##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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



For the quarterly period ended September 30, 2003



OR



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



For the transition period from
to



Commission File Number 0-010699



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HUDSON UNITED BANCORP

(Exact name of registrant as specified in its charter)



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



(201)-236-2600

(Registrants telephone number, including area code)



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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: 44,805,371 shares, no par value, outstanding as of October 30, 2003.



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##### Table of Contents

HUDSON UNITED BANCORP



INDEX



|                              | 
|----------------------------- | 
|PART I. FINANCIAL INFORMATION | 
|                              | 
|Item 1.                       | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|                              | 
|Item 2.                       | 
|Item 3.                       | 
|Item 4.                       | 
|                              | 
|PART II. OTHER INFORMATION    | 
|                              | 
|Item 6.                       | 
|                              | 



1



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##### Table of Contents

HUDSON UNITED BANCORP

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CONSOLIDATED BALANCE
SHEETS (Unaudited)



|(in thousands, except per share data)                                                                                                                                                                |  | September 30, 2003 |           |   | December 31, 2002 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ----------------- | -
|ASSETS                                                                                                                                                                                               |  |                    |           |   |                   |  
|Cash and due from banks                                                                                                                                                                              |  | $                  | 214,858   |   |                   | $
|Interest bearing due from banks                                                                                                                                                                      |  |                    | 67,173    |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL CASH AND CASH EQUIVALENTS                                                                                                                                                                      |  | $                  | 282,031   |   |                   | $
|                                                                                                                                                                                                     |  |                   
|Investment securities available for sale, at market value ($1,229 and $1,072 million pledged at September 30, 2003 and December
31, 2002 respectively)                                               |  | $                  | 2,937,860 |   |                   | $
|                                                                                                                                                                                                     |  |                   
|Loans and leases:                                                                                                                                                                                    |  |                    |           |   |                   |  
|Commercial and financial                                                                                                                                                                             |  | $                  | 1,854,680 |   |                   | $
|Commercial real estate mortgages                                                                                                                                                                     |  |                    | 957,421   |   |                   |  
|Consumer                                                                                                                                                                                             |  |                    | 1,034,092 |   |                   |  
|Credit card                                                                                                                                                                                          |  |                    | 332,826   |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|Sub-total                                                                                                                                                                                            |  | $                  | 4,179,019 |   |                   | $
|Residential mortgages                                                                                                                                                                                |  |                    | 195,483   |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL LOANS AND LEASES                                                                                                                                                                               |  | $                  | 4,374,502 |   |                   | $
|Less: Allowance for loan and lease losses                                                                                                                                                            |  |                    | (67,663   | ) |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|NET LOANS AND LEASES                                                                                                                                                                                 |  | $                  | 4,306,839 |   |                   | $
|                                                                                                                                                                                                     |  |                   
|Premises and equipment, net                                                                                                                                                                          |  |                    | 93,680    |   |                   |  
|Other real estate owned                                                                                                                                                                              |  |                    | 1,108     |   |                   |  
|Goodwill                                                                                                                                                                                             |  |                    | 73,921    |   |                   |  
|Core deposit and other intangibles, net of amortization                                                                                                                                              |  |                    | 23,497    |   |                   |  
|Investment in separate account bank owned life insurance                                                                                                                                             |  |                    | 141,972   |   |                   |  
|Other assets                                                                                                                                                                                         |  |                    | 114,456   |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL ASSETS                                                                                                                                                                                         |  | $                  | 7,975,364 |   |                   | $
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                 |  |                    |           |   |                   |  
|Deposits                                                                                                                                                                                             |  |                    |           |   |                   |  
|Noninterest bearing                                                                                                                                                                                  |  | $                  | 1,312,448 |   |                   | $
|NOW, money market and savings                                                                                                                                                                        |  |                    | 3,275,284 |   |                   |  
|Time deposits                                                                                                                                                                                        |  |                    | 1,681,059 |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL DEPOSITS                                                                                                                                                                                       |  | $                  | 6,268,791 |   |                   | $
|Customer repurchase agreements                                                                                                                                                                       |  |                    | 123,688   |   |                   |  
|FHLB and other borrowings                                                                                                                                                                            |  |                    | 679,824   |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL BORROWINGS                                                                                                                                                                                     |  | $                  | 803,512   |   |                   | $
|Other liabilities                                                                                                                                                                                    |  |                    | 74,744    |   |                   |  
|Subordinated debt                                                                                                                                                                                    |  |                    | 241,630   |   |                   |  
|Company-obligated mandatory redeemable preferred capital securities of subsidiary trusts holding solely junior subordinated
debentures of the Company                                                |  |                    | 128,967   |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL LIABILITIES                                                                                                                                                                                    |  | $                  | 7,517,644 |   |                   | $
|Stockholders Equity:                                                                                                                                                                                |  |                    |           |   |                   |  
|Common stock, no par value; authorized 103,000,000 shares; 52,186,866 shares issued and 44,793,049 shares outstanding in 2003 and
52,186,866 shares issued and 45,023,459 shares outstanding in 2002 |  |                    | 92,788    |   |                   |  
|Additional paid-in capital                                                                                                                                                                           |  |                    | 311,681   |   |                   |  
|Retained earnings                                                                                                                                                                                    |  |                    | 225,996   |   |                   |  
|Treasury stock, at cost, 7,393,817 shares in 2003 and 7,163,407 shares in 2002                                                                                                                       |  |                    | (176,756  | ) |                   |  
|Effect of Stock Based Compensation                                                                                                                                                                   |  |                    | (4,523    | ) |                   |  
|Accumulated other comprehensive income                                                                                                                                                               |  |                    | 8,534     |   |                   |  
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                           |  | $                  | 457,720   |   |                   | $
|                                                                                                                                                                                                     |  |                    |           |   |                   |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                           |  | $                  | 7,975,364 |   |                   | $
|                                                                                                                                                                                                     |  |                    |           |   |                   |  



