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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2005



OR



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



For the transition period from  to



Commission File Number 0-010699



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HUDSON UNITED BANCORP

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|New Jersey                                                     |  | 22-2405746                             
|(State of other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|1000 MacArthur Blvd, Mahwah, NJ                                |  | 07430                                  
|(Address of principal executive office)                        |  | (Zip Code)                             



(201)-236-2600

(Registrants telephone number, including area code)



Not Applicable

Former name, former address, and former fiscal year,

if changed since last report.



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 120b-2)    Yes  x    No ̈



Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



The number of shares of Common Stock, no par value, outstanding as of November 4, 2005 was 44,469,558.



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HUDSON UNITED BANCORP



INDEX



|                              |  |                                                                                                                                                  |  |        
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                                 
|                              |  |                                                                                                                                                 
|Item 1.                       |  | Financial Statements (Unaudited):                                                                                                                |  |        
|                              |  |                                                                                                                                                 
|                              |  | Consolidated Balance Sheets At September 30, 2005 and December 31, 2004                                                                          |  | 3      
|                              |  |                                                                                                                                                 
|                              |  | Consolidated Statements of Income For the Three Months Ended September 30, 2005 and 2004                                                         |  | 4      
|                              |  |                                                                                                                                                 
|                              |  | Consolidated Statements of Income For the Nine Months Ended September 30, 2005 and 2004                                                          |  | 5      
|                              |  |                                                                                                                                                 
|                              |  | Consolidated Statements of Comprehensive Income For the Three Months and Nine Months Ended September 30, 2005 and 2004                           |  | 6      
|                              |  |                                                                                                                                                 
|                              |  | Consolidated Statements of Changes in Stockholders Equity For the Nine Months Ended September 30, 2005 and for the Year Ended December 31, 2004 |  | 7      
|                              |  |                                                                                                                                                 
|                              |  | Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2005 and 2004                                                      |  | 8      
|                              |  |                                                                                                                                                 
|                              |  | Notes to Consolidated Financial Statements                                                                                                       |  | 9 - 17 
|                              |  |                                                                                                                                                 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                            |  | 18 -24 
|                              |  |                                                                                                                                                 
|Item 3.                       |  | Quantitative and Qualitative Disclosure about Market Risk                                                                                        |  | 24     
|                              |  |                                                                                                                                                 
|Item 4.                       |  | Controls and Procedures                                                                                                                          |  | 24 - 25
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                                                 
|                              |  |                                                                                                                                                 
|Item 2                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                      |  | 25     
|                              |  |                                                                                                                                                 
|Item 6                        |  | Exhibits                                                                                                                                         |  | 25     
|                              |  |                                                                                                                                                 
|                              |  | Signatures                                                                                                                                       |  | 26     



2



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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

|HUDSON | UNITED BANCORP
|------ | --------------

CONSOLIDATED BALANCE
SHEETS (Unaudited)



|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|(in thousands, except per share data)                                                                                                                                                                                              |  | September 30,2005 |           |   | December 31,2004 |  
|ASSETS                                                                                                                                                                                                                             |  |                   |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                                                                                            |  | $                 | 181,456   |   |                  | $ | 161,878   |  
|Interest bearing due from banks                                                                                                                                                                                                    |  |                   | 200,441   |   |                  |   | 99,028    |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL CASH AND CASH EQUIVALENTS                                                                                                                                                                                                    |  | $                 | 381,897   |   |                  | $ | 260,906   |  
|Investment securities available for sale, at fair value ($1,536,784 and $1,491,084 pledged at September 30, 2005 and December 31,
2004, respectively)                                                                              |  | $                 | 1,874,868 |   |                  | $ | 2,166,627 |  
|Investment securities held to maturity, at cost; (Fair Value: $1,090,421 at September 30, 2005 and $1,364,900 at December 31, 2004;
$851,525 and $1,201,730 million, at cost pledged, at September 30, 2005 and December 31, 2004) |  | $                 | 1,110,401 |   |                  | $ | 1,372,228 |  
|Trading Assets                                                                                                                                                                                                                     |  | $                 |          |   |                  | $ | 1,477     |  
|Loans and leases:                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Commercial and financial                                                                                                                                                                                                           |  | $                 | 2,306,968 |   |                  | $ | 2,190,339 |  
|Commercial real estate mortgages ($419,711 and $345,664 pledged at September 30, 2005 and December 31, 2004,
respectively)                                                                                                         |  |                   | 1,291,540 |   |                  |   | 1,113,604 |  
|Consumer                                                                                                                                                                                                                           |  |                   | 1,075,205 |   |                  |   | 995,766   |  
|Credit card                                                                                                                                                                                                                        |  |                   | 426,100   |   |                  |   | 400,700   |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|Sub-total                                                                                                                                                                                                                          |  | $                 | 5,099,813 |   |                  | $ | 4,700,409 |  
|Residential mortgages                                                                                                                                                                                                              |  |                   | 106,377   |   |                  |   | 126,775   |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL LOANS AND LEASES                                                                                                                                                                                                             |  | $                 | 5,206,190 |   |                  | $ | 4,827,184 |  
|Less: Allowance for loan and lease losses                                                                                                                                                                                          |  |                   | (59,334   | ) |                  |   | (60,799   | )
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|NET LOANS AND LEASES                                                                                                                                                                                                               |  | $                 | 5,146,856 |   |                  | $ | 4,766,385 |  
|                                                                                                                                                                                                                                   |  |                  
|Premises and equipment, net                                                                                                                                                                                                        |  | $                 | 81,205    |   |                  | $ | 121,037   |  
|Core deposit and other intangibles, net of amortization                                                                                                                                                                            |  |                   | 17,186    |   |                  |   | 20,104    |  
|Goodwill                                                                                                                                                                                                                           |  |                   | 83,653    |   |                  |   | 83,561    |  
|Investment in separate account bank owned life insurance                                                                                                                                                                           |  |                   | 154,402   |   |                  |   | 150,073   |  
|Landfill Investment assets held for sale                                                                                                                                                                                           |  |                   | 48,032    |   |                  |   |          |  
|Foreclosed property                                                                                                                                                                                                                |  |                   | 9,112     |   |                  |   | 15,618    |  
|Other assets                                                                                                                                                                                                                       |  |                   | 158,061   |   |                  |   | 121,026   |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL ASSETS                                                                                                                                                                                                                       |  | $                 | 9,065,673 |   |                  | $ | 9,079,042 |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                               |  |                   |           |   |                  |   |           |  
|Deposits                                                                                                                                                                                                                           |  |                   |           |   |                  |   |           |  
|Noninterest bearing                                                                                                                                                                                                                |  | $                 | 1,367,601 |   |                  | $ | 1,355,624 |  
|NOW, money market and savings                                                                                                                                                                                                      |  |                   | 3,890,206 |   |                  |   | 3,129,355 |  
|Time deposits                                                                                                                                                                                                                      |  |                   | 1,541,893 |   |                  |   | 1,859,219 |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL DEPOSITS                                                                                                                                                                                                                     |  | $                 | 6,799,700 |   |                  | $ | 6,344,198 |  
|Repurchase agreements                                                                                                                                                                                                              |  |                   | 1,078,806 |   |                  |   | 842,893   |  
|Other borrowings                                                                                                                                                                                                                   |  |                   | 208,009   |   |                  |   | 879,530   |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL BORROWINGS                                                                                                                                                                                                                   |  | $                 | 1,286,815 |   |                  | $ | 1,722,423 |  
|Liabilities related to Landfill Investment held for sale                                                                                                                                                                           |  |                   | 22,368    |   |                  |   |          |  
|Other liabilities                                                                                                                                                                                                                  |  |                   | 211,248   |   |                  |   | 255,587   |  
|Subordinated debt                                                                                                                                                                                                                  |  |                   | 225,000   |   |                  |   | 225,184   |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL LIABILITIES                                                                                                                                                                                                                  |  | $                 | 8,545,131 |   |                  | $ | 8,547,392 |  
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                              |  |                   |           |   |                  |   |           |  
|Preferred stock, authorized 25,000,000 shares, no shares issued and outstanding                                                                                                                                                    |  | $                 |          |   |                  | $ |          |  
|Common stock no par value: authorized 103,000,000 shares; 52,186,866 shares issued and 44,468,339 shares outstanding in 2005                                                                                                       |  |                   | 92,788    |   |                  |   | 92,788    |  
|Additional paid-in capital                                                                                                                                                                                                         |  |                   | 310,437   |   |                  |   | 310,102   |  
|Retained earnings                                                                                                                                                                                                                  |  |                   | 333,445   |   |                  |   | 304,000   |  
|Treasury stock, at cost 7,718,527 shares in 2005 and 7,204,063 shares in 2004                                                                                                                                                      |  |                   | (188,658  | ) |                  |   | (170,183  | )
|Effect of Stock Based Compensation                                                                                                                                                                                                 |  |                   | (5,646    | ) |                  |   | (1,359    | )
|Accumulated other comprehensive loss                                                                                                                                                                                               |  |                   | (21,824   | ) |                  |   | (3,698    | )
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                                                         |  | $                 | 520,542   |   |                  | $ | 531,650   |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                         |  | $                 | 9,065,673 |   |                  | $ | 9,079,042 |  
|                                                                                                                                                                                                                                   |  |                   |           |   |                  |   |           |  



See
Notes to Consolidated Financial Statements



December 31, 2004 Balance sheet from audited financial statements



3



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HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



|                                                              |  |                                 |         |      |   |        
|------------------------------------------------------------- |  | ------------------------------- | ------- | ---- | - | -------
|                                                              |  | Three Months EndedSeptember 30,
|(in thousands, except per share data)                         |  | 2005                            |         | 2004
|INTEREST AND FEE INCOME:                                      |  |                                 |         |      |   |        
|Loans and leases                                              |  | $                               | 82,671  |      | $ | 68,450 
|Investment Securities                                         |  |                                 | 34,579  |      |   | 37,498 
|Other                                                         |  |                                 | 1,169   |      |   | 384    
|                                                              |  |                                 |         |      |   |        
|TOTAL INTEREST AND FEE INCOME                                 |  | $                               | 118,419 |      | $ | 106,332
|                                                              |  |                                 |         |      |   |        
|INTEREST EXPENSE:                                             |  |                                 |         |      |   |        
|Deposits                                                      |  | $                               | 28,840  |      | $ | 12,836 
|Borrowings                                                    |  |                                 | 10,266  |      |   | 7,188  
|Subordinated and other debt                                   |  |                                 | 6,900   |      |   | 6,287  
|                                                              |  |                                 |         |      |   |        
|TOTAL INTEREST EXPENSE                                        |  | $                               | 46,006  |      | $ | 26,311 
|                                                              |  |                                 |         |      |   |        
|NET INTEREST INCOME                                           |  | $                               | 72,413  |      | $ | 80,021 
|PROVISION FOR LOAN AND LEASE LOSSES, PORTFOLIO LOANS          |  |                                 | 11,150  |      |   | 4,500  
|                                                              |  |                                 |         |      |   |        
|NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES |  | $                               | 61,263  |      | $ | 75,521 
|                                                              |  |                                 |         |      |   |        
|NON INTEREST INCOME:                                          |  |                                 |         |      |   |        
|Retail Service fees                                           |  | $                               | 8,655   |      | $ | 8,044  
|Credit Card fee income                                        |  |                                 | 9,703   |      |   | 7,981  
|Loan Fees                                                     |  |                                 | 2,249   |      |   | 3,965  
|ATM and debit card fees                                       |  |                                 | 1,766   |      |   | 1,757  
|Separate account bank owned life insurance income             |  |                                 | 1,414   |      |   | 1,441  
|Trust income                                                  |  |                                 | 764     |      |   | 740    
|Income from Landfill Investments                              |  |                                 | 6,100   |      |   | 6,321  
|Securities gains                                              |  |                                 | 366     |      |   | 12,050 
|Other Income                                                  |  |                                 | 3,537   |      |   | 2,052  
|                                                              |  |                                 |         |      |   |        
|TOTAL NONINTEREST INCOME                                      |  | $                               | 34,554  |      | $ | 44,351 
|                                                              |  |                                 |         |      |   |        
|NONINTEREST EXPENSE                                           |  |                                 |         |      |   |        
|Salaries and benefits                                         |  | $                               | 25,382  |      | $ | 33,498 
|Occupancy expense                                             |  |                                 | 8,096   |      |   | 7,459  
|Equipment expense                                             |  |                                 | 3,241   |      |   | 4,111  
|Deposit and other insurance                                   |  |                                 | 584     |      |   | 664    
|Outside services  data processing                            |  |                                 | 6,081   |      |   | 10,507 
|Outside services  other                                      |  |                                 | 5,961   |      |   | 6,281  
|Amortization of intangibles                                   |  |                                 | 1,222   |      |   | 1,222  
|Marketing expense                                             |  |                                 | 2,696   |      |   | 1,580  
|Telephone expense                                             |  |                                 | 1,441   |      |   | 1,378  
|Expense for Landfill Investments                              |  |                                 | 8,424   |      |   | 5,188  
|Foreclosed property expense                                   |  |                                 | 8,610   |      |   | 119    
|Merger related expenses                                       |  |                                 | 3,082   |      |   |       
|Other expense                                                 |  |                                 | 3,531   |      |   | 3,877  
|                                                              |  |                                 |         |      |   |        
|TOTAL NONINTEREST EXPENSE                                     |  | $                               | 78,351  |      | $ | 75,884 
|                                                              |  |                                 |         |      |   |        
|INCOME BEFORE INCOME TAXES                                    |  |                                 | 17,466  |      |   | 43,988 
|PROVISION FOR INCOME TAXES                                    |  |                                 | 2,704   |      |   | 11,450 
|                                                              |  |                                 |         |      |   |        
|NET INCOME                                                    |  | $                               | 14,762  |      | $ | 32,538 
|                                                              |  |                                 |         |      |   |        
|NET INCOME PER COMMON SHARE                                   |  |                                 |         |      |   |        
|Basic                                                         |  | $                               | 0.33    |      | $ | 0.73   
|Diluted                                                       |  | $                               | 0.33    |      | $ | 0.72   
|WEIGHTED AVERAGE SHARES OUTSTANDING                           |  |                                 |         |      |   |        
|Basic                                                         |  |                                 | 44,260  |      |   | 44,700 
|Diluted                                                       |  |                                 | 44,438  |      |   | 44,952 



