified as "Loss." All or a portion of general loan loss
allowances established to cover possible losses related to assets classified
"Substandard" or "Doubtful" can be included in determining our regulatory
capital, while specific valuation allowances for loan losses generally do not
qualify as regulatory capital. Assets that do not currently expose us to
sufficient risk to warrant classification in one of the aforementioned
categories but possess weaknesses are designated as "Special Mention" and
monitored by us.

     At December 31, 2001, the aggregate amount of our assets classified as
"Special Mention" and "Substandard" were $756,000 and $1,070,000, respectively.
No assets were classified as "Doubtful," and no assets were classified as
"Loss." Subsequent to December 31, 2001, management reclassified the $1,070,000
"Substandard" loan as "Doubtful".

<PAGE>


     ALLOWANCE FOR LOAN LOSSES. American Bank has established a systematic
methodology for the determination of provisions for loan losses. The methodology
is set forth in a formal policy and takes into consideration the need for an
overall general valuation allowance as well as specific allowances that are tied
to individual loans.

     In originating loans, we recognize that losses will occur and that the risk
of loss will vary with, among other things, the type of loan being made, the
creditworthiness of the borrower over the term of the loan, general economic
conditions and, in the case of a secured loan, the quality of the collateral for
the loan.

     The general valuation allowance is maintained to cover losses inherent in
the loan portfolio. Management's periodic evaluation of the adequacy of the
allowance is based on 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 and current economic conditions, as such factors
may be applicable. Specific valuation allowances are established to absorb
losses on loans for which full collectibility cannot be reasonably assured.

     Our evaluation of the adequacy of the allowance for loan losses includes a
review of all loans on at least a quarterly basis. For residential mortgage
loans and consumer loans, the primary factors used to determine the adequacy of
the allowance are delinquency, collateral value, general economic conditions
and, where applicable, individual borrower information that is known to us. For
commercial loans and commercial real estate loans the review includes financial
performance of the borrower, payment history, collateral value, general economic
conditions and more specific economic conditions affecting specific industries
or business activities of the borrowers within the portfolio segments.

     The amount of the general portion of the allowance for loan losses is
determined by applying loss factors to the outstanding loans in the portfolio.
The amount of the factor applied to the loans is dependent upon the type of loan
and management's assessment of the relative risk associated with that loan type.
The factors may change from time to time if conditions or events warrant such
change. American Bank commenced operations in 1997, and as of December 31, 2001
had not charged off any loans. In addition, we have had very limited amounts of
loan delinquencies. As a result, we rely upon the past experience and knowledge
of management, gained at other banking institutions where they have worked, as a
basis for determining our loss factors.

     Management maintains an allowance for loan losses that it considers
adequate based on the evaluation process that it performs 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.

     At December 31, 2001 and December 31, 2000, American Bank had an allowance
for loan losses of approximately $1,998,000 and $1,242,000, respectively.
Management believes that the allowance for loan losses at December 31, 2001 and
December 31, 2000, is adequate to absorb losses inherent in the portfolio.
Although management believes that it uses the best information available to make
such determinations, future adjustments to the allowance for loan losses may be
necessary, and the results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations. Furthermore, while American Bank believes it has
established its existing allowance for loan losses in accordance with Generally
Accepted Accounting Principles, there can be no assurance that the Pennsylvania
Department of Banking or Board of Governors of the Federal Reserve System, in
reviewing our loan portfolio, will not request us to increase our allowance for
loan losses. In addition, because future events affecting borrowers and
collateral cannot be predicted with certainty, there can be no assurance that
the existing allowance for loan losses is adequate or that material increases
will not be necessary should the quality of any loans deteriorate as a result of
the factors discussed above. Any material increase in the allowance for loan
losses may adversely affect American Bank's financial condition and results of
operations.


<PAGE>


     The following table sets forth an analysis of American Bank's allowance for
loan losses.

<TABLE>
<CAPTION>

                                                                 YEARS ENDED
                                                                 DECEMBER 31,
                                         ------------------------------------------------------------
                                            2001        2000         1999        1998         1997
                                         ---------   ---------    ---------   ---------    ---------
                                                            (DOLLARS IN THOUSANDS)

<S>                                      <C>         <C>          <C>         <C>          <C>
Balance at beginning period............  $   1,242   $     767    $     508   $     111    $      --
Provision for loan losses..............        651         475          259         397          111
Allowance  recorded in connection with
  purchase of loan pools...............        105          --           --          --           --
                                         ---------   ---------    ---------   ---------    ---------
Balance at end of period...............  $   1,998   $   1,242    $     767   $     508    $     111
                                         =========   =========    =========   =========    =========
Ratio of net charge-offs during the
  period to average loans outstanding
  during the period....................          0%          0%           0%          0%           0%
                                         =========   =========    =========   =========    =========
Ratio of net charge-offs during the
  period to average non-performing
  assets...............................          0%          0%           0%          0%           0%
                                         =========   =========    =========   =========    =========
</TABLE>

     The distribution of our allowance for loan losses at the dates indicated is
summarized as follows:

<TABLE>
<CAPTION>

                                                               DECEMBER 31,
                   ------------------------------------------------------------------------------------------------------
                                 2001                              2000                               1999
                   --------------------------------  --------------------------------  ----------------------------------
                                           PERCENT                           PERCENT                            PERCENT
                                           OF LOANS                          OF LOANS                           OF LOANS
                                 LOAN      IN EACH                 LOAN      IN EACH                  LOAN      IN EACH
                   AMOUNT       AMOUNTS    CATEGORY   AMOUNT     AMOUNTS     CATEGORY    AMOUNT     AMOUNTS     CATEGORY
                   OF LOSS        BY       TO TOTAL   OF LOSS       BY       TO TOTAL    OF LOSS       BY       TO TOTAL
                   ALLOWANCE   CATEGORY     LOANS    ALLOWANCE   CATEGORY     LOANS     ALLOWANCE   CATEGORY     LOANS
                   ---------  ---------   ---------  ---------   ---------  ---------   --------   ----------  ---------
                                                          (DOLLARS IN THOUSANDS)

<S>                <C>        <C>             <C>    <C>         <C>            <C>     <C>        <C>             <C>
Commercial.......  $     610  $  21,139       15.34% $     274   $  18,264      14.95%  $    164   $   10,959      20.21%
Commercial
 mortgage........        578     40,668       29.50        391      29,183      23.89        231       16,726      30.83
Residential
 mortgage........        400     64,810       47.01        341      64,466      52.78        125       18,475      34.06
Consumer.........        125     11,237        8.15        107      10,235       8.38         84        8,085      14.90
Unallocated......        285         --          --        129          --         --        163           --         --
                   ---------  ---------   ---------  ---------   ---------  ---------   --------   ----------  ---------