See
Notes to Consolidated Financial Statements



2



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##### Table of Contents

HUDSON UNITED BANCORP

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CONSOLIDATED STATEMENTS
OF INCOME (Unaudited)



|                                                                    |  | Three Months Ended September 30,
|------------------------------------------------------------------- |  | --------------------------------
|(in thousands, except per share data)                               |  | 2003                            
|INTEREST AND FEE INCOME:                                            |  |                                 
|Loans and leases                                                    |  | $                               
|Investment securities                                               |  |                                 
|Other                                                               |  |                                 
|                                                                    |  |                                 
|TOTAL INTEREST AND FEE INCOME                                       |  | $                               
|                                                                    |  |                                 
|INTEREST EXPENSE:                                                   |  |                                 
|Deposits                                                            |  |                                 
|Borrowings                                                          |  |                                 
|Subordinated and other debt                                         |  |                                 
|                                                                    |  |                                 
|TOTAL INTEREST EXPENSE                                              |  | $                               
|                                                                    |  |                                 
|NET INTEREST INCOME                                                 |  | $                               
|PROVISION FOR LOAN AND LEASE LOSSES, PORTFOLIO LOANS                |  |                                 
|                                                                    |  |                                 
|NET INTEREST INCOME AFTER TOTAL PROVISION FOR LOAN AND LEASE LOSSES |  | $                               
|                                                                    |  |                                 
|NONINTEREST INCOME:                                                 |  |                                 
|Retail service fees                                                 |  | $                               
|Credit card fee income                                              |  |                                 
|ATM and debit card fees                                             |  |                                 
|Separate account bank owned life insurance income                   |  |                                 
|Trust income                                                        |  |                                 
|Other income                                                        |  |                                 
|Securities gains                                                    |  |                                 
|                                                                    |  |                                 
|TOTAL NONINTEREST INCOME                                            |  | $                               
|                                                                    |  |                                 
|NONINTEREST EXPENSE:                                                |  |                                 
|Salaries and benefits                                               |  | $                               
|Occupancy expense                                                   |  |                                 
|Equipment expense                                                   |  |                                 
|Outside services - data processing                                  |  |                                 
|Outside services-other                                              |  |                                 
|Telephone expense                                                   |  |                                 
|Marketing expense                                                   |  |                                 
|Amortization of intangibles                                         |  |                                 
|Deposit and other insurance                                         |  |                                 
|Other expense                                                       |  |                                 
|                                                                    |  |                                 
|TOTAL NONINTEREST EXPENSE                                           |  | $                               
|                                                                    |  |                                 
|INCOME BEFORE INCOME TAXES                                          |  | $                               
|PROVISION FOR INCOME TAXES                                          |  |                                 
|                                                                    |  |                                 
|NET INCOME                                                          |  | $                               
|                                                                    |  |                                 
|NET INCOME PER COMMON SHARE                                         |  |                                 
|Basic                                                               |  | $                               
|Diluted                                                             |  | $                               
|WEIGHTED AVERAGE SHARES OUTSTANDING:                                |  |                                 
|Basic                                                               |  |                                 
|Diluted                                                             |  |                                 



See
Notes to Consolidated Financial Statements



3



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##### Table of Contents

HUDSON UNITED BANCORP

---

CONSOLIDATED STATEMENTS
OF INCOME (Unaudited)



|                                                                    |  | Nine Months EndedSeptember 30,
|------------------------------------------------------------------- |  | ------------------------------
|(in thousands, except per share data)                               |  | 2003                          
|INTEREST AND FEE INCOME:                                            |  |                               
|Loans and leases                                                    |  | $                             
|Investment securities                                               |  |                               
|Other                                                               |  |                               
|                                                                    |  |                               
|TOTAL INTEREST AND FEE INCOME                                       |  | $                             
|                                                                    |  |                               
|INTEREST EXPENSE:                                                   |  |                               
|Deposits                                                            |  | $                             
|Borrowings                                                          |  |                               
|Subordinated and other debt                                         |  |                               
|                                                                    |  |                               
|TOTAL INTEREST EXPENSE                                              |  | $                             
|                                                                    |  |                               
|NET INTEREST INCOME                                                 |  | $                             
|PROVISION FOR LOAN AND LEASE LOSSES, PORTFOLIO LOANS                |  |                               
|                                                                    |  |                               
|PROVISION FOR LOAN AND LEASE LOSSES, ACCELERATED DISPOSITION        |  |                               
|                                                                    |  |                               
|TOTAL PROVISION FOR LOAN AND LEASE LOSSES                           |  |                               
|                                                                    |  |                               
|NET INTEREST INCOME AFTER TOTAL PROVISION FOR LOAN AND LEASE LOSSES |  | $                             
|                                                                    |  |                               
|NONINTEREST INCOME:                                                 |  |                               
|Retail service fees                                                 |  | $                             
|Credit card fee income                                              |  |                               
|ATM and debit card fees                                             |  |                               
|Separate account bank owned life insurance income                   |  |                               
|Trust income                                                        |  |                               
|Dime merger termination payment                                     |  |                               
|Impairment on mortgage related servicing assets                     |  |                               
|Securities gains                                                    |  |                               
|Trading asset gains                                                 |  |                               
|Other income                                                        |  |                               
|                                                                    |  |                               
|TOTAL NONINTEREST INCOME                                            |  | $                             
|                                                                    |  |                               
|NONINTEREST EXPENSE:                                                |  |                               
|Salaries and benefits                                               |  | $                             
|Occupancy expense                                                   |  |                               
|Equipment expense                                                   |  |                               
|Outside services - data processing                                  |  |                               
|Outside services-other                                              |  |                               
|Telephone expense                                                   |  |                               
|Marketing expense                                                   |  |                               
|Amortization of intangibles                                         |  |                               
|Deposit and other insurance                                         |  |                               
|Expenses related to Dime termination payment                        |  |                               
|Other expense                                                       |  |                               
|                                                                    |  |                               
|TOTAL NONINTEREST EXPENSE                                           |  | $                             
|                                                                    |  |                               
|INCOME BEFORE INCOME TAXES                                          |  | $                             
|PROVISION FOR INCOME TAXES                                          |  |                               
|                                                                    |  |                               
|NET INCOME                                                          |  | $                             
|                                                                    |  |                               
|NET INCOME PER COMMON SHARE                                         |  |                               
|Basic                                                               |  | $                             
|Diluted                                                             |  | $                             
|WEIGHTED AVERAGE SHARES OUTSTANDING:                                |  |                               
|Basic                                                               |  |                               
|Diluted                                                             |  |                               



