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, 2004
                                       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: 0-31246

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

               PENNSYLVANIA                                 01-0593266
      --------------------------------                 ---------------------
        (State or Other Jurisdiction                     (I.R.S. Employer
      of 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  X  .    NO       .
        -----         -----

         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. [ ]

         The Registrant's revenues for the year ended December 31, 2004 were
$20.7 million.

         As of March 15, 2005, there were 7,539,249 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 March 15, 2005 was $16.2 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

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

2. Proxy Statement for the 2005 Annual Meeting of Stockholders (Part III)


<PAGE>

                                     PART I

ITEM 1.  BUSINESS

AMERICAN BANK INCORPORATED

         American Bank Incorporated was organized in August 2001 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 $40.3 million.
American Bank Incorporated's principal business is overseeing and directing the
business of American Bank. At December 31, 2004, American Bank Incorporated had
total consolidated assets of $503.4 million, total deposits of $345.7 million
and stockholders' equity of $41.9 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 23,700 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.

         AmericanBank Online and pcbanker.com are registered trademarks of
American Bank and the brand names for Internet banking and financial services
provided by American Bank. Through AmericanBank Online and pcbanker.com,
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 loans, 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 residential mortgage
loans on a nationwide basis.

                                       2

<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 costs, and allowance for losses) as of the
dates indicated:

<TABLE>
<CAPTION>
                                                                           AT DECEMBER 31,
                               ---------------------------------------------------------------------------------------------------
                                       2004                  2003               2002               2001               2000
                               --------------------   ------------------  -----------------  -----------------   -----------------
                                AMOUNT     PERCENT     AMOUNT    PERCENT   AMOUNT   PERCENT   AMOUNT   PERCENT    AMOUNT   PERCENT
                               ---------   --------   ---------  -------  --------  -------  --------  -------   --------  -------
                                                                            (IN THOUSANDS)
<S>                            <C>         <C>        <C>        <C>      <C>       <C>      <C>       <C>       <C>       <C>
Real Estate Loans:
------------------
Commercial(1)...............   $ 108,702      44.44%  $  96,609    46.66% $ 65,569    47.89% $ 40,668    29.50%  $ 29,183    23.89%
Residential(2)..............      72,840      29.78      53,393    25.79    32,344    23.62    64,810    47.01     64,466    52.78
                               ---------   --------   ---------  -------  --------  -------  --------  -------   --------  -------
  Total real estate loans...     181,542      74.22     150,002    72.45    97,913    71.51   105,478    76.51     93,649    76.67
                               ---------   --------   ---------  -------  --------  -------  --------  -------   --------  -------
Other Loans:
------------
Consumer loans(3)...........      18,804       7.69      15,098     7.29    13,762    10.05    11,237     8.15     10,235     8.38
Commercial..................      44,254      18.09      41,937    20.26    25,249    18.44    21,139    15.34     18,264    14.95
                               ---------   --------   ---------  -------  --------  -------  --------  -------   --------  -------
  Total other loans.........      63,058      25.78      57,035    27.55    39,011    28.49    32,376    23.49     28,499    23.33
                               ---------   --------   ---------  -------  --------  -------  --------  -------   --------  -------

Total loans receivable......     244,600     100.00%    207,037   100.00%  136,924   100.00%  137,854   100.00%   122,148   100.00%
                               ---------   ========   ---------  =======  --------  =======  --------  =======   --------  =======

Less:
-----
Deferred (fees) and costs...         516                    207               (239)              (267)               (292)
Allowance for loan losses...      (2,768)                (2,412)            (1,759)            (1,998)             (1,242)
                               ---------              ---------           --------           --------            --------
  Total loans receivable, net  $ 242,348              $ 204,832           $134,926           $135,589            $120,614
                               =========              =========           ========           ========            ========
</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.
(3)  Consumer loans include home equity loans and home equity lines of credit.



                                       3
<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 $1,000,000
or less may be approved by one or more authorized senior officers, as required
by policy. Loans over $1,000,000 require approval by the 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, 2004, $108.7 million, or 44.44% 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,
2004, the largest such loan had a balance of $5.1 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-to-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, 2004, $6.3 million, or 2.56% 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, 2004, the
largest such loan had a balance of $865,000. At that date, we had no multifamily
residential real estate loans that were delinquent in excess of 30 days.