 Total...........  $   1,998  $ 137,854      100.00% $   1,242   $ 122,148     100.00%  $    767   $   54,245     100.00%
                   =========  =========   =========  =========   =========  =========   ========   ==========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                  DECEMBER 31,
                    ----------------------------------------------------------------------
                                  1998                                1997
                    --------------------------------  ------------------------------------
                                             PERCENT                            PERCENT
                                             OF LOANS                           OF LOANS
                                  LOAN       IN EACH                 LOAN       IN EACH
                    AMOUNT OF    AMOUNTS     CATEGORY  AMOUNT OF    AMOUNTS    CATEGORY
                      LOSS          BY       TO TOTAL     LOSS        BY        TO TOTAL
                    ALLOWANCE    CATEGORY     LOANS     ALLOWANCE   CATEGORY     LOANS
                    ----------  ----------  -------    ---------    ---------  --------
                                           (DOLLARS IN THOUSANDS)

<S>                 <C>         <C>            <C>     <C>          <C>            <C>
Commercial........  $       95  $    6,360     17.75%  $      20    $     881      15.43%
Commercial
 mortgage.........          91       7,127     19.88          25        1,097      19.22
Residential
 mortgage.........         126      17,417     48.58          39        3,542      62.04
Consumer..........          52       4,945     13.79          22          189       3.31
Unallocated.......         144          --       --            5           --        --
                    ----------  ----------  -------    ---------    ---------  --------

 Total............  $      508  $   35,849    100.00%  $     111    $   5,709     100.00%
                    ==========  ==========  ========   =========    =========  =========
</TABLE>


INVESTMENT ACTIVITIES

     Our securities portfolio is managed by our President and our Chief
Financial Officer in accordance with a written investment policy of the Board of
Directors that addresses strategies, types, and levels of permitted investments.

     At December 31, 2001, our securities portfolio equaled $204.0 million, or
55.3% of total assets. Our investment portfolio is comprised of mortgage-backed
securities, U.S. government and agency securities, corporate debt securities,
trust preferred securities, mutual funds and short-term commercial paper. At
December 31, 2001, mortgage-backed securities amounted to $78.0 million, U.S.
government and agency securities amounted to $29.1 million, corporate
obligations, including $14.0 million of short-term commercial paper, amounted to
$62.4 million,


<PAGE>


trust preferred securities amounted to $4.0 million, mutual funds amounted to
$30.5 million and restricted equity investments in correspondent banks amounted
to $4.9 million. At December 31, 2001, there were no securities of a single
issuer (excluding U.S. Government and its agencies and corporations) that
exceeded 10% of stockholders' equity.

     We classify securities as either available for sale or held to maturity
based upon our intent and ability to hold such securities. Securities available
for sale include debt and equity securities that are held for an indefinite
period of time and are not intended to be held to maturity. Securities available
for sale include securities that we intend to use as part of our overall
asset/liability management strategy and that may be sold in response to changes
in interest rates and resultant prepayment risk and other factors related
thereto. Securities available for sale are carried at fair value and unrealized
gains and losses (net of related tax effects) on such securities are excluded
from earnings but are included in stockholders' equity. Upon realization, such
gains and losses will be included in our earnings. Investment securities and
mortgage-backed securities that we have the positive intent and the ability to
hold to maturity are classified as held to maturity. Securities held to maturity
are carried at cost and are adjusted for amortization of premiums and accretion
of discounts over the estimated lives of the securities.

     Our securities portfolio composition is designed to provide a liquid
portfolio, yet maximize yield on a risk-adjusted basis. The process by which we
decide to acquire debt instruments, trust preferred securities, and corporate
and municipal obligations is similar to that of underwriting a loan. We evaluate
the potential credit risk associated with these types of investment instruments
by becoming familiar with the institution, its earnings history, and its ability
to meet its debt obligations.

     The amortized cost and approximate fair value of securities as of December
31, 2001, 2000 and 1999 are summarized as follows:

<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31, 2001
                                                ---------------------------------------------------------------
                                                                      GROSS           GROSS
                                                                   UNREALIZED       UNREALIZED
                                                AMORTIZED COST        GAINS           LOSSES        FAIR VALUE
                                                --------------    -------------    -------------   -------------
                                                                         (IN THOUSANDS)
<S>                                             <C>              <C>              <C>             <C>
Available for sale securities:
   U.S. Government agencies................     $      26,351    $         294    $          --   $      26,645
   Corporate notes.........................            45,079            1,216             (228)         46,067
   Mortgage backed securities..............            67,375              326              (83)         67,618
   Mutual funds............................            30,470               15               --          30,485
   Trust preferred obligations.............             1,984               --              (93)          1,891
   Other securities........................             2,505                3              (37)          2,471
                                                -------------    -------------    -------------   -------------
     Total.................................     $     173,764    $       1,854    $        (441)  $     175,177
                                                =============    =============    =============   =============

Held to maturity:
   Trust preferred obligations.............     $       2,113    $          51    $          (3)  $       2,161
   Corporate notes.........................             2,249              119               --          23,685
   Mortgage backed securities..............            10,360              181              (64)         10,477
   Other...................................               100               --               --             100
                                                -------------    -------------    -------------   -------------
     Total.................................     $      14,822    $         351    $         (67)  $      15,106
                                                =============    =============    =============   =============
</TABLE>



<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31, 2000
                                                ---------------------------------------------------------------
                                                                      GROSS           GROSS
                                                                   UNREALIZED       UNREALIZED
                                                AMORTIZED COST        GAINS           LOSSES        FAIR VALUE
                                                --------------    -------------    -------------   -------------
                                                                         (IN THOUSANDS)
<S>                                             <C>              <C>              <C>             <C>
Available for sale securities:
   U.S. Government agencies................     $      27,168    $          74    $        (113)  $      27,129
   Corporate notes.........................            21,379              234              (55)         21,558
   Mortgage-backed securities..............            12,700               73             (105)         12,668
   Trust preferred obligations.............             1,979               --             (113)          1,866
                                                -------------    -------------    -------------   -------------
     Total.................................     $      63,226    $         381    $        (386)  $      63,221
                                                =============    =============    =============   =============
Held to maturity:
   Trust preferred obligations.............     $       1,870    $          10    $        (155)  $       1,725
   Corporate notes.........................             2,247               51               --           2,298
   Mortgage-backed securities..............             8,281              177               --           8,458
   Other...................................             5,100               --               --           5,100
                                                -------------    -------------    -------------   -------------
     Total.................................     $      17,498    $         238    $        (155)  $      17,581
                                                =============    =============    =============   =============
</TABLE>