See
Notes to Consolidated Financial Statements



4



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##### Table of Contents

HUDSON UNITED BANCORP

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CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (Unaudited)



|                                                                                                                                 |  | Three Months EndedSeptember 30 |        
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | -------
|(In thousands)                                                                                                                   |  | 2003                           |        
|NET INCOME                                                                                                                       |  | $                              | 30,403 
|                                                                                                                                 |  |                               
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                                                                          |  |                                |        
|Net unrealized securities (losses) gains arising during period (tax benefit of $7,943 and tax expense of $2,510
respectively)    |  | $                              | (15,843
|                                                                                                                                 |  |                               
|Change in valuation of derivative contracts (tax expense of $4,261 in 2002)                                                      |  |                                |       
|Less: reclassification for net (losses) income included in net income (tax benefit of $751 and tax expense of $152
respectively) |  |                                | (1,236 
|                                                                                                                                 |  |                                |        
|Other comprehensive (loss) income                                                                                                |  | $                              | (14,607
|                                                                                                                                 |  |                                |        
|COMPREHENSIVE INCOME                                                                                                             |  | $                              | 15,796 
|                                                                                                                                 |  |                                |        
|                                                                                                                                 | 
|                                                                                                                                 |  | Nine Months EndedSeptember 30  |        
|(In thousands)                                                                                                                   |  | 2003                           |        
|NET INCOME                                                                                                                       |  | $                              | 87,839 
|                                                                                                                                 |  |                               
|OTHER COMPREHENSIVE INCOME NET OF TAX:                                                                                           |  |                                |        
|Net unrealized securities (losses)/gains arising during period (tax benefit of $8,326 and tax expense of $9,865
respectively)    |  | $                              | (16,884
|Change in valuation of derivative contracts (tax benefit of $2,471 and tax expense of $66 respectively)                          |  |                                | (3,684 
|Less: reclassification for net losses included in net income (tax benefits of $5,213 and $2,243 respectively)                    |  |                                | (8,048 
|                                                                                                                                 |  |                                |        
|Other comprehensive (loss) income                                                                                                |  | $                              | (12,520
|                                                                                                                                 |  |                                |        
|COMPREHENSIVE INCOME                                                                                                             |  | $                              | 75,319 
|                                                                                                                                 |  |                                |        



See
Notes to Consolidated Financial Statements



5



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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 of StockCompensation Plans |   |  | AccumulatedOtherComprehensive Income (Loss) |          |   | Total |  
|---------------------------------- |  | ------------ | - |  | -------------------------- | ------ | - | ----------------- | - | ------- | -------------- |  | - | --------------------------------- | - |  | ------------------------------------------- | -------- | - | ----- | -
|                                   |  | Shares       |   |  | Amount                     |        |   |                   |   |         |                | 
|Balance at December 31, 2001       |  | 45,814,227   |   |  | $                          | 92,796 |   |                   | $ | 320,309 |                |  | $ | 104,570                           |   |  | $                                           | (146,560 | ) |       | $
|                                   |  |              |   |  |                            |        |   |                   |   |         |                |  |   |                                   |   |  |                                             |          |   |       |  
|Net income                         |  |             |   |  |                            |       |   |                   |   |        |                |  |   | 123,206                           |   |  |                                             |         |   |       |  
|Cash dividends                     |  |             |   |  |                            |       |   |                   |   |        |                |  |   | (50,232                           | ) |  |                                             |         |   |       |  
|Stock options exercised            |  | 434,813      |   |  |                            |       |   |                   |   | (6,842  | )              |  |   |                                  |   |  |                                             | 12,250   |   |       |  
|Other transactions                 |  |             |   |  |                            | (8     | ) |                   |   |        |                |  |   |                                  |   |  |                                             |         |   |       |  
|Purchase of treasury stock         |  | (1,303,952   | ) |  |                            |       |   |                   |   |        |                |  |   |                                  |   |  |                                             | (37,686  | ) |       |  
|Effect of stock compensation plans |  | 78,371       |   |  |                            |       |   |                   |   |        |                |  |   |                                  |   |  |                                             | 2,125    |   |       |  
|Other comprehensive income         |  |             |   |  |                            |       |   |                   |   |        |                |  |   |                                  |   |  |                                             |         |   |       |  
|                                   |  |              |   |  |                            |        |   |                   |   |         |                |  |   |                                   |   |  |                                             |          |   |       |  
|Balance at December 31, 2002       |  | 45,023,459   |   |  | $                          | 92,788 |   |                   | $ | 313,467 |                |  | $ | 177,544                           |   |  | $                                           | (169,871 | ) |       | $
|                                   |  |              |   |  |                            |        |   |                   |   |         |                |  |   |                                   |   |  |                                             |          |   |       |  
|Net income                         |  |             |   |  |                            |       |   |                   |   |        |                |  |   | 87,839                            |   |  |                                             |         |   |       |  
|Cash dividends                     |  |             |   |  |                            |       |   |                   |   |        |                |  |   | (39,387                           | ) |  |                                             |         |   |       |  
|Stock options exercised            |  | 237,055      |   |  |                            |       |   |                   |   | (1,961  | )              |  |   |                                  |   |  |                                             | 7,161    |   |       |  
|Other transactions                 |  | (11,220      | ) |  |                            |       |   |                   |   | 175     |                |  |   |                                  |   |  |                                             | (175     | ) |       |  
|Purchase of treasury stock         |  | (527,095     | ) |  |                            |       |   |                   |   |        |                |  |   |                                  |   |  |                                             | (16,525  | ) |       |  
|Effect of stock compensation plans |  | 70,850       |   |  |                            |       |   |                   |   |        |                |  |   |                                  |   |  |                                             | 2,654    |   |       |  
|Other comprehensive (loss)         |  |             |   |  |                            |       |   |                   |   |        |                |  |   |                                  |   |  |                                             |         |   |       |  
|                                   |  |              |   |  |                            |        |   |                   |   |         |                |  |   |                                   |   |  |                                             |          |   |       |  
|Balance at September 30, 2003      |  | 44,793,049   |   |  | $                          | 92,788 |   |                   | $ | 311,681 |                |  | $ | 225,996                           |   |  | $                                           | (176,756 | ) |       | $
|                                   |  |              |   |  |                            |        |   |                   |   |         |                |  |   |                                   |   |  |                                             |          |   |       |  