         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 may 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, 2004, $72.8 million, or


                                       4

<PAGE>

29.78% of American Bank's total loans receivable, consisted of one- to
four-family residential real estate and construction loans. We originated $15.0
million, $31.1 million, and $24.7 million of one- to four-family residential
mortgage and construction loans for the years ended December 31, 2004, 2003, and
2002, respectively. We purchased adjustable rate one-to-four-family residential
mortgages of $26.1 million, $28.0 million, and $1.2 million during the years
ended December 31, 2004, 2003, and 2002, respectively. At December 31, 2004,
American Bank had one mortgage loan secured by one- to four-family real estate
that was 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, 2004, 2003, and 2002, we sold $10.8 million, $25.0 million, and
$19.7 million of fixed-rate one- to four-family mortgage loans, respectively.
However, depending on interest rates, we may keep fixed-rate mortgages in our
portfolio. Our residential mortgage 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,
2004, $55.9 million, or 22.87% 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 period, which may be from 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 plus a
margin. 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 caps and may include 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, 2004, $3.0 million,
or 1.24%, 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, 2004, we had no residential construction loans that were delinquent
in excess of 30 days

         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, 2004, consumer loans
amounted to $18.8 million, or 7.69% of the total loan portfolio. At that date,
we had two consumer loans that were delinquent in excess of 30 days.


                                       5

<PAGE>

         At December 31, 2004, the largest component of the consumer loan
portfolio consisted of fixed-rate home equity loans, which totaled $9.0 million,
or 3.67% of the total loan portfolio. At December 31, 2004, outstanding balances
of variable-rate home equity lines of credit totaled $3.3 million with total
unused commitments of $5.1 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. 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, 2004, had a
balance of $44.3 million, which represented 18.09% of the total loan portfolio.
On that date, the largest such loan had a balance of $1.1 million. As of
December 31, 2004, 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.







                                       6

<PAGE>

         MATURITY OF LOAN PORTFOLIO. The following table sets forth certain
information at December 31, 2004, 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, overdraft
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 enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>
                                          MULTI-FAMILY
                                         AND COMMERCIAL     CONSTRUCTION OR                         COMMERCIAL
                  ONE- TO FOUR-FAMILY     REAL ESTATE         DEVELOPMENT          CONSUMER           BUSINESS           TOTAL
                 -----------------     -----------------   -----------------   ----------------   ----------------  ---------------
                            WEIGHTED             WEIGHTED           WEIGHTED           WEIGHTED           WEIGHTED          WEIGHTED
                            AVERAGE              AVERAGE            AVERAGE             AVERAGE            AVERAGE           AVERAGE
                   AMOUNT    RATE      AMOUNT     RATE     AMOUNT    RATE     AMOUNT     RATE      AMOUNT   RATE     AMOUNT   RATE
                  --------  -----     --------    -----    -------   -----    ------     -----    --------  -----   --------  -----
                                                                    (DOLLARS IN THOUSANDS)
<S>               <C>        <C>       <C>          <C>     <C>        <C>     <C>       <C>      <C>       <C>     <C>       <C>
Due During Years Ending
  December 31,

2005 ..........   $  7,111    5.49%    $ 21,388     5.82%   $ 6,414    6.56%   $ 8,999    5.34%   $ 24,227   6.29%  $ 68,139   5.96%
2006 to 2009 ..     26,367    4.96       51,089     6.15      4,380    5.68      3,958    5.06      19,794   5.98    105,588   5.76
2010 and
 beyond .......     38,484    5.51       26,309     5.95         --      --      5,847    5.55         233   6.20     70,873   5.68
                  --------   -----     --------    -----    -------   -----     ------   -----    --------  -----   --------  -----
Total .........   $ 71,962    5.29%    $ 98,786     6.02%   $10,794    6.20%   $18,804    5.35%   $ 44,254   6.15%  $244,600   5.79%
                  ========   =====     ========    =====    =======   =====    =======   =====    ========= =====   ========  =====
</TABLE>

         The total amount of loans due after December 31, 2005, that have
predetermined interest rates is $96.5 million, while the total amount of loans
due after this date that have floating or adjustable interest rates is $80.0
million.





                                       7
<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.

         During the year ended December 31, 2004 we charged off one loan and
recorded impairment charges on two other loans for a total of $39,000. At
December 31, 2004, we had four loans classified as non-performing and in the
process of being resolved, no loans delinquent more than 30 days and no assets
acquired in settlement of loans. During the year ended December 31, 2003, we had
two loans that we classified as non-performing. We charged off these two loans,
which totaled $2,900. During the year ended December 31, 2002, we had one loan
that we classified as non-performing. We charged off $455,000 on this loan and
originated a new loan to new borrowers for the same business, which is
performing in accordance with its terms. During January of 2003, we recovered
$250,000 of the charge-off.

         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, 2004 we had no real estate acquired in settlement of loans.

         RESTRUCTURED LOANS. Under accounting principles generally accepted in
the United States of America, 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, 2004.

         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.

