HUBCO INC. ANNUAL REPORT 1996
=============================

<TABLE>
<CAPTION>

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data              1996           1995            1994             1993              1992
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>             <C>              <C>              <C>
Year ended December 31
Interest and fee income                                $  204,182      $  203,651      $  170,929       $  149,528       $  164,346
Interest expense                                           72,828          70,440          53,126           50,771           67,749
Net interest income                                       131,354         133,211         117,803           98,757           96,597
Provision for loan losses                                  12,295           9,515           9,309           31,917           26,320
Noninterest income                                         29,289          27,239          22,837           22,594           20,916
Securities gains/(losses)                                     987             986            (417)           1,977            4,614
Noninterest expense                                       116,239         102,842          94,931           97,098           93,764
Income before income taxes                                 33,096          49,079          35,983           (5,687)           2,043
Net income                                                 21,497          34,565          23,388           (6,008)           8,484

------------------------------------------------------------------------------------------------------------------------------------
Per Common Share
Net income--fully diluted                              $     0.93      $     1.44      $     1.02       $    (0.32)      $     0.58
Cash dividends declared                                $     0.68      $     0.58      $     0.35       $     0.30       $     0.26
Book value at year end                                 $     9.37      $     9.65      $     8.62       $     6.73       $     7.34
Average common shares outstanding-fully diluted            23,225          24,116          22,945           18,706           14,678
Common shares outstanding                                  21,624          22,117          21,260           16,900           16,097

------------------------------------------------------------------------------------------------------------------------------------

At December 31
Securities available for sale                          $  655,492      $  502,381      $  213,815       $  179,267       $  130,789
Securities held to maturity                               280,914         294,057         715,509          599,587          456,709
Loans, net of unearned and deferred fees                1,884,355       1,652,022       1,569,059        1,303,397        1,373,631
Total assets                                            3,115,687       2,778,416       2,770,667        2,322,713        2,219,105
Deposits                                                2,592,092       2,446,273       2,414,999        2,103,895        2,021,029
Long-term debt                                            100,000          25,000          25,000             --               --
Total stockholders' equity                                206,333         216,796         187,305          117,965          122,406

------------------------------------------------------------------------------------------------------------------------------------
Performance Ratios
Net interest margin                                          5.05%           5.34%           5.03%            4.75%            4.81%
Effeciency ratio                                             68.1%           61.3%           63.9%            73.2%            78.0%
Return on average assets                                     0.76%           1.27%           0.91%          -0.27%             0.38%
Return on average equity                                    10.44%          17.31%          15.77%          -5.01%             7.57%

------------------------------------------------------------------------------------------------------------------------------------
Capital Ratios *
Tier 1 Leverage Ratio                                        5.71%           7.56%           6.28%            7.22%            7.38%
Total Risk-Based Capital Ratio                              14.08%          17.21%          16.71%           14.85%           14.10%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 *  Capital ratios for the years 1992 through 1995 are as previously stated and
    do not consider the retroactive application of pooling of interest
    transactions.

--------------------------------------------------------------------------------
                                                                               5

<PAGE>

HUBCO, INC. ANNUAL REPORT 1996
================================================================================

                  Management's Discussion
                  and Analysis

ACQUISITION SUMMARY

HUBCO, Inc. began its acquisition program in the fall of 1990. Since that time
the company has completed seventeen acquisitions and has grown from a $550
million banking company to a $3.1 billion community banking franchise. The
acquisition program has been utilized to achieve efficiencies and to spread the
cost of new products and technologies over a larger asset base. The financial
results of these acquisitions are difficult to measure other than on an as
reported basis each quarter because pooling of interest transactions change
historical results from those actually reported by HUBCO.

On January 12, 1996, the Company acquired Growth Financial Corp. (Growth) and
merged its subsidiary bank, Growth Bank, into Hudson. Growth was a $128 million
bank, headquartered in Basking Ridge, New Jersey, that had 3 branches. On July
1, 1996 the Company acquired Lafayette American Bank and Trust Company
(Lafayette) and continued to operate it as an independent commercial bank.
Lafayette was a $700 million bank in Connecticut that operated 19 branches,
primarily in Fairfield County. On December 13, 1996 the Company acquired
Westport Bancorp, Inc. (Westport) and merged its subsidiary bank with Lafayette.
Westport was a $317 million bank based in Westport, Connecticut that had 7
branches. All three acquisitions were accounted for on the pooling-of-interests
accounting method, and, therefore, the financial statements for periods prior to
the mergers have been restated to include these institutions and their results
of operations.

On August 30, 1996 the Company acquired Hometown Bancorporation (Hometown), a
$194 million bank holding company headquartered in Darien, Connecticut.
Hometown's 2 -branch banking subsidiary, The Bank of Darien, was merged into
Lafayette. On November 29, 1996 Lafayette acquired UST Bank/Connecticut and
merged it into the Connecticut franchise. UST Bank was a $111 million commercial
bank with 4 branch locations. Both acquisitions were accounted for with the
purchase method of accounting and as such their assets and earnings are included
in the Company's consolidated results only from the date of acquisition.

In addition, during 1996 the Company purchased 4 New Jersey branches with total
deposits of $70.3 million and merged them into Hudson. The Company also sold 1
branch during the year with deposits of $9.7 million.

On April 5, 1995, Jefferson National Bank was merged with the Company's
wholly-owned subsidiary, Hudson United Bank (Hudson) and on June 30, 1995, Urban
National Bank was merged with Hudson. Both acquisitions were accounted for with
the pooling-of-interests accounting method, and, therefore, the financial
statements for periods prior to the merger have been restated to include the
assets and earnings of these banks. Jefferson was a $90 million bank
headquartered in Passaic, New Jersey, that operated 4 branches and Urban
National was a $230 million bank headquartered in Franklin Lakes, New Jersey,
that had 9 branches.

In 1994, the Company completed three acquisitions that were accounted for with
the purchase method of accounting. In May, 1994, the Company purchased four
branches of Polifly Federal Savings & Loan from the Resolution Trust Company
(RTC), with $104 million in deposits in Bergen county. In July, 1994, the
acquisition of Washington Savings was consummated. Washington was a $350 million
savings institution serving Hudson and Bergen counties. In December, 1994,
Shoppers Charge Accounts Co. was acquired for $16.3 million in cash. Shoppers is
a private label credit card company with approximately $63 million in high
yielding credit card receivables at the time of the acquisition. It has
approximately 200 merchant customers in 44 states. The earnings from the 1994
acquisitions are included in the Company's consolidated results only from the
dates of acquisition.

It is the Company's philosophy that acquisitions become accretive to earnings
within a short time frame, generally within one year.

NET INCOME SUMMARY

In 1996, the Company incurred one-time charges ("special charges") as detailed
below:

CHARGE                                                      PRE-TAX    AFTER-TAX
--------------------------------------------------------------------------------
Special SAIF assessment                                     $   825     $   512
Merger related and
restructuring charges -
    Lafayette                                                13,018       9,016
    Westport                                                  8,986       5,901
                                                            --------------------
Total special charges
    in noninterest expense                                  $22,829     $15,429
Special provision for
    possible loan losses                                      4,000       2,340
                                                            --------------------
Total special charges                                       $26,829     $17,769
                                                            ====================

Further details relative to the special charges are discussed in the Noninterest
Expense category. Including all special charges, earnings for 1996 declined to
$21,497 or $.93 per share fully diluted. This represents a decrease of $13,068,
or 37.8%, from 1995. The earnings and earnings per share for 1995 represented a
47.9% increase over the $23.4 million or $1.02 per share earned in 1994.


In 1996, the Company earned $39.3 million or $1.69 per share excluding special
charges. This represents a 13.6 % increase over the $34.6 million earned in
1995. On an earnings per share basis excluding special charges, 1996 increased
17.4%

--------------------------------------------------------------------------------
6
<PAGE>


over the $1.44 earnings per share for 1995. Return on average assets
excluding special charges for 1996, 1995, and 1994 was 1.38%, 1.27%, and 0.91%,
respectively and return on average equity was 19.07%, 17.31%, and 15.77%. It
should be noted that the return on assets for 1995 and 1994 before restatement
for the poolings had been reported as 1.46% and 1.11% and the return on equity
had been 19.49% and 16.57%. This indicates that the Company acquired banks which
earned at a much lower rate prior to being acquired and the Company improved the
acquired banks' performance.


The main component to earnings, the net interest margin, decreased to 5.05% in
1996. A 7.3% increase in noninterest income offset the decline in net interest
income. The primary factor contributing to the increase in net income excluding
special charges was a reduction in noninterest expense (before special charges)
of $9,432, or 9.2%. As reflected in the summary table of one-time charges, the
decrease in net income of $13,068, or 37.8%, is entirely attributable to the
special charges disclosed therein. A more detailed analysis of these components
will be discussed later.

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS, AND RATES

(Dollars in thousands)

<TABLE>
<CAPTION>
                                         1996                                 1995                                1994
                         -------------------------------    --------------------------------     ---------------------------------
                            AVERAGE                YIELD/       AVERAGE                YIELD/        AVERAGE                YIELD/
                            BALANCE    INTEREST     RATE        BALANCE     INTEREST    RATE         BALANCE    INTEREST     RATE
                         -------------------------------    --------------------------------     ---------------------------------
<S>                      <C>           <C>          <C>      <C>          <C>           <C>      <C>           <C>            <C>
ASSETS
Interest-bearing
    deposits with banks  $       679   $     30     4.42%    $    1,385   $      60     4.33%    $    6,044    $    235       3.89%
Federal funds sold            17,594      1,023     5.81%        27,384       1,575     5.75%        36,564       1,613       4.41%
Securities-taxable           855,021     53,141     6.22%       853,505      53,801     6.30%       869,210      50,837       5.85%
Securities-tax exempt         10,617        677     6.38%        30,844       1,735     5.63%        44,164       2,540       5.75%
Loans                      1,723,335    149,664     8.68%     1,590,663     147,241     9.26%     1,405,759     116,805       8.31%
                         -------------------------------    --------------------------------     ---------------------------------
    Total Earning Assets   2,607,246    204,535     7.84%     2,503,781     204,412     8.16%     2,361,741     172,030       7.28%

Cash and due from banks      130,449                            118,438                             121,279
Allowance for loan losses    (31,881)                           (31,276)                            (35,070)
Premises and equipment        43,484                             45,761                              39,387
Other assets                  89,556                             79,908                              74,129
                          ----------                         ----------                          ----------
TOTAL ASSETS              $2,838,854                         $2,716,612                          $2,561,466
                          ==========                         ==========                          ==========

Taxable-equivalent
    adjustment                         $    353                           $     761                            $  1,101
                                       --------                           ---------                            --------


LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing
    transaction accounts  $  455,882   $  9,574     2.10%   $   413,185   $  10,329     2.50%    $  414,467    $  9,160       2.21%
Savings accounts             634,579     13,335     2.10%       689,277      16,858     2.45%       776,485      18,661       2.40%
Time deposits                805,948     39,795     4.94%       768,253      34,490     4.49%       610,261      20,032       3.28%
                         -------------------------------    --------------------------------     ---------------------------------

Total Interest-Bearing
    Deposits               1,896,409     62,704     3.31%     1,870,715      61,677     3.30%     1,801,213      47,853       2.66%
Short-term borrowings        135,541      6,219     4.59%       110,704       6,610     5.97%        81,536       3,031       3.72%
Long-term debt                47,483      3,905     8.22%        25,000       2,153     8.61%        36,080       2,242       6.21%
                         -------------------------------    --------------------------------     ---------------------------------

    Total Interest-Bearing
    Liabilities            2,079,433     72,828     3.50%     2,006,419      70,440     3.51%     1,918,829      53,126       2.77%
                                       --------                           ---------                            --------
Demand deposits              524,017                            487,031                             455,000
Other liabilities             29,477                             23,441                              39,364
                          ----------                         ----------                          ----------
Stockholders' equity         205,927                            199,721                             148,273
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY  $2,838,854                         $2,716,612                          $2,561,466
                          ==========                         ==========                          ==========
NET INTEREST INCOME                    $131,707                           $ 133,972                            $118,904
                                       ========                           =========                            ========
NET INTEREST MARGIN                                 5.05%                               5.35%                                 5.03%
                                                    ====                                ====                                  ====
</TABLE>

--------------------------------------------------------------------------------
                                                                               7
<PAGE>


The following graphs depict the Company's Return on Average Assets and Return on
Average Equity, excluding the Special Charges in 1996, for the years ended
December 31, 1996, 1995, and 1994.

                            Return on Average Asset

                                               1994     1995     1996
                                               ----     ----     ----
         As reported                           1.35%    1.46%    1.38%
         Adjusted for Poolings                  .91%     1.27%   1.38%


                            Return on Average Equity

                                               1994     1995     1996
                                               ----     ----     ----
         As reported                          19.44%   19.49%   19.07%
         Adjusted for Poolings                15.77%   17.31%   19.07%


NET INTEREST INCOME

Net interest income is the difference between the interest earned on earning
assets and the interest paid on deposits and borrowings. The principal earning
assets are the loan portfolio, comprised of commercial loans for businesses,
mortgage loans for businesses and individuals, consumer loans (such as car
loans, home equity loans, etc.) and credit card loans, along with the investment
portfolio. The investment portfolio represents the liquidity of the Company.
Deposits and borrowings not required to fund loans and other assets are invested
primarily in government and government agency securities.

Net interest income is affected by a number of factors including the level,
pricing, and maturity of earning assets and interest-bearing liabilities,
interest rate fluctuations, asset quality, and the amount of noninterest-bearing
deposits and capital. In the following discussion, interest income is presented
on a fully taxable-equivalent basis ("FTE"). Fully taxable-equivalent interest
income restates reported interest income on tax-exempt loans and securities as
if such interest were taxed at the statutory Federal income tax rate of 35%.

In 1996, net interest income on a FTE basis was $131.7 million, a 1.7% decrease
from the $134.0 million in 1995. The $134.0 million in 1995 had increased 12.7%
over 1994. Reasons for the change in net interest income between years is
divided into two components. One is the change in the balance of earning assets
and interest-bearing liabilities, or the change due to "Volume". The second
component of the change is the yield/rate on these balances. Yield/rate changes
are attributable to either the Company changing rates from time-to-time or to
changes in the general level of interest rates.

CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME--RATE/VOLUME ANALYSIS

<TABLE>
<CAPTION>
                                            INCREASE/(DECREASE)                  INCREASE/(DECREASE)
                                        -----------------------------      ----------------------------
                                                 1996 OVER 1995                    1995 OVER 1994
                                        -----------------------------      ----------------------------
(Dollars in thousands)                   VOLUME       RATE      TOTAL      VOLUME      RATE      TOTAL
-------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>        <C>          <C>        <C>       <C>
INTEREST AND FEE INCOME:
Loans                                   $11,845    $(9,422)   $ 2,423      $16,302    $14,134   $30,436
Securities-taxable                           95       (755)      (660)        (932)     3,896     2,964
Securities-tax exempt                    (1,264)       206     (1,058)        (750)       (55)     (805)
Federal funds sold                         (569)        17       (552)        (461)       423       (38)
Interest bearing deposits                   (31)         1        (30)        (199)        24      (175)
                                        -----------------------------      ----------------------------
    Total interest and fee income        10,076     (9,953)       123       13,960     18,422    32,382
                                        -----------------------------      ----------------------------

INTEREST EXPENSE:
Interst bearing transaction accounts      1,000     (1,755)      (755)         (28)     1,197     1,169
Savings                                  (1,270)    (2,253)    (3,523)      (2,128)       325    (1,803)
Time deposits                             1,748      3,557      5,305        5,974      8,484    14,458
Short-term borrowings                     1,314     (1,705)      (391)       1,328      2,251     3,579
Long-term debt                            1,853       (101)     1,752         (806)       717       (89)
                                        -----------------------------      ----------------------------
    Total interest expense                4,645     (2,257)     2,388        4,340     12,974    17,314
                                        -----------------------------      ----------------------------
       Net Interest Income               $5,431    $(7,696)   $(2,265)     $ 9,620    $ 5,448   $15,068
                                        =============================      ============================
</TABLE>
--------------------------------------------------------------------------------
8
<PAGE>


As indicated by the table, Changes in Taxable Equivalent Net Interest Income,
the decrease in net interest income between 1996 and 1995 was due to the
decrease in the yield on interest earning assets and the increase in the volume
of interest bearing liabilities exceeding the effect of the increase in loan
balances and the decrease in rates paid on deposits. The volume growth on both
sides of the balance sheet was realized primarily through the purchases of
Hometown and UST Bank/Connecticut. Deposit growth was further generated by the
branch purchases completed during the year.