See
Notes to Consolidated Financial Statements



6



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##### Table of Contents

HUDSON UNITED BANCORP

---

CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited)

(in thousands)



|                                                                                  |  | Nine Months Ended September 30, |           
|--------------------------------------------------------------------------------- |  | ------------------------------- | ----------
|                                                                                  |  | 2003                            |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                 |           
|Net Income                                                                        |  | $                               | 87,839    
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |           
|Provision for loan and lease losses                                               |  |                                 | 20,500    
|Provision for depreciation and amortization                                       |  |                                 | 14,904    
|Amortization (Accretion) of investment securities premiums (discounts), net       |  |                                 | 22,046    
|Impairment on mortgage servicing assets                                           |  |                                 | (2,004    
|Securities (gains)losses                                                          |  |                                 | 333       
|Trading gains                                                                     |  |                                 | 3,449     
|(Gain)/Loss on sales of premises and equipment                                    |  |                                 | (176      
|(Increase)/Decrease in deferred taxes                                             |  |                                 | (3,742    
|(Increase)/Decrease in other assets                                               |  |                                 | 627       
|Decrease in other liabilities                                                     |  |                                 | (31,929   
|                                                                                  |  |                                 |           
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |  | $                               | 111,847   
|                                                                                  |  |                                 |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                 |           
|Proceeds from sales of investment securities:                                     |  |                                 |           
|Available for sale                                                                |  | $                               | 1,249,684 
|Proceeds from repayments and maturities of investment securities:                 |  |                                 |           
|Available for sale                                                                |  |                                 | 1,286,808 
|Purchases of investment securities:                                               |  |                                 |           
|Available for sale                                                                |  |                                 | (2,901,832
|Net increase in loans other than purchases and sales                              |  |                                 | (46,927   
|Increase in loans due to purchases                                                |  |                                 | (2,718    
|Proceeds from sales of loans                                                      |  |                                 |          
|Acquisition of credit card assets                                                 |  |                                 | (10,148   
|Proceeds from sales of premises and equipment                                     |  |                                 | 430       
|Purchases of premises and equipment                                               |  |                                 | (4,073    
|Decrease in other real estate                                                     |  |                                 | 207       
|                                                                                  |  |                                 |           
|NET CASH USED IN INVESTING ACTIVITIES                                             |  | $                               | (428,569  
|                                                                                  |  |                                 |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                 |           
|Net increase in deposits                                                          |  | $                               | 69,090    
|Net increase (decrease) in borrowings                                             |  |                                 | 333,826   
|Payment of subordinated debt securities                                           |  |                                 | (37,698   
|Proceeds from issuance of debt securities                                         |  |                                 | 33,967    
|Payment of debt securities                                                        |  |                                 | (25,300   
|Proceeds from issuance of Common stock                                            |  |                                 | 5,200     
|Cash dividends                                                                    |  |                                 | (39,387   
|Acquisition of treasury stock                                                     |  |                                 | (16,525   
|                                                                                  |  |                                 |           
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                         |  | $                               | 323,173   
|                                                                                  |  |                                 |           
|INCREASE IN CASH AND CASH EQUIVALENTS                                             |  | $                               | 6,451     
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                  |  |                                 | 275,580   
|                                                                                  |  |                                 |           
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        |  | $                               | 282,031   
|                                                                                  |  |                                 |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                                 |           
|Cash paid during the period                                                       |  |                                 |           
|Interest                                                                          |  | $                               | 73,919    
|Taxes                                                                             |  |                                 | 29,248    



See
Notes to Consolidated Financial Statements



7



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##### Table of Contents

HUDSON UNITED BANCORP

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in
thousands, except per share data)



NOTE A
 BASIS OF PRESENTATION



The accompanying unaudited consolidated
financial statements of Hudson United Bancorp and Subsidiaries (Hudson Unitedor the Company) include the accounts of the parent company, Hudson United Bancorp, and its wholly-owned subsidiaries: Hudson United Bank (the
Bank), HUBCO Capital Trust I, HUBCO Capital Trust II, Hudson United Capital Trust I and Hudson United Capital Trust II. All material intercompany balances and transactions have been eliminated in consolidation. 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, 2002.