<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31, 1999
                                                ---------------------------------------------------------------
                                                                      GROSS           GROSS
                                                                   UNREALIZED       UNREALIZED
                                                AMORTIZED COST        GAINS           LOSSES        FAIR VALUE
                                                --------------    -------------    -------------   -------------
                                                                         (IN THOUSANDS)
<S>                                             <C>              <C>              <C>             <C>
Available for sale securities:
   U.S. Treasury securities................     $       1,000    $           1    $          --   $       1,001
   U.S. Government agencies................            18,630               --             (630)         18,000
   Corporate notes.........................            11,718                2             (131)         11,589
   Mortgage-backed securities..............            14,974               --             (414)         14,560
   Other securities........................             1,972               --              (78)          1,894
                                                -------------    -------------    -------------   -------------
     Total.................................     $      48,294    $           3    $      (1,253)  $      47,044
                                                =============    =============    =============   =============
Held to maturity:
   Trust preferred obligations.............     $       1,037    $          --    $         (84)  $         953
   Other...................................               100               --               --             100
                                                -------------    -------------    -------------   -------------
     Total.................................     $       1,137    $          --    $         (84)  $       1,053
                                                =============    =============    =============   =============
</TABLE>


<PAGE>


     The maturity schedule of the investment portfolio, by contractual maturity,
as of December 31, 2001, is shown below. Expected maturities may differ from
contractual maturities because the securities may be called or prepaid with or
without any penalty.

<TABLE>
<CAPTION>

                                         DUE IN ONE YEAR OR    DUE AFTER ONE YEAR     DUE AFTER FIVE YEARS
                                                LESS           THROUGH FIVE YEARS      THROUGH TEN YEARS      DUE AFTER TEN YEARS
                                        -------------------   ----------------------  ---------------------   -------------------
                                         AMOUNT      RATE       AMOUNT      RATE       AMOUNT        RATE      AMOUNT      RATE
                                        --------   --------    --------   --------    ---------    --------   --------   --------
                                                                                      (DOLLARS IN THOUSANDS)
Investment Securities
----------------------

<S>                                     <C>            <C>     <C>            <C>     <C>                     <C>
U.S. Government
   agency ...........................   $  2,001       5.39%   $ 24,350       4.98%   $      --          --%  $     --         --%
Corporate notes .....................     15,476       6.01      31,852       6.05           --          --         --         --
Trust preferred
   obligations ......................         --         --          --         --           --          --      4,097       6.41
Mutual funds ........................         --         --          --         --           --          --         --         --
Mortgage backed
   securities .......................         --         --          --         --           --          --         --         --
Other ...............................        100         --          --         --           --          --      2,505       7.12
                                        --------   --------    --------   --------    ---------    --------   --------   --------
     Total ..........................   $ 17,577       5.94%   $ 56,202       5.58%   $      --          --%  $  6,602       6.69%
                                        ========   ========    ========   ========    =========    ========   ========   ========
</TABLE>


<TABLE>
<CAPTION>

                                         NON-MATURITY AND        MORTGAGE BACKED
                                           MUTUAL FUNDS             SECURITIES                 TOTAL
                                        --------------------   --------------------    --------------------
                                         AMOUNT      RATE       AMOUNT       RATE       AMOUNT      RATE
                                        --------   ---------   ---------   --------   ---------   ---------

Investment Securities
----------------------

<S>                                     <C>                    <C>                     <C>             <C>
U.S. Government
   agency ...........................   $     --          --%  $      --         --%   $ 26,351        5.01%
Corporate notes .....................         --          --          --         --      47,328        6.04
Trust preferred
   obligations ......................         --          --          --         --       4,097        6.41
Mutual funds ........................     30,470        2.97          --         --      30,470        2.97
Mortgage backed
   securities .......................         --          --      77,735       5.81      77 735        5.81
Other ...............................         --          --          --         --       2,605        7.12
                                        --------   ---------   ---------   --------   ---------   ---------
     Total ..........................   $ 30,470        2.97%  $  77,735       5.81%  $ 188,586        5.33%
                                        ========   =========   =========   ========   =========   =========
</TABLE>


<PAGE>


DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

     Deposits are the major source of funds for our lending and investment
activities. In addition, we also generate funds from loan principal repayments
and prepayments, and from the maturities and cash flow of investment securities.
Scheduled loan repayments are a relatively stable source of funds, while deposit
inflows and outflows and loan prepayments are influenced significantly by
general interest rates and money market conditions. Borrowings from the Federal
Home Loan Bank of Pittsburgh may be used to supplement the availability of funds
from other sources, or for long-term funding purposes. We have no other
borrowing arrangements.

     Deposit instruments include NOW accounts, demand deposit accounts, money
market accounts, statement savings accounts and certificates of deposit. Deposit
account terms vary, with the principal differences being the minimum balance,
early withdrawal penalties and interest rate. We review our deposit mix and
pricing on a frequent basis. We do not utilize brokered deposits, nor have we
actively sought jumbo or other significant sources of certificates of deposit.

     We believe we are competitive in the types of accounts and interest rates
we offer on our deposit products. Commensurate with our Internet banking
strategy, we may seek to pay interest rates on deposits that are very
competitive, typically in the top one percent (1%) of banks nationally. We
determine deposit interest rates based on a number of conditions, including
rates paid by competitors, rates on U.S. Treasury securities, rates offered on
various Federal Home Loan Bank of Pittsburgh advance programs and the deposit
growth rate we are seeking to achieve.

     We may use premiums to attract new deposit accounts. Such premiums would be
reflected in an increase in our advertising and promotion expense, as well as
our cost of funds. We also seek business checking accounts and promote
individual retirement accounts.

     The following table sets forth the dollar amount of deposits in the various
types of deposit programs offered by American Bank as of the dates indicated.