See Notes to Unaudited Financial
Statements



4



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HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



|                                                              |  |                                |         |      |   |        
|------------------------------------------------------------- |  | ------------------------------ | ------- | ---- | - | -------
|                                                              |  | Nine Months EndedSeptember 30,
|(in thousands, except per share data)                         |  | 2005                           |         | 2004
|INTEREST AND FEE INCOME:                                      |  |                                |         |      |   |        
|Loans and leases                                              |  | $                              | 234,707 |      | $ | 202,109
|Investment Securities                                         |  |                                | 107,309 |      |   | 101,500
|Other                                                         |  |                                | 1,939   |      |   | 1,097  
|                                                              |  |                                |         |      |   |        
|TOTAL INTEREST AND FEE INCOME                                 |  | $                              | 343,955 |      | $ | 304,706
|                                                              |  |                                |         |      |   |        
|INTEREST EXPENSE:                                             |  |                                |         |      |   |        
|Deposits                                                      |  | $                              | 67,297  |      | $ | 35,780 
|Borrowings                                                    |  |                                | 29,683  |      |   | 14,327 
|Subordinated and other debt                                   |  |                                | 20,615  |      |   | 18,590 
|                                                              |  |                                |         |      |   |        
|TOTAL INTEREST EXPENSE                                        |  | $                              | 117,595 |      | $ | 68,697 
|                                                              |  |                                |         |      |   |        
|NET INTEREST INCOME                                           |  | $                              | 226,360 |      | $ | 236,009
|PROVISION FOR LOAN AND LEASE LOSSES, PORTFOLIO LOANS          |  |                                | 21,400  |      |   | 14,850 
|                                                              |  |                                |         |      |   |        
|NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES |  | $                              | 204,960 |      | $ | 221,159
|                                                              |  |                                |         |      |   |        
|NON INTEREST INCOME:                                          |  |                                |         |      |   |        
|Retail Service fees                                           |  | $                              | 22,561  |      | $ | 23,834 
|Credit Card fee income                                        |  |                                | 27,453  |      |   | 22,109 
|Loan Fees                                                     |  |                                | 8,602   |      |   | 13,254 
|ATM and debit card fees                                       |  |                                | 5,078   |      |   | 5,230  
|Separate account bank owned life insurance income             |  |                                | 4,329   |      |   | 4,488  
|Trust income                                                  |  |                                | 2,315   |      |   | 2,349  
|Income from Landfill Investments                              |  |                                | 17,432  |      |   | 21,936 
|Securities gains                                              |  |                                | 2,135   |      |   | 16,377 
|Other Income                                                  |  |                                | 11,403  |      |   | 9,429  
|                                                              |  |                                |         |      |   |        
|TOTAL NONINTEREST INCOME                                      |  | $                              | 101,308 |      | $ | 119,006
|                                                              |  |                                |         |      |   |        
|NONINTEREST EXPENSE                                           |  |                                |         |      |   |        
|Salaries and benefits                                         |  | $                              | 78,503  |      | $ | 84,533 
|Occupancy expense                                             |  |                                | 24,350  |      |   | 23,095 
|Equipment expense                                             |  |                                | 10,081  |      |   | 12,937 
|Deposit and other insurance                                   |  |                                | 1,772   |      |   | 1,925  
|Outside services  data processing                            |  |                                | 18,581  |      |   | 26,074 
|Outside services  other                                      |  |                                | 19,949  |      |   | 21,659 
|Amortization of intangibles                                   |  |                                | 3,667   |      |   | 3,689  
|Marketing expense                                             |  |                                | 6,685   |      |   | 5,073  
|Telephone expense                                             |  |                                | 4,284   |      |   | 4,239  
|Expense for Landfill Investments                              |  |                                | 27,912  |      |   | 18,567 
|Foreclosed property expense                                   |  |                                | 10,645  |      |   | 362    
|Merger related expense                                        |  |                                | 3,082   |      |   |       
|Other expense                                                 |  |                                | 10,321  |      |   | 10,090 
|                                                              |  |                                |         |      |   |        
|TOTAL NONINTEREST EXPENSE                                     |  | $                              | 219,832 |      | $ | 212,243
|                                                              |  |                                |         |      |   |        
|INCOME BEFORE INCOME TAXES                                    |  |                                | 86,436  |      |   | 127,922
|PROVISION FOR INCOME TAXES                                    |  |                                | 7,211   |      |   | 32,743 
|                                                              |  |                                |         |      |   |        
|NET INCOME                                                    |  | $                              | 79,225  |      | $ | 95,179 
|                                                              |  |                                |         |      |   |        
|NET INCOME PER COMMON SHARE                                   |  |                                |         |      |   |        
|Basic                                                         |  | $                              | 1.78    |      | $ | 2.13   
|Diluted                                                       |  | $                              | 1.77    |      | $ | 2.12   
|WEIGHTED AVERAGE SHARES OUTSTANDING                           |  |                                |         |      |   |        
|Basic                                                         |  |                                | 44,592  |      |   | 44,649 
|Diluted                                                       |  |                                | 44,741  |      |   | 44,888 



See Notes to Unaudited Financial
Statements



5



---

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



|                                                                                                                                                                  |  |                                 |         |   |      |   |       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------
|                                                                                                                                                                  |  | Three Months EndedSeptember 30,
|(in thousands)                                                                                                                                                    |  | 2005                            |         |   | 2004
|NET INCOME                                                                                                                                                        |  | $                               | 14,762  |   |      | $ | 32,538
|                                                                                                                                                                  |  |                                
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                                                                                                           |  |                                 |         |   |      |   |       
|Net Unrealized securities gains (losses) on available for sale securities arising during period (tax benefit of $7,840 and a tax expense of
$29,643 respectively) |  |                                 | (13,288 | ) |      |   | 23,939
|Amortization of net unrealized losses arising from the transfer of securities from AFS to HTM (tax expense of $246 and $221,
respectively)                        |  |                                 | 459     |   |      |   | 366   
|Less: reclassification for net gains included in net income (tax expense of $770 and $5,349 respectively)                                                         |  |                                 | 1,430   |   |      |   | 18,399
|                                                                                                                                                                  |  |                                 |         |   |      |   |       
|Other comprehensive (loss) / income                                                                                                                               |  | $                               | (14,259 | ) |      | $ | 5,906 
|                                                                                                                                                                  |  |                                 |         |   |      |   |       
|COMPREHENSIVE INCOME                                                                                                                                              |  | $                               | 503     |   |      | $ | 38,444
|                                                                                                                                                                  |  |                                 |         |   |      |   |       



|See | Notes to Unaudited Consolidated Financial Statements
|--- | ----------------------------------------------------



|                                                                                                                                                              |  |                                |         |   |      |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------
|                                                                                                                                                              |  | Nine Months EndedSeptember 30,
|(in thousands)                                                                                                                                                |  | 2005                           |         |   | 2004
|NET INCOME                                                                                                                                                    |  | $                              | 79,225  |   |      | $ | 95,179
|                                                                                                                                                              |  |                               
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                                                                                                       |  |                                |         |   |      |   |       
|Net Unrealized securities gains (losses) on available for sale securities arising during period (tax benefit of $10,025 and tax expense
$20,200 respectively) |  |                                | (17,380 | ) |      |   | 8,713 
|Amortization of net unrealized losses arising from the transfer of securities from AFS to HTM (tax expense of $695 and $623
respectively)                     |  |                                | 1,292   |   |      |   | 901   
|Less: reclassification for net gains included in net income (tax expense of $1,098 and $4,959 respectively)                                                   |  |                                | 2,038   |   |      |   | 7,181 
|                                                                                                                                                              |  |                                |         |   |      |   |       
|Other comprehensive (loss) / income                                                                                                                           |  | $                              | (18,126 | ) |      | $ | 2,433 
|                                                                                                                                                              |  |                                |         |   |      |   |       
|COMPREHENSIVE INCOME                                                                                                                                          |  | $                              | 61,099  |   |      | $ | 97,612
|                                                                                                                                                              |  |                                |         |   |      |   |       