For purposes of presentation, management has discussed some comparisons to the nine months ended 2002 on a GAAP and non-GAAP basis excluding certain items, which are
listed in the body of the individual discussions. Management feels that it is necessary to discuss certain items in this manner to give the reader a more meaningful assessment of the Companys performance because of certain income and expense
items that occurred in the first quarter of 2002 related to the Dime merger termination (see paragraph below under Reclassification of Certain Assets, Revenues and Expenses).



Reclassification of Certain Assets, Revenues and Expenses



Net income for the first nine months of 2002 included $77.0 million cash payment received
from Dime Bancorp, Inc. (Dime) on January 7, 2002, representing the final termination payment relating to the uncompleted merger of the Company and Dime. Also included in the first half of 2002 were $21.5 million of certain expenses
resulting from the merger resolution and other charges ($8.3 million in expenses directly related to the Dime termination payment and other expenses including, $0.2 million in salaries and benefits, $1.3 million in occupancy expenses, $1.1 million
in equipment expenses, $0.2 million in expenses classified as outside services  other, and $10.4 million in other expenses) and an additional $21.3 million provision for possible loan and lease losses relating to the accelerated
disposition of certain nonperforming commercial and industrial loans.



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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 September 30,
|------------------------------------------------------------ |  | --------------------------------
|                                                             |  | 2003                            
|Basic Earnings Per Share                                     |  |                                 
|Net Income                                                   |  | $                               
|Weighted average common shares outstanding                   |  |                                 
|Basic earnings per share                                     |  | $                               
|Diluted Earnings Per Share                                   |  |                                 
|Net Income                                                   |  | $                               
|Weighted average common shares outstanding                   |  |                                 
|Effect of dilutive securities:                               |  |                                 
|Stock options                                                |  |                                 
|                                                             |  |                                 
|Weighted average common shares outstanding assuming dilution |  |                                 
|Diluted earnings per share                                   |  | $                               



|                                                             |  | Nine Months Ended September 30,
|------------------------------------------------------------ |  | -------------------------------
|                                                             |  | 2003                           
|Basic Earnings Per Share                                     |  |                                
|Net Income                                                   |  | $                              
|Weighted average common shares outstanding                   |  |                                
|Basic earnings per share                                     |  | $                              
|Diluted Earnings Per Share                                   |  |                                
|Net Income                                                   |  | $                              
|Weighted average common shares outstanding                   |  |                                
|Effect of dilutive securities:                               |  |                                
|Stock options                                                |  |                                
|                                                             |  |                                
|Weighted average common shares outstanding assuming dilution |  |                                
|Diluted earnings per share                                   |  | $                              

---

|(1) | 2002 nine month ended figures include $77 million cash payment received from Dime Bancorp, Inc. (Dime) on January 7, 2002, representing the final termination payment
relating to the uncompleted merger of the Company and Dime, $21.5 million of certain expenses resulting from the merger resolution and other charges, and an additional $21.3 million provision for possible loan and lease losses relating to the
accelerated disposition of certain nonperforming commercial and industrial loans.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE C  ACQUISITIONS/BUSINESS COMBINATIONS



The Company announced on July 25, 2003 the signing of a definitive agreement to acquire Flatiron Credit Company, Inc., an insurance premium
finance company. The Company completed the acquistion on October 31, 2003. The majority of loans outstanding in Flatirons portfolio are made to small business customers located throughout the nation; are in amounts between $20,000 and
$500,000; are secured by an ability to cancel the insurance policy upon payment default and obtain a refund of the remaining unearned premiums from the insurance company; have maturities of less than one year; are fixed rate; and are originated at
yields that are higher than the Prime Rate. Flatiron operates profitably and the Company expects the



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##### Table of Contents

acquisition to be immediately accretive to EPS. The purchase price of the acquisition was $40 million in cash, subject to certain subsequent adjustments,
based on the book value of Flatiron on the closing date; and also subject to additional potential earn-out payments by the Company, based on the increase in the net income of Flatiron in the two years after the closing date 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), which is a 9% premium to projected book value. The Company will account for the $3.4
premium in an as yet undetermined manner, after an evaluation of the fair value of the assets and liabilties, and the treatment of goodwill sometime in the fourth quarter of 2003.The premium is also approximately 1% of Flatirons assets, which
are estimated to be $257 million on the closing date.



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 are anticipated to amount to approximately $10 million per year, and are scheduled to expire on December 31, 2007. The acquisition of the ownership interests was recorded at a value of $20 million, which was
approximately equal to the book value of the net assets of the LGPs on the closing date. 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. The operations of the LPGs result in a net loss before income taxes which is included in consolidated results of operations. The provision for income taxes is reduced by Section 29 tax credits which exceed
the net loss before income taxes.



During the first nine months of 2003 the
Company paid total consideration of $10.1 million for $11.5 million in credit card receivables from unrelated third parties, with an associated discount of $1.3 million. The Company entered into agreements at several times in 2002 to purchase third
party credit card assets from unrelated third parties. The Company had paid total consideration during 2002 of $62.6 million for $66.2 million of these assets, with an associated discount of $3.6 million.



NOTE D  INVESTMENT SECURITIES



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



|                                                 |  | September 30, 2003
|------------------------------------------------ |  | ------------------
|                                                 |  | AmortizedCost     
|                                                 |  |                   
|Available for Sale                               |  |                   
|U.S. Government securities/agencies              |  | $                 
|Mortgage-backed securities                       |  |                   
|Asset backed and other debt securities           |  |                   
|Obligations of states and political subdivisions |  |                   
|FHLB stock                                       |  |                   
|Other equity securities                          |  |                   
|                                                 |  |                   
|                                                 |  | $                 
|                                                 |  |                   



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##### Table of Contents

|                                                 |  | December 31, 2002
|------------------------------------------------ |  | -----------------
|                                                 |  | AmortizedCost    
|                                                 |  |                  
|Available for Sale                               |  |                  
|U.S. Government securities/agencies              |  | $                
|Mortgage-backed securities                       |  |                  
|Asset backed and other debt securities           |  |                  
|Obligations of states and political subdivisions |  |                  
|FHLB stock                                       |  |                  
|Other equity securities                          |  |                  
|                                                 |  |                  
|                                                 |  | $                
|                                                 |  |                  



Investment securities with a market
value of $1,229 million at September 30, 2003 and $1,072 million at December 31, 2002 were pledged as collateral for public sector deposits, customer repurchase agreements and borrowings from the Federal Home Loan Bank and other counterparties.