<TABLE>
<CAPTION>

                                                                      DECEMBER 31,
                         -------------------------------------------------------------------------------------------------------
                                       2001                               2000                               1999
                         -------------------------------    -------------------------------    --------------------------------
                           AVERAGE                            AVERAGE                            AVERAGE
                         OUTSTANDING  INTEREST   AVERAGE    OUTSTANDING  INTEREST   AVERAGE    OUTSTANDING  INTEREST   AVERAGE
                           BALANCE      PAID       RATE       BALANCE      PAID       RATE       BALANCE      PAID       RATE
                         ----------   --------   --------   ----------   --------   --------   ----------   --------   --------
                                                                 (DOLLARS IN THOUSANDS)

<S>                      <C>          <C>                   <C>          <C>                   <C>          <C>
Demand, non-interest
 bearing............     $   21,358   $     --         --%  $    8,919   $     --         --%  $    5,228   $     --         --%
Demand,
 interest-bearing...         52,993      1,795       3.39       30,649        868       2.83       15,132        259       1.71
Savings.............         55,460      2,288       4.13       38,127      1,844       4.84       34,500      1,606       4.65
Certificates of deposit      94,130      5,394       5.73       58,212      3,605       6.19       23,546      1,184       5.03
                         ----------   --------   --------   ----------   --------   --------   ----------   --------   --------
   Total Deposits...     $  223,941   $  9,477       4.23%  $  135,907   $  6,317       4.97%  $   78,406   $  3,049   $   4.17%
                         ==========   ========   ========   ==========   ========   ========   ==========   ========   ========
</TABLE>

     The following table indicates the amount of American Bank's certificates of
deposit and other deposits by time remaining until maturity as of December 31,
2001.

<TABLE>
<CAPTION>

                                                                            MATURITY
                                                ----------------------------------------------------------------
                                                3 MONTHS OR    OVER 3 TO    OVER 6 TO     OVER 12
                                                    LESS       6 MONTHS     12 MONTHS     MONTHS        TOTAL
                                                -----------   -----------  -----------  -----------  -----------
                                                                         (IN THOUSANDS)
<S>                               <C>           <C>           <C>          <C>          <C>          <C>
Certificates of deposit less than $100,000.     $    17,281   $    17,446  $    21,380  $    18,727  $    78,834
Certificates of deposit of $100,000 or more           3,920         3,248        3,302        2,693       13,163
Public funds(1)............................           3,707           111        1,129            3        4,950
                                                -----------   -----------  -----------  -----------  -----------
Total certificates of deposit..............     $    24,908   $    20,805  $    25,811  $    21,423  $    92,947
                                                ===========   ===========  ===========  ===========  ===========
</TABLE>

------------
(1) Deposits from governmental and other public entities.


     FEDERAL HOME LOAN BANK ADVANCES. American Bank has the ability to use
advances from the Federal Home Loan Bank of Pittsburgh (FHLB) to supplement its
funds and to meet deposit withdrawal requirements. The FHLB provides various
forms of advances, or secured credit, for member financial institutions. As a
member of the FHLB, we are required to own capital stock in the FHLB and are
authorized to apply for advances on the security of


<PAGE>


such stock and certain of our mortgage loans and other assets (principally
securities that are obligations of, or guaranteed by, the U.S. Government and
government agencies), subject to certain creditworthiness standards. Depending
on the program, limitations on the amount of advances are based on the financial
condition of the member institution and the adequacy of collateral pledged to
secure the credit. See Note 8 to the Consolidated Financial Statements for
additional information related to FHLB advances.

EMPLOYEES

     As of December 31, 2001, we had 42 full-time employees and 6 part-time
employees. The employees are not represented by any collective bargaining group.
We believe our relations with our employees are good.


                           REGULATION AND SUPERVISION

     The following discussion of certain laws and regulations that are
applicable to American Bank Incorporated and American Bank, as well as
descriptions of laws and regulations contained elsewhere herein, summarizes the
aspects of such laws and regulations which are deemed to be material to American
Bank Incorporated and American Bank. However, the summary does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations. Any change in this regulation, whether by the Federal Deposit
Insurance Corporation, the Pennsylvania Department of Banking, the Board of
Governors of the Federal Reserve System or Congress, could have a material
adverse impact on American Bank Incorporated and American Bank and their
operations.

AMERICAN BANK INCORPORATED

     HOLDING COMPANY ACQUISITIONS. American Bank Incorporated is a bank holding
company within the meaning of the Bank Holding Company Act. Federal law
generally prohibits a company, without prior Federal Reserve approval, from
acquiring the ownership or control of any bank. In accordance with Board of
Governors of the Federal Reserve System policy, American Bank Incorporated is
expected to act as a source of financial strength to American Bank and to commit
resources to support American Bank in circumstances where American Bank
Incorporated might not do so absent such policy. Under the Bank Holding Company
Act, American Bank Incorporated is subject to periodic examination by the Board
of Governors of the Federal Reserve System and is required to file periodic
reports of its operations and such additional information as the Board of
Governors of the Federal Reserve System may require.

     On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act (the "1999 Act") which repealed Depression-era laws that
generally separated the business of banking from other financial services
including the business of insurance and securities. From time to time other
bills may be introduced in the United States Congress which could result in
additional or in less regulation of the business of American Bank Incorporated
and American Bank. It cannot be predicted at this time whether any such
legislation actually will be adopted or how such adoption would affect the
business of American Bank Incorporated or American Bank.

     BANK HOLDING COMPANY ACT ACTIVITIES AND OTHER LIMITATIONS. A bank holding
company is a legal entity separate and distinct from its subsidiary bank or
banks. Normally, the major source of a holding company's revenue is dividends a
holding company receives from its subsidiary banks. The right of a bank holding
company to participate as a stockholder in any distribution of assets of its
subsidiary banks upon their liquidation or reorganization or otherwise is
subject to the prior claims of creditors of such subsidiary banks. The
subsidiary banks are subject to claims by creditors for long-term and short-term
debt obligations, including obligations for Federal funds purchased and
securities sold under repurchase agreements, as well as deposit liabilities.
Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
in the event of a loss suffered by the FDIC in connection with a banking
subsidiary of a bank holding company (whether due to a default or the provision
of FDIC assistance), other banking subsidiaries of the holding company could be
assessed for such loss.

     The Bank Holding Company Act also prohibits a bank holding company, with
certain exceptions, from acquiring more than 5% of the voting shares of any
company that is not a bank and from engaging in any business other than banking
or managing or controlling banks. Under the Bank Holding Company Act, the Board
of Governors of the Federal Reserve System is authorized to approve the
ownership of shares by a bank holding company in any company, the activities of
which the Board of Governors of the Federal Reserve System has



<PAGE>


determined to be so closely related to banking or to managing or controlling
banks as to be a proper incident thereto. In making such determinations, the
Board of Governors of the Federal Reserve System is required to weigh the
expected benefit to the public, such as greater convenience, increased
competition or gains in efficiency, against the possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices. A bank holding company that becomes a
Financial Holding Company under the 1999 Act is permitted to engage in
activities that are financial in nature or incidental to such financial
activities. The 1999 Act lists certain activities that are considered financial
in nature and permits the Board of Governors of the Federal Reserve System to
expand that list to include other activities that are complementary to the
activities on the preapproved list. The preapproved activities include (1)
securities underwriting, dealing and market making; (2) insurance underwriting;
(3) merchant banking; and (4) insurance company portfolio investments.

