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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-Q



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



For the quarterly period ended March 31, 2004



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



HUDSON UNITED BANCORP

(Exact name of
registrant as specified in its charter)



|                                        |  |                                        
|--------------------------------------- |  | ---------------------------------------
|New Jersey                              |  | 22-2405746                             
|(State of other jurisdiction of         |  | (I.R.S. Employer Identification Number)
|incorporation or organization)          |  |                                        
|                                        | 
|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.



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 12b-2)

Yes x No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the last practicable date: shares, no par value, 44,874,517 outstanding as of May 3, 2004.



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##### Table of Contents

HUDSON UNITED BANCORP



INDEX



|                              |  |                                                                                                                                               |  |      
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                              
|                              |  |                                                                                                                                              
|Item 1.                       |  | Financial Statements (Unaudited):                                                                                                             |  |      
|                              |  |                                                                                                                                              
|                              |  | Consolidated Balance Sheets At March 31, 2004 and December 31, 2003                                                                           |  | 2    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Income For the Three Months Ended March 31, 2004 and 2003                                                          |  | 3    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2004 and 2003                                            |  | 4    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Changes in Stockholders Equity For the Three Months Ended March 31, 2004 and for the Year Ended December 31, 2003 |  | 5    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2004 and 2003                                                      |  | 6    
|                              |  |                                                                                                                                              
|                              |  | Notes to Consolidated Financial Statements                                                                                                    |  | 7-13 
|                              |  |                                                                                                                                              
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                         |  | 13-19
|                              |  |                                                                                                                                              
|Item 3.                       |  | Quantitative and Qualitative Disclosure about Market Risk                                                                                     |  | 19   
|                              |  |                                                                                                                                              
|Item 4.                       |  | Controls and Procedures                                                                                                                       |  | 19   
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                                              
|                              |  |                                                                                                                                              
|Item 1.                       |  | Legal Proceedings                                                                                                                             |  | 20   
|                              |  |                                                                                                                                              
|Item 6.                       |  | Issuer Repurchases of its Equity Shares During the Quarter                                                                                    |  | 20   
|                              |  |                                                                                                                                              
|                              |  | Exhibits and Reports on Form 8-K                                                                                                              |  | 20-21
|                              |  |                                                                                                                                              
|                              |  | Signatures                                                                                                                                    |  | 21   



1



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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED BALANCE SHEETS (Unaudited)



|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|(in thousands, except per share data)                                                                                                               |  | March 31, 2004 |           |   | December 31, 2003 |  
|ASSETS                                                                                                                                              |  |                |           |   |                   |   |           |  
|Cash and due from banks                                                                                                                             |  | $              | 194,126   |   |                   | $ | 272,636   |  
|Interest bearing due from banks                                                                                                                     |  |                | 94,883    |   |                   |   | 41,358    |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL CASH AND CASH EQUIVALENTS                                                                                                                     |  | $              | 289,009   |   |                   | $ | 313,994   |  
|Investment securities available for sale, at market value ($ 1,110 and $1,813 million pledged at March 31, 2004 and December 31, 2003
respectively) |  | $              | 1,851,445 |   |                   | $ | 2,706,185 |  
|Investment securities held to maturity, at cost; $816,304 market value ($748,995, at cost pledged at March 31, 2004)                                |  | $              | 815,917   |   |                   | $ |          |  
|Loans and leases:                                                                                                                                   |  |                |           |   |                   |   |           |  
|Commercial and financial                                                                                                                            |  | $              | 2,126,354 |   |                   | $ | 2,137,499 |  
|Commercial real estate mortgages                                                                                                                    |  |                | 989,182   |   |                   |   | 993,937   |  
|Consumer                                                                                                                                            |  |                | 1,032,885 |   |                   |   | 1,033,693 |  
|Credit card                                                                                                                                         |  |                | 296,680   |   |                   |   | 326,713   |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|Sub-total                                                                                                                                           |  | $              | 4,445,101 |   |                   | $ | 4,491,842 |  
|Residential mortgages                                                                                                                               |  |                | 156,981   |   |                   |   | 167,913   |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL LOANS AND LEASES                                                                                                                              |  | $              | 4,602,082 |   |                   | $ | 4,659,755 |  
|Less: Allowance for loan and lease losses                                                                                                           |  |                | (67,839   | ) |                   |   | (67,846   | )
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|NET LOANS AND LEASES                                                                                                                                |  | $              | 4,534,243 |   |                   | $ | 4,591,909 |  
|Premises and equipment, net                                                                                                                         |  | $              | 124,063   |   |                   | $ | 125,168   |  
|Other real estate owned                                                                                                                             |  |                | 769       |   |                   |   | 977       |  
|Intangibles, net of amortization                                                                                                                    |  |                | 21,771    |   |                   |   | 22,664    |  
|Goodwill                                                                                                                                            |  |                | 79,010    |   |                   |   | 81,068    |  
|Investment in separate account bank owned life insurance                                                                                            |  |                | 145,672   |   |                   |   | 144,126   |  
|Other assets                                                                                                                                        |  |                | 110,746   |   |                   |   | 114,567   |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL ASSETS                                                                                                                                        |  | $              | 7,972,645 |   |                   | $ | 8,100,658 |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                |  |                |           |   |                   |   |           |  
|Deposits                                                                                                                                            |  |                |           |   |                   |   |           |  
|Noninterest bearing                                                                                                                                 |  | $              | 1,292,628 |   |                   | $ | 1,328,586 |  
|NOW, money market and savings                                                                                                                       |  |                | 3,063,369 |   |                   |   | 3,009,821 |  
|Time deposits                                                                                                                                       |  |                | 1,886,601 |   |                   |   | 1,904,952 |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL DEPOSITS                                                                                                                                      |  | $              | 6,242,598 |   |                   | $ | 6,243,359 |  
|Repurchase agreements                                                                                                                               |  |                | 438,584   |   |                   |   | 532,485   |  
|Other borrowings                                                                                                                                    |  |                | 306,798   |   |                   |   | 388,734   |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL BORROWINGS                                                                                                                                    |  | $              | 745,382   |   |                   | $ | 921,219   |  
|Other liabilities                                                                                                                                   |  |                | 256,980   |   |                   |   | 238,117   |  
|Subordinated debt                                                                                                                                   |  |                | 234,934   |   |                   |   | 239,773   |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL LIABILITIES                                                                                                                                   |  | $              | 7,479,894 |   |                   | $ | 7,642,468 |  
|Stockholders Equity:                                                                                                                               |  |                |           |   |                   |   |           |  
|Common stock, no par value; authorized 103,000,000 shares;                                                                                          |  |                |           |   |                   |   |           |  
|52,186,866 shares issued and 44,826,051 shares outstanding in 2004 and 52,186,866 shares issued and 44,798,901 shares outstanding in
2003           |  | $              | 92,788    |   |                   | $ | 92,788    |  
|Additional paid-in capital                                                                                                                          |  |                | 311,198   |   |                   |   | 311,310   |  
|Retained earnings                                                                                                                                   |  |                | 253,174   |   |                   |   | 237,046   |  
|Treasury stock, at cost, 7,360,815 shares in 2004 and 7,387,965 shares in 2003                                                                      |  |                | (175,532  | ) |                   |   | (176,505  | )
|Effect of Stock Based Compensation                                                                                                                  |  |                | (4,789    | ) |                   |   | (3,899    | )
|Accumulated other comprehensive income (loss)                                                                                                       |  |                | 15,912    |   |                   |   | (2,550    | )
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                          |  | $              | 492,751   |   |                   | $ | 458,190   |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                          |  | $              | 7,972,645 |   |                   | $ | 8,100,658 |  
|                                                                                                                                                    |  |                |           |   |                   |   |           |  