The increase in net interest income between 1995 and 1994 was due to the
increase in the volume of earning assets and the increase in rates on these
assets exceeding the increased volume of deposits and rates paid on deposits.
The growth was realized through acquisitions, primarily Shoppers Charge Accounts
Co. in December 1994 and Washington and Polifly in mid-1994, but also due to
internal growth. As the table indicates, the change in net interest income due
to asset yield increases exceeded the effect of deposit volume and deposit rate
increases. With acquisitions, the Company's rate structure is implemented.
Interest rates were at the lowest level in 25 years at the end of 1993 and rates
increased during 1994. Rates declined somewhat in 1995 but still remain well
above the December 1993 level. Despite these movements in interest rates and the
acquisitions of banks with different deposit rate structures, the Company was
able to control rate volatility resulting in relatively minor effects on net
interest income.

NET INTEREST MARGIN

The net interest margin is computed by dividing net interest income on a FTE
basis by average earning assets. The Company's net interest margin was 5.05%,
5.35%, and 5.03% for 1996, 1995, and 1994, respectively. The yield on earning
assets decreased 32 basis points in 1996 compared to 1995. The primary reasons
for the decline are a decrease of 6 basis points in the yield on securities
which comprised one-third of the average earning assets, and a decrease of 58
basis points on loan yields. The lower yield on securities is the result of
maturities in the portfolio where funds were reinvested at a lower rate. The
decline in loan yield results from a decrease in the prime rate, from an average
of 8.83% in 1995 to an average of 8.27% in 1996 along with an increase of
$3,993, or 14.4% in nonperforming loans.

The yield on earning assets increased 88 basis points in 1995 over 1994. The
rising interest rates and the addition of the credit card receivables from
Shoppers were the contributing factors along with the lower level of
nonperforming assets. The cost of interest-bearing deposits increased to a
lesser extent, by 74 basis points, during this period resulting in a
significantly improved net interest margin. The Company focuses on the cost side
of the net interest margin and its deposit mix moderates the change in the cost
of interest-bearing liabilities during a rising rate period.

The Company's average cost of all deposits for 1996 was 2.59%. Approximately 44%
of the Company's deposits are in transaction accounts, another 26% in savings
accounts, and only 30% of its deposits are in the higher cost certificates of
deposit as of year-end 1996.

The Company maintains a laddered investment portfolio. Most of the securities
are either U.S. Treasury or U.S. Government Agency securities. Maturities are
generally kept below 5 years for final maturity. The weighted average life of
the portfolio is three and one-half years. The Company does not generally invest
in exotic securities and does not invest in derivatives. The mortgage-backed
securities are agency obligations or Planned Amortization Classes (PAC's)
comprised of A or B traunches.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

Management determines the provision and adequacy of the allowance for
loan losses based on a number of factors including an in-house loan review
program conducted throughout the year. The loan portfolio is evaluated to
identify potential problem loans, credit concentrations, and other risk factors
such as current and projected economic conditions locally and nationally.
General economic trends can greatly affect loan losses and there are no
assurances that future changes to the loan loss allowance may not be significant
in relation to the amount provided during a particular period. Management does,
however, consider the allowance for loan losses to be adequate for the reporting
periods based on evaluation and analysis of the loan portfolio at the time.
Accompanying tables reflect the three-year history of charge-offs and the
allocation of the allowance by loan category.

The provision for loan losses was $12.3 million for 1996 compared with $9.5
million and $9.3 million in 1995 and 1994, respectively. The increase in the
provision in 1996 of $2.8 million, or 29.5%, is due to the $4 million special
provision, reflecting the Company's reserve methodology and the new Connecticut
bank subsidiary. The allowance for

--------------------------------------------------------------------------------
                                                                               9
<PAGE>

The following is a summary of the activity in the allowance for loan losses, by
loan category:

ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
(Dollars in thousands)                                  1996                  1995              1994
--------------------------------------------------------------------------------------------------------
<S>                                                <C>                   <C>                 <C>
Amount of Loans Outstanding at End of Year         $ 1,884,355           $ 1,652,022         $ 1,569,059
                                                   =====================================================
Daily Average Amount of Loans Outstanding          $ 1,723,335           $ 1,590,663         $ 1,405,759
                                                   =====================================================
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year                       $    30,105           $    30,958         $    33,463
Loans charged off:
    Real estate mortgages                                4,580                 6,130              12,721
    Commercial                                           6,477                 5,503               7,099
    Consumer                                             3,164                 1,535                 789
                                                   -----------------------------------------------------
       Total loans charged off                          14,221                13,168              20,609
                                                   -----------------------------------------------------
Recoveries:
    Real estate mortgages                                  776                 1,222                 459
    Commercial                                             469                   926               1,766
    Consumer                                             1,071                   563                 418
                                                   -----------------------------------------------------
       Total recoveries                                  2,316                 2,711               2,643
                                                   -----------------------------------------------------
       Net loans charged off                            11,905                10,457              17,966
                                                   -----------------------------------------------------
Allowance of acquired companies                          4,658                  --                 4,717
Transfers from assets held for sale or
    reserve for foreclosed property losses                --                      89               1,435
Provision for loan losses                               12,295                 9,515               9,309
Balance at end of year                             $    35,153           $    30,105         $    30,958
                                                   =====================================================
Allowance for loan losses as a percentage of
    loans outstanding at year end                         1.87%                 1.82%               1.97%
Net charge offs as a percentage of average
    loans outstanding                                     0.69%                 0.66%               1.28%
                                                   =====================================================
</TABLE>
The following is the allocation of the allowance for loan losses, by loan
category:

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                            December 31,
                                       1996                     1995                      1994
                              ----------------------     --------------------     ---------------------
                                            CATEGORY                 CATEGORY                  CATEGORY
                                             PERCENT                  PERCENT                   PERCENT
(Dollars in thousands)        ALLOWANCE     OF LOANS     ALLOWANCE   OF LOANS     ALLOWANCE    OF LOANS
--------------------------------------------------------------------------------------------------------
<S>                           <C>              <C>       <C>            <C>       <C>            <C>
Real estate mortgages         $ 10,723         56.3%     $  6,815       58.1%     $  6,287       56.8%
Commercial and industrial       11,454         25.6%       14,604       25.2%       17,072       25.6%
Consumer                         2,885         18.1%        2,197       16.7%        2,603       17.6%
Unallocated                     10,091                      6,489                    4,996
                              ----------------------     --------------------     ---------------------
         Total                $ 35,153          100%     $ 30,105        100%     $ 30,958        100%
                              ======================     ====================     =====================
</TABLE>

loan losses as a percentage of loans outstanding for the last three years was
1.87%, 1.82%, and 1.97%. The allowance for loan losses as a percentage of
nonperforming loans for the last three-years was 111%, 108%, and 73%
representing an improving coverage of problem loans.

NONINTEREST INCOME

Noninterest income, excluding securities gains and losses, was $29.3 million for
1996, a 7.5% increase over 1995. Noninterest income for 1995 was $27.2 million,
a 19.3%, increase over 1994. The reported increase for 1996 includes a $622 gain
resulting from the sale of a Hudson United branch. Excluding that gain and the
nonrecurring items in 1995 (discussed below), the increase in noninterest income
from 1995 to 1996 was $4,104, or 16.7%.

The primary factor for the increase in 1996 is increased loan fees of $2,698,
which arise from the exporting of late charges and increased discounts from
Shoppers Charge. The remaining increase is due to an increase in branch fees of
$332, an increase in international fees of $512, and an increase in gains on
sale of loans. Service charges on deposit accounts increased by $338, or 2.5%,
as a result of an increase of $79,683, or 8.9% , in the average volume of
transaction accounts. Trust income decreased by $428, or 12.0%, as a result of
the sale in September 1995 of Lafayette's trust

--------------------------------------------------------------------------------
10
<PAGE>


business to Sachem Trust. Trust fees for Hudson United showed an increase of
$187, or 24.6%. The significant growth in fee income reported by the Company for
1995 is a result of several nonrecurring items and a strategic initiative to add
new fee based products and services. Service charges on deposit accounts
decreased 2.1% as a result of the competitive environment. Trust department fee
income decreased by $83, or 2.3%, as a result of the Lafayette sale to Sachem.
New services, such as International Services generated $.4 million of fee income
and fees from Shoppers Charge added $2.5 million of fee income. Included in
noninterest income for 1995 are one-time receipts of $2.4 million of which $1.6
million represents the collection of a legal claim instituted by Urban National
Bank, which was settled by Hudson United, as Urban's successor. In addition, the
sale of a 50% interest in the Company's data processing subsidiary to another
financial institution resulted in a gain of $.8 million. This joint venture has
reduced data processing costs and will spread the cost of future technology
investments.

The Company realized $1.0 million in securities gains in 1996 and in 1995
compared with $.4 million of losses in 1994. The 1996 gains result primarily
from the sale of equity investments in other financial institutions. Of the 1995
gains, $.6 million occurred in the first half of the year as several financial
institutions which the Company held positions in were acquired. In the fourth
quarter, however, with the FAS #115 window opportunity to realign the
held-to-maturity and available for sale portfolios, the Company sold nearly 300
small security issues that had been acquired through acquisitions over the past
two years. The proceeds were reinvested in several larger securities with
similar maturities and a large portion of the portfolio was allocated to
Available for Sale. This will allow the Company to better manage the investment
portfolio.

NONINTEREST EXPENSES

Noninterest expense increased 13.0% or $13.4 million to $116.2 million in 1996
from the $102.8 million for 1995. The $102.8 million noninterest expense for
1995 increased over 1994 by $7.9 million. Comparability between 1996 and 1995
and between 1995 and 1994 is impacted by purchase accounting acquisitions
(Hometown, UST and branch purchases during 1996 and Polify, Washington and
Shoppers during 1994). As indicated earlier, the Westport, Lafayette, Growth,
Jefferson and Urban acquisitions were accounted for as poolings and, therefore,
all periods presented have been restated although expense structures are
different after acquisition than they were before.

Salary expense for each of the last three years was $34.9, $37.9, and $34.4
million. The 7.9% reduction in salary expense from $37.9 million in 1995 to
$34.9 million in 1996 is even more significant than it appears when the purchase
accounting acquisitions are taken into account. These savings were realized
despite the 1996 addition of four branches in New Jersey and six in Connecticut.
The full annualized effect of the anticipated cost savings from the
centralization of support functions is not yet reflected as the computer
conversions for Lafayette, Hometown and Westport took place near year-end and
the UST conversion is scheduled for the first quarter of 1997. The growth in
salaries from 1994 to 1995 of $3,510, or 10.2%, is primarily attributable to the
increased staffing levels necessitated by the 1994 acquisitions of Polifly,
Washington and, to a greater extent, Shoppers Charge. Employee benefits as a
percentage of salaries were at the lowest level in 1996 (28%) due to
consolidations of acquired benefit plans.

Occupancy expense amounted to $10.1 million, $11.0 million, and $10.4 million
for 1996, 1995, and 1994, respectively. The decrease in occupancy expense from
1995 to 1996 and the increase from 1994 to 1995 are primarily attributable to
Shoppers Charge occupancy cost at its original headquarters, where the last
rental payment was December, 1995. Equipment expense amounted to $5.3 million,
$5.8 million, and $5.7 million in 1996, 1995 and 1994, respectively. There were
no significant changes in equipment expense during this period other than the
savings in 1996 from the 1995 sale of 50% of the data processing subsidiary and
a moderate increase in 1995 due to the private label credit card division.

Deposit and other insurance expense has shown significant reductions from $7.2
million in 1994 to $4.9 million in 1995 and $1.3 million in 1996. Although the
most significant portion of the savings is attributable to the reduction in the
deposit insurance assessment rate for the Company's banking subsidiaries, the
Company has also benefitted from savings realized through negotiations on its
other insurance coverages.

Outside services expense has increased from $8.8 million in 1994 to $10.2
million in 1995 and to $11.9 million for 1996. The increase from 1995 to 1996 of
$1.7 million, or 16.7%, is primarily attributable to the payments for data
processing services to the jointly owned service provider. Of the $1.4 million
increase from 1994 to 1995, correspondent bank fees increased $.5 million,
stationery and supplies increased $.4 million, loan origination costs increased
$.2 million, and external professional fees increased $.3 million. These
increases were primarily due to the growth of the Company.

Other Real Estate Owned (OREO) expense increased from $1.9 million in 1995 to
$3.2 million in 1996, an increase of $1.3 million, or 68.4%. Of that amount, $.9
million represents the increase in the provision for possible OREO losses which
management had effected in the beginning of 1996. The remaining increase of $.4
million is the result of disposition and maintenance costs during 1996. The
decrease from 1994 to 1995 of $1,309, or 41.1%, is due to a decline of $4,282 in
OREO assets.

--------------------------------------------------------------------------------
                                                                              11
<PAGE>


The increase in the amortization of intangibles from 1995 to 1996
is attributable to the increase in goodwill established for the Hometown and UST
purchases of $14.6 million and $6.2 million, respectively. The increase in the
amortization of intangibles from 1994 to 1995 is attributable to the full year
amortization applicable to the 1994 acquisitions.

Merger related and restructuring costs were $22.0 million, $2.9 million, and $.8
million for 1996, 1995 and 1994, respectively. The costs for 1994 and 1995
included printing, legal, accounting, mailing, conversion costs, consulting fees
and other like costs associated with the 1994 and 1995 acquisitions. For 1996,
the merger related costs were comprised of basically the same types of expenses
described for the two prior periods. The additional element in 1996 - the
restructuring costs - were expensed in the current period of acquisition to
provide for the ongoing cost of restructuring the payroll and rental expense of
the Connecticut franchise to meet the Company's operational strategies. Such
costs include targeted branch and operations center closings, change of control
contracts, data processing issues, demolition, moving and restoration costs and
other expenses related to the integration of the acquired companies.

Other expenses decreased $780, or 5.8%, from $13,452 in 1995 to $12,672 in 1996
due to a reduction in miscellaneous gains and losses occurring primarily from
branch operations. The increase from 1994 to 1995 of $1,102, or 8.9%, is the
result of increases in a number of miscellaneous expense categories related to
the acquisition of the Company's credit card business, as well as the
implementation of the Company's International Department, Asset Based Lending
group and Alternative Investment Products Program, all of which were established
toward the end of 1994.

FEDERAL INCOME TAXES

The income tax provision for Federal and state taxes approximates 35% for 1996,
30% for 1995 and 35% for 1994. The reduction in the overall rate in 1995 is due
to the reversal of a tax reserve no longer deemed necessary primarily as a
result of an IRS settlement during the second quarter which covered the tax
years 1991, 1992, and 1993.

FINANCIAL CONDITION

Total assets at December 31, 1996 increased by $337,271, or 12.1%, as a result
of the purchase of Hometown, UST and the four New Jersey branch offices.