     The Board of Governors of the Federal Reserve System has by regulation
determined that certain activities are closely related to banking within the
meaning of the Bank Holding Company Act. These activities include operating a
mortgage company, finance company, credit card company, factoring company, trust
company or savings association; performing certain data processing operations;
providing limited securities brokerage services; acting as an investment or
financial advisor; acting as an insurance agent for certain types of
credit-related insurance; leasing personal property on a full-payout,
non-operating basis; providing tax planning and preparation services; operating
a collection agency; and providing certain courier services. The Board of
Governors of the Federal Reserve System also has determined that certain other
activities, including real estate brokerage and syndication, land development,
property management and underwriting of life insurance not related to credit
transactions, are not closely related to banking and a proper incident thereto.
However, under the 1999 Act certain of these activities are permissible for a
bank holding company that becomes a Financial Holding Company.

     CAPITAL REQUIREMENTS. The Board of Governors of the Federal Reserve System
has adopted capital adequacy guidelines for bank holding companies (on a
consolidated basis) substantially similar to those of American Bank, discussed
below. On a pro forma basis following completion of the offering, American Bank
Incorporated's pro forma Tier 1 and total capital would exceed the Board of
Governors of the Federal Reserve System's capital adequacy requirements.

     RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between a bank
and its "affiliates" are subject to quantitative and qualitative restrictions
under Sections 23A and 23B of the Federal Reserve Act and FDIC regulations.
Affiliates of a bank include, among other entities, the bank's holding company
and companies that are controlled by or under common control with the bank.

     In general, the extent to which a bank or its subsidiaries may engage in
certain "covered transactions" with affiliates is limited to an amount equal to
10% of the institution's capital and surplus, in the case of covered
transactions with any one affiliate, and to an amount equal to 20% of such
capital and surplus, in the case of covered transactions with all affiliates. In
addition, a bank and its subsidiaries may engage in covered transactions and
certain other transactions only on terms and under circumstances that are
substantially the same, or at least as favorable to the savings bank or its
subsidiary, as those prevailing at the time for comparable transactions with
nonaffiliated companies. A "covered transaction" is defined to include a loan or
extension of credit to an affiliate; a purchase of investment securities issued
by an affiliate; a purchase of assets from an affiliate, with certain
exceptions; the acceptance of securities issued by an affiliate as collateral
for a loan or extension of credit to any party; or the issuance of a guarantee,
acceptance or letter of credit on behalf of an affiliate.

     In addition, Sections 22(h) and (g) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer and
to a greater than 10% stockholder of a bank, and certain affiliated interests of
either, may not exceed, together with all other outstanding loans to such person
and affiliated interests, the bank's loans to one borrower limit (generally
equal to 15% of the institution's unimpaired capital and surplus). Section 22(h)
also requires that loans to directors, executive officers and principal
stockholders be made on terms substantially the same as offered in comparable
transactions to other persons and also requires prior board approval for certain
loans. In addition, the aggregate amount of extensions of credit by a bank to
all insiders cannot exceed the institution's unimpaired capital and surplus.
Furthermore, Section 22(g) places additional restrictions on loans to executive
officers.


<PAGE>


     FEDERAL SECURITIES LAWS. American Bank Incorporated's common stock is
registered with the SEC under Section 12(g) of the Securities Exchange Act of
1934. American Bank Incorporated is subject to the proxy and tender offer rules,
insider trading reporting requirements and restrictions, and certain other
requirements under the Exchange Act.

AMERICAN BANK

     American Bank operates as a state-chartered commercial bank incorporated
under the Pennsylvania Banking Code, and is a member bank of the Federal Reserve
Bank of Philadelphia. As such, we are subject to extensive regulation and
examination by the Pennsylvania Department of Banking and the Board of Governors
of the Federal Reserve System, as well as by the Federal Deposit Insurance
Corporation as the insurer of our deposit accounts. These regulatory authorities
regulate or monitor all areas of our operations, including capital requirements,
loans, interest rates, investments, borrowings, deposits, record keeping,
security devices, issuances of securities, payment of dividends, interest rate
risk management, acquisitions, mergers, establishment of branches, and corporate
reorganizations. There are periodic examinations by the Pennsylvania Department
of Banking and the Board of Governors of the Federal Reserve System to evaluate
our compliance with various regulatory requirements. This regulation and
supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulation, whether by
the Pennsylvania Department of Banking, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System, or Congress
could have a material adverse impact on American Bank and its operations.

     FEDERAL DEPOSIT INSURANCE CORPORATION ASSESSMENTS. The depositors of
American Bank are insured by the Bank Insurance Fund of the Federal Deposit
Insurance Corporation, up to applicable limits, and are subject to deposit
premium assessments by the Bank Insurance Fund. Under the Federal Deposit
Insurance Corporation's risk-based insurance system, Bank Insurance Fund
assessed deposits have been subject to premiums, which have varied, depending
upon the institution's capital position and other supervisory factors.

     The Federal Deposit Insurance Corporation may terminate the deposit
insurance of any insured depository institution, including American Bank, if it
determines after a hearing that the institution has engaged or is engaging in
unsafe or unsound practices, is in an unsafe or unsound condition or has
violated any applicable law, regulation, order, or any condition imposed by an
agreement with the Federal Deposit Insurance Corporation. The Federal Deposit
Insurance Corporation may also suspend deposit insurance temporarily prior to
the hearing process for the permanent termination of insurance, if, among other
things, the institution has no tangible capital. If insurance of accounts is
terminated, the accounts at the institution at the time of the termination, less
subsequent withdrawals, shall continue to be insured for a period of six months
to two years, as determined by the Federal Deposit Insurance Corporation.
American Bank is not aware of any circumstances that would result in termination
of its deposit insurance.