See
Notes to Unaudited Consolidated Financial Statements





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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



|                                                              |  |                              |        |      |   |         |  
|------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------- | -
|                                                              |  | Three Months Ended March 31, |       
|(in thousands, except per share data)                         |  | 2004                         |        | 2003 |  
|INTEREST AND FEE INCOME:                                      |  |                              |        |      |   |         |  
|Loans and leases                                              |  | $                            | 67,197 |      | $ | 72,337  |  
|Investment securities                                         |  |                              | 30,590 |      |   | 29,448  |  
|Other                                                         |  |                              | 358    |      |   | 625     |  
|                                                              |  |                              |        |      |   |         |  
|TOTAL INTEREST AND FEE INCOME                                 |  | $                            | 98,145 |      | $ | 102,410 |  
|                                                              |  |                              |        |      |   |         |  
|INTEREST EXPENSE:                                             |  |                              |        |      |   |         |  
|Deposits                                                      |  | $                            | 11,958 |      | $ | 17,472  |  
|Borrowings                                                    |  |                              | 2,210  |      |   | 3,222   |  
|Subordinated and other debt                                   |  |                              | 6,086  |      |   | 6,512   |  
|                                                              |  |                              |        |      |   |         |  
|TOTAL INTEREST EXPENSE                                        |  | $                            | 20,254 |      | $ | 27,206  |  
|                                                              |  |                              |        |      |   |         |  
|NET INTEREST INCOME                                           |  | $                            | 77,891 |      | $ | 75,204  |  
|PROVISION FOR LOAN AND LEASE LOSSES, PORTFOLIO LOANS          |  |                              | 5,600  |      |   | 7,000   |  
|                                                              |  |                              |        |      |   |         |  
|NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES |  | $                            | 72,291 |      | $ | 68,204  |  
|                                                              |  |                              |        |      |   |         |  
|NONINTEREST INCOME:                                           |  |                              |        |      |   |         |  
|Retail service fees                                           |  | $                            | 8,088  |      | $ | 9,003   |  
|Credit card fee income                                        |  |                              | 7,199  |      |   | 6,396   |  
|Loan Fees                                                     |  |                              | 4,534  |      |   | 3,457   |  
|ATM and debit card fees                                       |  |                              | 1,653  |      |   | 1,773   |  
|Separate account bank owned life insurance income             |  |                              | 1,546  |      |   | 1,796   |  
|Trust income                                                  |  |                              | 798    |      |   | 495     |  
|Income From Landfill Investments                              |  |                              | 5,162  |      |   |        |  
|Trading asset gain                                            |  |                              |       |      |   | 3,536   |  
|Securities (losses)/gains                                     |  |                              | 3,470  |      |   | (3,259  | )
|Other income                                                  |  |                              | 3,113  |      |   | 3,686   |  
|                                                              |  |                              |        |      |   |         |  
|TOTAL NONINTEREST INCOME                                      |  | $                            | 35,563 |      | $ | 26,883  |  
|                                                              |  |                              |        |      |   |         |  
|NONINTEREST EXPENSE:                                          |  |                              |        |      |   |         |  
|Salaries and benefits                                         |  | $                            | 25,635 |      | $ | 22,942  |  
|Occupancy expense                                             |  |                              | 8,201  |      |   | 8,217   |  
|Equipment expense                                             |  |                              | 4,480  |      |   | 4,493   |  
|Deposit and other insurance                                   |  |                              | 621    |      |   | 520     |  
|Outside services  data processing                            |  |                              | 7,511  |      |   | 6,893   |  
|Outside services-other                                        |  |                              | 8,204  |      |   | 5,444   |  
|Amortization of intangibles                                   |  |                              | 1,244  |      |   | 1,055   |  
|Marketing expense                                             |  |                              | 706    |      |   | 700     |  
|Telephone expense                                             |  |                              | 1,366  |      |   | 1,445   |  
|Expense for Landfill Investments                              |  |                              | 5,882  |      |   |        |  
|Other expense                                                 |  |                              | 2,719  |      |   | 2,948   |  
|                                                              |  |                              |        |      |   |         |  
|TOTAL NONINTEREST EXPENSE                                     |  | $                            | 66,569 |      | $ | 54,657  |  
|                                                              |  |                              |        |      |   |         |  
|INCOME BEFORE INCOME TAXES                                    |  |                              | 41,285 |      |   | 40,430  |  
|PROVISION FOR INCOME TAXES                                    |  |                              | 10,303 |      |   | 12,129  |  
|                                                              |  |                              |        |      |   |         |  
|NET INCOME                                                    |  | $                            | 30,982 |      | $ | 28,301  |  
|                                                              |  |                              |        |      |   |         |  
|NET INCOME PER COMMON SHARE                                   |  |                              |        |      |   |         |  
|Basic                                                         |  | $                            | 0.69   |      | $ | 0.63    |  
|Diluted                                                       |  | $                            | 0.69   |      | $ | 0.63    |  
|WEIGHTED AVERAGE SHARES OUTSTANDING:                          |  |                              |        |      |   |         |  
|Basic                                                         |  |                              | 44,808 |      |   | 44,756  |  
|Diluted                                                       |  |                              | 45,003 |      |   | 44,966  |  



See
Notes to Unaudited Consolidated Financial Statements





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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



|                                                                                                                                                                |  |                              |        |      |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------ | -
|                                                                                                                                                                |  | Three Months Ended March 31, |       
|(In thousands)                                                                                                                                                  |  | 2004                         |        | 2003 |  
|NET INCOME                                                                                                                                                      |  | $                            | 30,982 |      | $ | 28,301 |  
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                                                                                                         |  |                              |        |      |   |        |  
|Net unrealized securities gains (losses) on available for sale securities arising during period (tax expense of $10,866 and tax benefit of
$3,197 respectively) |  | $                            | 18,555 |      | $ | (5,453 | )
|Change in valuation of derivative contracts (tax benefit of $1,866 in 2003)                                                                                     |  |                              |       |      |   | (2,702 | )
|Less: reclassification for net gains (losses) included in net income (tax expense of $71 and tax benefit of $2,447
respectively)                                |  |                              | 93     |      |   | (3,544 | )
|                                                                                                                                                                |  |                              |        |      |   |        |  
|Other comprehensive (loss) income                                                                                                                               |  | $                            | 18,462 |      | $ | (4,611 | )
|                                                                                                                                                                |  |                              |        |      |   |        |  
|COMPREHENSIVE INCOME                                                                                                                                            |  | $                            | 49,444 |      | $ | 23,690 |  
|                                                                                                                                                                |  |                              |        |      |   |        |  



See
Notes to Unaudited Consolidated Financial Statements





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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)