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



NOTE E  SEPARATE ACCOUNT BANK OWNED LIFE INSURANCE



The assets in the separate account consist of investment grade rated securities, the majority of which are Treasuries or Triple A rated mortgage backed securities. The assets in the separate account are independently
managed by Goldman Sachs Asset Management LP. The Companys investment equaled its cash surrender value at the end of the third quarter of 2003. The Company made its investment in separate account bank owned life insurance as part of a plan to
manage the long term cost of employee benefits, and to do so in a tax efficient manner, and consequently the Company has no current intention of surrendering its policy. The cash surrender value of the policy is guaranteed by Sun Life Insurance
Company of Canada (Sun Life) in the ordinary course of business. Sun Life does not guarantee the cash surrender value if the Company were to exchange its policy for a similar policy of a different insurance carrier rather than surrender
it for cash, or if the Company has undergone a change of control within two years prior to the date of surrender. The Company would also be subject to increased federal income tax liability if it were to surrender the policy.



NOTE F  SUBORDINATED DEBT



In January, 1994, the Company sold $25.0 million aggregate principal amount of subordinated
debentures. The debentures, which mature in 2004, bear interest at a fixed rate of 7.75% per annum payable semi-annually. The Company repurchased $7.8 million of this debt during the second quarter of 2002, and $8.8 million remains outstanding as of
September 30, 2003.



In September 1996, the Company sold $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 outstanding balance of this debt is $30.2 million as of September 30, 2003



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%.



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##### Table of Contents

On May 6, 2002, the Bank issued $200 million of 7.00% subordinated notes due May of 2012. Interest on the note is payable
semi-annually.



NOTE G  COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED CAPITAL SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY



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 June 30, 2003, $45.0 million of the 8.98% Capital Securities remained outstanding.



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.



The Company issued on March 31, 2003, $20 million
of 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 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 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 trust preferred securities are callable at par on April 24, 2008, and have a fixed rate yield of 6.45% until the
call date. Thereafter the yield on this issuance is based on 3-month LIBOR plus 3.25%.



The following is a maturity distribution of outstanding subordinated debt and capital trust securities at September 30, 2003:



|Year Maturing |  | Year Callable/ Maturity |  | Subordinated Debt |         | Capital Trust Securities |   | Total ($ millions)
|------------- |  | ----------------------- |  | ----------------- | ------- | ------------------------ | - | ------------------
|2004          |  | Not callable            |  | $                 | 8,790   |                          |   |                   
|2006          |  | Not callable            |  |                   | 30,215  |                          |   |                   
|2012          |  | Not callable            |  |                   | 202,625 |                          |   |                   
|2027          |  | 2007                    |  |                   |         |                          | $ | 45,000            
|2028          |  | 2008                    |  |                   |         |                          |   | 50,000            
|2033          |  | 2008                    |  |                   |         |                          |   | 33,967            
|              |  |                         |  |                   |         |                          |   |                   
|              |  |                         |  | $                 | 241,630 |                          | $ | 128,967           
|              |  |                         |  |                   |         |                          |   |                   



The table above includes $2.5 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, $0.09 million in deferred gains associated with the cancelation
of derivatives associated with a portion of the Companys subordinated debt and $1.0 million in costs associated with the Companys issuance of Capital Trust Securities.



Financial Accounting Standards Board Interpretation No. 46 (FIN 46) when finally implemented may have an impact regarding how trust
preferred securities are treated for purposes of the Companys capital ratios. Trust preferred securities will continue to be included in Tier 1 capital , up to the 25% of Tier 1 capital limitation, notwithstanding FIN 46, until notice is given
by the Federal Reserve Bank. If trust preferred securities are not treated as Tier 1 capital, the Company believes its leverage ratio would be adversely affected.



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##### Table of Contents

NOTE H  RECENT ACCOUNTING STANDARDS



The FASB issued SFAS No. 148 Accounting for Stock-Based Compensation-Transition and
Disclosure on December 31, 2002. This pronouncement provides alternative methods of transition to FAS 123. The Company has adopted FASB No. 148 effective January 1, 2003. The Company has elected to utilize the prospective method, which
requires that the companies apply the recognition provisions of Statement 123 to all employee awards granted, modified, or settled after the beginning of the fiscal year in which the recognition are first applied. The Company expects no material
impact on its operations from adoption of this statement.



The FASB issued SFAS
No. 149 Amendment of Statement 133 on Derivative Instruments and Hedging Activities in April 2003. This statement amends and clarifies financial accounting and reporting for derivative instruments and hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company expects no material impact on its operations from adoption of this statement.



The FASB issued SFAS No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity in
May 2003. This pronouncement requires that an issuer classify a financial instrument that is within its scope as a liability. The Company expects no material impact on its operations from adoption of this statement.



NOTE I: - 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 September 30, 2003, there remained 902,000
shares and as of December 31, 2002 there remained 968,000 shares available for grant from the 2002 Stock Option Plan.