The Company considers its liquidity and capital to be adequate. At the end of
1996, the Company had $24.2 million in Federal funds sold and $936 million in
securities that are available to meet future loan demand. During the FAS #115
window opportunity, the Company moved securities from the Held to Maturity to
Available for Sale category so that approximately 70% of the investment
portfolio is now in the Available for Sale category and only 30% is in the Held
to Maturity category. This enables management to more effectively manage
liquidity, the portfolio, and the net interest margin. A net decline in total
capital of $10.5 million resulted from the Company's purchase of $19.8 million
in common treasury shares, which was partially offset by the addition of $6.1
million from net income less dividends paid, a $.7 million increase in the
mark-to-market of available for sale securities, and other capital transactions.
The purchased treasury shares were reissued within pooling limitations in the
Growth, Lafayette and Westport transactions and in the issuance of shares
relative to the 3% stock dividend. At the end of 1996, Hubco's Tier 1 Leverage
ratio was 5.71%.

SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE

The securities portfolios serve to manage interest rate risk and as a source of
liquidity. Consequently, the portfolios are managed over time in response to
changes in market conditions and as loan demand changes.

At December 31, 1996 and 1995, the portfolios comprised 30 % and 29% of the
total assets of the Company. The amount of securities as a percentage of earning
assets is a function of the amount of deposits and the amount of loans. The
Company does not have a policy with respect to the size of the portfolio.

The Company's philosophy with respect to managing the portfolio is to purchase
primarily government and agency securities with maturities laddered over a five
year period. As mentioned previously, the Company sold approximately 300
individual small holdings in December, 1995 in order to decrease the number of
securities in the portfolio.

--------------------------------------------------------------------------------
12

<PAGE>

The following table summarizes the composition of the portfolios as of December
31, 1996 and 1995:

<TABLE>
<CAPTION>

                                         1996                                         1995
                         ------------------------------------------   ----------------------------------------
                                     GROSS UNREALIZED    ESTIMATED                 GROSS UNREALIZED  ESTIMATED
                         AMORTIZED   -----------------    MARKET      AMORTIZED    -----------------   MARKET
                           COST      GAINS    (LOSSES)     VALUE        COST       GAINS     (LOSSES)   VALUE
---------------------------------------------------------------------------------------------------------------
<S>                      <C>         <C>       <C>         <C>         <C>         <C>       <C>       <C>
HELD TO MATURITY
    PORTFOLIO
U.S. Government          $ 76,837    $  326    $   (21)    $ 77,142    $ 95,521    $2,438    $   (18)  $ 97,941
U.S. Government
    Agencies              204,077     1,508     (3,117)     202,468     198,536     2,300     (1,192)   199,644
                         ------------------------------------------    ----------------------------------------
                         $280,914    $1,834    $(3,138)    $279,610    $294,057    $4,738    $(1,210)  $297,585
                         ==========================================    ========================================
AVAILABLE FOR SALE
    PORTFOLIO
U.S. Government          $ 85,403    $  535    $   (51)    $ 85,887    $153,056    $1,662    $  (408)  $154,310
U.S. Government
    Agencies              496,370     3,118     (3,376)     496,112     313,446     1,333     (1,770)   313,009
States and Political
    Subdivisions           11,575         6         (2)      11,579      10,095        30        (10)    10,115
Other dept securities       4,344        53        (11)       4,386      16,481       198        (52)    16,627
Other securities           52,730     5,088       (290)      57,528       5,666     2,935       (281)     8,320
                         ------------------------------------------    ----------------------------------------
                         $650,422    $8,800    $(3,730)    $655,492    $498,744    $6,158    $(2,521)  $502,381
                         ==========================================    ========================================
</TABLE>

LOAN PORTFOLIO
DISTRIBUTION OF LOANS BY CATEGORY

                                           December 31,
(Dollars in thousands)             1996       1995          1994
--------------------------------------------------------------------------------
Loans secured by real estate:
   Residential mortgage
     loans-fixed               $  209,015   $  197,471   $  191,262
   Residential mortgage
     loans-variable               372,059      311,763      284,822
   Residential home
     equity loans                 145,660       95,985      104,001
   Construction loans              25,080       30,186       20,323
   Commercial mortgage
     loans                        479,566      449,852      415,836
                               ------------------------------------
                                1,231,380    1,085,257    1,016,244
                               ------------------------------------
Commercial and
   industrial loans:
   Secured by real estate         113,102      124,568      150,469
   Other                          368,962      292,158      251,319
                               ------------------------------------
                                  482,064      416,726      401,788
                               ------------------------------------
Shoppers Charge
   credit cards                    61,759       57,915       67,577
Other loans to individuals
   for household, family
   and other personal
   expenditures                   109,152       92,124       83,450
                               ------------------------------------
   Total Loan Portfolio        $1,884,355   $1,652,022   $1,569,059
                               ====================================

Total loans at December 31, 1996 increased by $232,333, or 14.1%, due to
internal growth and to the Hometown and UST acquisitions. Except for
construction loans and commercial loans secured by real estate, all other
categories increased. The largest increase in terms of volume was in commercial
loans, which grew by $76,804, or 26.3%. The Company has experienced success in
originating commercial loans in the markets served. During 1996, Hudson United
Bank achieved SBA Preferred Lender status and a centralized group was
established to underwrite small business loans which improved approval time.
Mortgage loans categorized as fixed residential, variable residential and
commercial showed increases of 5.6%, 19.3%, and 6.6%, respectively, as a result
of the portfolios acquired through acquisitions. In addition, new products and
technological advances for improved customer service contributed to the growth
in mortgage loans. Home equity loans increased by $49,675, or 51.8%, of which
approximately one-half of the increase resulted from acquisitions with the
remainder due to internal growth. The Shoppers Charge credit card portfolio
increased by $3.8 million. 1996 was a year in which Shoppers expanded its niche
by establishing private label credit card programs with several national chains,
primarily high end womens apparel retailers. In addition, the increased
effectiveness of SCA's credit marketing programs including "instant credit"
resulted in a processing sales increase in excess of 25% and a 204% increase in
new account applications processed. SCA currently services 222 merchants who
collectively have 648 stores in 44 states. Shoppers' portfolio of $61,759 at
year end represents an increase of 7% over the prior year end.

ASSET QUALITY

The Company's principal earning assets are its loans, which are primarily to
businesses and individuals located in New Jersey and Connecticut with the
exception of the credit card loans which are originated in 44 states. Inherent
in the lending business is the risk of deterioration in a borrower's ability to
repay loans under existing loan agreements. Other risk elements include the
amount of nonaccrual and past-due loans, the amount of potential problem loans,
industry or geographic

--------------------------------------------------------------------------------
                                                                              13
<PAGE>


loan concentrations, and the level of other real estate owned (OREO) that must
be managed and disposed of.

The following table shows the loans past due 90-days or more and still accruing
and applicable asset quality ratios:

                                        December 31,
                                   1996      1995       1994
                                 ---------------------------
Commercial                       $2,921    $1,026     $1,102
Real estate                       3,292     4,142      1,733
Consumer                            832       461        178
Credit card                       1,486       592        657
                                 ---------------------------
   Total Loans
   Past-Due 90-Days
   or More and Still
   Accruing                      $8,531    $6,221     $3,670
                                 ===========================
   AS A PERCENT OF
   TOTAL LOANS                     0.45%     0.38%      0.23%
                                 ===========================
   AS A PERCENT OF
   TOTAL ASSETS                    0.27%     0.22%      0.13%
                                 ===========================

These ratios have increased from the Company's historical levels due to the
asset quality of acquired institutions along with the reporting of delinquent
credit card receivables. In the past, if the account was on a recourse basis
with a cash reserve only the net amount was reported as delinquent. In addition,
in March of 1996 the credit card division switched from the recency method to
the contractual method of reporting delinquencies on. Comparable basis numbers
reported for 1995 would have been $2.5 million.

Nonaccruing loans consist of commercial loans and commercial mortgage loans
past-due 90-days or more and not fully secured or in the process of collection.
Residential real estate loans are generally placed on nonaccrual status after
180 days of delinquency and consumer loans after 90 days of delinquency and are
charged off after 120 days of delinquency. Any loan may be put on nonaccrual
status earlier if the Company has concern about the future collectability of the
loan or its ability to return to current status.

Nonaccrual real estate loans are principally loans in the foreclosure process
secured by real estate, including single family residential, multi-family, and
commercial properties.

Nonaccruing consumer loans are loans to individuals. Excluding the credit card
receivables, these loans are principally secured by automobiles or real estate.

Renegotiated loans are loans which were renegotiated as to the term or rate or
both to assist the borrower after the borrower has suffered adverse

The following table summarizes the Company's nonperforming assets:

<TABLE>
<CAPTION>
NONPERFORMING ASSETS                                                         December 31,
(Dollars in thousands)                                          1996              1995             1994
---------------------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>              <C>
Nonaccrual Loans                                               $ 29,029         $ 23,700         $ 35,043
Renegotiated Loans                                                2,779            1,879            6,528
                                                               ------------------------------------------
    Total Nonperforming Loans                                    31,808           25,579           41,571
Other Real Estate Owned                                           5,651           11,564           15,846
                                                               ------------------------------------------
    Total Nonperforming Assets                                 $ 37,459         $ 37,143         $ 57,417
                                                               ==========================================
Ratios:
    Nonaccrual Loans to Total Loans                                1.54%            1.43%            2.23%
    Nonperforming Assets to Total Assets                           1.20%            1.34%            2.07%
    Allowance for Loan Losses to Nonaccrual Loans                   121%             127%              88%
    Allowance for Loan Losses to Nonperforming Loans                111%             118%              74%
</TABLE>

effects in financial condition. Terms are designed to fit the ability of the
borrower to repay and the Company's objective of obtaining repayment. The
Company has $2.8 million that are considered renegotiated loans.

OREO consists of properties on which the Bank has foreclosed or has taken a deed
in lieu of the loan obligation. OREO properties are carried at fair value at all
times. The cost to dispose of OREO properties, the cost to maintain them during
ownership, and any declines in fair value from the inception of ownership are
charged to current earnings. The Company has been successful in disposing of
OREO properties, including those acquired in acquisitions. At December 31, 1996,
1995, and 1994, OREO amounted to $5.7 million, $11.6 million, and $15.8 million.
The decline from year to year reflects the Company's success in disposing of
these properties.

At December 31, 1996, nonperforming loans increased by $6.2 million, or 24.4%.
The acquired companies added significantly to the Company's level of
nonperforming loans. The Company has been able to either dispose of or return
the loan to current status on the great majority of the problem loans acquired
in previous acquisitions.

The amount of interest income on nonperforming loans which would have been
recorded had these loans continued to perform under their original terms
amounted to $2.7 million, $2.5 million, and $3.0 million for the years 1996,
1995, and 1994, respectively. The amount of interest income recorded on such
loans for each of the years was $.4 million, $.6 million, and $.3 million. The

--------------------------------------------------------------------------------
14
<PAGE>


Company has no outstanding commitments to advance additional funds to borrowers
whose loans are in a nonperforming status.

Measures to control and reduce the level of nonperforming loans are continuing.
Efforts are made to identify slow paying loans and collection procedures are
instituted. After identification, steps are taken to understand the problems of
the borrower and to work with the borrower toward resolving the problem, if
practicable. Continuing collection efforts are a priority for the Banks.

The allowance for possible loan losses at December 31, 1996, 1995, and 1994 as a
percentage of total loans was 1.87%, 1.82%, and 1.97%, respectively. Management
formally reviews the loan portfolio and evaluates credit risk on at least a
quarterly basis throughout the year. Such review takes into consideration the
financial condition of the borrowers, fair market value of collateral, level of
delinquencies, historical loss experience by loan category, industry trends, and
the impact of local and national economic conditions. The table on page 10 shows
the allowance by loan category and the level of unallocated allowance. The
unallocated portion, which is available to absorb loan losses but which is not
deemed necessary for any specific loan or loan category, has increased in each
of the years 1994, 1995, and 1996.

DEPOSITS

As of December 31, 1996, Hudson United Bank has 58 branch offices located
primarily in Bergen, Essex, Hudson, and Passaic counties with other locations in
Middlesex, Morris, Union and Somerset counties. Hudson manages the branch system
by regionalizing into 4 regions with each managed by a regional manager with a
loan staff.

Lafayette American Bank has 27 branch offices located in New Haven and Fairfield
counties. Lafayette has established 2 regions.

The Company devotes as much attention to the cost side of the net interest
margin as to loans, emphasizing the generation of the lowest cost deposits. The
following table summarizes the deposit base:

                                       December 31,
                           1996           1995          1994
----------------------------------------------------------------
Noninterest-
   bearing
   deposits            $  622,718      $  555,928    $,0507,585
NOW/MMDA
   deposits               520,088         477,172       481,989
Savings deposits          622,880         633,707       732,237
Time deposits             826,406         779,466       693,188
                       ----------------------------------------
   Total Deposits      $2,592,092      $2,446,273    $2,414,999
                       ========================================

The increase in deposits from 1995 to 1996 of $145,819, or 6.0%, is primarily
attributable to the New Jersey branch purchases and to the Connecticut purchases
of Hometown and UST. As noted earlier, 44% of the deposit base is in low or
noninterest bearing core deposits and another 24% is in low cost savings
deposits. This funding base provides a very low cost funding source for the
Company.

LIQUIDITY

Liquidity is a measure of the Company's ability to meet the needs of depositors,
borrowers, and creditors at a reasonable cost and without adverse financial
consequences. The Company has several liquidity measurements that are evaluated
on a frequent basis. The Company has adequate sources of liquidity including
Securities Available for Sale, Federal funds lines, and the ability to acquire
funds from the Federal Home Loan Bank. In addition, the securities portfolio
maturities are laddered over 5 years which means there are continuous maturities
of securities. The management of balance sheet volumes, mixes, and maturities
enables the Company to maintain adequate levels of liquidity.

The liquidity requirements of the Company, primarily for dividends to
shareholders, debt service, and other corporate purposes are met through cash
and short-term money market investments and regular periodic dividends from the
subsidiary banks. The Company also has the ability, when and if necessary, to
access the capital markets. Management considers the liquidity of the Company
and the subsidiary banks to be adequate to meet current and anticipated funding
requirements.

CAPITAL

Capital adequacy is a measure of the amount of capital needed to support asset
growth, absorb unanticipated losses, and provide safety for depositors. The
regulators establish minimum capital ratio guidelines for the banking industry.
The capital ratios impact the performance of the Company in that these ratios
determine the FDIC deposit insurance premium rate a bank must pay. The following
table sets forth the regulatory minimum capital ratio guidelines and the current
capital ratios of the Company.

                         REGULATORY      COMPANY
                           CAPITAL       CAPITAL
                         GUIDELINES      RATIOS
--------------------------------------------------
Tier 1 Leverage Ratio      3 - 5%         5.71%
Tier 1 Risk-Based
   Capital Ratio             4%           8.55%
Total Risk-Based Capital     8%          14.08%

At December 31, 1996, 1995, and 1994 the Company exceeded all regulatory capital
guidelines including those for a well capitalized institution. In January, 1995,
the Company issued a 3-for-2 stock split and prior to that a 10% stock dividend
was declared on June 1, 1993. Following the January stock split, the $.15 per
quarter cash dividend was retained which effectively resulted in a 50% increase
in the cash dividend. On November 15, 1996, the Company paid a 3% stock dividend
and increased its regular quarterly cash dividend from $.17 to $.19 per common
share, effecting a 15% dividend increase. The dividend payout ratio

--------------------------------------------------------------------------------
                                                                              15
<PAGE>


was 72% for 1996 compared with 42% in 1995 and 35% in 1994. The increase in the
1996 ratio is due to the lower net income resulting from the special charges.
Excluding the special charges the payout ratio was 43%.