     CAPITAL REQUIREMENTS. The Board of Governors of the Federal Reserve System
has promulgated regulations and adopted a statement of policy regarding the
capital adequacy of state-chartered banks that are members of the Federal
Reserve System. The Board of Governors of the Federal Reserve System's capital
regulations establish a minimum 3% Tier 1 leverage capital requirement for the
most highly-rated member banks, with an additional cushion of at least 100 to
200 basis points for all other state-chartered member banks, which effectively
will increase the minimum Tier 1 leverage ratio for such other banks to 4% to 5%
or more. The highest-rated banks are those that the Board of Governors of the
Federal Reserve System determines are not anticipating or experiencing
significant growth and have well diversified risk, including no undue interest
rate risk exposure, excellent asset quality, high liquidity, good earnings, and,
in general, which are considered a strong banking organization and are rated
composite 1 under the Uniform Financial Institutions Rating System. Tier 1 or
core capital is defined as the sum of common stockholders' equity (including
retained earnings), non-cumulative perpetual preferred stock and related
surplus, and minority interests in consolidated subsidiaries, minus all
intangible assets other than certain qualifying supervisory goodwill and certain
purchased mortgage servicing rights.

     The Board of Governors of the Federal Reserve System also requires that
banks meet a risk-based capital standard, which requires the maintenance of
total Tier 1 capital and supplementary (Tier 2) capital to risk-weighted assets
of 8.0%, of which at least 4.0% shall be Tier 1 capital.

<PAGE>


     In determining the amount of risk-weighted assets, all assets, plus certain
off-balance sheet assets, are multiplied by a risk-weight of 0% to 100%, based
on risks the Board of Governors of the Federal Reserve System believes are
inherent in the type of asset or item. The components of Tier 1 capital are
equivalent to those discussed above under the leverage capital standard. The
components of supplementary capital include certain perpetual preferred stock,
certain mandatory convertible securities, certain subordinated debt and
intermediate preferred stock and general allowances for loan and lease losses.
Allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of
capital counted toward supplementary capital cannot exceed 100% of core capital.
As of December 31, 2001, American Bank met each of its capital requirements.

     The Board of Governors of the Federal Reserve System, along with the other
Federal bank regulatory agencies, adopted a regulation providing that the
agencies will take account of the exposure of a bank's capital and economic
value to changes in interest rate risk in assessing a bank's capital adequacy.
According to the agencies, applicable considerations include the quality of
American Bank's interest rate risk management process, the overall financial
condition of American Bank and the level of other risks at American Bank for
which capital is needed. Institutions with significant interest rate risk may be
required to hold additional capital. The agencies also have issued a joint
policy statement providing guidance on interest rate risk management, including
a discussion of the critical factors affecting the agencies' evaluation of
interest rate risk in connection with capital adequacy.

     A bank may be subject to higher minimum requirements than those described
above if, for example, a bank has previously received special attention or has a
high susceptibility to interest rate risk. Banks with capital ratios below the
required minimum are subject to certain administrative actions, including prompt
corrective action, the termination of deposit insurance upon notice and hearing,
or a temporary suspension of insurance without a hearing.

     American Bank is also subject to more stringent Pennsylvania Department of
Banking capital guidelines. Although not adopted in regulation form, the
Pennsylvania Department of Banking utilizes capital standards requiring a
minimum of 6% leverage capital and 10% risk-based capital. The components of
leverage and risk-based capital are substantially the same as those defined by
the Board of Governors of the Federal Reserve System. As of December 31, 2001,
American Bank exceeded the Pennsylvania Department of Banking's capital
guidelines.

     PROMPT CORRECTIVE ACTION. In addition to the capital adequacy guidelines,
the Board of Governors of the Federal Reserve System is required to take "prompt
corrective action" with respect to any state-chartered bank that does not meet
specified minimum capital requirements. Federal regulations applicable to
financial institutions establish five capital levels: "well capitalized,"
"adequately capitalized," "undercapitalized," "severely undercapitalized" and
"critically undercapitalized."

o    An institution is considered "well capitalized" if it has a total
     risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital
     ratio of 6% or greater, and a leverage ratio of 5% or greater, and it is
     not subject to an order, written agreement, capital directive, or prompt
     corrective action directive to meet and maintain a specific capital level
     for any capital measure.

o    An institution is considered "adequately capitalized" if it has a total
     risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
     ratio of at least 4% and leverage capital ratio of 4% or greater (or a
     leverage ratio of 3% or greater if the institution is rated composite 1 in
     its most recent report of examination, subject to appropriate Federal bank
     regulatory agency guidelines), and the institution does not meet the
     definition of an undercapitalized institution.

o    An institution is considered "undercapitalized" if it has a total
     risk-based capital ratio that is less than 8%, a Tier 1 risk-based capital
     ratio that is less than 4%, or a leverage ratio that is less than 4% (or a
     leverage ratio that is less than 3% if the institution is rated composite 1
     in its most recent report of examination, subject to appropriate Federal
     Banking agency guidelines).

o    A "significantly undercapitalized" institution is one which has a total
     risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital
     ratio that is less than 3%, or a leverage ratio that is less than 3%.

o    A "critically undercapitalized" institution is one that has a ratio of
     tangible equity to total assets that is equal to or less than 2%.


<PAGE>


     Under certain circumstances, a "well capitalized," "adequately
capitalized," or "undercapitalized" institution may be treated as if the
institution were in the next lower capital category.

     Federal banking regulators are authorized to take "prompt corrective
action" with respect to capital-deficient institutions. In addition to requiring
the submission of a capital restoration plan, Federal law contains broad
restrictions on certain activities of undercapitalized institutions involving
asset growth, acquisitions, branch establishment, and expansion into new lines
of business. With certain exceptions, an insured depository institution is
prohibited from making capital distributions, including dividends, and is
prohibited from paying management fees to control persons (e.g., a holding
company) if the institution would be undercapitalized after any such
distribution or payment.

     As an institution's capital decreases, the powers of the Federal regulators
become greater. A significantly undercapitalized institution is subject to
mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions. The
regulators have very limited discretion in dealing with a critically
undercapitalized institution and are in most cases required to appoint a
receiver or conservator if the capital deficiency is not corrected promptly.

     ACTIVITIES AND INVESTMENTS OF INSURED STATE-CHARTERED BANKS. The activities
and equity investments of Federal Deposit Insurance Corporation-insured,
state-chartered member banks are generally limited to those that are permissible
for national banks. Under regulations dealing with equity investments, an
insured state bank generally may not directly or indirectly acquire or retain
any equity investment of a type, or in an amount that is not permissible for a
national bank unless the Federal Deposit Insurance Corporation has determined
that such activities would pose no risk to the insurance fund of which it is a
member and the bank is in compliance with applicable regulatory capital
requirements. An insured state bank is not prohibited from, among other things,
(a) acquiring or retaining a majority interest in a subsidiary, (b) investing as
a limited partner in a partnership, the sole purpose of which is direct or
indirect investment in the acquisition, rehabilitation, or new construction of a
qualified housing project, provided that such limited partnership investments
may not exceed 2% of the bank's total assets, and (c) acquiring up to 10% of the
voting stock of a company that solely provides or reinsures directors',
trustees', and officers' liability insurance coverage or bankers' blanket bond
group insurance coverage for insured depository institutions.