See Notes to Unaudited Consolidated
Financial Statements



6



---

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY



|                                            |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                     |  |   |        |   |  |   |         |   |  |   |         |  
|------------------------------------------- |  | ------------- | - |  | -------------- | - | ----------- | - | ------------------------ |  | - | ---------------- | - |  | ------------- | ------- | - | ------------------------------------- | - | -------- | ----------------------------------- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|(in thousands, exceptshares)                |  | Common Shares |   |  | PreferredStock |   | CommonStock |   | AdditionalPaid inCapital |  |   | RetainedEarnings |   |  | TreasuryStock |         |   | Effect ofStock BasedCompensationPlans |   |          | AccumulatedOtherComprehensive(Loss) |  |   | Total  |  
|Balance at December 31, 2003                |  | 44,798,901    |   |  | $              |  |             | $ | 92,788                   |  | $ | 311,310          |   |  | $             | 237,046 |   |                                       | $ | (176,505 | )                                   |  | $ | (3,899 | ) |  | $ | (2,550  | ) |  | $ | 458,190 |  
|                                            |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                     |  |   |        |   |  |   |         |   |  |   |         |  
|Net income                                  |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | 128,083 |   |                                       |   |         |                                     |  |   |       |   |  |   |        |   |  |   | 128,083 |  
|Cash dividends ($1.36 cash paid per share)  |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | (61,129 | ) |                                       |   |         |                                     |  |   |       |   |  |   |        |   |  |   | (61,129 | )
|Shares issued for Stock Options exercised   |  | 102,932       |   |  |                |  |             |   |                         |  |   | (1,208           | ) |  |               |        |   |                                       |   | 3,262    |                                     |  |   |       |   |  |   |        |   |  |   | 2,054   |  
|Purchase of treasury stock                  |  | (14,980       | ) |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | (561     | )                                   |  |   |       |   |  |   |        |   |  |   | (561    | )
|Effect of stock based compensation plans    |  | 95,950        |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | 3,621    |                                     |  |   | 2,540  |   |  |   |        |   |  |   | 6,161   |  
|Other comprehensive loss                    |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   |         |                                     |  |   |       |   |  |   | (1,148  | ) |  |   | (1,148  | )
|                                            |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                     |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2004                |  | 44,982,803    |   |  | $              |  |             | $ | 92,788                   |  | $ | 310,102          |   |  | $             | 304,000 |   |                                       | $ | (170,183 | )                                   |  | $ | (1,359 | ) |  | $ | (3,698  | ) |  | $ | 531,650 |  
|                                            |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                     |  |   |        |   |  |   |         |   |  |   |         |  
|Net income                                  |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | 79,225  |   |                                       |   |         |                                     |  |   |       |   |  |   |        |   |  |   | 79,225  |  
|Cash dividends ($ 1.11 cash paid per share) |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | (49,780 | ) |                                       |   |         |                                     |  |   |       |   |  |   |        |   |  |   | (49,780 | )
|Shares issued for Stock options exercised   |  | 149,536       |   |  |                |  |             |   |                         |  |   | 335              |   |  |               |        |   |                                       |   | 3,569    |                                     |  |   |       |   |  |   |        |   |  |   | 3,904   |  
|Purchase of treasury stock                  |  | (810,500      | ) |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | (27,309  | )                                   |  |   |       |   |  |   |        |   |  |   | (27,309 | )
|Effect of stock based compensation plans    |  | 146,500       |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | 5,265    |                                     |  |   | (4,287 | ) |  |   |        |   |  |   | 978     |  
|Other comprehensive loss                    |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   |         |                                     |  |   |       |   |  |   | (18,126 | ) |  |   | (18,126 | )
|                                            |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                     |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at September 30, 2005               |  | 44,468,339    |   |  | $              |  |             | $ | 92,788                   |  | $ | 310,437          |   |  | $             | 333,445 |   |                                       | $ | (188,658 | )                                   |  | $ | (5,646 | ) |  | $ | (21,824 | ) |  | $ | 520,542 |  
|                                            |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                     |  |   |        |   |  |   |         |   |  |   |         |  



See Notes to Consolidated Financial
Statements



7



---

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                                     |  |                                |          |   |      |   |            |  
|------------------------------------------------------------------------------------ |  | ------------------------------ | -------- | - | ---- | - | ---------- | -
|                                                                                     |  | Nine Months EndedSeptember 30, |         
|(in thousands)                                                                       |  | 2005                           |          |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |                                |          |   |      |   |            |  
|Net Income                                                                           |  | $                              | 79,225   |   |      | $ | 95,179     |  
|Adjustments to reconcile to net income to net cash provided by operating activities: |  |                                |          |   |      |   |            |  
|Provision for loan an lease losses                                                   |  |                                | 21,400   |   |      |   | 14,850     |  
|Provision for securities impairment                                                  |  |                                |         |   |      |   | 4,300      |  
|Provision for Landfill Investments held for sale                                     |  |                                | 8,900    |   |      |   |           |  
|Provision for depreciation and amortization                                          |  |                                | 11,875   |   |      |   | 14,295     |  
|Provision for Foreclosed property                                                    |  |                                | 6,928    |   |      |   |           |  
|Amortization (Accretion) of investment securities premiums (discounts), net          |  |                                | 1,347    |   |      |   | 4,926      |  
|Amortization on stock based compensation plans                                       |  |                                | 978      |   |      |   | 5,858      |  
|Loss / (gain) on sales of premises and equipment                                     |  |                                | 19       |   |      |   | (134       | )
|Securities (gains)                                                                   |  |                                | (2,135   | ) |      |   | (20,677    | )
|Trading asset losses                                                                 |  |                                | 111      |   |      |   |           |  
|Decrease in trading assets held for sale                                             |  |                                | 1,477    |   |      |   |           |  
|(Increase) in Landfill Investment assets held for sale                               |  |                                | (48,032  | ) |      |   |           |  
|(Increase) in other assets                                                           |  |                                | (3,114   | ) |      |   | (38,316    | )
|Increase in Landfill Investment liabilities held for sale                            |  |                                | 22,368   |   |      |   |           |  
|(Decrease) in other liabilities                                                      |  |                                | (44,523  | ) |      |   | (16,527    | )
|                                                                                     |  |                                |          |   |      |   |            |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                            |  | $                              | 56,824   |   |      | $ | 63,754     |  
|                                                                                     |  |                                |          |   |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                                |          |   |      |   |            |  
|Proceeds from sales of investment securities                                         |  |                                |          |   |      |   |            |  
|Available for sale                                                                   |  | $                              | 810,208  |   |      | $ | 1,256,713  |  
|Proceeds from repayments and maturities of investment securities:                    |  |                                |          |   |      |   |            |  
|Available for sale                                                                   |  |                                | 423,075  |   |      |   | 838,269    |  
|Held to maturity                                                                     |  |                                | 312,100  |   |      |   | 260,449    |  
|Purchases of investment securities:                                                  |  |                                |          |   |      |   |            |  
|Available for sale                                                                   |  |                                | (970,586 | ) |      |   | (2,862,574 | )
|Held to maturity                                                                     |  |                                | (49,088  | ) |      |   | (73,300    | )
|Net (Increase) in loans other than purchases and sales                               |  |                                | (395,330 | ) |      |   | (173,155   | )
|Credit card receivables purchased                                                    |  |                                | (6,541   | ) |      |   | (14,965    | )
|Proceeds from sales of loans                                                         |  |                                |         |   |      |   | 6,003      |  
|Proceeds from sales of premises and equipment                                        |  |                                | 21       |   |      |   | 407        |  
|Purchases of premises and equipment                                                  |  |                                | (5,979   | ) |      |   | (6,432     | )
|(Increase) / Decrease in foreclosed property                                         |  |                                | (422     | ) |      |   | (1,134     | )
|                                                                                     |  |                                |          |   |      |   |            |  
|NET CASH (USED) IN / PROVIDED BY INVESTING ACTIVITIES                                |  | $                              | 117,458  |   |      | $ | (769,719   | )
|                                                                                     |  |                                |          |   |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |                                |          |   |      |   |            |  
|Net increase in demand deposits, NOW and savings accounts                            |  | $                              | 772,828  |   |      | $ | 311,698    |  
|Net (decrease) in certificates of deposit                                            |  |                                | (317,326 | ) |      |   | (264,618   | )
|Net increase / (decrease) in borrowings                                              |  |                                | (435,608 | ) |      |   | 626,730    |  
|Payment of subordinated debt securities                                              |  |                                |         |   |      |   | (14,597    | )
|Proceeds from issuance of debt securities                                            |  |                                |         |   |      |   | 19,810     |  
|Proceeds from issuance of common stock for stock option exercises                    |  |                                | 3,904    |   |      |   | 1,234      |  
|Cash dividends paid                                                                  |  |                                | (49,780  | ) |      |   | (45,407    | )
|Acquisition of treasury stock                                                        |  |                                | (27,309  | ) |      |   | (561       | )
|                                                                                     |  |                                |          |   |      |   |            |  
|NET CASH (USED) IN /PROVIDED BY FINANCING ACTIVITIES                                 |  | $                              | (53,291  | ) |      | $ | 634,289    |  
|                                                                                     |  |                                |          |   |      |   |            |  
|INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS                                   |  | $                              | 120,991  |   |      | $ | (71,676    | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                     |  |                                | 260,906  |   |      |   | 313,994    |  
|                                                                                     |  |                                |          |   |      |   |            |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                           |  | $                              | 381,897  |   |      | $ | 242,318    |  
|                                                                                     |  |                                |          |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                   |  |                                |          |   |      |   |            |  
|Cash Paid during the period                                                          |  |                                |          |   |      |   |            |  
|Interest                                                                             |  | $                              | 112,612  |   |      | $ | 21,881     |  
|Taxes                                                                                |  | $                              | 37,762   |   |      | $ | 38,627     |  
|Additional Disclosures                                                               |  |                                |          |   |      |   |            |  
|Securities transferred from available for sale to held to maturity                   |  | $                              |         |   |      | $ | 1,581,566  |  



See Notes to Consolidated Financial
Statements



8



---

|                                                      
|------------------------------------------------------
|HUDSON UNITED BANCORP                                 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|(in thousands, except per share data)                 



NOTE
A  BASIS OF PRESENTATION



The accompanying unaudited consolidated
financial statements of Hudson United Bancorp and Subsidiaries (Hudson United or the Company) include the accounts of the parent company, Hudson United Bancorp, and its wholly-owned subsidiary: Hudson United Bank (the
Bank). These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the information presented includes all adjustments and
normal recurring accruals considered necessary for a fair presentation, in all material respects, of the interim period results. The results of operations for periods of less than one year are not necessarily indicative of results for the full year.
The consolidated financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2004. The Companys significant accounting policies are outlined in Note 1 Summary
of Significant Accounting Policies in its Form 10-K for the year ended December 31, 2004, previously filed with the SEC. There have not been any significant changes in factors or methodology applied to our critical accounting policies since
December 31, 2004 that would be considered material to the Companys operations.



During May 2003, the Company acquired ownership interests in two companies, a wholly owned company and a 50% owned company, involved in landfill gas projects (LGPs). The Company has included both companies
in the consolidated financial statements from their date of acquisition, the minority interest is included in other liabilities, income in the noninterest income category and expense in the noninterest expense category.



All intercompany accounts and transactions are eliminated in
consolidation.



Trusts holding solely junior debentures of the Company that
issued Company-obligated mandatory redeemable preferred capital securities have been deconsolidated and the junior debentures are included under other liabilities on the Companys consolidated balance sheet, as a result of the application of
FIN 46 and SFAS 150.



NOTE B  TD
BANKNORTH MERGER



On July 11, 2005, the Company, TD Banknorth, Inc. and
The Toronto-Dominion Bank entered into an agreement and plan of merger. Hudson United shareholders will receive approximately $1.9 billion in cash and TD Banknorth common stock. Under the terms of the definitive agreement, Hudson United shareholders
will have the right, subject to proration, to elect to receive cash and/or TD Banknorth, Inc. common stock, in either case having a value equal to $21.07 plus the product of 0.7247 times the average closing price of the TD Banknorth, Inc. common
stock during a ten-trading day period ending on the fifth trading day prior to the closing date.



The cash for the transaction will be financed through TD Banknorths sale of approximately 29.6 million shares of TD Banknorth common stock to TD Banknorths majority shareholder, TD Bank Financial
Group, at a price of $31.79 per share.



The transaction is subject to approval
by shareholders of Hudson United and TD Banknorth, Inc., as well as customary regulatory approvals, and is expected to close in the first quarter of 2006. The following table reconciles the components of merger related expense at September 30,
2005:



Hudson United Bancorp Merger-Related Expenses



|                                                   |  |   |      
|-------------------------------------------------- |  | - | -----
|Investment Banking Fee                             |  | $ | 1,710
|SERP Change of Control expense                     |  |   | 244  
|Professional Fees and other merger related expense |  |   | 1,128
|                                                   |  |   |      
|Total Merger-Related Expenses                      |  | $ | 3,082
|                                                   |  |   |      



9



---

NOTE C  EARNINGS PER SHARE



Basic earnings per share is computed by dividing net income by the weighted average number
of common shares outstanding less restricted stock during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares plus the incremental number of shares issuable from restricted stock
and the exercise of stock options, calculated using the treasury stock method.