In 1994, the Company issued $19.1 million in convertible preferred stock in
connection with the Washington acquisition. Based on the terms the stock became
convertible in 1995. Approximately $2 million in preferred stock which was not
converted by the holders as of June 30, was redeemed for cash. Pursuant to the
November 1993 Board authorization to repurchase up to 10% of the shares
outstanding each year, the Company acquired approximately 1.16 million shares of
common stock in 1995 which were then utilized for the 1.2 million shares issued
in the conversion of the preferred stock. During 1996, the Company's treasury
stock was reissued for the 3% stock dividend and for acquisitions. At December
31, 1996, there were no common or preferred shares held in treasury.

In September , 1996, the Company sold $75 million of subordinated debt in a
private placement which was subsequently registered with the SEC. The
subordinated debentures bear interest at 8.20% per annum payable semi-annually
and mature in 2006. Proceeds of the issuance were used for general corporate
purposes including the funding of the subsidiary banks' securities portfolios.
The debt has been structured to comply with the Federal Reserve Bank rules
regarding debt qualifying as Tier 2 capital.

At the end of the reporting period, there were no known uncertainties that will
have or that are reasonably likely to have a material effect on the Company's
liquidity, capital resources or operations; nor is the Company aware of any
current regulatory pronouncements which, if implemented, would have such an
effect.

LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT.

The primary objectives of asset/liability management are to provide for the
safety of depositor and investor funds, assure adequate liquidity and maintain
an appropriate balance between interest sensitive earning assets and
interest-sensitive liabilities. Liquidity management involves the ability to
meet the cash flow requirements of customers who may be either depositors
wanting to withdraw funds or borrowers with credit needs. Interest rate
sensitivity management seeks to avoid widely fluctuating net interest margins
and to ensure consistent net interest income through periods of changing
economic conditions.

Given the above, liquidity for HUBCO is defined as the ability to raise cash
quickly at a reasonable cost without principal loss. The Company uses several
measurements of liquidity in monitoring its liquidity position. In addition, the
Company has a number of borrowing facilities with other banks and with the
Federal Home Loan Bank that are or can be used as sources of liquidity without
having to sell assets to raise cash. At December 31, 1996, the Company's
liquidity ratios exceeded all minimum standards set forth by internal policies.

The Company's Asset and Liability Committee is responsible for monitoring and
managing the Company's exposure to changes in market interest rates. The
Committee attempts to maintain a stable net interest margin by repricing and
reallocating assets and liabilities within the competitive banking environment.

Interest rate risk is determined by the relative sensitivities of earning assets
and interest-bearing liabilities to changes in interest rates. Overnight Federal
Funds on which rates change daily and loans which are tied to the prime rate
differ considerably from long-term securities and fixed rate loans. Similarly,
time deposits and money market deposit accounts are much more rate sensitive
than NOW and Savings accounts.

The Company uses a number of tools in evaluating its risk from changes in
interest rates. Critical to any analysis are the assumptions used to evaluate
the interest sensitivity of noninterest-bearing deposit accounts, NOW and
Savings accounts, and other core deposits. What core deposit customers do in
changing interest rate environments depends on the overall rate environment, the
Company's strategy in adjusting interest rates, and adjustments in interest
rates by competitive financial institutions.

The Company is asset sensitive with respect to assets versus liabilities that
reprice immediately when interest rates change. Approximately 36% of assets
reprice immediately versus 23% of liabilities. The 90-day gap is $411 million.
The Company has managed its overall asset/liability sensitivity through balance
sheet pricing strategies. The following table indicates that the Company would
have a short term negative impact on net interest income in a declining rate
environment and a positive impact in a rising rate environment.

--------------------------------------------------------------------------------
16
<PAGE>


The following table shows the gap position of the Company at December 31, 1996:
GAP  ANALYSIS

<TABLE>
<CAPTION>
                                                             December 31, 1996

                                                     DUE BETWEEN
                                        DUE WITHIN     91 DAYS      DUE AFTER   NON-INTEREST
(In Thousands)                            90 DAYS   AND ONE YEAR    ONE YEAR       BEARING       TOTAL
---------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>           <C>         <C>
ASSETS
Federal Funds Sold                    $    24,200    $    --        $    --       $   --      $   024,200
Securities                                145,592       27,358        763,456         --          936,406
Total Loans                               953,075      237,996        693,284         --        1,884,355
Non-Interest Bearing
    Assets                                   --           --           --           270,726       270,726
                                      -------------------------------------------------------------------
Total Assets                          $ 1,122,867    $ 265,354    $ 1,456,740     $ 270,726   $ 3,115,687
Percent of
    Total Assets                            36.04%        8.52%         46.75%         8.69%       100.00%
=========================================================================================================
SOURCE OF FUNDS
Interest-Bearing
    Deposits                          $   523,595    $ 322,214    $ 1,123,564    $    --      $ 1,969,373
Short-Term Borrowings                     187,979         --            --            --          187,979
Long-Term Debt                               --           --          100,000         --          100,000
Non-Interest Bearing
    Deposits                                                                        622,719       622,719
Other Liabilities                            --           --            --           29,283        29,283
Stockholders' Equity                         --           --            --          206,333       206,333
                                      -------------------------------------------------------------------
Total Source of Funds                 $   711,574    $ 322,214    $ 1,223,564    $  858,335   $ 3,115,687
Percent of Total Source of Funds            22.84%       10.34%         39.27%        27.55%       100.00%
=========================================================================================================
Interest Rate Sensitivity Gap         $   411,293    $ (56,860)   $   233,176    $ (587,609)
---------------------------------------------------------------------------------------------------------
Cumulative Interest
    Rate Sensitivity Gap              $   411,293    $ 354,433    $   587,609
---------------------------------------------------------------------------------------------------------
</TABLE>



--------------------------------------------------------------------------------
                                                                              17

<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================

                 Consolidated
                 Balance Sheets
<TABLE>
<CAPTION>

December 31, (in thousands, except share data)                                          1996             1995
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>              <C>
ASSETS
Cash and due from banks                                                              $   128,868      $   156,891
Federal funds sold                                                                        24,200           64,200
                                                 TOTAL CASH AND CASH EQUIVALENTS         153,068          221,091
Securities available for sale, at market value                                           655,492          502,381
Securities held to maturity, at cost (market value of $279,610
   and $297,585 for 1996 and 1995, respectively)                                         280,914          294,057
Loans:
   Real estate mortgage                                                                1,085,720          974,872
   Commercial and financial                                                              499,004          435,060
   Consumer credit                                                                       237,872          184,175
   Credit card                                                                            61,759           57,915
                                                                                      ---------------------------
                                                                     TOTAL LOANS       1,884,355        1,652,022
   Less: Allowance for possible loan losses                                              (35,153)         (30,105)
                                                                                      ---------------------------
                                                                       NET LOANS       1,849,202        1,621,917
Premises and equipment, net                                                               43,510           42,160
Other real estate owned                                                                    5,651           11,564
Intangibles, net of amortization                                                          29,225            7,572
Other assets                                                                              98,625           77,674
                                                                                      ---------------------------
                                                                    TOTAL ASSETS      $3,115,687       $2,778,416
                                                                                      ===========================
LIABILITIES AND STOCKHOLDERSO EQUITY
Deposits:
   Noninterest bearing                                                                $  622,719       $  555,928
   Interest bearing                                                                    1,969,373        1,890,345
                                                                                      ---------------------------
                                                                  TOTAL DEPOSITS       2,592,092        2,446,273
Short-term borrowings                                                                    187,979           62,982
Other liabilities                                                                         29,283           27,365
                                                                                      ---------------------------
                                                               TOTAL LIABILITIES       2,809,354        2,536,620
                                                                                      ---------------------------
Subordinated debt                                                                        100,000           25,000
                                                                                      ---------------------------
Commitments and contingencies
StockholdersO Equity:

   Convertible Preferred stock--Series B, no par value; authorized
      10,300,000 shares; 39,600 shares issued and outstanding
      in 1996; 41,850 shares issued and outstanding in 1995                                3,960            4,185
   Common stock, no par value; authorized 51,500,000
      shares; 21,624,468 shares issued  and outstanding
      in 1996 and issued 22,117,443 and outstanding 22,072,589 shares in 1995             38,448           38,265
   Additional paid-in capital                                                            104,233          110,229
   Retained earnings                                                                      56,968           63,173
   Treasury stock, at cost, 44,854 common
      shares in 1995                                                                        --               (647)
   Restricted stock award                                                                   (279)            (688)
   Unrealized gain  on securities available
      for sale, net of income taxes                                                        3,003            2,279
                                                                                      ---------------------------
                                                      TOTAL STOCKHOLDERSO EQUITY         206,333          216,796
                                                                                      ---------------------------
                                      TOTAL LIABILITIES AND STOCKHOLDERSO EQUITY      $3,115,687       $2,778,416
                                                                                      ===========================
</TABLE>
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
18
<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================

                 Consolidated Statements
                 of Income
<TABLE>
<CAPTION>

Year ended December 31, (in thousands, except per share data)               1996            1995         1994
----------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>           <C>            <C>
INTEREST AND FEE INCOME:
Loans--taxable                                                             $149,331      $146,801       $116,200
Loans--tax-exempt                                                               217           286            393
Securities--taxable                                                          53,141        53,801         50,837
Securities--tax-exempt                                                          440         1,128          1,651
Other                                                                         1,053         1,635          1,848
                                                                           -------------------------------------
                                       TOTAL INTEREST AND FEE INCOME        204,182       203,651        170,929
                                                                           -------------------------------------
INTEREST EXPENSE:
Deposits                                                                     62,704        61,677         47,853
Short-term borrowings                                                         6,219         6,610          3,031
Subordinated and other debt                                                   3,905         2,153          2,242
                                                                           -------------------------------------
                                              TOTAL INTEREST EXPENSE         72,828        70,440         53,126
                                                                           -------------------------------------
                                                 NET INTEREST INCOME        131,354       133,211        117,803
PROVISION FOR POSSIBLE LOAN LOSSES                                           12,295         9,515          9,309
                                                                           -------------------------------------
                                 NET INTEREST INCOME AFTER PROVISION
                                            FOR POSSIBLE LOAN LOSSES        119,059       123,696        108,494
                                                                           -------------------------------------
NONINTEREST INCOME:
Trust department income                                                       3,151         3,579          3,662
Service charges on deposit accounts                                          13,999        13,661         13,957
Securities gains (losses)                                                       987           986           (417)
Other income                                                                 12,139         9,999          5,218
                                                                           -------------------------------------
                                            TOTAL NONINTEREST INCOME         30,276        28,225         22,420
                                                                           -------------------------------------
NONINTEREST EXPENSE:
Salaries                                                                     34,857        37,888         34,378
Pension and other employee benefits                                           9,874        12,708         10,816
Occupancy expense                                                            10,089        10,985         10,391
Equipment expense                                                             5,285         5,784          5,685
Deposit and other insurance                                                   2,173         4,899          7,202
Special SAIF assessment                                                         825          --             --
Outside services                                                             11,912        10,159          8,798
Other real estate owned expense                                               3,189         1,879          3,188
Amortization of intangibles                                                   3,358         2,181          1,299
Merger related and restructuring costs                                       22,005         2,907            824
Other                                                                        12,672        13,452         12,350
                                                                           -------------------------------------
                                           TOTAL NONINTEREST EXPENSE        116,239       102,842         94,931
                                                                           -------------------------------------
                                          INCOME BEFORE INCOME TAXES         33,096        49,079         35,983
PROVISION FOR INCOME TAXES                                                   11,599        14,514         12,595
                                                                           -------------------------------------
                                                          NET INCOME       $ 21,497      $ 34,565       $ 23,388
                                                                           =====================================
INCOME PER COMMON SHARE:
Primary                                                                        $.93         $1.45          $1.03
Fully diluted                                                                  $.93         $1.44          $1.02

WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary                                                                      23,225        23,608         22,343
Fully diluted                                                                23,225        24,116         22,945
</TABLE>


See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
                                                                              19
<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================

      Consolidated Statements of Changes in
      StockholdersO Equity For the Years Ended December 31, 1996, 1995, and 1994

<TABLE>
<CAPTION>


                                      CONVERTIBLE
                                     PREFERRED STOCK          COMMON STOCK
                                    ------------------   --------------------
(in thousands, except share data)   SHARES      AMOUNT     SHARES      AMOUNT
-------------------------------------------------------------------------------
<S>                                  <C>        <C>       <C>         <C>
Balance at December 31, 1993         113,585    $ 4,564   15,716,611  $ 27,944
                                     ==========================================
Net income -- 1994                      --         --           --        --
Cash dividends -- common                --         --           --        --
Cash dividends -- preferred             --         --           --        --
Stock dividend of acquired company      --         --         53,029        94
Issuance of common stock for -
   Stock options exercised              --         --          5,813        10
   Warrants exercised                   --         --          4,152         8
   Dividend reinvestment and
     stock purchase plan and
     rights offerings                   --         --      4,579,124     8,142
   Preferred stock  conversion       (69,635)      (169)     308,374       548
Issuance of preferred stock          797,811     19,147         --        --
Issuance and retirement of
   treasury stock                       --         --           --        --
Purchase of treasury stock:
   Preferred                            --         --           --        --
Sale of treasury stock                  --         --           --        --
Restricted stock transactions           --         --           --        --
Effect of compensation plans            --         --           --        --
Other equity transactions               --         --           --        --
Change in unrealized holding gains
   (losses) on securities available
   for sale                             --         --           --        --
                                     ------------------------------------------
Balance at December 31, 1994         841,761     23,542   20,667,103    36,746
                                     ==========================================
Net income -- 1995                      --         --           --        --
Cash dividends -- common                --         --           --        --
Cash dividends -- preferred             --         --           --        --
Stock dividend of acquired company      --         --         55,655        99
Issuance of common stock for -
   Stock options exercised              --         --         63,825       114
   Warrants exercised                                        663,353     1,179
   Dividend reinvestment and
     stock purchase plan                --         --          1,715         3
Conversion of preferred stock         (2,100)      (210)      69,757       124
Redemption of preferred stock and
   conversion of preferred stock
   to  common stock                 (797,811)   (19,147)        --        --
Purchase of treasury stock:
   Preferred                            --         --           --        --
   Common                               --         --           --        --
Restricted stock transactions           --         --           --        --
Effect of compensation plans            --         --           --        --
Regulatory approved transfer of
   acquired subsidiary                  --         --           --        --
Change in unrealized holding gains
   (losses) on securities
   available for sale                   --         --           --        --
                                     ------------------------------------------
Balance at December 31, 1995          41,850      4,185   21,521,408    38,265
                                     ==========================================