                                       8

<PAGE>

         At December 31, 2004, the aggregate amount of our assets classified as
"Special Mention" and "Substandard" were $1,709,000 and $160,000, respectively.
No assets were classified as "Doubtful," and $39,000 of assets were classified
as "Loss."

         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, 2004
had recorded losses on five loans. In addition, we have had very limited amounts
of loan delinquencies. As a result, we consider the past experience and
knowledge of management, gained at other banking institutions where they have
worked, in 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, 2004 and December 31, 2003, American Bank had an
allowance for loan losses of approximately $2,768,000 and $2,412,000,
respectively. Management believes that the allowance for loan losses at December
31, 2004 was adequate to absorb losses inherent in the portfolio at that date.
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 accounting
principles generally accepted in the United States of America, there can be no
assurance that the Pennsylvania Department of Banking or the 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.


                                       9
<PAGE>
         The following table sets forth an analysis of American Bank's allowance
for loan losses.

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                        ------------------------------------------------------
                                          2004        2003        2002        2001       2000
                                        -------     -------     -------     -------    -------
                                                         (DOLLARS IN THOUSANDS)
<S>                                     <C>         <C>         <C>         <C>        <C>
Balance at beginning period .........   $ 2,412     $ 1,759     $ 1,998     $ 1,242    $   767
Provision for loan losses ...........       393         405         212         651        475
Allowance recorded in connection
  with purchase of loan pools .......        --          --          --         105         --
Recoveries ..........................         2         251           4          --         --
Charge-offs .........................       (39)         (3)       (455)         --         --
                                        -------     -------     -------     -------    -------
Net (charge-offs) recoveries ........       (37)        248        (451)         --         --
                                        -------     -------     -------     -------    -------
Balance at end of period ............   $ 2,768     $ 2,412     $ 1,759     $ 1,998    $ 1,242
                                        =======     =======     =======     =======    =======
Ratio of net charge-offs (recoveries)
  during the period to average loans
  outstanding during the period .....     0.002%      (0.15)%      0.34%          0%         0%
                                        =======     =======     =======     =======    =======
Ratio of net charge-offs during the
  period to average non-performing
  assets ............................     18.81%          0%          0%          0%         0%
                                        =======     =======     =======     =======    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                   ----------------------------------------------------------------------------------------------------
                                 2004                             2003                                2002
                   -------------------------------   -------------------------------     ------------------------------
                                           PERCENT                           PERCENT                           PERCENT
                                           OF LOANS                          OF LOANS                          OF LOANS
                                 LOAN      IN EACH                 LOAN      IN EACH                 LOAN      IN EACH
                     AMOUNT     AMOUNTS    CATEGORY  AMOUNT OF    AMOUNTS    CATEGORY    AMOUNT     AMOUNTS    CATEGORY
                    OF LOSS       BY       TO TOTAL    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.......  $     600  $  44,254      18.09%  $     576   $  41,937     20.26%    $    370  $  25,249      18.44%
Commercial
 mortgage........      1,474    108,702      44.44       1,327      96,609     46.66          959     65,569      47.89
Residential
 mortgage........        363     72,840      29.78         245      53,393     25.79          182     32,344      23.62
Consumer.........        161     18,804       7.69         116      15,098      7.29          112     13,762      10.05
Unallocated......        170         --         --         148          --        --          136         --         --
                   ---------  ---------   --------   ---------   ---------   -------     --------  ---------   --------

 Total...........  $   2,768  $ 244,600     100.00%  $   2,412   $ 207,037    100.00%    $  1,759  $ 136,924     100.00%
                   =========  =========   ========   =========   =========   =======     ========  =========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                DECEMBER 31,
                   -----------------------------------------------------------------
                                 2001                             2000
                   -------------------------------   -------------------------------
                                           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........ $     610  $  21,139      15.34%  $     274   $  18,264     14.95%
Commercial
 mortgage.........       578     40,668      29.50         391      29,183     23.89
Residential
 mortgage.........       400     64,810      47.01         341      64,466     52.78
Consumer..........       125     11,237       8.15         107      10,235      8.38
Unallocated.......       285         --         --         129          --        --
                   ---------  ---------   --------   ---------   ---------   -------

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

                                       10

<PAGE>

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, 2004, our securities portfolio equaled $234.4 million,
or 46.59% of total assets. Our securities portfolio is comprised of
mortgage-backed securities, U.S. government and agency securities, corporate
debt securities, trust preferred securities, mutual funds and common stock. At
December 31, 2004, mortgage-backed securities amounted to $135.2 million, U.S.
government and agency securities amounted to $29.6 million, trust preferred
securities amounted to $38.6 million, common stock in domestic corporations
amounted to $11.5 million and mutual funds amounted to $19.2 million. At
December 31, 2004, there were no securities of a single issuer (excluding the
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.