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 September 30, 2003 and September 30, 2002. The Company has adopted the prospective method
of recording stock compensation expense effective January 1, 2003 (in thousands except per share data):



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|                                                                                                                                                                                                        |  |             |  | Three months ended
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | ------------------
|                                                                                                                                                                                                        |  |             |  | September 30, 2003
|Net income                                                                                                                                                                                              |  | As reported |  | $                 
|Plus: Stock-based employee compensation cost, net of related tax effects, included in the determination of net income as reported
(1)                                                                   |  |             |  |                   
|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) |  |             |  |                   
|                                                                                                                                                                                                        |  | Pro forma   |  | $                 
|                                                                                                                                                                                                        |  |             | 
|Basic earnings per share                                                                                                                                                                                |  | As reported |  | $                 
|                                                                                                                                                                                                        |  | Pro forma   |  | $                 
|                                                                                                                                                                                                        |  |             | 
|Diluted earnings per share                                                                                                                                                                              |  | As reported |  | $                 
|                                                                                                                                                                                                        |  | Pro forma   |  | $                 
|                                                                                                                                                                                                        |  |            
|                                                                                                                                                                                                        |  |             |  | Nine months ended 
|                                                                                                                                                                                                        |  |             |  | September 30, 2003
|Net income                                                                                                                                                                                              |  | As reported |  | $                 
|Plus: Stock-based employee compensation cost, net of related tax effects, included in the determination of net income as reported
(1)                                                                   |  |             |  |                   
|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) |  |             |  |                   
|                                                                                                                                                                                                        |  | Pro forma   |  | $                 
|                                                                                                                                                                                                        |  |             | 
|Basic earnings per share                                                                                                                                                                                |  | As reported |  | $                 
|                                                                                                                                                                                                        |  | Pro forma   |  | $                 
|                                                                                                                                                                                                        |  |             | 
|Diluted earnings per share                                                                                                                                                                              |  | As reported |  | $                 
|                                                                                                                                                                                                        |  | Pro forma   |  | $                 

---

|(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
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



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NOTE J:



Core deposit and other intangibles is as follows for the periods indicated (in thousands):



|At September 30, 2003              |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net CarryingAmount
|---------------------------------- |  | -------------------- | ------ | ----------------------- | - | ------------------
|Core deposit and other intangibles |  | $                    | 42,291 |                         | $ | 18,794            
|                                   |  |                      |        |                         |   |                   
|                                   |  |                      |       
|At December 31, 2002               |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net CarryingAmount
|Core deposit intangibles           |  | $                    | 42,029 |                         | $ | 15,606            
|                                   |  |                      |        |                         |   |                   



The following is the
estimated amortization expense on core deposit intangibles for the years ended December 31:



|2003 |  | $ | 4,265
|---- |  | - | -----
|2004 |  |   | 4,308
|2005 |  |   | 4,308
|2006 |  |   | 4,268
|2007 |  |   | 4,222



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,
| | - | ----------------------------------------



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



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



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



The 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, 2002.



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##### Table of Contents

RESULTS OF OPERATIONS



OVERVIEW



The Company had net income of $30.4 million, or $0.68 per diluted share, for the third quarter of 2003 compared to $27.1 million, or $0.60 per diluted share for the
comparable period in 2002. The Company had net income of $87.8 million, or $1.96 per diluted share, for the nine months ended 2003 compared to $94.9 million, or $2.09 per diluted share for the comparable period in 2002.



Net income for the first nine months of 2002 included a $77.0 million cash payment received
from Dime Bancorp, Inc. (Dime) on January 7, 2002, representing the final termination payment relating to the uncompleted merger of the Company and Dime. Also included in the first half of 2002 were $21.5 million of certain expenses
resulting from the merger resolution and other charges ($8.3 million in expenses directly related to the Dime termination payment and other expenses including, $0.2 million in salaries and benefits, $1.3 million in occupancy expenses, $1.1 million
in equipment expenses, $0.2 million in expenses classified as outside services  other, and $10.4 million in other expense) and an additional $21.3 million provision for loan and lease losses relating to the accelerated disposition of certain
nonperforming commercial and industrial loans.



The Companys return on
average equity was 28.18% and return on average assets was 1.49% for the third quarter of 2003. The net interest margin was 3.90% and the efficiency ratio was 55.52% for the third quarter of 2003. The Companys return on average equity was
25.43%, return on average assets was 1.45% for the third quarter of 2002. The net interest margin was 4.60% and the efficiency ratio was 54.22% for the third quarter of 2002. The increase in the efficiency ratio in the third quarter of 2003 compared
to the third quarter of 2002 is due mainly to increased noninterest expense and decreased net interest income which was off set slightly by an increase in noninterest income in the third quarter of 2003 over third quarter 2002 levels. The
Companys efficiency ratio is calculated by dividing noninterest expense (minus amortization expense, and OREO expense) by the sum of net interest income, noninterest income and the tax equivalent adjustment and any mortgage impairment charges,
minus securities gains. The Companys OREO expense, included as a part of other expense on the Companys Consolidated Statements of Income, was $0.2 million and $0.05 million for the quarters ended September 30, 2003 and September 30, 2002
respectively. The Companys tax equivalent adjustments were $1.1 million and $0.9 million respectively for the quarters ended September 30, 2003 and June 30, 2002. The Company believes that the efficiency ratio is useful to investors because it
effectively measures the Companys ability to control its expenses in relationship to increasing or decreasing income components. The formula used by the Company is a common formula used to arrive at the efficiency ratio for banks and this
formula allows the Company and investors to compare itself to peers. The formula may not be the same as that used by other companies.