(in thousands, except shares)



|                                           |  |              |   |                            |        |        |                   |   |         |                |  |   |                                  |   |  |                                             |          |   |       |   |        |   |  |   |         |   |  |   |         |  
|------------------------------------------ |  | ------------ | - | -------------------------- | ------ | ------ | ----------------- | - | ------- | -------------- |  | - | -------------------------------- | - |  | ------------------------------------------- | -------- | - | ----- | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                           |  | Common Stock |   | AdditionalPaid-in- Capital |        |        | Retained Earnings |   |         | Treasury Stock |  |   | Effect ofStock BasedCompensation |   |  | AccumulatedOtherComprehensive Income (Loss) |          |   | Total |  
|                                           |  | Shares       |   |                            | Amount |        |                   |   |         |                | 
|Balance at December 31, 2002               |  | 45,023,459   |   |                            | $      | 92,788 |                   | $ | 313,467 |                |  | $ | 177,544                          |   |  | $                                           | (169,871 | ) |       | $ | (2,456 | ) |  | $ | 21,054  |   |  | $ | 432,526 |  
|Net income                                 |  |             |   |                            |        |       |                   |   |        |                |  |   | 112,321                          |   |  |                                             |         |   |       |   |       |   |  |   |        |   |  |   | 112,321 |  
|Cash dividends ($1.18 cash paid per share) |  |             |   |                            |        |       |                   |   |        |                |  |   | (52,819                          | ) |  |                                             |         |   |       |   |       |   |  |   |        |   |  |   | (52,819 | )
|Stock options exercised                    |  | 250,383      |   |                            |        |       |                   |   | (2,332  | )              |  |   |                                 |   |  |                                             | 7,778    |   |       |   |       |   |  |   |        |   |  |   | 5,446   |  
|Other transactions                         |  | (11,220      | ) |                            |        |       |                   |   | 175     |                |  |   |                                 |   |  |                                             | (175     | ) |       |   |       |   |  |   |        |   |  |   |        |  
|Purchase of treasury stock                 |  | (527,095     | ) |                            |        |       |                   |   |        |                |  |   |                                 |   |  |                                             | (16,525  | ) |       |   |       |   |  |   |        |   |  |   | (16,525 | )
|Effect of stock based compensation plans   |  | 63,374       |   |                            |        |       |                   |   |        |                |  |   |                                 |   |  |                                             | 2,288    |   |       |   | (1,443 | ) |  |   |        |   |  |   | 845     |  
|Other comprehensive (loss)                 |  |             |   |                            |        |       |                   |   |        |                |  |   |                                 |   |  |                                             |         |   |       |   |       |   |  |   | (23,604 | ) |  |   | (23,604 | )
|                                           |  |              |   |                            |        |        |                   |   |         |                |  |   |                                  |   |  |                                             |          |   |       |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2003               |  | 44,798,901   |   |                            | $      | 92,788 |                   | $ | 311,310 |                |  | $ | 237,046                          |   |  | $                                           | (176,505 | ) |       | $ | (3,899 | ) |  | $ | (2,550  | ) |  | $ | 458,190 |  
|                                           |  |              |   |                            |        |        |                   |   |         |                |  |   |                                  |   |  |                                             |          |   |       |   |        |   |  |   |         |   |  |   |         |  
|Net income                                 |  |             |   |                            |        |       |                   |   |        |                |  |   | 30,982                           |   |  |                                             |         |   |       |   |       |   |  |   |        |   |  |   | 30,982  |  
|Cash dividends ($0.33 cash paid per share) |  |             |   |                            |        |       |                   |   |        |                |  |   | (14,854                          | ) |  |                                             |         |   |       |   |       |   |  |   |        |   |  |   | (14,854 | )
|Stock options exercised                    |  | 9,130        |   |                            |        |       |                   |   | (112    | )              |  |   |                                 |   |  |                                             | 290      |   |       |   |       |   |  |   |        |   |  |   | 178     |  
|Purchase of treasury stock                 |  | (14,980      | ) |                            |        |       |                   |   |        |                |  |   |                                 |   |  |                                             | (561     | ) |       |   |       |   |  |   |        |   |  |   | (561    | )
|Effect of stock compensation plans         |  | 33,000       |   |                            |        |       |                   |   |        |                |  |   |                                 |   |  |                                             | 1,244    |   |       |   | (890   | ) |  |   |        |   |  |   | 354     |  
|Other comprehensive income                 |  |             |   |                            |        |       |                   |   |        |                |  |   |                                 |   |  |                                             |         |   |       |   |       |   |  |   | 18,462  |   |  |   | 18,462  |  
|                                           |  |              |   |                            |        |        |                   |   |         |                |  |   |                                  |   |  |                                             |          |   |       |   |        |   |  |   |         |   |  |   |         |  
|Balance at March 31, 2004                  |  | 44,826,051   |   |                            | $      | 92,788 |                   | $ | 311,198 |                |  | $ | 253,174                          |   |  | $                                           | (175,532 | ) |       | $ | (4,789 | ) |  | $ | 15,912  |   |  | $ | 492,751 |  
|                                           |  |              |   |                            |        |        |                   |   |         |                |  |   |                                  |   |  |                                             |          |   |       |   |        |   |  |   |         |   |  |   |         |  



See
Notes to Unaudited Consolidated Financial Statements





---

##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)



|                                                                                          |  |                              |          |   |      |   |            |  
|----------------------------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ---- | - | ---------- | -
|                                                                                          |  | Three Months Ended March 31, |         
|                                                                                          |  | 2004                         |          |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                              |          |   |      |   |            |  
|Net Income                                                                                |  | $                            | 30,982   |   |      | $ | 28,301     |  
|Adjustments to reconcile net income to net cash provided by operating Activities:         |  |                              |          |   |      |   |            |  
|Provision for loan and lease losses                                                       |  |                              | 5,600    |   |      |   | 7,000      |  
|Provision for depreciation and amortization                                               |  |                              | 4,893    |   |      |   | 4,956      |  
|Amortization (Accretion) of investment securities premiums (discounts), net               |  |                              | 1,497    |   |      |   | 4,160      |  
|Amortization of restricted stock                                                          |  |                              | 354      |   |      |   |            |  
|(Gain)/loss on sales of premises and equipment                                            |  |                              | 22       |   |      |   | (153       | )
|Securities (gains)losses                                                                  |  |                              | (3,470   | ) |      |   | (3,259     | )
|Deferred income tax provision                                                             |  |                              | 9,679    |   |      |   | (2,641     | )
|(Increase)/decrease in other assets                                                       |  |                              | (7,532   | ) |      |   | 9,102      |  
|Decrease in other liabilities                                                             |  |                              | (5,920   | ) |      |   | (40,039    | )
|                                                                                          |  |                              |          |   |      |   |            |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                 |  | $                            | 36,105   |   |      | $ | 7,427      |  
|                                                                                          |  |                              |          |   |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                              |          |   |      |   |            |  
|Proceeds from sales of investment securities:                                             |  |                              |          |   |      |   |            |  
|Available for sale                                                                        |  | $                            | 202,926  |   |      | $ | 637,153    |  
|Proceeds from repayments and maturities of investment securities:                         |  |                              |          |   |      |   |            |  
|Available for sale                                                                        |  |                              | 305,881  |   |      |   | 350,130    |  
|Purchases of investment securities:                                                       |  |                              |          |   |      |   |            |  
|Available for sale                                                                        |  |                              | (365,454 | ) |      |   | (1,317,246 | )
|Held to maturity                                                                          |  |                              | (73,300  | ) |      |   |            |  
|Decrease (increase) in loans other than purchases and sales                               |  |                              | 53,648   |   |      |   | 72,262     |  
|Increase in loans due to purchases                                                        |  |                              |         |   |      |   | (2,718     | )
|Credit card receivables purchased                                                         |  |                              | (1,582   | ) |      |   |           |  
|Proceeds from sales of premises and equipment                                             |  |                              | 12       |   |      |   | 407        |  
|Purchases of premises and equipment                                                       |  |                              | (2,578   | ) |      |   | (814       | )
|Decrease (increase) in other real estate                                                  |  |                              | 208      |   |      |   | 271        |  
|                                                                                          |  |                              |          |   |      |   |            |  
|NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES                                       |  | $                            | 119,761  |   |      | $ | (260,555   | )
|                                                                                          |  |                              |          |   |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                              |          |   |      |   |            |  
|Net increase (decrease) in demand deposits, NOW and savings accounts                      |  | $                            | 17,590   |   |      | $ | (63,005    | )
|Net increase (decrease) in certificates of deposit                                        |  |                              | (18,351  | ) |      |   | 47,407     |  
|Net increase (decrease) in borrowings                                                     |  |                              | (175,837 | ) |      |   | 249,968    |  
|Payment of subordinated debt securities                                                   |  |                              | (8,826   | ) |      |   |           |  
|Proceeds from issuance of debt securities                                                 |  |                              | 19,810   |   |      |   | 35,000     |  
|Payment of debt securities                                                                |  |                              |         |   |      |   | (25,300    | )
|Proceeds from issuance of Common stock                                                    |  |                              | 178      |   |      |   | 927        |  
|Cash dividends paid                                                                       |  |                              | (14,854  | ) |      |   | (12,692    | )
|Acquisition of treasury stock                                                             |  |                              | (561     | ) |      |   | (16,525    | )
|                                                                                          |  |                              |          |   |      |   |            |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                                 |  | $                            | 180,851  |   |      | $ | 215,780    |  
|                                                                                          |  |                              |          |   |      |   |            |  
|INCREASE IN CASH AND CASH EQUIVALENTS                                                     |  | $                            | (24,985  | ) |      | $ | (37,348    | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                          |  |                              | 313,994  |   |      |   | 275,580    |  
|                                                                                          |  |                              |          |   |      |   |            |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                |  | $                            | 289,009  |   |      | $ | 238,232    |  
|                                                                                          |  |                              |          |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                        |  |                              |          |   |      |   |            |  
|Cash paid during the period                                                               |  |                              |          |   |      |   |            |  
|Interest                                                                                  |  | $                            | 17,874   |   |      | $ | 26,396     |  
|Taxes                                                                                     |  |                              | 10,809   |   |      |   | 12,956     |  
|Additional Disclosures Securities transferred from available for sale to held to maturity |  |                              | 742,617  |   |      |   |            |  