         In management's opinion, the unrealized losses reflect changes in
interest rates subsequent to the acquisition of specific securities. The Company
has the ability to hold these securities until maturity or market price
recovery. Management believes that the unrealized losses represent temporary
impairment of the securities.

         The amortized cost and approximate fair value of securities as of
December 31, 2004, 2003 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                                      AT DECEMBER 31, 2004
                                       -------------------------------------------------
                                                      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 .......    $ 27,750      $      1     $   (131)     $ 27,620
   Mortgage-backed securities .....     132,727           560         (524)      132,763
   Mutual funds and mortgage-backed
     mutual funds .................      19,254            --          (86)       19,168
   U.S. Government agency preferred
     stock ........................       2,505            --         (522)        1,983
   Common stock ...................       9,114         2,402          (55)       11,461
   Trust preferred obligations ....      27,667           368         (119)       27,916
                                       --------      --------     --------      --------
     Total ........................    $219,017      $  3,331     $ (1,437)     $220,911
                                       ========      ========     ========      ========
Held to maturity:
   Trust preferred obligations ....    $ 10,683      $    361     $     (5)     $ 11,039
   Mortgage-backed securities .....       2,446            50           --         2,496
   Other ..........................         351            --           --           351
                                       --------      --------     --------      --------
     Total ........................    $ 13,480           441     $     (5)     $ 13,886
                                       ========      ========     ========      ========
</TABLE>

                                       11

<PAGE>

<TABLE>
<CAPTION>
                                                      AT DECEMBER 31, 2003
                                       -------------------------------------------------
                                                      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 .......    $ 15,997      $     36     $     --      $ 16,033
   Corporate notes ................       6,685           127           --         6,812
   Mortgage-backed securities .....     184,774           689         (999)      184,464
   Mutual funds and mortgage-backed
     mutual funds .................      20,427            --         (100)       20,327
   U.S. Government agency preferred
     stock ........................       2,505            25         (273)        2,257
   Common stock ...................       4,224           677           --         4,901
   Trust preferred obligations ....       2,047             9         (104)        1,952
                                       --------      --------     --------      --------
     Total ........................    $236,659      $  1,563     $ (1,476)     $236,746
                                       ========      ========     ========      ========
Held to maturity:
   Trust preferred obligations ....    $ 11,530      $    263     $    (94)     $ 11,699
   Mortgage-backed securities .....       3,481            54           --         3,535
   Other ..........................         350            --           --           350
                                       --------      --------     --------      --------
     Total ........................    $ 15,361           317     $    (94)     $ 15,584
                                       ========      ========     ========      ========
</TABLE>


<TABLE>
<CAPTION>
                                                      AT DECEMBER 31, 2002
                                       -------------------------------------------------
                                                      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 .......    $ 35,993      $    181     $     --      $ 36,174
   Corporate notes ................      26,759           570         (372)       26,957
   Mortgage-backed securities .....     164,192         2,198         (179)      166,211
   Mutual funds ...................      40,552            18           --        40,570
   U.S. Government agency preferred
    stock .........................       2,505            27         (115)        2,417
   Common stock ...................       2,622            --         (135)        2,487
   Trust preferred obligations ....       1,985            --         (232)        1,753
                                       --------      --------     --------      --------
     Total ........................    $274,608      $  2,994     $ (1,033)     $276,569
                                       ========      ========     ========      ========

Held to maturity:
   Trust preferred obligations ....    $  5,451      $     82     $    (33)     $  5,500
   Corporate notes ................       2,249            36           --         2,285
   Mortgage-backed securities .....       5,666            93           --         5,759
   Other ..........................         100            --           --           100
                                       --------      --------     --------      --------
     Total ........................    $ 13,466      $    211     $    (33)     $ 13,644
                                       ========      ========     ========      ========

</TABLE>




                                       12
<PAGE>

         The maturity schedule of the investment portfolio, by contractual
maturity, as of December 31, 2004, 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                          NON-MATURITY AND
                             LESS          THROUGH FIVE YEARS      THROUGH TEN YEARS    DUE AFTER TEN YEARS       MUTUAL FUNDS
                      -----------------    ------------------      -----------------    ------------------     ------------------
                       AMOUNT     RATE      AMOUNT      RATE       AMOUNT     RATE       AMOUNT      RATE       AMOUNT      RATE
                      -------    ------    --------    ------      ------    -------    --------    ------     --------    ------
                                                              (DOLLARS IN THOUSANDS)
<S>                   <C>          <C>     <C>         <C>         <C>       <C>        <C>         <C>        <C>           <C>
Investment Securities
---------------------