A reconciliation of weighted average common shares outstanding to weighted average common shares outstanding assuming dilution follows (in thousands, except per share data):



|                                                                  |  |                                 |        |      |   |       
|----------------------------------------------------------------- |  | ------------------------------- | ------ | ---- | - | ------
|                                                                  |  | Three Months EndedSeptember 30,
|                                                                  |  | 2005                            |        | 2004
|Basic Earnings Per Share                                          |  |                                 |        |      |   |       
|Net Income                                                        |  | $                               | 14,762 |      | $ | 32,538
|Weighted average common shares outstanding                        |  |                                 | 44,260 |      |   | 44,700
|Basic Earnings per share                                          |  | $                               | 0.33   |      | $ | 0.73  
|                                                                  |  |                                
|Diluted Earnings Per Share                                        |  |                                 |        |      |   |       
|Net Income                                                        |  | $                               | 14,762 |      | $ | 32,538
|Weighted average common shares outstanding                        |  |                                 | 44,260 |      |   | 44,700
|Plus: Incremental shares from assumed conversion of stock options |  |                                 | 178    |      |   | 252   
|                                                                  |  |                                 |        |      |   |       
|Weighted average common shares assuming dilution                  |  |                                 | 44,438 |      |   | 44,952
|Diluted earnings per share                                        |  | $                               | 0.33   |      | $ | 0.72  
|                                                                  | 
|                                                                  |  | Nine Months EndedSeptember 30, 
|                                                                  |  | 2005                            |        | 2004
|Basic Earnings Per Share                                          |  |                                 |        |      |   |       
|Net Income                                                        |  | $                               | 79,225 |      | $ | 95,179
|Weighted average common shares outstanding                        |  |                                 | 44,592 |      |   | 44,649
|Basic Earnings per share                                          |  | $                               | 1.78   |      | $ | 2.13  
|                                                                  |  |                                
|Diluted Earnings Per Share                                        |  |                                 |        |      |   |       
|Net Income                                                        |  | $                               | 79,225 |      | $ | 95,179
|Weighted average common shares outstanding                        |  |                                 | 44,592 |      |   | 44,649
|Plus: Incremental shares from assumed conversion of stock options |  |                                 | 149    |      |   | 239   
|                                                                  |  |                                 |        |      |   |       
|Weighted average common shares assuming dilution                  |  |                                 | 44,741 |      |   | 44,888
|Diluted earnings per share                                        |  | $                               | 1.77   |      | $ | 2.12  



Options to purchase 20,945 shares at
$33.37 through $37.95 per share and 139,800 shares at $34.74 through $38.10 per share were outstanding during the third quarter ended September 30, 2005 and 2004, respectively but were not included in the computation of diluted EPS because the
options would have been anti-dilutive at September 30, 2005 and September 30, 2004, respectively.



Options to purchase 150,471 shares at $33.97 through $37.95 per share and 139,800 shares at $34.74 through $38.10 per share were outstanding during the first nine months of 2005 and 2004, but were not included in the
computation of diluted EPS because the options would have been anti-dilutive at September 30, 2005 and September 30, 2004, respectively.



NOTE D  ACQUISITIONS/BUSINESS COMBINATIONS



The Company, through its subsidiary Hudson United Bank, acquired Flatiron Credit Company (Flatiron) on October 31, 2003.
The purchase price of the acquisition was approximately $40 million in cash based on the estimated book value of Flatiron on the closing date of the acquisition. The Bank may also be obligated to make additional earn-out payments, based on the
increase in net income of Flatiron in the two years after the closing of the acquisition. The purchase price (excluding any potential earn-out payments) represented a $3.4 million premium to Flatirons estimated book value (before acquisition
costs). At December 31, 2004, $4.5 million of additional goodwill was recorded representing the first earn-out payment which was finalized with no adjustment and paid in the first quarter of 2005. The final earn-out payment, if any, will be
based on 2005 financial results compared to 2004.



In 2003, Hudson United
acquired ownership interests in two companies involved in landfill gas projects (LGPs). The Company as the owner of the LGPs is eligible to receive tax credits under Section 29 of the Internal Revenue Code (Section 29 tax
credits),



10



---

which are available to producers of fuel from non-conventional sources. These Section 29 tax credits were $6.0
million and $7.1 million for the nine month periods ended September 30, 2005 and 2004, respectively. The Section 29 tax credits, which may be limited or eliminated based upon a formula tied to the average price of crude oil during each
calendar year, are scheduled to expire on December 31, 2007. The difference between the acquisition value of $20 million and the net asset value was recorded as a reduction of the carrying value of long-lived equipment.



The Company entered into agreements in the first nine months of 2005 to purchase third party
credit card assets from unaffiliated third parties. As of September 30, 2005, the Company had paid total consideration of $6.5 million for $8.9 million of these assets, with an associated discount of $2.4 million.



NOTE E  LANDFILL GAS INVESTMENTS



During June 2005, the Company received an indication of interest from an investor group,
which the Company was willing to accept, for the purchase of the Companys landfill gas loan and investments for cash and classified the investments as held for sale. Once a disposal group has been classified as held for sale the group should
be assessed each reporting period and shall be measured at the lower of its carrying amount or fair value less cost to sell. The Company evaluates a disposal group classified as held for sale monthly and will report the disposal group as a
discontinued operation pursuant to SFAS 144 paragraph 42 if (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction and (b) the
entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. The Company will report the Landfill Gas Investments as discontinued operations in the period in which it can be
determined that Hudson United bank will not have any continuing involvement in the operations of the Landfill Gas Investments after the completion of the sale.



During August and September 2005, the average price of crude oil increased to in excess of $60 per barrel. The investor group informed the Company that as a result of
the increase in crude oil prices they were willing to proceed with the purchase of the Landfill Investments under a modified purchase structure. The Company is continuing to negotiate acceptable sales terms with the investor group. During the three
months ended September 30, 2005, the Company recorded an additional provision of $2.4 million which is included in expense for Landfill Investments. A provision of $6.5 million was recorded at June 30, 2005 which results in a total of $8.9
million of provision for the nine month period ended September 30, 2005 to reduce the carrying value of the landfill gas loan and investments to their net realizable value less cost to sell.



At September 30, 2005, Landfill Investment assets held for sale of $48.0 million and
liabilities related to Landfill Investments held for sale of $22.4 million have been reclassified on the consolidated balance sheets. The following table reconciles the components of the Landfill Investments held for sale at September 30, 2005:



|                                                    |  |                    |       
|--------------------------------------------------- |  | ------------------ | ------
|                                                    |  | September 30, 2005
|Landfill Investment assets held for sale            |  |                    |       
|Cash and due from banks                             |  | $                  | 6,318 
|Commercial and financial Loans                      |  |                    | 9,403 
|Premises and equipment, net                         |  |                    | 26,777
|Other Assets                                        |  |                    | 5,534 
|                                                    |  |                    |       
|Total Landfill Investment assets held for sale      |  | $                  | 48,032
|                                                    |  |                    |       
|Landfill Investment liabilities held for sale       |  |                    |       
|Other liabilities                                   |  | $                  | 22,368
|                                                    |  |                    |       
|Total Landfill Investment liabilities held for sale |  | $                  | 22,368
|                                                    |  |                    |       



11



---

NOTE F  INVESTMENT SECURITIES



The following table presents the amortized cost and estimated fair value of investment
securities available for sale and held to maturity at the dates indicated excluding trading assets (in thousands):



|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|--------------------------------------------------------------------------- |  | ------------------ | --------- | ---------------- | -------- | ----- | ------------------- | - | ------- | - |  | - | ---------
|                                                                            |  | September 30, 2005
|                                                                            |  | AmortizedCost      |           | Gross Unrealized |          |       | EstimatedFair Value
|                                                                            |  |                    | Gains     |                  | (Losses) |       |                    
|Available for Sale                                                          |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $                  | 142,660   |                  | $        |      |                     | $ | (2,039  | ) |  | $ | 140,621  
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                    | 1,679,358 |                  |          | 1,444 |                     |   | (28,952 | ) |  |   | 1,651,850
|All other mortgage backed securities                                        |  |                    | 11,084    |                  |          |      |                     |   | (134    | ) |  |   | 10,950   
|Asset backed and other debt securities                                      |  |                    | 4,066     |                  |          | 310   |                     |   |        |   |  |   | 4,376    
|FHLB stock                                                                  |  |                    | 15,708    |                  |          |      |                     |   |        |   |  |   | 15,708   
|Other securities                                                            |  |                    | 51,570    |                  |          | 161   |                     |   | (368    | ) |  |   | 51,363   
|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|                                                                            |  | $                  | 1,904,446 |                  | $        | 1,915 |                     | $ | (31,493 | ) |  | $ | 1,874,868
|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|                                                                            | 
|                                                                            |  | September 30, 2005
|                                                                            |  | AmortizedCost      |           | Gross Unrealized |          |       | EstimatedFair Value
|                                                                            |  |                    | Gains     |                  | (Losses) |       |                    
|Held to Maturity                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $                  | 73,300    |                  | $        |      |                     | $ | (1,360  | ) |  | $ | 71,940   
|State and Political Subdivisions                                            |  |                    | 60,272    |                  |          | 1     |                     |   | (52     | ) |  |   | 60,221   
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                    | 824,845   |                  |          | 927   |                     |   | (16,578 | ) |  |   | 809,194  
|All other mortgage backed securities                                        |  |                    | 148,117   |                  |          |      |                     |   | (2,977  | ) |  |   | 145,140  
|Asset backed and other debt securities                                      |  |                    | 3,867     |                  |          | 59    |                     |   |        |   |  |   | 3,926    
|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|                                                                            |  | $                  | 1,110,401 |                  | $        | 987   |                     | $ | (20,967 | ) |  | $ | 1,090,421
|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|                                                                            | 
|                                                                            |  | December 31, 2004 
|                                                                            |  | AmortizedCost      |           | Gross Unrealized |          |       | EstimatedFair Value
|                                                                            |  |                    | Gains     |                  | (Losses) |       |                    
|Available For Sale                                                          |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $                  | 142,644   |                  | $        | 89    |                     | $ | (7      | ) |  | $ | 142,726  
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                    | 1,605,564 |                  |          | 3,490 |                     |   | (6,706  | ) |  |   | 1,602,348
|All other mortgage backed securities                                        |  |                    | 62,818    |                  |          | 364   |                     |   | (108    | ) |  |   | 63,074   
|Asset backed and other debt securities                                      |  |                    | 165,478   |                  |          | 2,704 |                     |   | (677    | ) |  |   | 167,505  
|FHLB stock                                                                  |  |                    | 45,150    |                  |          |      |                     |   |        |   |  |   | 45,150   
|Other securities                                                            |  |                    | 144,145   |                  |          | 2,609 |                     |   | (930    | ) |  |   | 145,824  
|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          
|                                                                            |  | $                  | 2,165,799 |                  | $        | 9,256 |                     | $ | (8,428  | ) |  | $ | 2,166,627
|                                                                            |  |                    |           |                  |          |       |                     |   |         |   |  |   |          



12



---

|                                                                            |  |                   |           |                  |          |       |                     |   |        |   |  |   |          
|--------------------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | -------- | ----- | ------------------- | - | ------ | - |  | - | ---------
|                                                                            |  | December 31, 2004
|                                                                            |  | AmortizedCost     |           | Gross Unrealized |          |       | EstimatedFair Value
|                                                                            |  |                   | Gains     |                  | (Losses) |       |                    
|Held to Maturity                                                            |  |                   |           |                  |          |       |                     |   |        |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $                 | 73,300    |                  | $        |      |                     | $ | (419   | ) |  | $ | 72,881   
|State and Political Subdivisions                                            |  |                   | 65,208    |                  |          |      |                     |   | (14    | ) |  |   | 65,194   
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                   | 1,049,940 |                  |          | 1,512 |                     |   | (7,072 | ) |  |   | 1,044,380
|All other mortgage backed securities                                        |  |                   | 178,811   |                  |          | 458   |                     |   | (1,813 | ) |  |   | 177,456  
|Asset backed and other debt securities                                      |  |                   | 4,969     |                  |          | 20    |                     |   |       |   |  |   | 4,989    
|                                                                            |  |                   |           |                  |          |       |                     |   |        |   |  |   |          
|                                                                            |  | $                 | 1,372,228 |                  | $        | 1,990 |                     | $ | (9,318 | ) |  | $ | 1,364,900
|                                                                            |  |                   |           |                  |          |       |                     |   |        |   |  |   |          



The
following table summarizes trading assets at December 31, 2004 (in thousands):



|                        |  |                    |      
|----------------------- |  | ------------------ | -----
|                        |  | EstimatedFairValue
|Trading Asset Portfolio |  |                    |      
|Other Equity Securities |  | $                  | 1,477
|                        |  |                    |      
|Total                   |  | $                  | 1,477
|                        |  |                    |      



Investment securities with a book
value of $2.4 billion at September 30, 2005 and $2.7 billion at December 31, 2004 were pledged as collateral for public sector deposits, customer repurchase agreements and borrowings from the Federal Home Loan Bank and other parties.