See Notes to
Consolidated Financial Statements





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##### Table of Contents

HUDSON UNITED BANCORP



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share data)



NOTE A  BASIS OF PRESENTATION AND
CONSOLIDATION



The accompanying unaudited consolidated financial statements of
Hudson United Bancorp and Subsidiary(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, 2003. 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, 2003, 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, 2003 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 (LPGs). 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 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 the Companys consolidated balance sheet, as a result of the application of FIN 46 and SFAS 150. Certain amounts from the prior
year have been reclassified to the current years presentation.





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##### Table of Contents

NOTE B  EARNINGS PER SHARE



Basic earnings per share is computed by dividing net income by the weighted average number
of common shares outstanding 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 the exercise of stock options,
calculated using the treasury stock method.



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



|                                                             |  |                              |        |      |   |       
|------------------------------------------------------------ |  | ---------------------------- | ------ | ---- | - | ------
|                                                             |  | Three Months Ended March 31,
|                                                             |  | 2004                         |        | 2003
|Basic Earnings Per Share                                     |  |                              |        |      |   |       
|Net Income                                                   |  | $                            | 30,982 |      | $ | 28,301
|Weighted average common shares outstanding                   |  |                              | 44,808 |      |   | 44,756
|Basic earnings per share                                     |  | $                            | 0.69   |      | $ | 0.63  
|Diluted Earnings Per Share                                   |  |                              |        |      |   |       
|Net Income                                                   |  | $                            | 30,982 |      | $ | 28,301
|Weighted average common shares outstanding                   |  |                              | 44,808 |      |   | 44,756
|Effect of dilutive securities:                               |  |                              |        |      |   |       
|Stock options                                                |  |                              | 195    |      |   | 214   
|                                                             |  |                              |        |      |   |       
|Weighted average common shares outstanding assuming dilution |  |                              | 45,003 |      |   | 44,970
|Diluted earnings per share                                   |  | $                            | 0.69   |      | $ | 0.63  



NOTE
C  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 next two years after the closing of the acquisition. The purchase price (excluding any potential earn-out
payments) represents a $3.4 million premium to Flatirons estimated book value (before acquisition costs). During the first quarter of 2004 the Company finalized the book value calculation of Flatiron. This finalization resulted in a downward
adjustment to goodwill for $2.1 million.



The Company acquired ownership
interests in the second quarter of 2003 in two companies involved in landfill gas projects (LGPs). These LGPs lease gas rights within landfills and own and operate the equipment that recovers methane gas, and generate revenues by selling
the gas. 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), which are available to producers of fuel from non-conventional sources. These
Section 29 tax credits were $6.3 million from acquisition in June 2003 through December 31, 2003 and $2.1 million for the first quarter of 2004. and are scheduled to expire on December 31, 2007. The acquisition occurred in connection with the
satisfaction of a loan the Company had previously made to the prior owner of the LGPs. The LGPs or predecessor entities have been in existence since 1997.





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##### Table of Contents

NOTE D  INVESTMENT SECURITIES



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



|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|--------------------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | -------- | ------ | --------------------- | - | ------- | - |  | - | ---------
|                                                                            |  | March 31, 2004   
|                                                                            |  | AmortizedCost     |           | Gross Unrealized |          |        | Estimated MarketValue
|                                                                            |  |                   | Gains     |                  | (Losses) |        |                      
|Available for Sale                                                          |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|U.S. Treasury and Government Agencies(includes mortgage backed securities)  |  | $                 | 862,075   |                  | $        | 13,059 |                       | $ | (32     | ) |  | $ | 875,102  
|State and Political subdivisions                                            |  |                   | 39,152    |                  |          | 505    |                       |   |        |   |  |   | 39,657   
|Asset backed and other debt securities                                      |  |                   | 759,458   |                  |          | 19,200 |                       |   | (8,032  | ) |  |   | 770,626  
|FHLB stock                                                                  |  |                   | 16,250    |                  |          |       |                       |   |        |   |  |   | 16,250   
|Other securities                                                            |  |                   | 144,693   |                  |          | 5,135  |                       |   | (18     | ) |  |   | 149,810  
|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|                                                                            |  | $                 | 1,821,628 |                  | $        | 37,899 |                       | $ | (8,082  | ) |  | $ | 1,851,445
|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|                                                                            | 
|                                                                            |  | December 31, 2003
|                                                                            |  | AmortizedCost     |           | Gross Unrealized |          |        | EstimatedMarketValue 
|                                                                            |  |                   | Gains     |                  | (Losses) |        |                      
|Available for Sale                                                          |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|U.S. Treasury and Government Agencies (includes mortgage backed securities) |  | $                 | 1,484,587 |                  | $        | 6,464  |                       | $ | (15,157 | ) |  | $ | 1,475,894
|State and Political subdivisions                                            |  |                   | 39,560    |                  |          | 514    |                       |   |        |   |  |   | 40,074   
|Asset backed and other debt securities                                      |  |                   | 1,027,682 |                  |          | 15,548 |                       |   | (12,767 | ) |  |   | 1,030,463
|FHLB stock                                                                  |  |                   | 16,250    |                  |          |       |                       |   |        |   |  |   | 16,250   
|Other securities                                                            |  |                   | 141,429   |                  |          | 2,175  |                       |   | (100    | ) |  |   | 143,504  
|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|                                                                            |  | $                 | 2,709,508 |                  | $        | 24,701 |                       | $ | (28,204 | ) |  | $ | 2,706,185
|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|                                                                            | 
|                                                                            |  | March 31, 2004   
|                                                                            |  | AmortizedCost     |           | Gross Unrealized |          |        | EstimatedMarketValue 
|                                                                            |  |                   | Gains     |                  | (Losses) |        |                      
|Held to Maturity                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|U.S. Government securities/agencies (includes mortgage backed securities)   |  | $                 | 690,509   |                  | $        | 387    |                       | $ |        |   |  | $ | 690,896  
|Asset backed and other debt securities                                      |  |                   | 125,408   |                  |          |       |                       |   |        |   |  |   | 125,408  
|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          
|                                                                            |  | $                 | 815,917   |                  | $        | 387    |                       | $ |        |   |  | $ | 816,304  
|                                                                            |  |                   |           |                  |          |        |                       |   |         |   |  |   |          



Investment securities with a market
value of $1,859 million at March 31, 2004 and $1,813 million at December 31, 2003 were pledged as collateral for public sector deposits, repurchase agreements, interest rate swaps and borrowings from the Federal Home Loan Bank and other
counterparties.