U.S. Government
   Agency............ $    --        --    $ 27,620      3.33%     $   --         --    $     --        --     $     --        --
Trust preferred
   Obligations......       --        --          --        --          --         --      38,599      7.76%          --        --
Mutual funds........       --        --          --        --          --         --          --        --       19,168      2.23%
Mortgage backed
   Securities.......       --        --          --        --          --         --          --        --           --        --
U.S. Government
   agency preferred
   stock............       --        --          --        --          --         --       1,983      3.32%          --        --
Common stock               --        --          --        --          --         --          --        --       11,461      0.78
Other...............      251      3.63%         --        --         100       2.25%         --        --           --        --
                      -------    ------    --------    ------      ------    -------    --------    ------     --------    ------
      Total.......... $   251      3.63%   $ 27,620      3.33%     $  100       2.25%   $ 40,582      7.54%    $ 30,629      1.69%
                      =======    ======    ========    ======      ======    =======    ========    ======     ========    ======




<CAPTION>
[RESTUBBED]




                         MORTGAGE-BACKED
                           SECURITIES                 TOTAL
                      -------------------     -------------------
                        AMOUNT      RATE        AMOUNT      RATE
                      ---------    ------     ---------    ------
                                    (DOLLARS IN THOUSANDS)
<S>                   <C>          <C>        <C>          <C>
Investment Securities
---------------------

U.S. Government
   Agency............ $      --        --     $  27,620      3.33%
Trust preferred
   Obligations......         --        --        38,599      7.76
Mutual funds........         --        --        19,168      2.23
Mortgage backed
   Securities.......    135,209      3.65%      135,209      3.65
U.S. Government
   agency preferred
   stock............         --        --         1,983      3.32
Common stock                 --        --        11,461      0.78
Other...............         --        --           351      3.24
                      ---------    ------     ---------    ------
      Total.......... $ 135,209      3.65%    $ 234,391      4.03%
                      =========    ======     =========    ======
</TABLE>





                                       13
<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 enter into agreements
with customers as part of our cash management services whereby we sell
securities to the customer under an agreement to repurchase the security at par.
Securities sold under agreements to repurchase, which are secured borrowings,
generally mature within one day and are recorded at the amount of cash received
in connection with the transaction.

         DEPOSITS. 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 pay interest rates on deposits that are very competitive, and are
typically in the top five percent (5%) 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 for the years
indicated.

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                         ------------------------------------------------------------------------------------------------------

                                        2004                              2003                               2002
                         --------------------------------   --------------------------------   --------------------------------
                           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>       <C>          <C>        <C>
Demand, non-interest
 bearing............     $   17,336   $     --         --%  $   15,324   $     --         --%  $   12,286   $     --         --%
Demand,
 interest-bearing...        103,761      1,313       1.26       94,011      1,263       1.34       76,535      1,673       2.19
Savings.............        102,236      1,386       1.36       91,416      1,386       1.52       85,818      1,975       2.30
Certificates of
 deposit ...........        120,834      3,809       3.15      120,628      4,163       3.45      103,007      4,115       3.99
                         ----------   --------   --------   ----------   --------   --------   ----------   --------   --------
   Total deposits...     $  344,167   $  6,508       1.89%  $  321,379   $  6,812       2.12%  $  277,646   $  7,763       2.80%
                         ==========   ========   ========   ==========   ========   ========   ==========   ========   ========
</TABLE>



                                       14
<PAGE>

         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, 2004.

<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>
Certificates of deposit less
  than $100,000 ...........................   $ 14,136     $ 11,078     $ 25,016     $ 43,000     $ 93,230
Certificates of deposit of $100,000
  or more .................................      8,434        3,405        7,588       13,921       33,348
Public funds(1) ...........................         --          120            3           --          123
                                              --------     --------     --------     --------     --------
Total certificates of deposit .............   $ 22,570     $ 14,603     $ 32,607     $ 56,921     $126,701
                                              ========     ========     ========     ========     ========
</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 to supplement its funds
and to meet deposit withdrawal requirements. The Federal Home Loan Bank of
Pittsburgh provides various forms of advances, or secured credit, for member
financial institutions. As a member of the Federal Home Loan Bank of Pittsburgh,
we are required to own capital stock in the Federal Home Loan Bank of Pittsburgh
and are authorized to apply for advances on the security of 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 9 to the Consolidated Financial Statements for additional
information related to Federal Home Loan Bank of Pittsburgh advances.

EMPLOYEES

         As of December 31, 2004, we had 44 full-time employees and four
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.

         From time to time legislation 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


                                       15

<PAGE>

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.