Other securities include preferred stocks of Community Reinvestment Act Funds
and common stocks of other financial institutions.



EITF No. 03-1
The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments discusses recommendations set forth on the proposed models for evaluating impairment of equity securities and debt securities. The Company
has adopted these guidelines as of December 31, 2003 and continues to monitor the status of the recommendations set forth in EITF No.3-1. The Financial Accounting Standards Board decided not to provide additional guidance on the meaning of
other than temporary impairment, but directed the staff to issue proposed FSP EITF 03-1a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, as final. The final FSP will supersede EITF No. 03-1
and will be retitled FSP FAS 115-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. FSP FAS 115-1 would be effective for other-than-temporary impairment analysis conducted in periods beginning
after September 15, 2005. The Company monitors the market value fluctuations of its investment portfolio on a monthly basis as well as associated credit ratings to determine potential impairment of a security. As of December 31, 2004, the
Company had $81.1 million of securities classified as Other-Than-Temporarily Impaired. These securities are carried at the lower of cost or fair value. Charges for Other-Than-Temporarily Impaired securities were $13.9 million
in 2004. As of September 30, 2005, the Company did not have any securities classified as Other-Than Temporarily Impaired. The Companys investment securities with unrealized losses are considered temporarily impaired due to
interest rate fluctuations that occurred during the year.



NOTE G  BORROWINGS



The maturity of the
Companys federal funds purchased, repurchase agreements and FHLB advances at September 30, 2005 and December 31, 2004 are as follows:



|         |  |          |           |            |   |          
|-------- |  | -------- | --------- | ---------- | - | ---------
|         |  | 09/30/05 |           | 12/31/2004
|2005 (1) |  | $        | 586,815   |            | $ | 1,497,423
|2006 (2) |  |          | 675,000   |            |   | 200,000  
|2007     |  |          |          |            |   |         
|2008     |  |          | 25,000    |            |   | 25,000   
|         |  |          |           |            |   |          
|Total    |  | $        | 1,286,815 |            | $ | 1,722,423

---

|(1) | Includes $450 million of structured repurchase agreements extendable at the option of the counterparty in 2005.
|--- | ---------------------------------------------------------------------------------------------------------------

|(2) | Includes $475 million of structured repurchase agreements extendable at the option of the counterparty in 2006.
|--- | ---------------------------------------------------------------------------------------------------------------



13



---

|                      |  |                   |   |  |                  |  
|--------------------- |  | ----------------- | - |  | ---------------- | -
|                      |  | September 30,2005 |   |  | December 31,2004 |  
|Weighted average rate |  | 2.58              | % |  | 1.68             | %



The Company decreased its borrowings
by $435.6 million at September 30, 2005 over December 31, 2004 levels. This decrease was primarily due to decreases in Federal Home Loan Bank advances. At September 30, 2005, the Company had a $40 million line of credit with an
unaffiliated bank, which matures June 30, 2006. The line of credit was not utilized during the first nine months of 2005.



NOTE H  SUBORDINATED DEBT



On May 6, 2002, the Bank issued $200 million of 7.00% subordinated notes due May 2012. The debentures bear interest at a fixed interest rate of 7.00% per annum
payable semi-annually. The proceeds of the above issuance were used for general corporate purposes including providing Tier 2 Capital to Hudson United.



In September 1996, the Company issued $75 million aggregate principal amount of subordinated debentures. The debentures, which mature in 2006, bear interest at a fixed
interest rate of 8.20% per annum payable semi-annually. The Company repurchased $7.0 million of this debt during 2002, $37.8 million during 2003 and $5.7 million during 2004. The outstanding balance of this debt is $24.5 million as of
September 30, 2005. The 2003 debt repurchase was repurchased from an investment banking firm at a price of 115% of par, which resulted in a premium of $5.7 million and a total transaction value of $44.0 million, which also included accrued
interest. The Company at the same time issued a $45 million, 3.50% fixed rate institutional certificate of deposit due in May of 2008 to the same investment banking firm. The changed terms of the debt instruments and the present value of the cash
flows of the obligations repurchased and the new obligation issued were not considered to be substantially different. The effective annual interest cost of the new obligation issued by the Company is 6.02%.



Proceeds of the above issuances were used for general purposes including providing Tier I
capital to the subsidiary bank. The debt has been structured to comply with the Federal Reserve Bank and FDIC rules regarding debt qualifying as Tier 2 capital at the Company.



NOTE I  JUNIOR SUBORDINATED DEBENTURES ASSOCIATED WITH CAPITAL TRUST SECURITIES



The Company issued on March 17, 2004, $20 million of capital trust preferred
securities, with a final maturity of March 17, 2034, using Hudson United Statutory Trust I, a statutory business trust formed under the laws of the State of Connecticut. The sole asset of the trust, which is the obligor on the Capital Trust
Securities, is $20.6 million principal amount variable rate Junior Subordinated Debentures due 2034 of the Company. The capital trust preferred securities have a rate equal to the 3-month LIBOR plus 2.79% adjusting quarterly at each interest payment
date and are callable by the Company on or after March 17, 2009 and any subsequent interest payment date thereafter. As of September 30, 2005, $20.0 million of the Hudson United Statutory Trust I and $20.6 million Junior Subordinated
Debentures respectively, remained outstanding.



On March 31, 2003, the
Company issued $20 million of capital trust preferred securities, with a final maturity on April 15, 2033, using Hudson United Capital Trust I, a statutory business trust formed under the laws of the State of Delaware. The sole asset of the
trust, which is the obligor on the Capital Trust Securities, is $20.6 million principal amount at a fixed rate of 6.85% Junior Subordinated Debentures due 2038 of the Company. The capital trust preferred securities are callable at par on
April 15, 2008, and have a fixed rate yield of 6.85% until the call date. Thereafter the yield on this issuance is based on 6-month LIBOR plus 3.30%. As of September 30, 2005, $20 million of the Hudson United Capital Trust I and $20.6
million Junior Subordinated Debentures respectively, remained outstanding.



The
Company issued on March 28, 2003, $15 million of capital trust preferred securities, with a final maturity of April 10, 2033, using Hudson United Capital Trust II, a statutory business trust formed under the laws of the State of Delaware.
The sole asset of the trust, which is the obligor on the Capital Trust Securities, is $15.5 million principal amount at a fixed rate of 6.45% Junior Subordinated Debentures due 2038 of the Company. The capital trust preferred securities are callable
at par on April 24, 2008, and have a fixed rate yield of 6.45% until the call date. Thereafter the yield on this issuance is based on 3-month LIBOR plus 3.25%. As of September 30, 2005, $15.0 million of the Hudson United Capital Trust II
and $15.5 million of Junior Subordinated Debentures respectively, remained outstanding.



On June 19, 1998, the Company issued $50.0 million in aggregate liquidation amount at a fixed rate of 7.65% Capital Securities due June 2028, using HUBCO Capital Trust II, a statutory business trust formed under the laws of the State
of Delaware. The sole asset of the trust, which is the obligor on the Series B Capital Securities, is $51.5 million principal amount of 7.65% Junior Subordinated Debentures due 2028 of the Company. The 7.65% Capital Securities are redeemable by the
Company on or after June 15, 2008, or earlier in the event the deduction of related interest for federal income taxes is prohibited, treatment as Tier 1 Capital is no longer permitted or certain other contingencies arise. As of
September 30, 2005, $50.0 million of the HUBCO Capital Trust II and $51.5 million Junior Subordinated Debentures respectively, remained outstanding.



14



---

On January 31, 1997, the Company issued $50.0 million in aggregate liquidation amount of 8.98% Capital Securities
due February 2027, using HUBCO Capital Trust I, a statutory business trust formed under the laws of the State of Delaware. The sole asset of the trust, which is the obligor on the Series B Capital Securities, is $51.5 million principal amount at a
fixed rate of 8.98% Junior Subordinated Debentures due 2027 of the Company. The 8.98% Capital Securities are redeemable by the Company on or after February 1, 2007, or earlier in the event the deduction of related interest for federal income
tax is prohibited, treatment as Tier 1 capital is no longer permitted or certain other contingencies arise. As of September 30, 2005, $45.0 million of the 8.98% Capital Securities and $46.5 Junior Subordinated Debentures respectively, remained
outstanding.



The five issues of capital securities have preference over the
common securities under certain circumstances with respect to cash distributions and amounts payable on liquidation and are guaranteed by the Company. The net proceeds of the offerings are being used for general corporate purposes and to increase
capital levels of the Company and its subsidiaries. The securities qualify as Tier I capital under the capital guidelines of the Federal Reserve. 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 or capital resources.



The FASB issued Interpretation No. 46 (Consolidation of Variable Interest Entities) in December 2003. As a consequence of this interpretation the Company now deconsolidates all of its capital trust
issuances and now reports these issuances in the other liability line on the Companys balance sheet. On March 1, 2005 the Federal Reserve Bank released its final rule on trust preferred securities. The final rule retains the bifurcated
system of limits on trust preferred securities: 15% of core capital elements limit for internationally active banks, and 25% of core capital elements for non-internationally active banks. The final rule does not have an impact upon the
Company.



The following is a maturity distribution of outstanding subordinated
debt and junior subordinated debentures associated with capital trust securities, which are included in the other liability section of the Companys consolidated balance sheet :



|              |  |                         |  |                   |         |                              |   |         |  |   |        
|------------- |  | ----------------------- |  | ----------------- | ------- | ---------------------------- | - | ------- |  | - | -------
|Year Maturing |  | Year Callable/ Maturity |  | Subordinated Debt |         | JuniorSubordinatedDebentures |   | Total  
|2006          |  | Not callable            |  | $                 | 24,515  |                              |   |         |  | $ | 24,515 
|2012          |  | Not callable            |  |                   | 200,485 |                              |   |         |  |   | 200,485
|2027          |  | 2007                    |  |                   |         |                              | $ | 46,547  |  |   | 46,547 
|2028          |  | 2008                    |  |                   |         |                              |   | 50,432  |  |   | 50,432 
|2033          |  | 2008                    |  |                   |         |                              |   | 35,120  |  |   | 35,120 
|2034          |  | 2009                    |  |                   |         |                              |   | 20,439  |  |   | 20,439 
|              |  |                         |  |                   |         |                              |   |         |  |   |        
|              |  |                         |  | $                 | 225,000 |                              | $ | 152,538 |  | $ | 377,538
|              |  |                         |  |                   |         |                              |   |         |  |   |        



The
table above includes $2.3 million in issuance costs associated with the Companys junior subordinated debentures.



Trusts holding solely junior subordinated debentures of the Company that issued Company-obligated mandatory redeemable preferred capital securities have been
deconsolidated and the junior subordinated debentures are included under other liabilities on its consolidated balance sheet, as a result of the application of FIN 46 and SFAS 150.