Other equity securities include preferred stocks of Government
Sponsored Entities, and common stocks of other financial institutions.



NOTE E  SUBORDINATED DEBT



On May 6,
2002, the Bank issued $200 million of 7.00% subordinated notes due May of 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.





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##### Table of Contents

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 and $37.8 million during 2003. The outstanding balance of this debt is $30.2 million
as of March 31, 2004.



In January 1994, the Company issued $25.0 million
aggregate principal amount of subordinated debentures which bore interest at a fixed rate of 7.75% per annum payable semi-quarterly. The debentures, matured in January of 2004, at which time, the Company redeemed this debt.



The Company has marked to market $85.0 million of its subordinated debt as a result of it
being hedged by interest rate swaps accounted for as fair value hedges. The fair value adjustment as of March 31, 2004 on the Companys subordinated debt was $4.7million.



The Company repurchased $37.8 million of its 8.20% fixed rate subordinated debt due in September of 2006 in the second quarter of 2003. The
debt 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%.



NOTE F  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 Subordinatd 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.



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%. 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.



On June 19, 1998, the Company issued $50.0 million in aggregate liquidation amount 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.



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 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 March 31, 2004, $45.0 million of the 8.98% Capital Securities and $46.5 Junior
Subordinated Debentures respectively, remained outstanding.





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##### Table of Contents

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 at March 31, 2004:



|              |  |                        |  |                  |         |                              |   |                    |  |   |        
|------------- |  | ---------------------- |  | ---------------- | ------- | ---------------------------- | - | ------------------ |  | - | -------
|Year Maturing |  | Year Callable/Maturity |  | SubordinatedDebt |         | JuniorSubordinatedDebentures |   | Total ($ millions)
|2006          |  | Not callable           |  | $                | 30,215  |                              |   |                    |  | $ | 30,215 
|2012          |  | Not callable           |  |                  | 204,719 |                              |   |                    |  |   | 204,719
|2027          |  | 2007                   |  |                  |         |                              |   | 46,500             |  |   | 46,500 
|2028          |  | 2008                   |  |                  |         |                              |   | 51,500             |  |   | 51,500 
|2033          |  | 2008                   |  |                  |         |                              |   | 35,068             |  |   | 35,068 
|2034          |  | 2009                   |  |                  |         |                              |   | 20,430             |  |   | 20,430 
|              |  |                        |  |                  |         |                              |   |                    |  |   |        
|              |  |                        |  | $                | 234,934 |                              | $ | 153,498            |  | $ | 388,432
|              |  |                        |  |                  |         |                              |   |                    |  |   |        



The table above includes $4.7 million
in mark to market adjustment that is included in the Companys balance sheet on the portion of the Companys subordinated debt that is hedged with interest rate derivatives and $1.2 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.



The five
outstanding issues of capital trust preferred 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 Basel Committee on Banking Supervision (Basel Committee) is developing a new set of risk-based capital
standards(New Accord). In a press release dated January 15, 2004, it was announced that the Basel Committee will make further refinements to certain critical components of the New Accord. The Basel Committee intends to finalize the New
Accord by mid-year 2004. U.S. banking regulators have proposed an effective date of January 1, 2007, for the New Accord, which will affect the Company. The Company will continue to monitor the progress of the Basel initiative. The consideration of
the impact of FIN 46 for capital trust securities has not yet been finalized by the Federal Reserve. The Company is currently including the allowable portion of its trust preferred securities in the calculation of regulatory capital. Depending upon
the final interpretation given, there may be a material impact upon the Companys regulatory capital.



NOTE G: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 previous plans. There are other options outstanding that were granted under the plans of acquired companies. As of March 31, 2004, there remained 912,700 shares and as of December 31, 2003 there remained 915,700 shares available for
grant from the 2002 Stock Option Plan.



The Company has a restricted stock plan
in which 4,597 shares, as of March 31, 2004, of the Companys common stock may be granted to officers and key employees. On April 21, 2004 the Companys shareholders approved the addition of 1.0 million shares to this plan, for future
issuances.





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##### Table of Contents

If compensation cost had been determined based on the fair value at the grant dates for stock options awarded under the
Companys plans consistent with the method of SFAS No. 123, the Companys net income and income per share would have been reduced to the proforma amounts indicated below for quarter end and period end March 31, 2004 and March 31,2003. The
Company has adopted the prospective method of recording stock compensation expense effective January 1, 2003 (in thousands except per share data):



|                                                                                                                                                                                                       |  |            |  |                    |        |               |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- |  | ------------------ | ------ | ------------- | - | ------
|                                                                                                                                                                                                       |  |            |  | Three months ended
|                                                                                                                                                                                                       |  |            |  | March 31,2004      |        | March 31,2003
|Net income                                                                                                                                                                                             |  | Asreported |  | $                  | 30,982 |               | $ | 28,301
|Plus: Stock-based employee compensation cost, net of related tax effects, included in the determination of net income as reported(1)                                                                   |  |            |  |                    | 266    |               |   | 105   
|Less: Stock-based employee compensation cost, net of related tax effects, that would have been included in the determination of net income, if
the fair value method had been applied to all awards(2) |  |            |  |                    | 2,675  |               |   | 2,333 
|                                                                                                                                                                                                       |  | Proforma   |  | $                  | 28,573 |               | $ | 26,073
|Basic earnings per share                                                                                                                                                                               |  | Asreported |  | $                  | 0.69   |               | $ | 0.63  
|                                                                                                                                                                                                       |  | Proforma   |  | $                  | 0.63   |               | $ | 0.58  
|Diluted earnings per share                                                                                                                                                                             |  | Asreported |  | $                  | 0.69   |               | $ | 0.63  
|                                                                                                                                                                                                       |  | Proforma   |  | $                  | 0.64   |               | $ | 0.58  



|(1) | Includes expenses for both stock options and restricted stock
|--- | -------------------------------------------------------------



|(2) | Includes expenses for stock options for all awards, including awards granted in years prior to adoption of SFAS No. 148 and restricted stock
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



NOTE H:INCOME TAXES



The following represents the components of the Companys income tax expense for the
periods ended March 31:



|              |  |               |        |               |   |       
|------------- |  | ------------- | ------ | ------------- | - | ------
|              |  | March 31,2004 |        | March 31,2003
|Federal taxes |  | $             | 10,053 |               |   | 12,003
|State taxes   |  |               | 250    |               |   | 126   
|              |  |               |        |               |   |       
|Total         |  | $             | 10,303 |               | $ | 12,129