         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 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 Gramm-Leach-Bliley Act of 1999, certain of these activities
are permissible for a bank holding company that becomes a financial holding
company under the Gramm-Leach-Bliley Act. American Bank Incorporated has not
elected to qualify as a financial holding company, although it may seek to do so
in the future. Bank holding companies may qualify to become a financial holding
company if:

        o   each of its depository institution subsidiaries is "well
            capitalized";

        o   each of its depository institution subsidiaries is "well managed";

        o   each of its depository institution subsidiaries has at least a
            "satisfactory" Community Reinvestment Act rating at its most recent
            examination; and

        o   the bank holding company has filed a certification with the Federal
            Reserve Board that it elects to become 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. American Bank Incorporated's Tier 1 and total capital exceed the Board of
Governors of the Federal Reserve System's capital adequacy requirements.


                                       16

<PAGE>

         THE USA PATRIOT ACT. The USA PATRIOT Act gives the federal government
new powers to address terrorist threats through enhanced domestic security
measures, expanded surveillance powers, increased information sharing and
broadened anti-money laundering requirements. Certain provisions of the Act
impose affirmative obligations on a broad range of financial institutions,
including Rantoul First Bank, s.b. These obligations include enhanced anti-money
laundering programs, customer identification programs and regulations relating
to private banking accounts or correspondence accounts in the United States for
non-United States persons or their representatives (including foreign
individuals visiting the United States).

         We have established policies and procedures to ensure compliance with
the USA PATRIOT Act's provisions, and the impact of the USA PATRIOT Act on our
operations has not been material.

         SARBANES-OXLEY ACT OF 2002. The Sarbanes-Oxley Act of 2002 implemented
legislative reforms intended to address corporate and accounting irregularities.
In addition to the establishment of a new accounting oversight board which
enforces auditing, quality control and independence standards and is funded by
fees from all publicly traded companies, the Act restricts accounting companies
from providing both auditing and consulting services. To ensure auditor
independence, any non-audit services being provided to an audit client require
pre-approval by the company's audit committee members. In addition, the audit
partners must be rotated. The Act requires chief executive officers and chief
financial officers, or their equivalent, to certify to the accuracy of periodic
reports filed with the SEC, subject to civil and criminal penalties if they
knowingly or willfully violate this certification requirement. In addition,
under the Act, counsel will be required to report evidence of a material
violation of the securities laws or a breach of fiduciary duty by a company to
its chief executive officer or its chief legal officer, and, if such officer
does not appropriately respond, to report such evidence to the audit committee
or other similar committee of the board of directors or the board itself.

         The legislation accelerates the time frame for disclosures by public
companies, as they must immediately disclose any material changes in their
financial condition or operations. Directors and executive officers must also
provide information for most changes in ownership in a company's securities
within two business days of the change. The period during which certain types of
law suits can be instituted against a company or its officers has been extended,
and bonuses issued to top executives prior to restatement of a company's
financial statements are now subject to disgorgement if such restatement was due
to corporate misconduct. Executives are also prohibited from insider trading
during retirement plan "blackout" periods, and loans to company executives are
restricted. In addition, civil and criminal penalties have been enhanced.

         The Act also increases the oversight of, and codifies certain
requirements relating to, audit committees of public companies and how they
interact with the company's "registered public accounting firm" (RPAF). Audit
Committee members must be independent and are barred from accepting consulting,
advisory or other compensatory fees from the issuer. In addition, companies must
disclose whether at least one member of the committee is a "financial expert"
(as such term will be defined by the SEC) and if not, why not. Under the Act, a
RPAF is prohibited from performing statutorily mandated audit services for a
company if such company's chief executive officer, chief financial officer,
comptroller, chief accounting officer or any person serving in equivalent
positions has been employed by such firm and participated in the audit of such
company during the one-year period preceding the audit initiation date. The Act
also prohibits any officer or director of a company or any other person acting
under their direction from taking any action to fraudulently influence, coerce,
manipulate or mislead any independent public or certified accountant engaged in
the audit of the company's financial statements for the purpose of rendering the
financial statement's materially misleading. In accordance with the Act, the SEC
proposed rules requiring inclusion of an internal control report and assessment
by management in the annual report to shareholders. The Act requires the RPAF
that issues the audit report to attest to and report on management's assessment
of the company's internal controls. In addition, the Act requires that each
financial report required to be prepared in accordance with (or reconciled to)
generally accepted accounting principles and filed with the SEC reflect all
material correcting adjustments that are identified by a RPAF in accordance with
generally accepted accounting principles and the rules and regulations of the
SEC.

                                       17

<PAGE>

         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.

         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.


                                       18

<PAGE>

         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.

         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, 2004, 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.

                                       19
<PAGE>

         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, 2004,
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%.