<CAPTION>
                                                                              UNREALIZED
                                                                             HOLDING GAIN
                                                                              (LOSS) ON
                                     ADDITIONAL                    RESTRICTED SECURITIES
                                      PAID-IN  RETAINED   TREASURY    STOCK    AVAILABLE
(in thousands, except share data)     CAPITAL  EARNINGS    STOCK      AWARD    FOR SALE    TOTAL
------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>      <C>         <C>       <C>        <C>
Balance at December 31, 1993          $ 96,392  $ 7,130  $ (4,571)   $ (946)   $ 4,525$   135,038
                                    =============================================================
Net income -- 1994                        --     23,388      --        --         --       23,388
Cash dividends -- common                  --     (3,512)     --        --         --       (3,512)
Cash dividends -- preferred               --       (447)     --        --         --         (447)
Stock dividend of acquired company         521     (615)     --        --         --         --
Issuance of common stock for -
   Stock options exercised                  25     --        --        --         --           35
   Warrants exercised                        2     --        --        --         --           10
   Dividend reinvestment and
     stock purchase plan and
     rights offerings                   24,175     --        --        --         --       32,317
   Preferred stock  conversion            (379)    --        --        --         --         --
Issuance of preferred stock               --       --        --        --         --       19,147
Issuance and retirement of
   treasury stock                           (2)      (1)     --        --         --           (3)
Purchase of treasury stock:
   Preferred                              --       --      (7,855)     --         --       (7,855)
Sale of treasury stock                       5     --          59      --         --           64
Restricted stock transactions             --          6       703      (320)      --          389
Effect of compensation plans               130     --        --        --         --          130
Other equity transactions                   (3)    --        (100)     --         --         (103)
Change in unrealized holding gains
   (losses) on securities available
   for sale                               --       --        --        --      (11,293)   (11,293)
                                    -------------------------------------------------------------
Balance at December 31, 1994           120,866   25,949   (11,764)   (1,266)    (6,768)   187,305
                                    =============================================================
Net income -- 1995                        --     34,565      --        --         --       34,565
Cash dividends -- common                  --     (8,545)     --        --         --       (8,545)
Cash dividends -- preferred               --       (901)     --        --         --         (901)
Stock dividend of acquired company         824     (923)     --        --         --         --
Issuance of common stock for -
   Stock options exercised                 503     --        --        --         --          617
   Warrants exercised                      319     --        --        --         --        1,498
   Dividend reinvestment and
     stock purchase plan                    23     --        --        --         --           26
Conversion of preferred stock               86     --        --        --         --         --
Redemption of preferred stock and
   conversion of preferred stock
   to  common stock                        452     --      16,214      --         --       (2,481)
Purchase of treasury stock:
   Preferred                              --       --         (71)     --         --          (71)
   Common                                 --       --      (4,885)     --         --       (4,885)
Restricted stock transactions             --       --        (141)      578       --          437
Effect of compensation plans               184     --        --        --         --          184
Regulatory approved transfer of
   acquired subsidiary                 (13,028)  13,028      --        --         --         --
Change in unrealized holding gains
   (losses) on securities
   available for sale                     --       --        --        --        9,047      9,047
                                    -------------------------------------------------------------
Balance at December 31, 1995           110,229   63,173      (647)     (688)     2,279    216,796
                                    =============================================================
</TABLE>

See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
20
<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================

          Consolidated Statements of Changes in Stockholders' Equity (Continued)
          For the Years Ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>



                                       CONVERTIBLE
                                     PREFERRED STOCK          COMMON STOCK     ADDITIONAL
                                    ------------------     ------------------    PAID-IN
(in thousands, except share data)   SHARES      AMOUNT     SHARES      AMOUNT    CAPITAL
------------------------------------------------------------------------------------------
<S>                                  <C>      <C>         <C>        <C>       <C>
Net income -- 1996                      --    $    --           --   $    --   $    --
Cash dividends -- common                --         --           --        --        --
Cash dividends -- preferred             --         --           --        --        --
3% stock dividend                       --         --         15,269        27       680
Issuance of common stock for -

   Stock options exercised              --         --        256,608       455      (873)
   Warrants exercised                   --         --        143,836       255       207
   Dividend reinvestment  and
     stock purchase plan                --         --            371         1         6
   Preferred stock conversion         (2,250)      (225)      74,739       133        92
Issuance and retirement of

   treasury stock                       --         --       (387,763)     (688)   (7,218)
Purchase of treasury stock:
   Common                               --         --           --        --        --
Restricted stock transactions           --         --           --        --        --
Effect of compensation plans            --         --           --        --         116
Tax effect of exercise of
   nonqualifying stock options          --         --           --        --         994
Change in unrealized holding gains
   (losses) on securities available
   for sale                             --         --           --        --        --
                                      ----------------------------------------------------
Balance at December 31, 1996          39,600    $ 3,960   21,624,468  $ 38,448 $ 104,233
                                      ====================================================

<CAPTION>
                                                                      UNREALIZED
                                                                     HOLDING GAIN
                                                                      (LOSS) ON
                                                         RESTRICTED   SECURITIES
                                     RETAINED  TREASURY     STOCK      AVAILABLE
(in thousands, except share data)    EARNINGS    STOCK      AWARD      FOR SALE       TOTAL
---------------------------------------------------------------------------------------------
<S>                                  <C>        <C>       <C>           <C>          <C>
Net income -- 1996                   $ 21,497   $    --   $    --       $    --      $ 21,497
Cash dividends -- common              (14,600)       --        --            --       (14,600)
Cash dividends -- preferred              (825)       --        --            --          (825)
3% stock dividend                     (12,398)     11,657      --            --           (34)
Issuance of common stock for -

   Stock options exercised               --           782      --            --           364
   Warrants exercised                    --            74      --            --           536
   Dividend reinvestment  and
     stock purchase plan                 --          --        --            --             7
   Preferred stock conversion            --          --        --            --
Issuance and retirement of

   treasury stock                        --         7,906      --            --          --
Purchase of treasury stock:
   Common                                --       (19,770)     --            --       (19,770)
Restricted stock transactions              17          (2)      409          --           424
Effect of compensation plans              104        --        --            --           220
Tax effect of exercise of
   nonqualifying stock options           --          --        --            --           994
Change in unrealized holding gains
   (losses) on securities available
   for sale                              --          --        --             724         724
                                    ---------------------------------------------------------
Balance at December 31, 1996         $ 56,968     $  --   $    (279)      $ 3,003    $206,333
                                    =========================================================
</TABLE>

See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
                                                                              21

<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================

                Consolidated Statements
                of Cash Flows
<TABLE>
<CAPTION>

For the Years Ended December 31, 1996, 1995, and 1994 (in thousands)        1996           1995           1994
----------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                $  21,497     $  34,565      $  23,388
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:

      Provision for possible loan losses                                     12,295         9,515          9,309
      Provision for depreciation and amortization                            10,495         7,695          6,996
      Amortization of securities premiums, net                                2,436           393          3,023
      Securities (gains) losses                                                (987)         (986)           417
      Gain on sale of loans                                                    (153)         (595)          (856)
      Gain on sale of interest in subsidiary                                   --            (817)          --
      Deferred income tax provision (benefit)                                (2,818)        6,539          4,495
      Net change in loans originated for sale                                  --          (1,079)         8,939
      Decrease (increase) in  other assets                                   17,013       (17,386)       (11,722)
      Increase (decrease) in other liabilities                                2,538         3,895        (46,336)
                                                                          --------------------------------------
                                     NET CASH PROVIDED BY (USED IN)
                                                OPERATING ACTIVITIES         62,316        41,739         (2,347)
                                                                          --------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                        103,767       158,446         89,965
Proceeds from repayments and maturities of securities:
   Available for sale                                                       122,192        42,289         88,326
   Held to maturity                                                          54,677       121,074        124,024
Purchases of securities:
   Available for sale                                                      (347,257)      (91,452)       (50,706)
   Held to maturity                                                         (47,929)      (87,709)      (325,675)
Net cash acquired through acquisitions                                       78,747          --           91,113
Net increase in loans                                                       (82,070)     (108,876)       (50,415)
Loans purchased                                                                --          (8,257)        (2,462)
Loans sold                                                                    9,450        21,357         14,381
Proceeds from sales of premises and equipment                                 1,233          --               26
Purchases of premises and equipment                                          (4,949)       (3,322)       (13,540)
Decrease in other real estate owned                                           6,151         4,361          3,953
                                                                          --------------------------------------
                                      NET CASH (USED IN) PROVIDED BY
                                                INVESTING ACTIVITIES       (105,988)       47,911        (31,010)
                                                                          --------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts
   and savings accounts                                                     (91,630)      (55,127)       (20,311)
Net (decrease) increase in  certificates of deposit                         (80,466)       86,401        (14,972)
Net increase (decrease) in short-term borrowings                            108,295       (57,113)        38,456
Proceeds from the issuance of subordinated debt                              73,738          --           24,683
Proceeds from the issuance of common stock                                      907         2,141         32,362
Redemption of convertible preferred stock                                      --          (2,481)          --
Cash dividends paid                                                         (15,425)       (9,446)        (3,959)
Proceeds from the sale of treasury stock                                       --            --               64
Purchase of treasury stock                                                  (19,770)       (4,956)        (7,855)
Proceeds from sale of interest in subsidiary                                   --           4,215           --
                                                                          --------------------------------------
                                      NET CASH (USED IN) PROVIDED BY
                                                FINANCING ACTIVITIES        (24,351)      (36,366)        48,468
                                                                          --------------------------------------
                                    (DECREASE) INCREASE  IN CASH AND
                                                    CASH EQUIVALENTS        (68,023)       53,284         15,111
                                        CASH AND CASH EQUIVALENTS AT
                                                   BEGINNING OF YEAR        221,091       167,807        152,696
                                                                          --------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                   $153,068      $221,091       $167,807
                                                                           =====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for-
   Interest                                                                $ 71,874      $ 68,706       $ 51,274
   Income taxes                                                              15,286        10,887          8,151
                                                                           =====================================
Liabilities assumed in purchase business
   combinations and branch acquisitions                                    $347,104          --         $389,233
</TABLE>

See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
22

<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================
                Notes To Consolidated Financial Statements

DECEMBER 31, 1996 (in thousands, except share data)

(1)   SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

HUBCO, Inc. (the Company) provides a full range of banking services to
individual and corporate customers through its two banking subsidiaries, Hudson
United Bank and Lafayette American Bank and Trust Company (Lafayette), with
branch locations in New Jersey and Connecticut. The Company is subject to the
regulations of certain Federal and state banking agencies and undergoes periodic
examinations by those agencies.

BASIS OF PRESENTATION AND CONSOLIDATION

The consolidated financial statements include the accounts of HUBCO, Inc. and
its subsidiaries, all of which are wholly owned. The financial statements of
institutions acquired which have been accounted for by the pooling of interests
method are included herein for all periods presented.

In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent liabilities, as of the date of the
financial statements and revenues and expenses for the period. Actual results
could differ significantly from those estimates.

All significant intercompany accounts and transactions are eliminated in
consolidation.

SECURITIES

The Company classifies its securities as held to maturity, available for sale
and held for trading purposes. Securities for which the Company has the ability
and intent to hold until maturity are classified as held to maturity. These
securities are carried at cost adjusted for amortization of premiums and
accretion of discounts on a straight-line basis which is not materially
different from the interest method. Management reviews its intent to hold
securities to maturity as a result of changes in circumstances, including major
business combinations. Sales or transfers of held to maturity securities may be
necessary to maintain the Company's existing interest rate risk position or
credit risk policy.

Securities which are held for indefinite periods of time which management
intends to use as part of its asset/liability strategy, or that may be sold in
response to changes in interest rates, changes in prepayment risk, increases in
capital requirements or other similar factors, are classified as available for
sale and are carried at fair value. Differences between available for sale
securities' amortized cost and fair value are charged/credited directly to
stockholders' equity, net of income taxes. The cost of securities sold is
determined on a specific identification basis.

The Company has no securities held for trading purposes at December 31, 1996 and
1995.

LOANS

Loans are recorded at their principal amounts outstanding. Interest income on
loans not made on a discounted basis is credited to income based on principal
amounts outstanding at applicable interest rates. Interest income on consumer
credit loans is recorded primarily using the simple interest method.

Recognition of interest on the accrual method is discontinued when, based on
contractual delinquency, timely payment is not expected. A nonaccrual loan is
not returned to an accrual status until interest is received on a current basis
and other factors indicate collection ability is no longer doubtful.

The net amount of all loan origination fees, direct loan origination costs and
loan commitment fees are deferred and recognized over the estimated life of the
related loans as an adjustment of yield.

ALLOWANCE FOR POSSIBLE LOAN LOSSES

The allowance is maintained at a level believed adequate by management to absorb
potential losses in the loan portfolio. Management's determination of the
adequacy of the allowance is based on an evaluation of the portfolio, past loan
loss experience, current economic conditions, volume, growth and composition of
the loan portfolio and other relevant factors. The allowance is increased by
provisions charged to expense and reduced by net charge-offs.

While management uses available information to recognize potential losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions, particularly in its market areas. In addition, various
regulatory agencies, as an integral part of their examination processes,
periodically review the allowance for possible loan losses of subsidiary banks.
Such agencies may require additions to the allowance based on their judgments of
information available to them at the time of their examinations.

PREMISES AND EQUIPMENT

Land, buildings and furniture, fixtures and equipment are carried at
cost. Depreciation on substantially all buildings and furniture, fixtures and
equipment is provided using the straight-line method based on estimated useful
lives ranging from 3-25 years. Maintenance and repairs are expensed as incurred
and additions and improvements are capitalized.

OTHER REAL ESTATE OWNED

Other real estate owned (OREO) includes loan collateral that has been formally
repossessed. These assets are transferred to OREO and recorded at the lower of
carrying cost or fair value of the properties. Subsequent provisions that result
from ongoing periodic evaluations of these OREO properties are charged to
expense in the period in which they are identified. OREO is carried at the lower
of cost or fair value, less estimated costs to sell. Carrying costs, such as
maintenance and property taxes, are charged to expense as incurred.

INVESTMENT IN JOINT VENTURE

The Company owns 50% of the common stock of United Financial
Services, a third-party data processing service provider. The investment is
being accounted for by the equity method.

INTANGIBLES

Intangible assets resulting from acquisitions under the purchase method of
accounting consist of goodwill and core deposit intangibles. Goodwill is being
amortized on a straight-line basis over periods ranging from five to ten years.
Core deposit intangibles are being amortized, on a straight-line basis, over the
estimated average remaining lives of such intangible assets (primarily five
years).

PURCHASED MORTGAGE SERVICING RIGHTS

Purchased mortgage servicing rights are carried at the lower of amortized cost
or the discounted value of the related estimated future net cash flow stream.
The cost of purchased mortgage servicing rights is amortized over the estimated
period of net servicing revenues.

--------------------------------------------------------------------------------
                                                                              23
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

FEDERAL INCOME TAXES

The Company uses the liability method of accounting for income taxes. Certain
income and expense items are recorded differently for financial reporting
purposes than for Federal income tax purposes and provisions for deferred taxes
are made in recognition of these temporary differences. A deferred tax valuation
allowance is established if it is more likely than not that all or a portion of
the Company's deferred tax asset will not be realized. Changes in the deferred
tax valuation allowance are reported through charges or credits to the income
tax provision.

The Company and its subsidiaries file a consolidated Federal income tax return.
Under tax sharing agreements, each subsidiary provides for and settles income
taxes with the Company as if they would have filed on a separate return basis.


As discussed further in Note (2), the Company acquired all of the outstanding
shares of Lafayette on July 1, 1996, and all of the outstanding shares of
Westport Bancorp, Inc. (Westport) on December 13, 1996. Lafayette and Westport
established valuation allowances due to uncertainties surrounding their ability
to realize their deferred tax assets. Considering the combined operating results
of HUBCO, it is unlikely that the Company would have established this valuation
allowance with respect to its federal deferred tax assets had the companies
previously been combined. Accordingly, the accompanying financial statements
(including quarterly financial information in Note 18) have been restated to
reflect what the changes to the valuation allowance would have been had the
companies always been combined.

TREASURY STOCK

The Company determines the cost of treasury shares under the weighted average
cost method.

LONG-LIVED ASSETS

Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
This standard requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The adoption of the standard did not have a material
impact on the Company's financial position or results of operations.

STOCK-BASED COMPENSATION

Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans and allows
companies to choose either 1) a fair value method of valuing stock-based
compensation plans which will affect reported net income, or 2) to continue
following the existing accounting rules for stock option accounting but disclose
what the impacts would have been had the new standard been adopted. The Company
elected the disclosure option of this standard. See Note 14.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective January 1, 1997, the Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. Those
standards are based on consistent application of a financial-components approach
that focuses on control. Under that approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. This statement
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. Management believes
that the adoption of the standard will not have a material impact on the
Company's financial position or results of operations.