     In addition, an insured state-chartered bank may not, directly, or
indirectly through a subsidiary, engage as "principal" in any activity that is
not permissible for a national bank, unless the Federal Deposit Insurance
Corporation has determined that such activities would pose no risk to the
insurance fund of which it is a member and the bank is in compliance with
applicable regulatory capital requirements. Any insured state-chartered bank
directly or indirectly engaged in any activity that is not permitted for a
national bank must cease the impermissible activity.

     PENNSYLVANIA BANKING LAW. The Pennsylvania Banking Code contains detailed
provisions governing the organization, location of offices, rights and
responsibilities of directors, officers, employees, and depositors, as well as
corporate powers, savings and investment operations, and other aspects of
American Bank and its affairs. The Pennsylvania Banking Code delegates extensive
rule making power and administrative discretion to the Pennsylvania Department
of Banking so that the supervision and regulation of state-chartered commercial
banks may be flexible and readily responsive to changes in economic conditions
and in savings and lending practices.

     One of the purposes of the Pennsylvania Banking Code is to provide banks
with the opportunity to be competitive with each other and with other financial
institutions existing under other Pennsylvania laws and other state, Federal and
foreign laws. A Pennsylvania bank may locate or change the location of its
principal place of business and establish an office anywhere in the
Commonwealth, with the prior approval of the Pennsylvania Department of Banking.

     The Pennsylvania Department of Banking generally examines each bank not
less frequently than once every two years. The Pennsylvania Department of
Banking may order any bank to discontinue any violation of law or unsafe or
unsound business practice and may direct any trustee, officer, attorney or
employee of a bank engaged in an objectionable activity, after the Pennsylvania
Department of Banking has ordered the activity to be terminated, to show cause
at a hearing before the Pennsylvania Department of Banking why such person
should not be removed.


<PAGE>


     RESTRICTIONS ON THE PAYMENT OF DIVIDENDS. Under Pennsylvania law, American
Bank may pay dividends only out of accumulated net earnings and may not declare
or pay any dividend requiring a reduction of our statutorily required surplus.
As previously discussed, state and Federal regulatory authorities have adopted
standards for the maintenance of adequate levels of capital by banks. Adherence
to such standards further limits our ability to pay dividends. In addition, our
regulators have authority to prohibit us from engaging in an unsafe or unsound
practice in conducting our business. The payment of dividends, depending upon
our financial condition, could be deemed to constitute such an unsafe or unsound
practice. As of December 31, 2001, American Bank had no accumulated net
earnings.

     LOANS TO ONE BORROWER. American Bank generally may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of
unimpaired capital and surplus. Additional amounts may be lent if the loan is
secured by specified collateral, such as obligations of, or guaranteed by,
Federal or state governments or agencies thereof. As of December 31, 2001,
American Bank was in compliance with its loans-to-one-borrower limitations.

     REGULATORY ENFORCEMENT AUTHORITY. Applicable banking laws include
substantial enforcement powers available to Federal banking regulators. This
enforcement authority includes, among other things, the ability to assess civil
monetary penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. Other actions or
inactions may provide the basis for enforcement action, including misleading or
untimely reports filed with regulatory authorities.

     American Bank is not subject to any cease-and-desist or removal orders,
injunctive actions, civil money penalties or other enforcement actions.

     COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions, the Federal
regulatory authorities evaluate the record of such financial institutions in
meeting the credit needs of their local communities, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
those institutions. These factors are also considered in evaluating mergers,
acquisitions, and applications to open a branch or facility. American Bank
received a "satisfactory" Community Reinvestment Act rating under the current
Community Reinvestment Act regulations in its most recent examination by the
Board of Governors of the Federal Reserve System.

     LENDING ACTIVITIES. Interest and certain other charges collected or
contracted for by American Bank are subject to state usury laws and certain
Federal laws concerning interest rates. American Bank's loan operations are also
subject to certain Federal laws applicable to credit transactions, such as (a)
the Federal Truth-In-Lending Act governing disclosures of credit terms to
consumer borrowers, (b) the Home Mortgage Disclosure Act of 1975 requiring
financial institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling its
obligation to help meet the housing needs of the communities it serves, (c) the
Equal Credit Opportunity Act prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending credit, (d) the Fair Credit
Reporting Act of 1978 governing the use and provision of information to credit
reporting agencies, (e) the Fair Debt Collection Act governing the manner in
which consumer debts may be collected by collection agencies, and (f) the rules
and regulations Federal agencies charged with the responsibility of implementing
such Federal laws.

     DEPOSIT ACTIVITIES. The deposit operations of American Bank also are
subject to (i) the Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and prescribes procedures
for complying with administrative subpoenas of financial records, and (ii) the
Electronic Funds Transfer Act and Regulation E issued by the Board of Governors
of the Federal Reserve System to implement that act, which govern automatic
deposits to and withdrawals from deposit accounts and customers' rights and
liabilities arising from the use of automated teller machines and other
electronic banking services.

     These and any other proposed laws, rules, and regulations could force us to
comply with more complex and perhaps more burdensome regulatory requirements,
which could materially adversely affect our business, financial condition,
results of operations, and cash flows.


<PAGE>


TAXATION

FEDERAL TAXATION

     For federal income tax purposes, American Bank Incorporated files a
consolidated federal income tax return with its wholly owned subsidiary on a
fiscal year basis. The applicable federal income tax expense or benefit is
properly allocated to each company based upon taxable income or loss calculated
on a separate company basis.

     Deferred income taxes arise from the recognition of items of income and
expense for tax purposes in years different from those in which they are
recognized in the consolidated financial statements. American Bank Incorporated
accounts for deferred income taxes by the asset and liability method, applying
the enacted statutory rates in effect at the balance sheet date to differences
between the book basis and the tax basis of assets and liabilities. The
resulting deferred tax liabilities and assets will be adjusted to reflect
changes in the tax laws.

     American Bank Incorporated is subject to the corporate alternative minimum
tax to the extent it exceeds American Bank Incorporated's regular income tax for
the year. The alternative minimum tax is imposed at the rate of 20% of a
specially computed tax base. For purposes of the alternative minimum tax, the
amount of alternative minimum taxable income that may be offset by net operating
losses is limited to 90% of alternative minimum taxable income.