         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.

                                       20

<PAGE>

         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.

         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.

         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.

                                       21

<PAGE>

         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.

TAXATION

FEDERAL TAXATION

         For federal income tax purposes, American Bank Incorporated files a
consolidated federal income tax return with its wholly owned subsidiaries 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 Incorporated`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.

ADDITIONAL RISK FACTORS

         In addition to factors discussed in the description of the business of
American Bank Incorporated and American Bank and elsewhere in this report, the
following are factors that could adversely affect future results of operations
and the financial condition of American Bank Incorporated.

NETWORK AND COMPUTER SYSTEMS COULD FAIL, WHICH COULD ADVERSELY AFFECT OUR
BUSINESS

         Our computer systems and network infrastructure could be vulnerable to
unforeseen problems. Because we conduct a substantial portion of our business
over the Internet and because we may now or in the future outsource certain
critical functions to qualified third parties, our operations depend on our
ability, as well as that of our third-party service providers, to protect our
computer systems and network infrastructure against damage from fire, power
loss, telecommunications failure, physical break-ins, or similar catastrophic
events.

         Customers may become dissatisfied by any system failure that interrupts
our ability to provide our services. Sustained or repeated system failures would
reduce the attractiveness of the electronic banking services that we provide.
Slower response time or system failures may also result from straining the
capacity of our software or hardware due to an increase in the volume of
services delivered through our servers. To the extent that we do not effectively
address any capacity constraints or system failures, our customers could seek
other providers of banking services. Any damage or failure that causes
interruptions in our operations could materially adversely affect our business,
financial condition, results of operations, and cash flows.

                                       22

<PAGE>

OUR SECURITY COULD BE BREACHED, WHICH COULD DAMAGE OUR REPUTATION AND DETER
CUSTOMERS FROM USING OUR SERVICES

         We must protect our computer systems and network from physical
break-ins, security breaches, and other disruptive problems caused by the
Internet or other users. Computer break-ins could jeopardize the security of
information stored in and transmitted through our computer systems and network,
which would likely adversely affect our ability to retain or attract customers,
could damage our reputation and could subject us to litigation. Although we rely
on encryption and authentication technology to provide the security and
authentication necessary to effect secure transmissions of confidential
information, and although we intend to continue to implement security technology
and establish operational procedures to prevent break-ins, damage, and failures,
these security measures may fail. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments could result in a
compromise or breach of the algorithms we and our third-party service providers
use to protect customer transaction data. If any compromise of our security were
to occur, it could have a material adverse effect on our business, financial
condition, results of operations, and cash flows.

RAPIDLY CHANGING TECHNOLOGIES MAY CAUSE US TO DELAY INTRODUCTION OF NEW
PRODUCTS, SERVICES AND ENHANCEMENTS, WHICH MAY RESULT IN A LOSS OF EXISTING
CUSTOMERS OR A FAILURE TO ATTRACT NEW CUSTOMERS

         Our future success will depend on our ability to adapt to rapidly
changing technologies. We also will have to enhance existing products and
services and develop and introduce a variety of new products and services to
address our customers' changing demands. If we are unable to develop and bring
additional products and services to market in a timely manner, we could lose
market share to competitors who are able to offer these services, which could
materially adversely affect our business, financial condition, results of
operations, and cash flows.

WE OBTAIN ESSENTIAL SOFTWARE FROM, OR OUTSOURCE ESSENTIAL SERVICES TO,
THIRD-PARTY PROVIDERS WHO MAY TERMINATE THEIR AGREEMENTS WITH US, RESULTING IN
INTERRUPTIONS TO OUR INTERNET AND GENERAL BANKING OPERATIONS

         We obtain essential software and/or technical support from third-party
providers. We obtain or outsource our core banking software, certain electronic
bill payment functions and other additional software and services from or to
qualified third-party vendors. Our agreements with each service provider are
generally cancelable by either party upon specified notice periods. If one of
our third-party service providers terminates its agreement with us and we are
unable to replace such provider with another service provider, our operations
may be interrupted. If an interruption were to continue for a significant period
of time, our business, financial condition, results of operations, and cash
flows could be materially adversely affected.

ITEM 2.  PROPERTIES

         The premises from which we operate are 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
2007. American Bank has the option to extend the lease agreement for four
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 is the Estate of Frederick J. Jaindl.
Mr. Jaindl was Chairman and a principal shareholder of American Bank
Incorporated until his death. The minimum lease payments due in 2005, 2006 and
2007 under the original terms of the lease are $343,000, $361,000 and $331,000,
respectively. 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 2007 and can be renewed for additional
3-year periods. The minimum annual payment under this lease is $17,700, $17,700
and $16,200 for the years ended 2005, 2006 and 2007 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, 2004, 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.