PER SHARE AMOUNTS

Primary income per common share is computed by dividing net income, less
dividends on the convertible preferred stock, by the weighted average number of
common shares outstanding during the year. Fully diluted income per share is
computed by dividing net income by the weighted average number of common shares
plus the number of shares issuable on conversion of the preferred stock. Shares
issuable upon the exercise of options are not included in the calculation of
income per common share since their effect is not material. All per share
amounts have been retroactively adjusted for the three-for-two common stock
split on January 14, 1995 and for all stock dividends.

CASH EQUIVALENTS

Cash equivalents include amounts due from banks and Federal funds sold.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1995 and 1994 amounts in order
to conform with 1996 presentation.

(2) BUSINESS COMBINATIONS

The following business combinations have been accounted for using the pooling of
interests method-

On April 5, 1995, the Company acquired all of the outstanding shares of
Jefferson National Bank (Jefferson), based in Passaic, New Jersey. Each share of
Jefferson common stock outstanding was converted into 2.778 shares of the
Company's common stock, for a total of 628,137 shares. At the time of the
acquisition, Jefferson had approximately $90,000 in assets.

On June 30, 1995, the Company acquired all of the outstanding shares of Urban
National Bank (Urban), based in Franklin Lakes, New Jersey. Each share of Urban
common stock outstanding was converted into 2.24 shares of the Company's common
stock, for a total of 2,199,230 shares. At the time of the acquisition, Urban
had approximately $230,000 in assets.

On January 12, 1996, the Company acquired all of the outstanding shares of
Growth Financial Corp (Growth), based in Basking Ridge, New Jersey. Each share
of Growth common stock outstanding was converted into .71 shares of the
Company's common stock, for a total of 1,271,558 shares. At the time of the
acquisition, Growth had approximately $128,000 in assets.


On July 1, 1996, the Company acquired all of the outstanding shares of Lafayette
American Bank and Trust Company (Lafayette), based in Bridgeport, Connecticut.
Each share of Lafayette common stock outstanding was converted into .606 shares
of the Company's common stock, for a total of 5,890,052 shares. At the time of
the acquisition, Lafayette had approximately $741,000 in assets.

On December 13, 1996, the Company acquired all the outstanding shares of
Westport Bancorp, Inc., (Westport) based in Westport, Connecticut. Each share of
Westport common stock outstanding was converted into .332175 shares of the
Company's common stock for a total of 1,866,086 shares. Westport's convertible
preferred stock was converted into a new preferred issue with identical terms,
including equivalent dividend yield. At the time of the acquisition, Westport
had approximately $317,000 in assets.

--------------------------------------------------------------------------------
24
<PAGE>

NOTES--(continued)
--------------------------------------------------------------------------------

Under the pooling-of-interests method, the accompanying consolidated financial
statements include the accounts of these acquired institutions for all periods
presented. Separate results of the combining pooled entities for the period
prior to their acquisition are as follows-

                                             1995          1994
---------------------------------------------------------------
Net interest income-
     The Company, as
       previously reported                $81,102       $58,021
     Jefferson                               --           3,775
     Urban                                   --           9,300
     Growth                                 5,969         5,298
     Lafayette                             31,442        28,824
     Westport                              14,698        12,585
                                         ----------------------
                                         $133,211      $117,803
                                         ======================
Net income (loss)-
     The Company, as
       previously reported                $23,684       $16,931
     Jefferson                               --            (983
     Urban                                   --           1,484
     Growth                                   198         1,120
     Lafayette (1)                          6,715         2,474
     Westport (1)                           3,968         2,362
                                         ----------------------
                                          $34,565       $23,388
                                         ======================

(1)  Represents amounts previously reported by Lafayette and Westport as
     restated for certain changes in the timing of deferred tax asset valuation
     allowance changes (see Note 1 - Federal Income Taxes).

The following business combinations have been accounted for using the purchase
method-

On August 30, 1996, the Company acquired Hometown Bancorporation (Hometown), a
$194 million bank holding company with 2 branch locations in Fairfield County,
Connecticut, for an aggregate cash consideration of $31.6 million which was
$14.6 million in excess of the fair value of the net assets acquired. Hometown's
banking subsidiary, The Bank of Darien, was merged into Lafayette. Since this
transaction was accounted for as a purchase, Hometown's results of operations
have been included in the accompanying financial statements subsequent to August
30, 1996.

On November 29, 1996, Lafayette acquired UST Bank/Connecticut, a
subsidiary of UST Corp, for a cash purchase price of $13.7 million which was
$6.7 million in excess of the fair value of the net assets acquired. UST
Bank/Connecticut is a $111 million commercial bank with 4 branch locations in
Fairfield County, Connecticut. Since this transaction was also accounted for as
a purchase, UST Bank/Connecticut's results of operations have been included in
the accompanying financial statements subsequent to November 29, 1996.

Pro forma results of operations have not been disclosed herein because the
Hometown and UST Bank/Connecticut business combinations were not deemed to be
significant.

Merger related and restructuring charges include payouts on existing employment
contracts, branch and operations center closings, professional services related
to the business combinations and other expenses related to the integration of
the acquired companies.

In addition, during 1996, the Company purchased 4 branches with total deposits
of $70.3 million for an aggregate premium of $3.6 million. The resulting core
deposit intangible is being amortized to expense on a straight line basis over 5
years. The Company also sold 1 branch during the year with deposits of $9.7
million and recorded a gain of $622.

(3) CASH AND DUE FROM BANKS

Banks are required to maintain an average reserve balance with the Federal
Reserve Bank. The average 1996 amount of this reserve for the Company's
subsidiary banks was approximately $36,914.

(4) SECURITIES

The amortized cost and estimated market value of securities as of December 31,
are summarized as follows:

                                        1996
                       ------------------------------------------
                                   GROSS UNREALIZED     ESTIMATED
                       AMORTIZED   ----------------      MARKET
                         COST      GAINS    (LOSSES)     VALUE
-----------------------------------------------------------------
AVAILABLE FOR SALE
U. S. Government      $  85,403   $   535    $    (51)  $ 85,887
U. S. Government
   agencies             496,370     3,118     (3,376)    496,112
States and political
   subdivisions          11,575         6         (2)     11,579
Other debt securities     4,344        53        (11)      4,386
Equity securities        52,730     5,088       (290)     57,528
                       ------------------------------------------
                       $650,422   $ 8,800    $(3,730)   $655,492
                       ==========================================
HELD TO MATURITY
U. S. Government       $ 76,837    $  326    $  (21)   $ 77,142
U. S. Government
   agencies             204,077     1,508     (3,117)    202,468
                       ------------------------------------------
                       $280,914   $ 1,834    $(3,138)   $279,610
                       ==========================================














                                        1995
                       ------------------------------------------
                                   GROSS UNREALIZED     ESTIMATED
                       AMORTIZED   -----------------     MARKET
                         COST      GAINS    (LOSSES)     VALUE
-----------------------------------------------------------------
AVAILABLE FOR SALE
U. S. Government       $153,056   $ 1,662      $(408)   $154,310
U. S. Government
   agencies             313,446     1,333     (1,770)    313,009
States and political
   subdivisions          10,095        30        (10)     10,115
Other debt securities    16,481       198        (52)     16,627
Equity securities         5,666     2,935       (281)      8,320
                       ------------------------------------------
                       $498,744   $ 6,158    $(2,521)   $502,381
                       ==========================================
HELD TO MATURITY
U. S. Government        $95,521   $ 2,438    $   (18)    $97,941
U. S. Government
   agencies             198,536     2,300     (1,192)    199,644
                       ------------------------------------------
                       $294,057   $ 4,738    $(1,210)   $297,585
                       ==========================================

The amortized cost and estimated market value of debt securities at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

--------------------------------------------------------------------------------
                                                                              25
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------


                                                      ESTIMATED
                                        AMORTIZED      MARKET
                                          COST          VALUE
----------------------------------------------------------------
AVAILABLE FOR SALE
Due in one year or less                  $ 55,976     $  56,211
Due after one year through five years     394,481       394,935
Due after five years through ten years     13,089        12,871
Due after ten years                        35,801        34,792
                                         -----------------------
                                          499,347       498,809
Mortgage-backed securities                 98,345        99,154
Equity securities                          52,730        57,529
                                         -----------------------
                                         $650,422      $655,492
                                         =======================
HELD TO MATURITY
Due in one year or less                  $ 39,996     $  40,107
Due after one year through five years     146,593       145,781
Due after five years through ten years     19,579        18,754
Due after ten years                        22,640        22,259
                                         -----------------------
                                          228,808       226,901
Mortgage-backed securities                 52,106        52,709
                                         -----------------------
                                         $280,914      $279,610
                                         =======================

Securities with an amortized cost basis of $36,489 and an estimated market value
of $36,143 previously held by Urban and Jefferson, and classified as
held-to-maturity were reclassified as available for sale upon consummation of
the acquisitions of Urban and Jefferson to maintain the Company's interest rate
risk positions.

In December 1995, the Financial Accounting Standards Board issued a special
report- "A Guide to Implementation of Statement No. 115 on Accounting for
Certain Investments in Debt and Equity Securities". This special report allowed
the Company to make a one-time reclassification of securities within the
categories without tainting other securities held-to-maturity. In December 1995,
the Company reclassified securities with an amortized cost basis of $316,828 and
an estimated market value of $310,915 from held-to-maturity to available for
sale. Securities with an amortized cost of $24,998 and an estimated market
value of $24,749 were sold in December 1995, resulting in a realized loss of
$249.

In July, 1994, the Company transferred securities with an amortized cost basis
of $117,393 and an estimated market value of $116,696 from available for sale to
held to maturity. The transfer resulted from the Company's review of its
interest rate risk position in connection with the acquisition of Washington
Bancorp, Inc. As of December 31, 1995 and 1994 these securities are included in
held to maturity at the estimated fair value at the transfer date, and the
unrealized loss is being accreted over the remaining life of the securities.

In December 1994, the Company transferred securities with an amortized cost
basis of $99,721 and an estimated market value of $98,698 from held to maturity
to available for sale. Securities with an amortized cost of $50,295 and an
estimated market value of $49,996 were immediately sold resulting in a realized
loss of $299. The purpose of a portion of the transfer and sale was to fund the
purchase price and repay assumed debt related to the acquisition of Shoppers
Charge Accounts Co. (Shoppers). As a result of the Shoppers business
combination, the Company transferred securities with an amortized cost basis of
$48,210 and an estimated fair value of $47,486 from held to maturity to
available for sale. The purpose of the transfer was to maintain the Company's
interest rate risk position and to adjust for the credit risk associated with
the purchase of credit card receivables. Sales of securities for the year ended
December 31 are summarized as follows:

                                1996        1995         1994
---------------------------------------------------------------
   Proceeds from sales        $103,767     $158,476     $89,963
   Gross gains from sales        2,024        2,208          25
   Gross losses from sales      (1,037)      (1,222)       (442)

Securities with a book value of $122,562 and $107,740 at December 31, 1996 and
1995, respectively, are pledged to secure public funds, repurchase agreements
and for other purposes as required by law.

(5) LOANS AND THE ALLOWANCE FOR POSSIBLE LOAN LOSSES

The Company's loan portfolio is diversified with no industry comprising greater
than 10% of the total loans outstanding. Real estate loans are primarily made in
the local lending area of the subsidiary banks.

The allowance for possible loan losses is based on estimates, and ultimate
losses may vary from the current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are reflected in
operations in the periods in which they become known.

A summary of the activity in the allowance for possible loan losses is as
follows-

                                  1996       1995       1994
----------------------------------------------------------------
Balance at January 1             $30,105    $30,958     $33,463
Additions (deductions)-
   Provision charged to expense   12,295      9,515       9,309
   Allowance acquired through
     mergers or acquisitions       4,658        --         4,717
   Recoveries on loans
     previously charged off        2,316      2,711       2,643
   Loans charged off             (14,221)   (13,168)    (20,609)
   Transfers from assets
     held for sale or reserve for
     foreclosed property losses      --           89       1,435
                                 -------------------------------
Balance at December 31           $35,153    $30,105     $30,958
                                 ===============================












(6) NONPERFORMING ASSETS

The following table presents information related to loans which are on
nonaccrual, contractually past due ninety days or more as to interest or
principal payments and loans which have been restructured to provide a reduction
or deferral of interest or principal for reasons related to the debtors'
financial difficulties.

                                               DECEMBER 31,
                                          -----------------------
                                           1996         1995
-----------------------------------------------------------------
Nonaccrual loans                          $29,029       $23,700
Renegotiated loans                          2,779         1,879
                                          -----------------------
     Total nonperforming loans            $31,808       $25,579
                                          =======================
90 days or more past due and
     still accruing                       $ 8,531       $ 6,221
                                          =======================

                                          YEAR ENDED DECEMBER 31,
                                          -----------------------
Gross interest income which
     would have been recorded
     under original terms                 $ 2,684       $ 2,519
                                          =======================
Gross interest income recorded
     during the year                      $   367       $   584
                                          =======================

In May 1993 and October 1994, the Financial Accounting Standards Board issued
SFAS 114, "Accounting by Creditors for Impairment of a Loan" and SFAS 118,"
Accounting by Creditors

--------------------------------------------------------------------------------
26
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

for Impairment of a Loan - Income Recognition and Disclosure." As defined in
SFAS 114 and 118, a loan is impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. SFAS 114 and 118
require that the measurement of impairment of a loan be based on the present
value of expected future cash flows, net of estimated costs to sell, discounted
at the loan's effective interest rate. Impairment can also be measured based on
a loan's observable market price or the fair value of collateral, if the loan is
collateral dependent. If the measure of the impaired loan is less than the
recorded investment in the loan, the Bank will be required to establish a
valuation allowance, or adjust existing valuation allowances, with a
corresponding charge or credit to the provision for possible loan losses.

The Company adopted these standards as of January 1, 1994 with no material
effect on its results of operations.

At December 31, 1996 and 1995 impaired loans, comprised principally of
nonaccruing loans, totaled $31,747 and $28,637, respectively. The allowance for
possible loan losses related to such impaired loans was $6,020 and $3,519 at
December 31, 1996 and 1995, respectively.

Included in the consolidated balance sheets as of December 31, 1996 and 1995 is
$5,347 and $5,581, respectively, of net cash surrender value (net of insurance
premium loans in the amount of $1,521 and $585, respectively) pertaining to life
insurance policies issued by a company (affiliated with Confederation Life
Insurance Company of Canada) which was placed in rehabilitation during 1994.
Although uncertainties exist as a result of the rehabilitation process and
although the Company has ceased accruing interest on this asset, the information
available to the Company does not indicate that this asset (which is not
included in the preceding nonperforming asset table) is impaired.

(7) LOANS TO RELATED PARTIES

In the ordinary course of business, subsidiary banks have extended credit to
various directors, officers and their associates.

The aggregate loans outstanding to related parties are summarized below for the
year ended December 31, 1996-

       Balance at January 1                             $14,969
       New loans issued                                   5,887
       Repayment of loans                                  (394)
       Loans to former directors                         (9,249)
                                                        --------
       Balance at December 31                           $11,213
                                                        ========
(8) PREMISES AND EQUIPMENT

The following is a summary of premises and equipment at December 31-

                                            1996          1995
----------------------------------------------------------------
Land                                      $ 8,959       $ 8,758
Premises                                   41,224        37,651
Furniture, fixtures and equipment          29,468        24,773
                                          ----------------------
                                           79,651        71,182
Less- Accumulated depreciation            (36,141)      (29,022)
                                          ----------------------
                                          $43,510       $42,160
                                          ======================

Depreciation and amortization expense for premises and equipment for 1996, 1995
and 1994 amounted to $5,135, $5,015 and $5,059, respectively.