A reconciliation of the provision for
income taxes, as reported, with the Federal income tax at the statutory rate for the period ended March 31 is as follows (in thousands)



|                                                      |  |               |        |   |               |   |        |  
|----------------------------------------------------- |  | ------------- | ------ | - | ------------- | - | ------ | -
|                                                      |  | March 31,2004 |        |   | March 31,2003 |  
|Tax at statutory rate                                 |  | $             | 14,450 |   |               | $ | 14,151 |  
|Increase (decrease) in taxes resulting from:          |  |               |        |   |               |   |        |  
|Section 29 tax credits                                |  |               | (2,082 | ) |               |   |       |  
|Tax-exempt income                                     |  |               | (1,862 | ) |               |   | (1,825 | )
|State income taxes, net of Federal income tax benefit |  |               | 163    |   |               |   | 82     |  
|Other, net                                            |  |               | (366   | ) |               |   | (279   | )
|                                                      |  |               |        |   |               |   |        |  
|Provision for income taxes                            |  | $             | 10,303 |   |               | $ | 12,129 |  





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NOTE I: 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 March 31, 2004 the Company had a total of $ 2,342 million in commitments to extend credit, $56.3 million in standby letters of credit and $15.0 million in commercial letters of credit.



NOTE J: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS



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



|                                                    |  |                |        |   |                |   |      |  
|--------------------------------------------------- |  | -------------- | ------ | - | -------------- | - | ---- | -
|                                                    |  | March 31, 2004 |        |   | March 31, 2003 |  
|Service cost                                        |  | $              | 568    |   |                | $ | 532  |  
|Interest cost                                       |  |                | 767    |   |                |   | 727  |  
|Expected return on plan assets                      |  |                | (1,201 | ) |                |   | (941 | )
|Amortization of unrecognized transition asset       |  |                |       |   |                |   | (18  | )
|Amortization on unrecognized gains                  |  |                | 68     |   |                |   | 221  |  
|Amortization of unrecognized past service liability |  |                | 20     |   |                |   | 19   |  
|                                                    |  |                |        |   |                |   |      |  
|Net periodic benefit costs:                         |  | $              | 222    |   |                | $ | 540  |  



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 March 31, 2004 and March 31, 2003.



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 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 levels of 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,
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------





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| |  | 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 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, 2003.



RESULTS OF OPERATIONS



OVERVIEW



The Company had net income of $31.0 million, or $0.69 per diluted share, for the first
quarter of 2004 compared to $28.3 million, or $0.63 per diluted share for the comparable period in 2003.



The Companys return on average equity was 26.51% and return on average assets was 1.54% for the first quarter of 2004. The net interest margin was 4.25 % for the first quarter of 2004. The Companys return
on average equity was 26.86%, return on average assets was 1.49% for the first quarter of 2003. The net interest margin was 4.36% for the first quarter of 2003.



NET REVENUE



Net revenue, which is the sum of net interest income and noninterest income, was $113.5 million for the first quarter of 2004. This was comprised of net
interest income of $77.9 million and noninterest income of $35.6 million. Net revenue for the first quarter of 2003 was $102.1 million. This was comprised of net interest income of $75.2 million and noninterest income of $26.9 million. Net revenue
for the first quarter of 2004 increased by $11.4 million, or 11.1%, compared to the first quarter of 2003. The increase to the first quarter of 2004 from the first quarter of 2003 is primarily attributed to decreased interest expense on deposits,
along with income from landfill investments and security gains.



NET INTEREST INCOME



Net
interest income for the first quarter of 2004 was $77.9 million and the net interest margin on a tax equivalent basis was 4.25%. Net interest income for the first quarter of 2003 was $75.2 million and the net interest margin, on a tax equivalent
basis, was 4.36%. Net interest income increased by $2.7 million in the first quarter of 2004 compared to the first quarter of 2003. The increase in net interest income was due primarily to lower interest expense on deposits. This was offset in part
by lower interest income on loans primarily attributable to prepayments on existing loans and subsequent new loans being originated at lower interest rates.



NONINTEREST INCOME



Noninterest income was $35.6 million in the first quarter of 2004 and $26.9 million in the first quarter of 2003. Noninterest income increased by $8.7
million, or 32.3%, compared to the first quarter of 2003. The increase in noninterest income was due mainly to gains on sales of securities and income from landfill gas companies in 2004 partially offset by reduced correspondant banking fees for the
terminated business in December 2003.



NONINTEREST EXPENSE



Noninterest expense was $66.6
million for the first quarter of 2004 compared to $54.7 million for the first quarter of 2003. The increase in noninterest expense in the first quarter of 2004 compared to the first quarter of 2003 was due primarily to increases in salaries and
benefits, expenses from landfill investments and other outside services. The increase in salaries and benefits in first quarter 2004 was primarily due to the acquisition of Flatiron Credit Company on October 31, 2003. The





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##### Table of Contents

increase in other outside service fees includes unusual professional fees of $2.7 million primarily resulting from the Companys termination of its
correspondent banking business



INCOME TAXES



The Companys pretax income for the first quarter of
2004 increased by $0.9 million to $41.3 million compared to the first quarter of 2003. The Companys provision for income taxes was $10.3 million for the quarter ended March 31, 2004 compared to $12.1 million for the first quarter of 2003. The
lower tax provision in the first quarter of 2004 compared to 2003 was primarily due to Section 29 energy tax credits from the Companys investment in landfill gas companies, which were acquired in the second quarter of 2003.



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



The provision for loan and lease losses was $5.6 million for
the first quarter of 2004 and $7.0 million for the first quarter of 2003. The decrease in 2004 over 2003 was due to the lower levels of nonperforming loans at March 31, 2004 as well as lower charge-offs. Net charge offs for the first quarter of 2004
were $5.6 million, which was equal to the provision for loan and leases losses.



The allowance for loan and lease losses totaled $67.8 million at March 31, 2004 and December 31, 2003 . It represented 477% of nonperforming loans and leases at March 31, 2004, compared to 513% at December 31, 2003. The allowance for loan
and lease losses as a percentage of total loans and leases was 1.47% at March 31, 2004 and 1.46% at December 31, 2003.



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.



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
| | - | ------------------------------------------------------------------------------





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##### Table of Contents

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 March 31, 2004.



Non
Performing Loans and Non Performing Assets



Nonperforming loans and leases
totaled $14.2 million at March 31, 2004. This was an increase of $1.0 million, or 7.6%, compared to $13.2 million of nonperforming loans and leases as of December 31, 2003. Nonperforming loans and leases were 0.31% of total loans and leases at March
31, 2004, compared to 0.28% at December 31, 2003.



Nonperforming assets were
$15.0 million at March 31, 2004, up from $14.2 million at December 31, 2003. Nonperforming assets as a percent of loans, leases and OREO were 0.33% at March 31, 2004 and 0.30% at December 31, 2003.