                                       23
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
         BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

(a) With respect to Item 201 of Regulation S-B, the "Market for Common Stock"
section of American Bank Incorporated's Annual Report to Stockholders is
incorporated herein by reference.

         Set forth below is certain information as of December 31, 2004
regarding compensation plans that authorize equity securities for issuance to
employees and directors of the Company.

<TABLE>
<CAPTION>
====================================================================================================================
                               NUMBER OF SECURITIES TO BE
                                ISSUED UPON EXERCISE OF                                    NUMBER OF SECURITIES
                                OUTSTANDING OPTIONS AND         WEIGHTED AVERAGE         REMAINING AVAILABLE FOR
                                         RIGHTS                  EXERCISE PRICE            ISSUANCE UNDER PLAN
--------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                            <C>
Stock Option Plan Approved by
   Shareholders............             183,088                      $6.87                       129,414
--------------------------------------------------------------------------------------------------------------------
Plans not approved by
   Shareholders............               -0-                          -0-                         -0-
--------------------------------------------------------------------------------------------------------------------

         Total.............             183,088                      $6.87                       129,414
====================================================================================================================
</TABLE>

In January of 2004, the Company established a dividend reinvestment and optional
stock purchase plan and registered 2,127,275 shares of common stock with the
Securities and Exchange Commission in connection with the plan on January 23,
2004 (File No. 333-112174). In March 2004, the Company issued 68,163 shares from
dividends that were reinvested and 259,654 shares from optional cash purchases
under the plan. Shares were issued at $8.27 per share, resulting in gross
proceeds of $2.7 million. Expenses incurred in establishing the plan totaled
$39,000, resulting in net proceeds of $2.7 million. The proceeds are being used
for general corporate purposes.

(b) Not Applicable.

(c) Not Applicable.

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.

ITEM 8A.  CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

         Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and

                                       24

<PAGE>

procedures (as defined in Rule 13a-15(e)) under the Exchange Act) as of the end
of the period covered by this report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of that date,
our disclosure controls and procedures were effective for the purpose of
ensuring that the information required to be disclosed in the reports that the
Company files or submits under the Exchange Act with the SEC (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and (2) is accumulated and communicated to our
management, including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal controls.

         There were no changes made in our internal controls during the quarter
ended December 31, 2004 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

         None










                                       25

<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The "Proposal I--Election of Directors" section of the Company's
definitive Proxy Statement for the Company's 2005 Annual Meeting of Stockholders
(the "2005 Proxy Statement") is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

         The "Proposal I--Election of Directors" section of the Company's 2005
Proxy Statement is incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The "Proposal I--Election of Directors" section of the Company's 2005
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 2005 Proxy Statement is incorporated herein by reference.


                                       26


<PAGE>

ITEM 13. 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*
10.1     Employment Agreement with Mark W. Jaindl*
10.2     Stock Option Plan*
10.3     Non-Qualified Deferred Compensation Plan for Senior Employees, as
         amended
13       Portions of Annual Report to Stockholders
21       Subsidiaries of the Registrant*
23       Consent of Beard Miller Company LLP
31.1     Certification of Chief Executive Officer Pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002
31.2     Certification of Chief Financial Officer Pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002
32       Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002

----------
*        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.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The "Proposal II--Ratification of Appointment of Auditors" section of
the Company's 2005 Proxy Statement is incorporated herein by reference.






                                       27

<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 25, 2005                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.


      Signatures                         Title                        Date
      ----------                         -----                        ----
\s\ Mark W. Jaindl              President, Chief Executive        March 25, 2005
----------------------------      Office and Chairman of the
Mark W. Jaindl                    Board (Principal Executive
                                  Officer)

\s\ Harry C. Birkhimer          Vice President and Chief          March 25, 2005
----------------------------      Financial Officer
Harry C. Birkhimer                (Principal Financial and
                                  Accounting Officer)

\s\ Anne L. Jaindl              Director                          March 25, 2005
----------------------------
Anne L. Jaindl


\s\ David M. Jaindl             Director                          March 25, 2005
----------------------------
David M. Jaindl


\s\ Elizabeth B. Gaul           Director                          March 25, 2005
----------------------------
Elizabeth B. Gaul


\s\ John C. Long                Director                          March 25, 2005
----------------------------
John C. Long


\s\ J. Scott Pidcock            Director                          March 29, 2005
----------------------------
J. Scott Pidcock


\s\ Philip S. Schwartz          Director                          March 25, 2005
----------------------------
Philip S. Schwartz


\s\ Martin F. Spiro             Director                          March 25, 2005
----------------------------
Martin F. Spiro


                                       28