(9) INCOME TAXES

The components of the provision (benefit) for income taxes for the year ended
December 31 are as follows-

                                  1996       1995         1994
---------------------------------------------------------------
Federal-
   Current                       $13,858    $ 6,088     $ 5,712
   Deferred                       (2,818)     6,539       4,495
State                                559      1,887       2,388
                                 ------------------------------
   Total provision for
   income taxes                  $11,599    $14,514     $12,595
                                 ==============================

A reconciliation of the provision for income taxes, as reported, with the
Federal income tax at the statutory rate of 35 percent for the year ended
December 31 is as follows:

                                  1996        1995        1994
----------------------------------------------------------------
Tax at statutory rate            $11,584    $17,155     $12,234
Increase (decrease) in taxes
     resulting from-
   Tax-exempt income                (424)      (495)       (715)
   State income taxes, net of
   Federal income tax benefit        363      1,226       1,552
   Reversal of reserves no
     longer deemed necessary         --       (2,076)        --
   Change in valuation allowance  (1,250)    (2,861)     (1,296)
   Other, net                      1,326      1,565         820
                                 -------------------------------
       Provision (benefit) for
       income taxes              $11,599    $14,514     $12,595
                                 ===============================

Significant components of deferred tax assets and liabilities are as follows:













                                          DECEMBER 31,
                                  -------------------------------
                                  1996        1995         1994
-----------------------------------------------------------------
Deferred Tax Assets (Liabilities):
  Allowance for possible
     loan losses                  $14,061    $10,605     $ 6,595
  Federal and state tax
      operating loss
      carryforwards                 6,349     11,288      15,711
  Director and officer
    compensation plans              1,189      1,212       1,245
  Purchased mortgage
    servicing rights                1,067      1,140       1,250
  Allowance for losses on
    other real estate                 902        826       1,259
  Depreciation                      1,116        503         336
  Unrealized (gain) loss on
    available for sale securities  (2,002)    (1,471)      1,684
  Acquisition expenses              2,692        --           --
  Other                             2,319      1,659        (304)
                                  -------------------------------
                                   27,693     25,762      27,776
  Valuation Allowance                --       (1,250)     (4,726)
                                  -------------------------------
  Net Deferred Tax Asset          $27,693    $24,512     $23,050
                                  ===============================

Management periodically evaluates the realizability of its deferred tax asset
and will adjust the level of the valuation allowance if it is deemed more likely
than not that all or a portion of the asset is realizable.

As of December 31, 1996, the Company had approximately $15,000 and $25,000 in
Federal and state carryforwards, respectfully, available for tax reporting
purposes resulting from the Lafayette business combination which are subject to
certain limitations as to the amount which may be utilized in any given year.

--------------------------------------------------------------------------------
                                                                              27
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

(10) PENSION PLANS AND POSTRETIREMENT BENEFITS

The Company and its acquired subsidiaries have certain pension plans which cover
eligible employees. The plans provide for payments to qualified employees based
on salary and years of service. The Company's funding policy for these plans is
to make the maximum annual contributions allowed by the applicable regulations.

Net pension cost includes the following-

                                   1996       1995         1994
----------------------------------------------------------------
Service cost -- benefits earned
   during the year                $1,055       $876        $728
Interest cost on projected
   benefit obligation              1,480      1,382         996
Actual return on plan assets      (2,816)    (3,977)       (719)
Net amortization and deferral      1,322      2,687        (351)
                                  ------------------------------
   Net periodic pension cost      $1,041       $968        $654
                                  ==============================

Assumptions used by HUBCO in the accounting for its plans in 1996, 1995 and 1994
were:

                                    1996          1995      1994
------------------------------------------------------------------
Weighted average
   discount rate                 7.0%-7.75%       7.0%        7.0%
Rate of increase in
   compensation                   4.0%-5.0%       4.0%        4.0%
Expected long-term rate of
   return on assets               8.0%-8.5%       8.0%        8.0%

The following table sets forth the funded status and amounts recognized in the
consolidated balance sheets at December 31 for the Company's plans:

                                             1996          1995
----------------------------------------------------------------
Actuarial present value of benefit
   obligations-
     Accumulated benefit
       obligation, including vested
       benefits of $18,894 and
       $18,145 for 1996 and
       1995, respectively                 $19,348       $18,679
                                          ======================
     Projected benefit obligation for
       service rendered to date           $22,553       $15,206
     Plan assets at fair value             22,806        16,035
                                          ----------------------
     Projected benefit obligation
       less than plan assets                  253           829
     Unrecognized portion as of
       December 31, of net asset
       existing at date of adoption of
       FASB Statement No. 87                 (377)         (100)
     Prior service cost not yet
       recognized in net periodic
       pension cost                         1,200           920
     Unrecognized net asset at
       December 31                           (479)         (735)
                                          ----------------------
     Prepaid pension costs included
       in other assets                       $597          $914
                                          ======================

The Company and its acquired subsidiaries have five 401(k) savings plans
covering substantially all of their employees. Under the Plans, the Company
matches varying percentages of the first 6% of the employee's contribution. The
Company's contributions under these Plans were approximately $654, $598 and $282
in 1996, 1995 and 1994, respectively.

Except for the pension plans, the Company does not provide any significant
post-retirement benefits.

(11) DEPOSITS

The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100, was approximately $112,943 and $61,772 in 1996 and
1995, respectively.

The scheduled maturities of certificates of deposit are as follows at December
31, 1996-

                  1997                      $671,761
                  1998                       104,058
                  1999                        29,551
                  2000                        12,673
                  2001 and thereafter          8,363
                                            --------
                                            $826,406
                                            --------

(12) BORROWINGS

The following is a summary of borrowings at December 31-

                                             1996          1995
----------------------------------------------------------------
Federal Home Loan Bank advances          $110,000     $   8,315
Securities sold under agreements
   to repurchase                           56,911        34,542
Federal funds purchased                    17,500        11,316
Treasury, Tax and Loan note                   893         7,288
Other borrowings                            2,675         1,521
                                         -----------------------
   Total borrowings                      $187,979       $62,982
                                         =======================

Information concerning securities sold under agreements to repurchase is
summarized as follows at December 31-

                                             1996          1995
---------------------------------------------------------------
Average daily balance during the year     $58,734       $69,198
Average interest rate during
   the year                                 3.43%         4.64%
Maximum month-end balance during
   the year                                97,649       106,801

Mortgage-backed securities underlying the agreements at
December 31-

                                             1996          1995
---------------------------------------------------------------
Carrying value                            $57,470       $32,035
Estimated fair value                      $57,709       $32,496

(13) SUBORDINATED DEBT

In September, 1996, the Company sold $75,000 aggregate principal amount of
subordinated debentures. The debentures, which mature in 2006, bear interest at
8.20% per annum payable semiannually. In January, 1994, the Company sold $25,000
aggregate principal amount of subordinated debentures. The debentures, which
mature in 2004, bear interest at 7.75% per annum payable semi-annually.

(14) STOCKHOLDERS' EQUITY

On October 13, 1994, the Company announced that its Board of Directors had
approved a 3-for-2 stock split effective January 14, 1995 to record holders of
HUBCO Common Stock on January 3, 1995. On November 15, 1996, the Company paid a
3% stock dividend to stockholders of record November 4, 1996. As a result, all
share data has been retroactively restated.

--------------------------------------------------------------------------------
28
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

In December, 1996, as part of the Westport acquisition, the Company converted
all outstanding preferred shares of Westport into a new class of preferred
stock. Holders of the preferred stock are entitled to dividends when and if
declared by the Company's Board of Directors. Each share of the preferred stock
is convertible at any time at the option of the holder thereof into 33.2175
shares of common stock, subject to certain adjustments. Each share is entitled
to 33.2175 votes.

In December, 1994 the Board of Directors adopted the 1995 Stock Option Plan
which provides for the issuance of up to 750,000 stock options or restricted
stock grants to employees of the Company in addition to restricted stock awards
previously granted. The option or grant price cannot be less than the fair
market value of the common stock at the date of the grant and options are
granted by the Company's restricted stock committee.

Transactions under the plan are summarized as follows:

                                     NUMBER            OPTION PRICE
                                    OF SHARES            PER SHARE
--------------------------------------------------------------------
Outstanding, December 31, 1994       463,500                 $12.46
Granted                               60,770            16.99-20.39
Cancelled                            (54,075)                 12.46
                                     -------------------------------
Outstanding, December 31, 1995       470,195            12.46-20.39
Granted                               19,570            20.04-20.87
Exercised                            (74,315)            4.14-12.83
Westport options converted           307,017             6.02-18.06
                                     -------------------------------
Outstanding, December 31, 1996       722,467           $6.02-$20.87
                                     -------------------------------

As of December 31, 1996, 656,292 shares are exercisable. In connection with the
Lafayette and Growth acquisitions, the Company issued HUBCO common shares to the
holders of options to purchase Lafayette or Growth common stock, the value of
which was based on the value of the options on the date of acquisition.

The Company applies APB Opinion 25 and related Interpretations in accounting for
its plan. Accordingly, no compensation cost has been recognized. Had
compensation cost been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, the
Company's net income and income per share would have been reduced to the
proforma amounts indicated below.

                                              1996       1995
---------------------------------------------------------------
Net income                 As reported       $21,497    $34,565
                           Pro forma          21,421     34,459
Primary earnings
   per share               As reported         $0.93      $1.45
                           Pro forma            0.92       1.44
Fully diluted earnings
   per share               As reported         $0.93      $1.44
                           Pro forma            0.92       1.43

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used: dividend
yield of 4%; risk-free interest rates of 5.64% to 6.84%; and expected life of 7
years.

The Company has a restricted stock plan in which 510,000 shares of the Company's
common stock may be granted to officers and key employees. During 1996 and 1995,
4,738 and 3,914 shares of common stock were awarded which vest between two to
five years from the date of grant. The value of shares issued that have not been
earned ($279) and ($688) has been recorded as a reduction of stockholders'
equity for 1996 and 1995, respectively. Amortization of restricted stock awards
charged to expense amounted to $423 , $455 and $389 in 1996, 1995 and 1994,
respectively.

On November 8, 1993, the Company's Board of Directors authorized management to
repurchase up to 10 percent of its outstanding common stock each year. The
program may be discontinued or suspended at any time, and there is no assurance
that the Company will purchase the full amount authorized. The acquired shares
are to be held in treasury to be used for stock option and other employee
benefit plans, stock dividends, preferred stock conversion or in connection with
the issuance of common stock in pending or future acquisitions primarily
accounted for under the purchase method of accounting. During 1996, the Company
purchased 971,000 shares at an aggregate cost of $19.8 million. Of these
treasury shares, 578,000 were reissued in connection with the 3% stock dividend
payable November 15, 1996, and 383,000 were reissued in connection with
acquisitions during 1996.

Deferred compensation arrangements have been established for certain directors
and management members. These plans provide for certain annual payments upon
retirement. In conjunction with certain of these arrangements, Lafayette is the
beneficiary under life insurance policies that it has purchased on the
respective participants and other nonparticipating employees. These plans do not
hold any assets.

Deferred compensation expense related to the plans for 1996, 1995 and 1994 was
$241, $80 and $209, respectively.

(15) RESTRICTIONS ON BANK DIVIDENDS, LOANS OR ADVANCES

Certain restrictions exist regarding the ability of Hudson United Bank and
Lafayette to transfer funds to the Company in the form of cash dividends, loans
or advances. New Jersey state banking regulations allow for the payment of
dividends in any amount provided that capital stock will be unimpaired and there
remains an additional amount of paid-in capital of not less than 50 percent of
the capital stock amount. Connecticut state banking regulations allow for the
declaration and payment of cash dividends only from the current year's and the
two prior year's retained net profits. As of December 31, 1996, $109,937 was
available for distribution to the Company from Hudson United Bank and $13,667
was available for distribution to the Company from Lafayette.

Under Federal Reserve regulations, each of the Banks is limited as to the
amounts it may loan to its affiliates, including the Company. All such loans are
required to be collateralized by specific obligations. During 1994, the Company
obtained a loan from Hudson United Bank for $4,000 in order to finance the
purchase of its administrative facility. The loan has been collateralized by the
property.

(16) LEASES

Total rental expense for all leases amounted to approximately $5,203, $4,752
and, $4,638 in 1996, 1995 and 1994, respectively. At December 31, 1996, the
minimum total rental commitments under all noncancellable leases on bank
premises with initial or remaining terms of more than one year were as follows-

     1997                                  $4,100
     1998                                   3,807
     1999                                   3,592
     2000                                   3,198
     2001                                   2,480
Thereafter                                 11,680


--------------------------------------------------------------------------------
                                                                              29
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

It is expected that in the normal course of business, leases that expire will be
renewed or replaced by leases of other properties.

(17) COMMITMENTS AND CONTINGENT LIABILITIES

In 1994, the Company entered into an interest rate exchange agreement for the
purpose of hedging the interest rate related to the subordinated debt. The
agreement is a contractual agreement between the Company and its counterparty to
exchange fixed and floating rate interest obligations without exchange of the
underlying notional amount of $25,000. Such agreement involves interest rate
risk. If interest rates increase, the benefit resulting from the agreement will
be diminished. The notional principal amount is used to express the volume of
the transaction involved in this agreement; however this amount does not
represent exposure to credit loss. The counterparty to the agreement is the
fixed rate payor on the agreement and the Company is the floating rate payor on
the agreement. The floating rate is reset every three months. The term of this
agreement is three years. Management does not anticipate any material loss as a
result of this transaction.

The Company and its subsidiaries, from time to time, may be defendants in legal
proceedings. In the opinion of management, based upon consultation with legal
counsel, the ultimate resolution of these legal proceedings will not have a
material effect on the consolidated financial statements. In the normal course
of business, the Company and its subsidiaries have various commitments and
contingent liabilities such as commitments to extend credit, letters of credit
and liability for assets held in trust which are not reflected in the
accompanying financial statements. Loan commitments, commitments to extend lines
of credit and standby letters of credit are made to customers in the ordinary
course of business. Both arrangements have credit risk essentially the same as
that involved in extending loans to customers and are subject to the Company's
normal credit policies. The Company's maximum exposure to credit loss for loan
commitments, primarily unused lines of credit and standby letters of credit
outstanding at December 31, 1996 was $315,925 and $17,675, respectively.
Commitments under commercial letters of credit used to facilitate customers
trade transactions were $1,485 at December 31, 1996.