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



|                                                        |  |                |        |   |                   |   |        |  
|------------------------------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                                        |  | March 31, 2004 |        |   | December 31, 2003 |  
|Nonaccrual Loans:                                       |  |                |        |   |                   |   |        |  
|Commercial                                              |  | $              | 8,536  |   |                   | $ | 7,555  |  
|Real Estate                                             |  |                | 5,542  |   |                   |   | 5,477  |  
|Consumer                                                |  |                | 133    |   |                   |   | 185    |  
|                                                        |  |                |        |   |                   |   |        |  
|Total Nonaccrual Loans                                  |  | $              | 14,211 |   |                   | $ | 13,217 |  
|Other Real Estate Owned                                 |  |                | 769    |   |                   |   | 977    |  
|                                                        |  |                |        |   |                   |   |        |  
|Total Nonperforming Assets                              |  | $              | 14,980 |   |                   | $ | 14,194 |  
|                                                        |  |                |        |   |                   |   |        |  
|Nonaccrual Loans to Total Loans and Leases              |  |                | 0.31   | % |                   |   | 0.28   | %
|Allowance for Loan and Lease Losses to Nonaccrual Loans |  |                | 477    | % |                   |   | 513    | %



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 ratios (in thousands):



|                                            |  |                |        |   |                   |   |        |  
|------------------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                            |  | March 31, 2004 |        |   | December 31, 2003 |  
|Loans Past Due 90 Days or More and Accruing |  |                |        |   |                   |   |        |  
|Commercial                                  |  | $              | 1,236  |   |                   | $ | 4,107  |  
|Real Estate                                 |  |                | 4,497  |   |                   |   | 2,867  |  
|Consumer                                    |  |                | 1,433  |   |                   |   | 2,228  |  
|Credit card                                 |  |                | 6,822  |   |                   |   | 7,481  |  
|                                            |  |                |        |   |                   |   |        |  
|Total Past Due Loans                        |  | $              | 13,988 |   |                   | $ | 16,683 |  
|                                            |  |                |        |   |                   |   |        |  
|As a percent of Total Loans and Leases      |  |                | 0.30   | % |                   |   | 0.36   | %





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##### Table of Contents

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 By Loan Category |          
|                                                                                             |  | Year to DateMarch 31,2004                             |           |      | Year EndedDecember31, 2003 |  
|(Dollars in thousands)                                                                       |  |                                                       |           |      |                            |  
|Amount of Loans and Leases Outstanding at Period End                                         |  | $                                                     | 4,602,082 |      |                            | $ | 4,659,755 |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Daily Average Amount of Loans and Leases Outstanding                                         |  | $                                                     | 4,604,370 |      |                            | $ | 4,333,434 |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Allowance for Loan and Lease Losses                                                          |  |                                                       |           |      |                            |   |           |  
|Balance at beginning of the period                                                           |  | $                                                     | 67,846    |      |                            | $ | 71,929    |  
|Loans charged off:                                                                           |  |                                                       |           |      |                            |   |           |  
|Real estate                                                                                  |  | $                                                     | 738       |      |                            | $ | 1,427     |  
|Commercial                                                                                   |  |                                                       | 972       |      |                            |   | 7,825     |  
|Consumer                                                                                     |  |                                                       | 6,768     |      |                            |   | 28,214    |  
|Other                                                                                        |  |                                                       | 5         |      |                            |   |          |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Total loans charged off                                                                      |  | $                                                     | 8,483     |      |                            | $ | 37,466    |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Recoveries:                                                                                  |  |                                                       |           |      |                            |   |           |  
|Real estate                                                                                  |  | $                                                     | 140       |      |                            | $ | 928       |  
|Commercial                                                                                   |  |                                                       | 1,076     |      |                            |   | 4,412     |  
|Consumer                                                                                     |  |                                                       | 1,660     |      |                            |   | 6,905     |  
|Other                                                                                        |  |                                                       |          |      |                            |   | 168       |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Total recoveries                                                                             |  | $                                                     | 2,876     |      |                            | $ | 12,413    |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Net loans charged off                                                                        |  | $                                                     | 5,607     |      |                            | $ | 25,053    |  
|Provision for loan and lease losses, portfolio loans                                         |  |                                                       | 5,600     |      |                            |   | 26,000    |  
|Reclassification of acquired reserves of credit card portfolios to loans                     |  |                                                       |          |      |                            |   | (5,030    | )
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Balance at period end                                                                        |  | $                                                     | 67,839    |      |                            | $ | 67,846    |  
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Allowance for Loan and Lease Losses to Total Loans and Leases                                |  |                                                       | 1.47      | %    |                            |   | 1.46      | %
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Provision for loan and lease losses, as a percentage of average loans and leases outstanding |  |                                                       | 0.49      | %(1) |                            |   | 0.60      | %
|                                                                                             |  |                                                       |           |      |                            |   |           |  
|Net loans charged off during period to average loans and leases outstanding                  |  |                                                       | 0.49      | %(1) |                            |   | 0.58      | %
|                                                                                             |  |                                                       |           |      |                            |   |           |  



|(1) | Annualized
|--- | ----------



FINANCIAL CONDITION



Loan and lease categories consisting of commercial and financial, commercial real estate, consumer, and credit card loans totaled
$4.4billion at March 31, 2004, compared to $4.5 billion at December 31, 2003 and $4.0 billion at March 31, 2003. 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 97% of loans and leases at March 31, 2004, compared to 96% at December 31, 2003 and
94% of loans and leases at March 31, 2003. The total loan to deposit ratio at March 31, 2004 and December 31, 2003 was 74% and 75% respectively.



Total investment securities were $2.7 billion at March 31, 2004, including $742.6 million transferred from available for sale to held to maturity. Investment securities
totaled $2.7 billion at December 31, 2003 and $2.8 billion at March 31, 2003, excluding trading assets of $133.5 million. Total assets were $8.0 billion at March 31, 2004, compared to $8.1 billion at December 31, 2003 and $7.8 billion at March 31,
2003.





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##### Table of Contents

Total deposits were $6.2 billion at March 31, 2004 and December 31, 2003.



Total borrowings were $745.4 million at March 31, 2004 and $921.2 million at December 31,
2003. The decrease in borrowings was due mainly to repayment of the Companys short-term advances with the Federal Home Loan Bank.



In the first quarter of 2004 the Company received final settlement for the book value calculation of Flatiron Credit at time of acquisition. This resulted in a downward
adjustment to goodwill for $2.1 million.



Total stockholders equity was
$492.8 million and book value per common share was $10.99 at March 31, 2004. All regulatory capital ratios exceed those necessary to be considered a well-capitalized institution.



The increase in stockholders equity resulted primarily from $31.0 million of net income, offset by payment of cash dividends of $14.9
million and treasury repurchases of $0.5 million, plus stock compensation transactions of $0.5 million and an increase in accumulated other comprehensive income of $18.5 million.



The Company repurchased 14,980 shares in the first quarter of 2004, at an average price of $37.48 per share. The total cash allocated for
these repurchases were $0.6 million. These repurchases were related to the vesting of shares under the Companys Restricted Stock Award Program.



Total shares outstanding were 44.8 million shares at March 31, 2004 and December 31, 2003, and 44.5 million shares at March 31, 2003.



The Company paid cash dividends of $0.33 per share in the first quarter of 2004 and $1.18 for
the full year 2003. Total cash allocated for the dividends was $14.9 million for the first quarter of 2004 and $52.8 for the full year 2003.



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, 2003.



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 $590 million at March 31, 2004 and $590 million at December 31, 2003.



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 and that have payments linked to LIBOR 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 is 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 March 31, 2004 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.