     American Bank's income tax returns have not been audited by the Internal
Revenue Service for the past five years.

STATE TAXATION

     American Bank Incorporated is subject to the Corporate Net Income Tax and
the Capital Stock Tax of the Commonwealth of Pennsylvania. Dividends received
from American Bank qualify for a 100% dividends-received deduction and are not
subject to Corporate Net Income Tax. In addition, American Bank Incorporated's
investments in its subsidiaries qualify as exempt intangible assets and greatly
reduce the amount of Capital Stock Tax assessed. American Bank is subject to the
Pennsylvania Bank Shares Tax based on its financial net income determined in
accordance with generally accepted accounting principles with certain
adjustments.

ITEM 2. PROPERTIES
------------------

PROPERTIES

     The premises from which we operate is located at 4029 West Tilghman Street,
Allentown, Pennsylvania. American Bank leases the premises for its principal
office under a five-year operating lease agreement expiring November 2002.
American Bank has the option to extend the lease agreement for five additional
five-year lease terms. American Bank is responsible for its direct or
proportionate share of real estate taxes, insurance, utilities, and maintenance
and repairs on the building. The lessor, Frederick J. Jaindl, is Chairman and a
principal shareholder of American Bank Incorporated. The minimum lease payments
due in 2002 under the original terms of the lease are $268,000. We maintain a
disaster recovery backup site for our computers and data processing systems.
This site is leased from a third party. The lease is for three years expiring in
November 2004 and can be renewed for additional 3-year periods. The minimum
annual payments under this lease are $17,700, $17,700 and $16,200 for the years
2002, 2003 and 2004 respectively.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     American Bank is involved, from time to time, as plaintiff or defendant in
various legal actions arising in the normal course of its business. At December
31, 2001, American Bank was not involved in any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

     No matters were submitted to a vote of stockholders during the fourth
quarter of the year under report.


<PAGE>


                                     PART II
                                     -------

ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCK HOLDER MATTERS
--------------------------------------------------------------------------

     The "Market for Common Stock" section of American Bank Incorporated's
Annual Report to Stockholders is incorporated herein by reference.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
       OF OPERATIONS
-------------------------------------------------------------------------------

     The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of American Bank Incorporated's Annual Report to
Stockholders is incorporated herein by reference.

ITEM 7. FINANCIAL STATEMENTS
----------------------------

     The financial statements of American Bank Incorporated's Annual Report to
Stockholders are incorporated herein by reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
-----------------------------------------------------------------------

     None.

                                    PART III
                                    --------

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-------------------------------------------------------

     The "Proposal I--Election of Directors" section of the Company's definitive
Proxy Statement for the Company's 2002 Annual Meeting of Stockholders (the "2002
Proxy Statement") is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

     The "Proposal I--Election of Directors" section of the Company's 2002 Proxy
Statement is incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The "Proposal I--Election of Directors" section of the Company's 2002 Proxy
Statement is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     The "Transactions with Certain Related Persons" section of the Company's
2002 Proxy Statement is incorporated herein by reference.


                                     PART IV
                                     -------

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

     (a) Financial Statements
         --------------------

         (A) Independent Auditor's Report

         (B) Consolidated Balance Sheets

         (C) Consolidated Statements of Income

         (D) Consolidated Statements of Stockholders' Equity

         (E) Consolidated Statements of Cash Flows


<PAGE>



         (F) Notes to Consolidated Financial Statements

     (b) Reports on Form 8-K
         -------------------

         None.

     (c) Exhibits
         ---------

3.1  Articles of Incorporation of American Bank Incorporated*
3.2  Bylaws of American Bank Incorporated*
4.1  Trust Agreement*
4.2  Form of Amended and Restated Trust Agreement of American Capital Trust I*
4.3  Form of Certificate of Trust*
4.4  Form of Common Stock Certificate of American Capital Trust I*
4.5  Form of Agreement as to Expenses and Liabilities of American Capital
     Trust*
4.6  Form of Preferred Stock Certificate of American Capital Trust I*
4.7  Form Certificate of Authentication*
4.8  Form of Preferred Securities Guarantee Agreement between American Bank
     Incorporated and Bankers Trust Company, as guarantee trustee*
4.9  Form of Indenture between American Bank Incorporated and Bankers Trust
     Company*
4.10 Form of Subordinated Debenture due 2032*
4.11 Form of Common Stock Certificate of American Bank Incorporated*
13   Portions of Annual Report to Stockholders
21   Subsidiaries of the Registrant*

------------------------------
*    Incorporated by reference to the Registration Statement on Form SB-2 of
     American Bank Incorporated (file no. 333-75582), originally filed with the
     Securities and Exchange Commission on December 21, 2001.


<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                       AMERICAN BANK INCORPORATED


Date:    March 26, 2002            By: \s\ Mark W. Jaindl
                                       ----------------------------------------
                                       Mark W. Jaindl
                                       President and Chief Executive Officer
                                       (Duly Authorized Representative)


     Pursuant to the requirements of the Securities Exchange of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                      Signatures                               Title                                  Date
                      ----------                               -----                                  ----

<S>                                                 <C>                                         <C>
   \s\ Frederick J. Jaindl
   ---------------------------------------------    Chairman of the Board                       March 26, 2002
   Frederick J. Jaindl


   \s\ Mark W. Jaindl                               President, Chief Executive Officer
   ----------------- ---------------------------    and Vice Chairman (Principal                March 26, 2002
   Mark W. Jaindl                                   Executive Officer)


   \s\ Harry C. Birkhimer
   ---------------------------------------------    Vice President and Chief Financial
   Harry C. Birkhimer                               Officer (Principal Financial and            March 26, 2002
                                                    Accounting Officer)


   \s\ David M. Jaindl
   ------------------ --------------------------    Director                                    March 26, 2002
   David M. Jaindl


   \s\ Elizabeth B. Gaul
   ---------------------------------------------    Director                                    March 26, 2002
   Elizabeth B. Gaul


   \s\ Arthur A. Haberberger
   ---------------------------------------------    Director                                    March 26, 2002
   Arthur A. Haberberger


   \s\ Philip S. Schwartz
   ---------------------------------------------    Director                                    March 26, 2002
   Philip S. Schwartz


   \s\ Martin F. Spiro
   ---------------------------------------------    Director                                    March 26, 2002
   Martin F. Spiro
</TABLE>


<PAGE>