(18) HUBCO, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31
                                                                                       ---------------------------
BALANCE SHEETS                                                                            1996             1995
------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>              <C>
ASSETS:
Cash                                                                                    $  12,092        $   4,848
Securities-
   Available for sale                                                                      43,130           12,387
   Held to maturity                                                                         1,307              --
Investment in subsidiaries                                                                236,639          207,043
Accounts receivable                                                                           334            7,572
Premises and equipment, net                                                                 5,541            5,600
Other assets                                                                               15,400           10,183
                                                                                         -------------------------
                                                                        TOTAL ASSETS     $314,443         $247,633
                                                                                         =========================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable                                                                         $    251         $    768
Notes payable-subsidiary                                                                    3,194            3,566
Accrued taxes and other liabilities                                                         4,665            1,503
                                                                                         -------------------------
                                                                   TOTAL LIABILITIES        8,110            5,837
Subordinated debt                                                                         100,000           25,000
Stockholders' equity                                                                      206,333          216,796
                                                                                         -------------------------
                                          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $314,443         $247,633
                                                                                         =========================
</TABLE>

<TABLE>
<CAPTION>
                                                                                            YEAR ENDED DECEMBER 31
                                                                                  ------------------------------------------
STATEMENTS OF INCOME                                                               1996              1995            1994
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>               <C>            <C>
INCOME:
   Cash dividends from bank subsidiaries                                          $49,041           $17,908        $ 14,261
   Interest                                                                         1,218               873           1,290
   Securities gains                                                                 1,063               813            --
   Rental income                                                                    1,093             1,714             238
   Other                                                                             --                 748            --
                                                                                  ------------------------------------------
                                                                                   52,415            22,056          15,789
EXPENSES:
   General and administrative                                                       3,482             1,729           1,781
   Interest                                                                         4,147             2,420           1,914
                                                                                  ------------------------------------------
                                                                                    7,629             4,149           3,695
                                                                                  ------------------------------------------
Income before income tax provision (benefit) and equity in
   undistributed net income (loss) of subsidiaries                                 44,786            17,907          12,094
Income tax provision (benefit)                                                     (1,453)               46            (742)
                                                                                  ------------------------------------------
                                                                                   46,239            17,861          12,836
Equity in undistributed net income (loss) of subsidiaries                         (24,742)           16,704          10,552
                                                                                  ------------------------------------------
                                                                  NET INCOME      $21,497           $34,565         $23,388
                                                                                  ==========================================
</TABLE>
--------------------------------------------------------------------------------
30
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------


HUBCO, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
<TABLE>
<CAPTION>

                                                                                                    YEAR ENDED DECEMBER 31
STATEMENTS OF CASH FLOWS                                                                   1996              1995            1994
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>               <C>             <C>
Operating activities:
   Net income                                                                             $21,497           $34,565         $23,388
   Adjustments to reconcile net income to
     net cash provided by (used in) operating activities-
       Provision for depreciation                                                             331               186             301
       Amortization of restricted stock                                                       424               455             389
       Securities gains                                                                    (1,063)             (813)           --
       Gain on sale of interest in subsidiary                                                --                (817)           --
       Increase in investment in subsidiaries                                             (30,601)          (22,380)         (6,880)
       Decrease (increase) in accounts receivable                                           7,238            (6,451)           (644)
       Increase in other assets                                                            (5,217)           (6,116)         (3,689)
       Decrease in notes payable                                                             (372)             (372)           --
       Decrease (increase) in accounts payable                                               (517)              121          (1,847)
       Increase in accrued taxes
         and other liabilities                                                              2,576               245             956
                                                                                          ------------------------------------------
                                                      NET CASH PROVIDED BY (USED IN)
                                                                OPERATING ACTIVITIES       (5,704)           (1,377)         11,974
                                                                                          ------------------------------------------
Investing activities:
   Proceeds from sale of securities                                                        11,742            18,909            --
   Proceeds from maturities of securities                                                   1,444               196             865
   Purchase of securities                                                                 (42,284)           (5,191)        (15,651)
   Net decrease (increase) in loans                                                           426                68            (494)
   Capital expenditures                                                                      (272)           (1,116)         (7,077)
                                                                                          ------------------------------------------
                                                      NET CASH PROVIDED BY (USED IN)
                                                                INVESTING ACTIVITIES      (28,944)           12,866         (22,357)
                                                                                          ------------------------------------------
Financing activities:
   Proceeds from sale of interest in subsidiary                                              --               4,215            --
   Proceeds from issuance of common stock                                                     907             2,100              45
   Proceeds from issuance of subordinated debt                                             73,738              --            24,683
   Dividends paid                                                                         (15,425)           (9,446)         (3,959)
   Redemption of convertible preferred stock                                                 --              (2,481)           --
   Purchase of treasury stock                                                             (19,770)           (4,956)         (7,855)
   Other                                                                                    2,442                41            --
                                                                                          ------------------------------------------
                                                         NET CASH PROVIDED BY (USED
                                                            IN) FINANCING ACTIVITIES       41,892           (10,527)         12,914
                                                                                          ------------------------------------------
                                                                    INCREASE IN CASH        7,244               942           2,531
                                                           CASH AT BEGINNING OF YEAR        4,848             3,886           1,355
                                                                                          ------------------------------------------
                                                                 CASH AT END OF YEAR      $12,092           $ 4,848         $ 3,886
                                                                                          ==========================================
</TABLE>

--------------------------------------------------------------------------------
                                                                              31
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

(19)  SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following quarterly financial information for the two years ended December
31, 1996 is unaudited. However, in the opinion of management, all adjustments,
which include only normal recurring adjustments necessary to present fairly the
results of operations for the periods are reflected. Results of operations for
the periods are not necessarily indicative of the results of the entire year or
any other interim period.

<TABLE>
<CAPTION>
                                                                                        THREE MONTHS ENDED
                                                               MARCH 31          JUNE 30      SEPTEMBER 30(a)     DECEMBER 31(a)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>                   <C>               <C>
1996
Net interest income                                             $32,318          $32,693               $32,431           $33,912
Provision for possible loan losses                                2,253            2,743                 1,679             5,620
Income before income taxes                                       13,512           12,658                 3,075             3,851
Net income                                                        8,317            7,732                 1,988             3,460
 Net income per share-primary                                       .35              .33                   .09               .16
Net income per share-fully diluted                                  .35              .33                   .09               .16

1995
Net interest income                                             $33,294          $33,142               $33,113           $33,662
Provision for possible loan losses                                2,600            2,390                 2,025             2,500
Income before income taxes                                       11,235           10,543                13,965            13,336
Net income                                                        7,455            9,399                 9,655             8,056
Net income per share - primary                                      .31              .40                   .40               .34
Net income per share - fully diluted                                .31              .39                   .40               .34
</TABLE>

(a)  Net income and related per share amounts for these periods in 1996 were
     significantly impacted by merger related and restructuring costs resulting
     from the acquisitions of Lafayette and Westport (see Note 2) that were
     completed in the third quarter and fourth quarter, respectively.

(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments include cash, loan agreements, accounts receivable and
payable, debt securities, deposit liabilities, loan commitments, standby letters
of credit and financial guarantees, among others. The fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than a forced or liquidation sale.

Estimated fair values have been determined by the Company using the best
available data and estimation methodology suitable for each category of
financial instruments. For those loans and deposits with floating rates, it is
presumed that estimated fair values generally approximate their recorded book
balances. The estimation methodologies used, the estimated fair values and
recorded book balances of the Company's financial instruments at December 31,
1996 and 1995 were as follows:

Cash and cash equivalents include cash and due from bank balances and Federal
funds sold. For these instruments, the recorded book balance approximates their
fair value.

For securities in the Company's portfolio, fair value was determined by
reference to quoted market prices. In the few instances where quoted market
prices were not available, prices for similar securities were used. Additional
detail is contained in Note 4 to these consolidated financial statements.

<TABLE>
<CAPTION>
                                                                   1996                                        1995
                                                     --------------------------------           ----------------------------------
                                                      ESTIMATED             RECORDED             ESTIMATED             RECORDED
                                                     FAIR VALUE            BOOK VALUE           FAIR VALUE            BOOK VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                  <C>                   <C>
Cash and cash equivalents                            $153,068               $153,068             $221,091              $221,091
Securities                                            935,102                931,336              799,966               792,801
</TABLE>

The Company aggregated loans into pools having similar characteristics when
comparing their terms, contractual rates, type of collateral, risk profile and
other pertinent loan characteristics. Since no active market exists for these
pools, fair values were estimated using the present value of future cash flows
expected to be received. Loan rates currently offered by the Bank were used in
determining the appropriate discount rate.

<TABLE>
<CAPTION>
                                                                   1996                                        1995
                                                     --------------------------------           --------------------------------
                                                      ESTIMATED             RECORDED             ESTIMATED             RECORDED
                                                     FAIR VALUE            BOOK VALUE           FAIR VALUE            BOOK VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                  <C>                   <C>
Loans, net of allowance                              $1,881,553             $1,849,202           $1,587,436            $1,621,917
</TABLE>

The fair value of demand deposits, savings deposits and certain money market
accounts approximate their recorded book balances. The fair value of fixed
maturity certificates of deposit was estimated using the present value of
discounted cash flows based on rates currently offered for deposits of similar
remaining maturities.

--------------------------------------------------------------------------------
32
<PAGE>
NOTES--(continued)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   1996                                        1995
                                                     --------------------------------          ---------------------------------
                                                      ESTIMATED             RECORDED             ESTIMATED             RECORDED
                                                     FAIR VALUE            BOOK VALUE           FAIR VALUE            BOOK VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                   <C>                  <C>                    <C>
Deposits                                             $2,594,386            $2,592,092           $2,439,804             $2,446,273
</TABLE>

The fair value for accrued interest receivable, the cash surrender value of life
insurance policies and for the other borrowed funds approximates their
respective recorded book balance.

<TABLE>
<CAPTION>
                                                                   1996                                        1995
                                                     --------------------------------           --------------------------------
                                                      ESTIMATED             RECORDED             ESTIMATED             RECORDED
                                                     FAIR VALUE            BOOK VALUE           FAIR VALUE            BOOK VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                   <C>                   <C>                   <C>
Accrued interest receivable                            $33,204               $33,204               $22,849               $22,849
Cash surrender value of life insurance                   5,072                 5,072                 5,347                 5,347
Short-term borrowings                                  187,979               187,979                62,982                62,982
</TABLE>

The fair value of the subordinated debt was determined by reference to quoted
market prices. 1996 1995

<TABLE>
<CAPTION>
                                                                   1996                                        1995
                                                     --------------------------------           --------------------------------
                                                      ESTIMATED             RECORDED             ESTIMATED             RECORDED
                                                     FAIR VALUE            BOOK VALUE           FAIR VALUE            BOOK VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                   <C>                   <C>                   <C>
Subordinated debt                                     $103,475              $100,000              $24,621               $25,000
</TABLE>

The Company's remaining assets and liabilities, which are not considered
financial instruments, have not been valued differently than has been customary
with historical cost accounting. There is no material difference between the
notional amount and estimated fair value of off-balance sheet items which are
primarily comprised of unfunded loan commitments which are generally priced at
market at the time of funding.

For certain homogeneous categories of loans, such as some residential mortgages,
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics. The fair value
of other types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.

(21) REGULATORY MATTERS

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

Quantitative measures established by regulation to ensure capital adequacy
require each of the Banks to maintain minimum amounts and ratios (set forth in
the table on page 34) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1996, that the Company and its subsidiary banks meet all capital adequacy
requirements to which they are subject.

As of December 31, 1996, the most recent notifications from applicable
regulatory authorities categorized the Company and Hudson United Bank as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, Banks must maintain minimum total risk-based,
Tier I risk-based, and Tier I leverage ratios as set forth in the table. There
are no conditions or events since that notification that management believes
have changed the institution's category. Lafayette has not had a regulatory
examination since its acquisition by Hubco, but expects to undergo an
examination early in 1997.

--------------------------------------------------------------------------------
                                                                              33

<PAGE>

NOTES--(continued)
--------------------------------------------------------------------------------

The Bank's actual capital amounts and ratios at December 31, 1996 are presented
in the following table.

<TABLE>
<CAPTION>
                                                                                                                  TO BE WELL
                                                                                                               CAPITALIZED UNDER
                                                                                    FOR CAPITAL                PROMPT CORRECTIVE
                                                      ACTUAL                     ADEQUACY PURPOSES             ACTION PROVISIONS
                                               AMOUNT        RATIO              AMOUNT        RATIO            AMOUNT        RATIO
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>               <C>              <C>           <C>             <C>
As of December 31, 1996:
   Total Capital to Risk Weighted Assets:
     HUBCO                                   $281,557       14.08%            $160,003        >8.0%          $200,004       >10.0%
     Hudson United Bank                       125,438       11.76%              85,362        >8.0%           106,703       >10.0%
     Lafayette American Bank                  102,933       11.31%              72,797        >8.0%            90,961       >10.0%

   Tier I Capital to Risk Weighted Assets:
     HUBCO                                    170,954        8.55%              80,002        >4.0%           120,002        >6.0%
     Hudson United Bank                       115,203       10.80%              42,681        >4.0%            64,022        >6.0%
     Lafayette American Bank                   91,478       10.05%              36,398        >4.0%            54,598        >6.0%

   Tier I Capital to Average Assets:
     HUBCO                                    170,954        5.71%             119,722        >4.0%           149,653        >5.0%
     Hudson United Bank                       115,203        6.79%              67,853        >4.0%            84,817        >5.0%
     Lafayette American Bank                   91,478        8.54%              42,826        >4.0%            53,532        >5.0%
</TABLE>

(22) SUBSEQUENT EVENT

On January 31, 1997, the Company issued $50,000 in capital securities offered by
HUBCO Capital Trust I pursuant to Rule 144A under the Securities Act of 1933.
The 8.98% capital securities will represent a preferred beneficial interest in
the assets of HUBCO Capital Trust I, a statutory business trust. The Trust
exists for the sole purpose of issuing the Trust Securities and investing the
proceeds in 8.98% Junior Subordinated Deferable Interest Debentures to be issued
by HUBCO which will mature on February 1, 2027. The capital securities will have
preference over the common securities under certain circumstances with respect
to cash distributions and amounts payable on liquidation. The $50,000 will be
included in Tier I capital for regulatory purposes, subject to certain
limitations, but will be classified as long-term debt for financial reporting
purposes.

================================================================================

                                               Report of Independent
                                                 Public Accountants

To the Stockholders and Board of Directors of HUBCO, Inc.:

We have audited the accompanying consolidated balance sheets of HUBCO, Inc. (a
New Jersey corporation) and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.The summarized financial data for Growth
Financial Corporation are based on the financial statements of Growth Financial
Corporation for 1995 and 1994 which were audited by other auditors. Their report
has been furnished to us and our opinion, insofar as it relates to the data in
Note 2, concerning Growth Financial Corporation, is based solely on the report
of other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audit and the reports of the other auditors
relative to 1995 and 1994 summarized financial data, the financial statements
referred to above present fairly, in all material respects, the financial
position of HUBCO, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.

Arthur Andersen LLP
Roseland, New Jersey
February 7, 1997

--------------------------------------------------------------------------------
34
<PAGE>

HUBCO, INC. AND SUBSIDIARIES
============================

                  Market and Dividend Information

HUBCO, Inc. is traded on the Nasdaq National Market under the symbol of HUBC. At
year end, there were approximately 3,475 common stockholders of record. The
quarterly common stock and dividend information is as follows:

QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION

(restated to give retroactive effect to stock dividends)

<TABLE>
<CAPTION>
                                  1996                              1995
                      ------------------------------   --------------------------------
                                             CASH                               CASH
QUARTER ENDING          HIGH      LOW      DIVIDENDS      HIGH       LOW      DIVIDENDS
----------------------------------------------------------------------------------------
<S>                   <C>       <C>        <C>          <C>       <C>         <C>
March 31              $ 21.97   $ 18.87    $ 0.165      $ 16.87   $ 14.24     $ 0.145
June 30               $ 21.12   $ 17.84    $ 0.165      $ 17.48   $ 15.02     $ 0.145
September 30          $ 21.00   $ 19.17    $ 0.165      $ 20.51   $ 16.75     $ 0.145
December 31           $ 24.87   $ 20.15    $ 0.190      $ 21.48   $ 18.69     $ 0.145
</TABLE>

HUBCO, Inc. will provide, free of charge, to any stockholders, upon written
request, a copy of the Corporation's Annual Report on Form 10-K, including the
financial statements and schedules which have been filed with the Securities &
Exchange Commission. Requests should be addressed to D. Lynn Van Borkulo-Nuzzo,
Corporate Secretary, HUBCO, Inc., 1000 MacArthur Blvd., Mahwah, New Jersey,
07430.

Duplicate accounts and mailings are costly and often unnecessary. We can
consolidate such accounts upon written request if you will notify either the
Corporate Secretary at the above address or Carolyn B. O'Neill, American Stock
Transfer and Trust Company, 40 Wall Street, New York, NY 10269.

DIVIDEND REINVESTMENT PLAN

If you are not enrolled in the Corporation's Dividend Reinvestment Plan and
would like to join the plan, you may obtain information by writing to the
Corporate Secretary at the above address.

--------------------------------------------------------------------------------
                                                                              35