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##### Table of Contents

Liquidity



Liquidity is a measure of the Companys ability to meet the needs of depositors, borrowers, and creditors at a reasonable cost and
without adverse financial consequences. The Company has several liquidity measurements that are evaluated on a frequent basis. The Company has adequate sources of liquidity including 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 March 31, 2004, and the minimum regulatory guidelines for such capital ratios for qualification as a well-capitalized institution are as follows:



Holding Company Capital Ratios



|                          |  |                         |   |  |                                                   |  
|------------------------- |  | ----------------------- | - |  | ------------------------------------------------- | -
|                          |  | Ratios atMarch 31, 2004 |   |  | Minimum RegulatoryGuidelines for Well-Capitalized |  
|Total Risk-Based Capital  |  | 14.42                   | % |  | 10.0                                              | %
|Tier 1 Risk-Based Capital |  | 9.50                    | % |  | 6.0                                               | %
|Tier 1 Leverage Ratio     |  | 6.83                    | % |  | 4.0                                               | %
|                          |  |                        
|Bank Capital Ratios       |  |                         |   |  |                                                   |  
|                          |  | Ratios atMarch 31, 2004 |   |  | Minimum RegulatoryGuidelines for Well-Capitalized |  
|Total Risk-Based Capital  |  | 13.44                   | % |  | 10.0                                              | %
|Tier 1 Risk-Based Capital |  | 8.72                    | % |  | 6.0                                               | %
|Tier 1 Leverage Ratio     |  | 6.26                    | % |  | 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, other than the potential impact of FIN 46 as described under Note F.



|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 quarterly report on Form 10-Q. 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.





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##### Table of Contents

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 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 errors and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not 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
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, control 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 1. | Legal Proceedings
|------- | -----------------



In December 2003, the Company terminated its banking business for its correspondent customers. This business primarily served customers organized in or operating from South America, Central America and the Caribbean.
On June 26, 2002, the Company acquired this business as part of its assumption of the deposit liabilities of Connecticut Bank of Commerce from the Federal Deposit Insurance Corporation as Receiver for Connecticut Bank of Commerce. This business had
been operated out of an office located at 90 Broad Street in New York City.



During the fourth quarter of 2003, the Company had been notified of an investigation by Government authorities.



On March 2, 2004 Hudson United Bank entered into a complete settlement with the New York County District Attorneys Office. Under the terms of the agreement, the
Company agreed to pay $3.5 million to the City of New York and $1.5 million to the District Attorneys office for the costs of the investigation. The Company, which recently upgraded its compliance program, agreed to continue its corrective
actions. The $5 million was charged against fourth quarter 2003 results of operations. Further expenses were incurred in the first quarter of 2004 as disclosed earlier in this document. The settlement agreement provides that the Company will prepare
enhanced written policies and procedures and implement a Company wide compliance training program. The estimated cost of professional fees related to these initiatives is approximately $1.0 million and will be expensed when incurred.



The FDIC has recently completed a review of the Banks compliance with the Bank Secrecy
Act and U.S. Patriot Act. Although the Report of Examination has not been finalized, management believes there is a likelihood of an enforcement action by the FDIC arising from the banking business conducted at 90 Broad St., New York, New York which
was terminated by the Bank in the fourth quarter of 2003 and the Banks domestic compliance program for anti-money laundering.



|Item 2(e) | Issuer Repurchases of Its Equity Shares During the Quarter
|--------- | ----------------------------------------------------------



|                    |  |                            |  |                          |       |                                                                          |        |                                                             |          
|------------------- |  | -------------------------- |  | ------------------------ | ----- | ------------------------------------------------------------------------ | ------ | ----------------------------------------------------------- | ---------
|                    |  | TotalnumbersharesPurchased |  | Averagepricepaidpershare |       | Totalnumber ofsharespurchasedas part ofpubliclyannouncedplans orprograms |        | Maximumnumber ofshares thatmay yet bepurchasedunder theplan
|January 1-31, 2004  |  | 2,081                      |  | $                        | 36.18 |                                                                          | 2,081- |                                                             | 3,957,606
|February 1-29, 2004 |  |                           |  |                          |      |                                                                          |       |                                                             | 3,957,606
|March 1-31, 2004    |  | 12,899                     |  | $                        | 37.69 |                                                                          | 12,899 |                                                             | 3,944,707







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In November 1993, the Companys Board of Directors authorized management to repurchase up to 10 percent of its
outstanding common stock each year. The program may be discontinued or suspended at any time, and there is no assurance that the Company will purchase the full amount authorized. The acquired shares are to be held in treasury and to be used for
stock option and other employee benefit plans, stock dividends, or in connection with the issuance of common stock in pending or future acquisitions. In June 2000, the Companys Board of Directors authorized the repurchase of up to 20% of the
Companys outstanding shares. In June 2001, the Companys Board of Directors extended the Companys stock repurchase program until December 2002 and authorized additional repurchases of up to 10% of the Companys outstanding
shares. The Board further authorized on January 30, 2003 the repurchase of up to $4.5 million outstanding shares of the Company. This most recent authorization will expire on June 30, 2004. The 14,980 shares repurchased during the first quarter of
2004 were related to the vesting of shares under the Companys Restricted Stock Award Program.



|Item 6: | Exhibits and Reports on Form 8-K -
|------- | ----------------------------------



(a) 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 From 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)).



4(a) Indenture dated March 17, 2004, between Hudson United Bancorp, and U.S. National Bank Association as Trustee for $20,000,000 Floating
Rate Junior Subordinated Deferred Interest Debentures due 2034 (filed herewith)



4(b) Guarantee agreement dated March 17, 2004 between Hudson United Bancorp, and U.S. Bank National Association (filed herewith)



4(c) Amended and Restated Declaration of Trust dated March 17, 2004, by and among Hudson United Bancorp, U.S. Bank National Association, Kenneth T. Neilson, James W. Nall
and George Amentas as Administrators (filed herewith)



4(d) Placement agreement
dated March 8, 2004 between Hudson United Bancorp, and Hudson United Statutory Trust I, a Connecticut statutory trust (filed herewith)



|     |  |                                                                                                                                                                                                                                                                         
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification of Chief Executive Officer. (filed herewith)                                                                                                                                                                                                              
|     | 
|31.2 |  | Certification of Chief Financial Officer. (filed herewith)                                                                                                                                                                                                              
|     | 
|32   |  | 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)



(b) Current Reports on
Form 8-K 



| | 1) | Current Report on Form 8-K dated January 5, 2004, (Announcing that in December 2003, the Company terminated its banking business for its correspondent customers)
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | Current Report on Form 8-K dated January 21, 2004, (Furnishing fourth quarter earnings for Hudson United Bancorp)
| | -- | -----------------------------------------------------------------------------------------------------------------



| | 3) | Current Report on Form 8-K dated January 29, 2004, (Regarding the Companys Investor Presentation)
| | -- | --------------------------------------------------------------------------------------------------



| | 4) | Current Report on Form 8-K dated March 2, 2004, (Announcing that the Company entered into a settlement concerning its banking business for correspondent customers)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------





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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



|     |  |              |  |  |  |                                                                    |  |                      
|---- |  | ------------ |  |  |  | ------------------------------------------------------------------ |  | ---------------------
|     |  |              |  | 
|     |  |              |  | 
|     |  | May 10, 2004 |  |  |  | By:                                                                |  | /s/ KENNETH T NEILSON
|     |  |              |  |  |  |                                                                   
|DATE |  |              |  |  |  | Kenneth T. Neilson Chairman, President and Chief Executive Officer



|     |  |              |  |  |  |                                                                                              |  |                  
|---- |  | ------------ |  |  |  | -------------------------------------------------------------------------------------------- |  | -----------------
|     |  |              |  | 
|     |  |              |  | 
|     |  | May 10, 2004 |  |  |  | By:                                                                                          |  | /s/ JAMES W. NALL
|     |  |              |  |  |  |                                                                                             
|DATE |  |              |  |  |  | James W. Nall Executive Vice President, Chief Financial Officer and Chief Accounting Officer