NOTE J  STOCK BASED COMPENSATION



The Board of Directors adopted and the shareholders approved on April 17, 2002, the 2002 Stock Option Plan, which provides for the
issuance of up to 1,250,000 stock options to employees of the Company, in addition to those 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. As of the adoption date
there were no further issuances from any of the Companys previous stock option plans. There are other options outstanding that were granted under the plans of acquired companies. As of September 30, 2005, there remained 858,200 shares and
as of December 31, 2004 there remained 875,200 shares available for grant from the 2002 Stock Option Plan.



The Board of Directors has adopted and the shareholders approved on April 21, 2004 an amended restricted stock plan, which authorized an additional one million
shares available for future issuances. As of September 30, 2005, 795,147 shares and as of December 31, 2004 there remained 941,647 shares available for grants.



The Company adopted as of January 1, 2003 SFAS No. 148 and will utilize the prospective method of transition, which requires that
companies apply the recognition provisions of Statement 123 to all employee awards granted, modified, or settled after the beginning of the fiscal year in which the recognition provisions are first applied. Adoption of this statement had no material
effect on the



15



---

Companys operations. The intrinsic value method is used on all grants prior to January 1, 2003. Since, the pro
forma effect on net income of the stock options granted prior to adoption of SFAS No. 148 is immaterial; we have not disclosed such pro forma compensation expense and its related effect on net income and earnings per share herein.



NOTE K - INCOME TAXES



The following represents the components of the Companys income tax expense for the period ended September 30:



|              |  |                   |       |                   |   |       
|------------- |  | ----------------- | ----- | ----------------- | - | ------
|              |  | Nine months ended
|              |  | September 30,2005 |       | September 30,2004
|Federal Taxes |  | $                 | 6,874 |                   | $ | 31,993
|State Taxes   |  |                   | 337   |                   |   | 750   
|              |  |                   |       |                   |   |       
|Total         |  | $                 | 7,211 |                   | $ | 32,743
|              |  |                   |       |                   |   |       



During the quarter ended June 30,
2005, the Company and the Internal Revenue Service reached a settlement related to the examination of the Companys Federal Income tax returns covering the years 1998 through 2002. The Company paid $12.6 million in additional income taxes for
the years 1998 through 2002. Tax reserves related to these years exceeded the amount of the settlement payment by $11.5 million and have reduced the provision for income taxes for 2005.



A reconciliation of the provision for income taxes, as reported, with the Federal income tax at the statutory rate for the nine-month period
ended September 30 is as follows (in thousands):



|                                                      |  |                   |         |   |                   |   |        |  
|----------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | ------ | -
|                                                      |  | Nine months ended |        
|                                                      |  | September 30,2005 |         |   | September 30,2004 |  
|Tax at statutory rate                                 |  | $                 | 30,253  |   |                   | $ | 44,773 |  
|Increase (decrease) in taxes resulting from:          |  |                   |         |   |                   |   |        |  
|IRS Settlement                                        |  |                   | (11,529 | ) |                   |   |       |  
|Section 29 tax credits                                |  |                   | (6,029  | ) |                   |   | (7,072 | )
|Tax-exempt income                                     |  |                   | (4,993  | ) |                   |   | (5,149 | )
|State income taxes, net of Federal income tax benefit |  |                   | 219     |   |                   |   | 488    |  
|Other, net                                            |  |                   | (710    | ) |                   |   | (297   | )
|                                                      |  |                   |         |   |                   |   |        |  
|Provision for income taxes                            |  | $                 | 7,211   |   |                   | $ | 32,743 |  
|                                                      |  |                   |         |   |                   |   |        |  



During the third quarter of 2005, the
Company evaluated the potential phase out of its Section 29 tax credits as a result of the increased price of crude oil. As a result of the analysis, the Company estimated that the Section 29 tax credits for the year 2005 will be subject to a 15%
limitation which reduced the third quarter of 2005 amount by $1.1 million.



NOTE L - COMMITMENTS AND CONTINGENT LIABILITIES



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 financial
condition of the Company.



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 stand-by 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. As of September 30, 2005, the Company had a total of $2.6 billion in commitments to extend credit, $56.0 million in standby letters of credit and $18.3 million in commercial letters of credit.



16



---

NOTE M  PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS



The following table outlines the Companys net periodic benefit costs for each of the
income statement periods contained in this report on Form 10-Q:



|                                                    |  |                    |        |   |                    |   |        |  
|--------------------------------------------------- |  | ------------------ | ------ | - | ------------------ | - | ------ | -
|                                                    |  | Nine months ended: |       
|                                                    |  | September 30, 2005 |        |   | September 30, 2004 |  
|Service cost                                        |  | $                  | 1,962  |   |                    | $ | 1,902  |  
|Interest cost                                       |  |                    | 2,439  |   |                    |   | 2,616  |  
|Expected return on plan assets                      |  |                    | (4,047 | ) |                    |   | (3,603 | )
|Amortization on unrecognized gains                  |  |                    | 648    |   |                    |   | 235    |  
|Amortization of unrecognized past service liability |  |                    | 57     |   |                    |   | 479    |  
|                                                    |  |                    |        |   |                    |   |        |  
|Net periodic benefit costs:                         |  | $                  | 1,059  |   |                    | $ | 1,629  |  



|                                                    |  |                     |        |   |                    |   |        |  
|--------------------------------------------------- |  | ------------------- | ------ | - | ------------------ | - | ------ | -
|                                                    |  | Three months ended: |       
|                                                    |  | September 30, 2005  |        |   | September 30, 2004 |  
|Service cost                                        |  | $                   | 654    |   |                    | $ | 634    |  
|Interest cost                                       |  |                     | 813    |   |                    |   | 872    |  
|Expected return on plan assets                      |  |                     | (1,349 | ) |                    |   | (1,201 | )
|Amortization on unrecognized gains                  |  |                     | 216    |   |                    |   | 78     |  
|Amortization of unrecognized past service liability |  |                     | 19     |   |                    |   | 159    |  
|                                                    |  |                     |        |   |                    |   |        |  
|Net periodic benefit costs:                         |  | $                   | 353    |   |                    | $ | 542    |  



The above tables does include costs
associated with the Companys SERP agreements with key employees. The Company did not have any gains or losses on settlements, prior service costs or recognized gains or losses in the three-month periods ended September 30, 2005 and
September 30, 2004. At this time the Company has not determined the contribution level for 2005.



17



---

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This financial review presents managements discussion and analysis of financial condition and results of operations. It should be read in conjunction with the
Companys Consolidated Financial Statements and the accompanying notes. All dollar amounts, other than per share information, are presented in thousands unless otherwise noted.



STATEMENTS REGARDING FORWARD-LOOKING INFORMATION



This document, both in Managements Discussion & Analysis and elsewhere,
contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about managements confidence and strategies and managements
expectations about new and existing programs and products, relationships, opportunities, technology and market conditions. These statements may be identified by such forward-looking terminology as expect, look,
believe, anticipate, consider, may, will, or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may
differ materially from the results discussed in these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others,



| |  |  | unexpected changes in interest rates,
| | - |  | -------------------------------------



| |  |  | deterioration in economic conditions,
| | - |  | -------------------------------------



| |  |  | deterioration in deposit and loan volume trends,
| | - |  | ------------------------------------------------



| |  |  | deterioration in loan quality,
| | - |  | ------------------------------



| |  |  | one or more changes in business models or failure to realize expected cost savings or revenue enhancements from changes in business models and acquisitions,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the continued existence and availability of tax credits, especially its Section 29 credits and other tax advantaged investments
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effects of legal, tax and regulatory provisions applicable to the Company.
| | - |  | ------------------------------------------------------------------------------



| |  |  | the TD Banknorth merger
| | - |  | -----------------------



The Company assumes no obligation for updating any such forward-looking statements at any time. Information on potential factors that could cause the Companys financial results to differ from the forward-looking
statements also is included from time to time in the Companys public reports filed with the SEC, including in our Form 10-K for the year ending December 31, 2004.



RESULTS OF OPERATIONS



OVERVIEW



The Company reported net income of $14.8 million, or $0.33 per diluted share, for the third quarter of 2005 compared to $32.5 million, or $0.72 per diluted share, for the
third quarter of 2004. The Company had net income of $79.2 million, or $1.77 per diluted share, for the nine months ended September 30, 2005. For the corresponding 2004 period, the Company reported net income of $95.2 million, or $2.12 per
diluted share.



The Companys return on average equity was 11.03% and
return on average assets was 0.64% for the third quarter of 2005. The net interest margin was 3.46%. The Companys return on average equity was 26.07% and return on average assets was 1.46% for the third quarter of 2004. The net interest margin
was 3.93%



For the first nine months of 2005, the Company had a return on
average equity of 19.90%, return on average assets of 1.17%, and a net interest margin of 3.69%. For the same period in 2004, the Company had a return on average equity of 26.38%, return on average assets of 1.50%, and a net interest margin of
4.09%.



During the third quarter of 2005, the Company began to position itself
for the upcoming merger with TD Banknorth. An increased emphasis has been directed towards incremental growth of our retail and commercial customer loans and deposits. Investment security purchases were limited to issuances of our public sector
customers. The HUBonus savings deposit marketing program was extended. The net cash inflow from the growth in retail, commercial and public sector deposits together with the proceeds from principal and interest payments on investment securities and
the sale of the tax advantaged investment securities was used to repay borrowings, brokered certificates of deposit and certificates of deposit $100,000 and over.



Our repositioning includes the planned sale of our Landfill Gas loan and investment and the sale of an OREO
project.



18



---

The continued flattening of the yield curve together with an increase in our excess liquidity resulted in a 34 basis
point reduction in the net interest margin as compared to the second quarter of 2005.



NET INTEREST INCOME



Net interest income for the third quarter of 2005 was $72.4 million and the net interest margin on a tax equivalent basis was 3.46%. Net interest income for the third
quarter of 2004 was $80.0 million and the net interest margin on a tax equivalent basis was 3.93%. Net interest income decreased by $7.6 million in the third quarter of 2005 compared to the same period of 2004. The decrease in net interest margin
for the third quarter of 2005 was due to increased lower yields on investment securities and increased yields on deposits and borrowings. The net interest margin was also affected by the Company maintaining higher liquidity (fed funds) to repay
borrowings as they mature.



Net interest income for the nine months ended 2005
was $226.4 million and the net interest margin on a tax equivalent basis was 3.69%. Net interest income for the same period in 2004 was $236.0 million and the net interest margin on a tax equivalent basis was 4.09%. Net interest income decreased by
$9.6 million when comparing the 2005 period to the corresponding 2004 period. The decrease in net interest income for the first nine months of 2005 compared to the comparable period in 2004 was due primarily to higher interest expense on deposits
and borrowings. This was offset in part by higher yields on new loans being originated in a higher interest rate environment. Interest income on securities increased in the first nine months of 2005 compared to the comparable period in 2004 due to
an increase in the average volume being partially offset by a decline in average yield.



NONINTEREST INCOME



Noninterest income was $34.6 million in the third quarter of 2005 and $44.4 million in the third quarter of 2004. Noninterest income for the third quarter of 2004
included $12.1 million of security gains and $2.0 million of merchant processing fees related to a business which was sold in the fourth quarter of 2004. Credit card fee income increased by $1.7 million.



Noninterest income was $101.3 million for the first nine months of 2005 and $119.0 million
for the first nine months of 2004. Noninterest income for the first nine months of 2005 decreased by $17.7 million. The decrease in noninterest income in 2005 compared to 2004 was due to a $14.2 million decrease in security gains and a $4.7 million
decrease in loan fees. During the fourth quarter of 2004 the Company sold its merchant processing business. Loan fees for the first nine months ended 2004 include $5.0 million of merchant processing fees from the sold portfolio which were zero in
2005. Credit card fee income increased by $5.3 million in the first nine months of 2005 compared to the comparable period in 2004. A decrease was also experienced in income from Landfill Investments related to bankruptcy claims in the amount of $4.7
million in the second quarter of 2004.



NONINTEREST EXPENSE



Noninterest expense was $78.4 million for the
third quarter of 2005 compared to $ 75.9 million for the third quarter of 2004. The increase in non interest expense is primarily due to higher foreclosed property expense totaling $8.3 million related to a property that was foreclosed in
December 2004. Increases in non interest expense was also experienced in marketing expense as a result of marketing programs aimed at increasing deposit growth and in merger related expenses. These increases were partially offset by a decrease in
salaries and benefits and outside services for data processing. Salaries and benefits for the three months ended September 30, 2004 includes a $7.9 million charge related to severance, retirement and early vesting of certain benefits. The
decrease in outside services is due to lower expenses associated with the modification of the Companys data processing and item processing contracts during the third quarter of 2004. Noninterest expense in 2005 includes a provision of $2.4
million to reduce the carrying value of the landfill gas investments to their net realizable value less cost to sell.



Noninterest expense was $219.8 million for the first nine months of 2005 compared to $212.2 million for the first nine months of 2004. The increase in noninterest expense
in the first nine months of 2005 compared to the first nine months of 2004 was primarily due to increases in expense from Landfill Investments, foreclosed property expense and merger related expense. Expense from Landfill Investments includes a
provision of $8.9 million to reduce the carrying value of the landfill gas investments to their net realizable value less cost to sell. Higher foreclosed property expense is related to a write down of a property that was foreclosed in December of
2004. Foreclosed property expense includes $10.4 million of expense relating to this property. Merger related expenses are related to the merger with TD Banknorth which is expected to occur in the first quarter of 2006. These increases were
partially offset by decreases in salaries and benefits, equipment expense and outside services for data processing. Salary and benefits expense is lower due to a $7.9 million charge related to severance, retirement and early vesting of certain
benefits that occurred during the third quarter of 2004. A decrease in outside services was experienced during the first nine months of 2005 resulting from lower expenses associated with the modification of the Companys data processing and
item processing contracts in 2004.



19



---

INCOME TAXES



The Companys pretax income for the third quarter of 2005 was $17.5 million, a decrease of $26.5 million, or 60%, compared to the third
quarter of 2004. The Companys provision for income taxes was $2.7 million for the third quarter of 2005 compared to an $11.5 million provision for the third quarter of 2004. The Companys effective tax rate was 15.5% for the third quarter
of 2005 compared to 26.0% for the third quarter of 2004. The effective tax rate is lower than the statutory Federal income tax rate as a result of tax advantaged loans and investments and the utilization of Section 29 U.S. Federal income tax
credits.



The Companys pretax income for the first nine months of 2005
was $86.4 million and $127.9 million for the first nine months of 2004. The Companys provision for income taxes was $7.2 million for the first nine months of 2005 and $32.7 million for the same period in 2004. The Companys effective tax
rate was 8.3% for the first nine months of 2005 compared to 25.6% for the first nine months of 2004. The decrease in the provision for the 2005 period was due to lower pre-tax income and the $11.5 million IRS settlement recognized during the second
quarter of 2005.



During the quarter ended June 30, 2005, the Company and
the Internal Revenue Service reached a settlement related to the examination of the Companys Federal Income tax returns covering the years 1998 through 2002. The Company paid $12.6 million in additional income taxes for the years 1998 through
2002. Tax reserves related to these years exceeded the amount of the settlement payment by $11.5 million and have reduced the provision for income taxes for 2005



During the third quarter of 2005, the Company evaluated the potential phase out of its Section 29 tax credits as a result of the
increased price of crude oil. As a result of the analysis, the Company estimated that the Section 29 tax credits for the year 2005 will be subject to a 15% limitation which reduced the third quarter of 2005 amount by $1.1 million.



PROVISION FOR LOAN AND LEASE LOSSES AND ALLOWANCE FOR
LOAN AND LEASE LOSSES



The provision for loan and lease losses was $11.2
million for the third quarter of 2005 and $4.5 million for the third quarter of 2004. Net charge offs for the third quarter of 2005 were $11.3 million compared to $4.3 million for the third quarter of 2004.



The provision for loan and lease losses was $21.4 million for the first nine months of 2005
and $14.9 million for the first nine months of 2004. The increase in 2005 compared 2004 was $6.5 million. Net charge-offs were $22.9 million for the first nine months of 2005 and $15.7 million for the first nine months of 2004.



The credit card portfolio was affected by hurricanes Katrina and Rita and one private label
credit card portfolio with an elevated level of delinquencies. Credit card and consumer loan portfolios were affected by an increased volume of bankruptcy filings in advance the October 2005 changes in the U.S. Bankruptcy laws. The Credit card and
consumer loan portfolios were evaluated and certain consumer loans classified as nonperforming including loans with reduced or rescheduled payment programs and consumer loans in the bankruptcy process were charged-off in the third quarter of 2005.
Consumer and credit card charge-offs were $11.0 million and recoveries were $1.0 million for the third quarter of 2005. Consumer and credit card charge-offs were $23.3 million and recoveries were $3.5 million for the nine month period ended
September 30, 2005.



The Allowance for loan and lease losses
(Allowance) totaled $59.3 million at September 30, 2005 compared to $60.8 million at December 31, 2004. It represented 371% of nonperforming loans and leases at September 30, 2005, compared to 496% at December 31,
2004. The Allowance as a percentage of total loans and leases was 1.14% at September 30, 2005 and 1.26% at December 31, 2004.



The determination of the adequacy of the Allowance and the periodic provisioning for estimated losses included in the consolidated financial statements is the
responsibility of management. The evaluation process is undertaken on a monthly basis. The methodology employed for assessing the adequacy of the Allowance consists of the following:



| |  |  | The establishment of allowance amounts for all specifically identified criticized loans, including those arising from business combinations, that have been designated as requiring
attention by managements internal loan review program.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The establishment of reserves for pools of homogenous types of loans not subject to specific review, including 1-4 family residential mortgages, consumer loans and leases, and
credit card portfolios, based upon historical loss rates.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



An
allocation of the allowance for the non-criticized loans in each portfolio is determined based upon the historical average loss experience of those portfolios.



20



---

Consideration is also given to the changed risk profile brought about by business combinations, knowledge about customers
and industries, the results of ongoing credit quality monitoring processes, the adequacy and expertise of the Companys lending staff, underwriting policies, loss histories, delinquency trends, nature of economic and business conditions, and
any concentration in the portfolio including real estate related loans located in the northeastern part of the United States. Since many of the loans depend upon the sufficiency of real estate collateral as a secondary source of repayment, any
adverse trend in the real estate markets could affect underlying values available to protect the Company from loss. Other evidence used to determine the amount of the Allowance and its components are as follows:



| |  |  | regulatory and other examinations
| | - |  | ---------------------------------



| |  |  | the amount and trend of criticized loans
| | - |  | ----------------------------------------



| |  |  | actual losses
| | - |  | -------------



| |  |  | peer comparisons with other financial institutions
| | - |  | --------------------------------------------------



| |  |  | opportunities to dispose of marginally performing loans for cash consideration
| | - |  | ------------------------------------------------------------------------------



Based upon the process employed and giving recognition to all attendant factors associated with the loan portfolio, management considers the Allowance to be adequate
at September 30, 2005.



Non Performing
Loans and Non Performing Assets



Nonperforming loans and leases totaled
$16.0 million at September 30, 2005. This was an increase of $3.7 million, compared to $12.3 million of nonperforming loans and leases as of December 31, 2004. Nonperforming loans and leases were 0.31 % of total loans and leases at
September 30, 2005, compared to 0.26% at September 30, 2004 and 0.25% at December 31, 2004.



The increase in the Companys non-performing loans and leases during the third quarter consists of $1.8 million increase in commercial loans, a $1.4 million increase in consumer loans, a $0.1 million increase in
insurance premium finance loans and a $0.3 million increase in non-performing loans secured by real estate.



Nonperforming assets were $25.1 million at September 30, 2005, compared to $14.6 million at September 30, 2004 and $27.9 million at December 31, 2004. Nonperforming assets as a percent of loans, leases
and foreclosed property were 0.48% at September 30, 2005, 0.30% at September 30, 2004 and 0.58% at December 31, 2004. One foreclosed property accounts for $8.0 million of the September 30, 2005 total as compared to $13.3 million
at December 31, 2004.



The following table presents the composition of
non-performing assets and selected asset quality ratios at the dates indicated (in thousands):



|                                                        |  |                    |        |   |                   |   |        |  
|------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | -
|                                                        |  | September 30, 2005 |        |   | December 31, 2004 |  
|Nonaccrual Loans:                                       |  |                    |        |   |                   |   |        |  
|Commercial                                              |  | $                  | 6,554  |   |                   | $ | 4,756  |  
|Commercial Insurance Premium Finance                    |  |                    | 749    |   |                   |   | 562    |  
|Real Estate                                             |  |                    | 7,188  |   |                   |   | 6,825  |  
|Consumer                                                |  |                    | 1,489  |   |                   |   | 114    |  
|                                                        |  |                    |        |   |                   |   |        |  
|Total Nonaccrual Loans                                  |  | $                  | 15,980 |   |                   | $ | 12,257 |  
|Foreclosed Assets                                       |  |                    | 9,112  |   |                   |   | 15,618 |  
|                                                        |  |                    |        |   |                   |   |        |  
|Total Nonperforming Assets                              |  | $                  | 25,092 |   |                   | $ | 27,875 |  
|                                                        |  |                    |        |   |                   |   |        |  
|Nonaccrual Loans to Total Loans and Leases              |  |                    | 0.31   | % |                   |   | 0.25   | %
|Allowance for Loan and Lease Losses to Nonaccrual Loans |  |                    | 371    | % |                   |   | 496    | %



21



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Loans Past Due 90 Days and Still Accruing



The following table shows loans past due 90 days or more and still accruing, along with the
applicable asset quality ratio (in thousands):



|                                            |  |                    |        |   |                   |   |        |  
|------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | -
|                                            |  | September 30, 2005 |        |   | December 31, 2004 |  
|Loans Past Due 90 Days or More and Accruing |  |                    |        |   |                   |   |        |  
|Commercial                                  |  | $                  | 1,992  |   |                   | $ | 687    |  
|Commercial Insurance Premium Finance        |  |                    | 319    |   |                   |   | 1,263  |  
|Real Estate                                 |  |                    | 1,563  |   |                   |   | 3,852  |  
|Consumer                                    |  |                    | 1,481  |   |                   |   | 1,492  |  
|Credit card                                 |  |                    | 10,238 |   |                   |   | 7,323  |  
|                                            |  |                    |        |   |                   |   |        |  
|Total Past Due Loans                        |  | $                  | 15,593 |   |                   | $ | 14,617 |  
|                                            |  |                    |        |   |                   |   |        |  
|As a percent of Total Loans and Leases      |  |                    | 0.30   | % |                   |   | 0.30   | %



Allowance for Loan and Lease Losses



The following table presents the activity in the allowance for loan and lease losses for the periods indicated:



|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------- | --------- | - | ---------------------------- | - | --------- | -
|                                                                                                 |  | Summary of Activity in the Allowance ByLoan Category |          
|(Dollars in thousands)                                                                           |  | Nine Months Ended September 30, 2005                 |           |   | Year Ended December 31, 2004 |  
|Amount of Loans and Leases Outstanding at Period End                                             |  | $                                                    | 5,206,190 |   |                              | $ | 4,827,184 |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Daily Average Amount of Loans and Leases Outstanding                                             |  | $                                                    | 4,929,818 |   |                              | $ | 4,700,573 |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Allowance for Loan and Lease Losses                                                              |  |                                                      |           |   |                              |   |           |  
|Balance at beginning of the period                                                               |  | $                                                    | 60,799    |   |                              | $ | 67,846    |  
|Loans charged off:                                                                               |  |                                                      |           |   |                              |   |           |  
|Real estate                                                                                      |  | $                                                    | 1,504     |   |                              | $ | 1,184     |  
|Commercial                                                                                       |  |                                                      | 3,557     |   |                              |   | 5,864     |  
|Commercial Insurance Premium Finance                                                             |  |                                                      | 690       |   |                              |   | 187       |  
|Consumer                                                                                         |  |                                                      | 23,338    |   |                              |   | 24,385    |  
|Other                                                                                            |  |                                                      |          |   |                              |   | 5         |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Total loans charged off                                                                          |  | $                                                    | 29,089    |   |                              | $ | 31,625    |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Recoveries:                                                                                      |  |                                                      |           |   |                              |   |           |  
|Real estate                                                                                      |  | $                                                    | 499       |   |                              | $ | 535       |  
|Commercial                                                                                       |  |                                                      | 1,800     |   |                              |   | 3,368     |  
|Commercial Insurance Premium Finance                                                             |  |                                                      | 327       |   |                              |   | 224       |  
|Consumer                                                                                         |  |                                                      | 3,546     |   |                              |   | 6,135     |  
|Other                                                                                            |  |                                                      | 52        |   |                              |   | 161       |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Total recoveries                                                                                 |  | $                                                    | 6,224     |   |                              | $ | 10,423    |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Net loans charged off                                                                            |  | $                                                    | 22,865    |   |                              | $ | 21,202    |  
|Provision for loan and lease losses, portfolio loans                                             |  |                                                      | 21,400    |   |                              |   | 14,850    |  
|Reclassification of reserves                                                                     |  |                                                      |          |   |                              |   | (695      | )
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Balance at period end                                                                            |  | $                                                    | 59,334    |   |                              | $ | 60,799    |  
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Allowance for Loan and Lease Losses to Total Loans and Leases                                    |  |                                                      | 1.14      | % |                              |   | 1.26      | %
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Provision for loan and lease losses, as a percentage of average loans and leases outstanding (1) |  |                                                      | 0.58%     |   |                              |   | 0.32      | %
|                                                                                                 |  |                                                      |           |   |                              |   |           |  
|Net loans charged off during period to average loans and leases outstanding (1)                  |  |                                                      | 0.62%     |   |                              |   | 0.45      | %
|                                                                                                 |  |                                                      |           |   |                              |   |           |  

---

|(1) | annualized
|--- | ----------



22



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FINANCIAL CONDITION



Loan and lease categories consisting of commercial and financial, commercial real estate, consumer, and credit card loans totaled $5.1
billion at September 30, 2005, compared to $4.7 billion at December 31, 2004. These four loan and lease categories are the areas of loans that the Company emphasizes. This is because they generally have more attractive yields; interest
rate sensitivity; and maturity characteristics than single family loans. These four loan and lease categories represented approximately 98% of loans and leases at September 30, 2005, compared to 97% at December 31, 2004. The loan to
deposit ratio at September 30, 2005 and December 31, 2004 was 77% and 76%, respectively.



Total investment securities were $3.0 billion at September 30, 2005, compared to $3.5 billion at December 31, 2004. Total assets were $9.1 billion at September 30, 2005 and December 31, 2004.



Deposits other than time deposits were $5.3 billion at September 30, 2005
and $4.5 billion at December 31, 2004. Total deposits were $6.8 billion at September 30, 2005 and $6.3 billion at December 31, 2004.



Total borrowings decreased by $436.6 million over year-end 2004 levels to $1.3 billion. This decrease was primarily due to decreases in Federal Home Loan Bank advances
with terms ranging from one month to slightly over one year.



Total
stockholders equity was $520.5 million and $531.7 million at September 30, 2005 and December 31, 2004, respectively. Book value per common share (defined as total stockholders equity divided by total shares outstanding) was
$11.71 at September 30,2005 and $11.82 at December 31, 2004. All regulatory capital ratios exceed those necessary to be considered a well-capitalized institution at both September 30, 2005 and December 31, 2004.



During April 2005, the board of directors approved a treasury share repurchase plan of up to
4.5 million shares. The Company did not repurchase any shares during the third quarter of 2005.



Total shares outstanding were 44.5 million shares at September 30, 2005 and 45.0 million at December 31, 2004.



The Company paid cash dividends of $0.37 per share in the third quarter of 2005. Total cash dividends paid in the third quarter of 2005 was
$16.4 million. Dividends paid in 2005 year to date were $1.11 per share. Total cash dividends paid in 2005 year to date were $49.8 million.



MARKET RISK



Interest Rate Risk



The primary objectives of asset-liability management are to provide for the safety of depositor and investor funds, assure adequate liquidity, maintain an appropriate
balance between interest-sensitive earning assets and interest-sensitive liabilities and enhance earnings. Interest rate sensitivity management ensures that the Company maintains acceptable levels of net interest income throughout a range of
interest rate environments. The Company seeks to maintain its interest rate risk within a range that it believes is both manageable and prudent, given its capital and income generating capacity.



The Company evaluates on a monthly basis its simulation model to measure the sensitivity of
net interest income to changes in market interest rates. There have been no material changes in these monthly simulations from the Companys results outlined in its Form 10-K for the year ended December 31, 2004.



During the first nine months of 2005, the Company decreased its investment portfolio by
approximately $555 million and increased its loan portfolio by approximately $379 million compared to December 31, 2004. The overall effect of this transition has relatively no change to the Companys balance sheet interest rate
sensitivity at September 30, 2005 as compared to December 31, 2004.



The Company enters into interest rate derivative contracts (interest rate swaps) from time to time for asset liability management purposes. The notional amount of the derivative contracts totaled $270 million at September 30, 2005 and
$495 million at December 31, 2004.



The purpose of these contracts is to
attempt to limit the volatility in the Companys net interest income and net interest margin in the event of changes in interest rates, in the context of the management of the Companys overall asset liability risk. Management did not
enter into these contracts for speculative purposes. Under SFAS No.133, the Company has adopted hedge accounting for these contracts. The derivative contracts hedging the fixed rate certificates of deposit and fixed rate debt have payments linked to
LIBOR



23



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and are accounted for as fair value hedges using the short-cut method under SFAS No. 133.
Under the short-cut method, any changes in value of the hedged item are assumed to be exactly as much as the change in the value of the derivative contract. Therefore, in a fair value hedge, the hedged item is adjusted by exactly the same amount as
the derivative, with no impact on earnings. All of the derivative contracts outstanding as of September 30, 2005 that are hedges for the Companys borrowings and certificates of deposit are indexed to LIBOR. Changes in interest rates will
impact the cash flows and valuation of such derivative contracts, but management does not expect the overall financial statement impact to be material under any interest rate scenario.



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 believes it has adequate sources of liquidity including the ability to attract deposits from businesses and individuals through its
branches; brokered deposits from securities firms; cash flow from interest, prepayments and principal repayments on investment securities and loans; Securities Available for Sale; and the ability to borrow funds on a collateralized basis from the
Federal Home Loan Bank and Federal Reserve discount window, through repurchase agreements collateralized by securities with customers and with securities firms; and through other sources. The management of balance sheet volumes, mixes and maturities
enables the Company to maintain adequate levels of liquidity.



Capital



The capital ratios for the
Company at September 30, 2005 and the minimum regulatory guidelines for such capital ratios for qualification as a well-capitalized institution are as follows:



|                               |  |                            |   |  |                                                 |  
|------------------------------ |  | -------------------------- | - |  | ----------------------------------------------- | -
|Holding Company Capital Ratios |  |                            |   |  |                                                 |  
|                               |  | Ratios atSeptember 30,2005 |   |  | MinimumRegulatoryGuidelinesfor Well-Capitalized |  
|Total Risk-Based Capital       |  | 13.17                      | % |  | 10.0                                            | %
|Tier 1 Risk-Based Capital      |  | 9.18                       | % |  | 6.0                                             | %
|Tier 1 Leverage Ratio          |  | 6.60                       | % |  | 4.0                                             | %
|                               |  |                           
|Bank Capital Ratios            |  |                            |   |  |                                                 |  
|                               |  | Ratios atSeptember 30,2005 |   |  | MinimumRegulatoryGuidelinesfor Well-Capitalized |  
|Total Risk-Based Capital       |  | 12.89                      | % |  | 10.0                                            | %
|Tier 1 Risk-Based Capital      |  | 8.87                       | % |  | 6.0                                             | %
|Tier 1 Leverage Ratio          |  | 6.34                       | % |  | 4.0                                             | %



The Company is not aware of any
current recommendations by the regulatory authorities that would have a material adverse effect on the Companys capital resources or operations.



Item 3. Quantitative and Qualitative Disclosure about Market Risk



(see discussion above under Market Risk, Interest rate Risk)



Item 4. Controls and Procedures



The
Companys Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Companys management, have evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the
period covered by this report. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures are effective.



The Companys Chief Executive Officer and Chief Financial Officer have also concluded
that there have not been any changes in the Companys internal control over financial reporting during the Companys third quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal
controls over financial reporting.



The Companys management, including
the CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not



24



---

absolute, assurance that the objectives of the control system are met. The design of a control system reflects resource
constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance with respect to financial statement preparation
and presentation that all control issues and instances of fraud, if any, within the Company have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur
because of simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon
certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, controls may become inadequate because of changes in conditions
or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



PART II. OTHER INFORMATION



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



|                  |  |                               |  |                              |  |                                                                                  |  |                                                                  
|----------------- |  | ----------------------------- |  | ---------------------------- |  | -------------------------------------------------------------------------------- |  | -----------------------------------------------------------------
|                  |  | Total number shares Purchased |  | Average price paid per share |  | Total number of shares purchased as part of publicly announced plans or programs |  | Maximum number of shares that may yet be purchased under the plan
|Jul 1  31, 2005  |  |                              |  |                             |  | 810,500                                                                          |  | 3,689,500                                                        
|Aug 1  31, 2005  |  |                              |  |                             |  | 810,500                                                                          |  | 3,689,500                                                        
|Sept 1  30, 2005 |  |                              |  |                             |  | 810,500                                                                          |  | 3,689,500                                                        



The Board authorized on April 15,
2005 the repurchase of up to 4.5 million outstanding shares of the Company. This approximates 10% of outstanding shares at April 15, 2005. This authorization expires on April 15, 2007.



Item 6. Exhibits



3(a) Certificate of
Incorporation of the Company as in effect on the date of this filing (Incorporated by reference from the Companys Amended Quarterly Reports on Form 10Q/A for the quarter ended June 30, 1999 filed September 10, 1999, Exhibit 3(a)).



3(b) By-laws of the Company, as in effect on the date of the filing
(Incorporated by reference from the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 filed May 15, 2003, Exhibit 3(b)).



10.1 Agreement and Plan of Merger among Hudson United Bancorp, TD Banknorth, Inc. and The Toronto-Dominion Bank dated July 11,2005
(Incorporated by reference from the Companys filing on Form 8-K/A dated July 11, 2005 and filed on July 14, 2005 Exhibit 2.1).



31.1 Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. (filed herewith)



31.2 Certification of Chief Financial Officer pursuant to Section 302 of The
Sarbanes-Oxley Act of 2002. (filed herewith)



32.1 Certification pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Kenneth T. Neilson, Chief Executive Officer of the Company, and James W. Nall, Chief Financial Officer of the Company. (filed herewith)



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SIGNATURES



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



|                 |  |                       |  |                                                      
|---------------- |  | --------------------- |  | -----------------------------------------------------
|                 |  | HUDSON UNITED BANCORP
|                 |  |                      
|November 8, 2005 |  | By:                   |  | /s/ KENNETH T. NEILSON                               
|DATE             |  |                       |  | Kenneth T. Neilson                                   
|                 |  |                       |  | Chairman, President and Chief Executive Officer      
|                 |  |                      
|November 8, 2005 |  | By:                   |  | /s/ JAMES W. NALL                                    
|DATE             |  |                       |  | James W. Nall                                        
|                 |  |                       |  | Executive Vice President, Chief Financial Officer and
|                 |  |                       |  | Chief Accounting Officer                             



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