The Companys return on average equity was 27.19% and return on average assets was 1.48% for the first nine months of 2003. The net interest margin was 4.14% and the
efficiency ratio was 53.90% for the first nine months of 2003. The Companys return on average equity was 31.56% and the return on average assets was 1.78% for the first nine months of 2002. The net interest margin was 4.69% and the efficiency
ratio was 48.52% for the first nine months of 2002. The Companys OREO expense, included as a part of other expense on the Companys Consolidated Statements of Income, was $0.5 million and $0.6 million for the nine months ended September
30, 2003 and September 30, 2002 respectively. The Companys tax equivalent adjustments were $3.1 million and $2.6 million respectively for the nine months ended September 30, 2003 and September 30, 2002. Results for the first nine months of
2002 included the items discussed in the second paragraph above expense) and an additional $21.3 million provision for loan and lease losses relating to the accelerated disposition of certain nonperforming commercial and industrial loans.



NET REVENUE



Net revenue, which is the sum of net interest income and noninterest income,
was $104.3 million for the third quarter of 2003. This was comprised of net interest income of $72.8 million and noninterest income of $31.5 million. Net revenue for the third quarter of 2003 remained relatively unchanged compared to net revenue for
the third quarter of 2002. The components of net revenue changed as a net interest income decrease was offset by an increase in noninterest income in the third quarter of 2003 over levels in the comparable period in 2002.



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Net revenue was $309.6 million for the first nine months of 2003. This was comprised of net interest
income of $224.2 million and noninterest income of $85.4 million. Net revenue for the first nine months of 2002 was $380.5 million. The change in the first nine months of 2003 from the comparable period in 2002 is primarily attributed to the
aforementioned $77.0 million Dime merger termination payment received in the first quarter of 2002 offset by $6.1 million of increases in credit card fee income and trading asset gains in 2003.



NET INTEREST INCOME



Net interest income for the third quarter of 2003 was $72.8 million and the
net interest margin was 3.90%. Net interest income for the third quarter of 2002 was $77.2 million and the net interest margin was 4.60%. Net interest income decreased by $4.4 million in the third quarter of 2003 compared to the comparable third
quarter of 2002. The decrease in net interest income in the third quarter of 2003 compared to the comparable quarter of 2002 was due to decreased interest income, which was attributable to lower yields on floating rate loans and increased
amortization of premiums on investment securities resulting from faster prepayment speeds, which was partially offset by an increase in average investments. These decreases in interest income were offset in part by lower interest expense on
deposits.



Net interest income for the first nine months of
2003 was $224.2 million and the net interest margin was 4.14%. Net interest income for the first nine months of 2002 was $224.1 million and the net interest margin was 4.69%. Net interest income remained relatively unchanged the first nine months of
2003 compared to the comparable period in 2002. The decrease in net interest margin in the first nine months of 2003 compared to the comparable nine months of 2002 was due to a higher level of Investment Securities funded by borrowings which
generate a smaller interest rate spread than the Companys traditional lending and deposit business.



The amortization of premiums on investment securities was $9.3 million in the third quarter of 2003 and $21.0 million for the year to date 2003. For the
third quarter of 2002 the amortization of premiums on investment securities was $0.8 million and $3.0 million for the year to date 2002. Total unamortized premiums and discounts on investment securities were $19.6 million at September 30, 2003 and
$22.0 million at September 30, 2002.



NONINTEREST INCOME



Noninterest income was $31.5 million in the third
quarter of 2003 and $27.4 million in the third quarter of 2002. Noninterest income for the third quarter of 2003 increased by $4.1 million compared to the third quarter of 2002. The increase in noninterest income in 2003 compared to 2002 was due
mainly to increases in Shoppers Charge credit card fee income and retail service fees and other income which included recoveries of other assets . The increases in these categories were offset in part by a decline in separate bank owned life
insurance income.



Noninterest income was $85.4 million in the first nine
months of 2003 and $156.4 million in the first nine months of 2002. Noninterest income for the first nine months of 2003 decreased by $71.0 million compared to the first nine months of 2002. The decrease in noninterest income in 2003 compared to
2002 was due mainly to the aforementioned $77.0 million Dime merger termination payment in 2002, offset by increases in credit card fee income, trading asset gains and other income which included recoveries of other assets in 2003. These increases
were offset by impairment charges on mortgage related servicing assets.



NONINTEREST EXPENSE



Noninterest expense was $59.1 million for the third quarter of 2003 compared to $58.4 million for the third quarter of 2002. The increase in noninterest expense in the third quarter of 2003 compared to the third quarter of 2002 was due
primarily to increases in outside services and expenses related to the Companys first full quarter of landfill gas projects expenses, which were offset in part by decreases in marketing expenses. The efficiency ratio was 55.52% for the third
quarter of 2003 and 54.22% for the third quarter of 2002.



Noninterest expense was $170.1 million for the first nine months of 2003 compared to $189.3 million for the first nine months of 2002. The decrease in noninterest expense in the first nine months of 2003 compared to the first nine months of
2002 was due primarily to the aforementioned $21.5 million of certain expenses incurred in 2002, offset by increases in 2003 occupancy expense, outside services-data processing and the Companys first four and one half months of landfill gas
projects expenses. These increases in expense were offset in part by declines in marketing expense in 2003.



17



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##### Table of Contents

INCOME TAXES



The Companys pretax income for the third quarter of 2003 of $38.7 million remained relatively unchanged, compared to
$38.7 for the third quarter of 2002. The Companys provision for income taxes was $8.3 million for the quarter ended September 30, 2003 compared to $11.6 million for the third quarter of 2002. The lower tax provision in the third quarter of
2003 compared to 2002 was primarily due to energy tax credits and a tax benefit associated with the closure of certain tax years in the third quarter of 2003.



The Companys pretax income for the first nine months of 2003 was $118.9 million, a decrease of $28.4 million, compared to the first nine months
of 2002. This decrease in pretax income for the first nine months of 2003 was due to the Dime merger termination payment, partially offset by certain expenses recorded in the first nine months of 2002.The Companys provision for income taxes
was $31.1 million for the nine months ended September 30, 2003 compared to $52.4 million for the comparable period in 2002. The lower tax provision was due to the Companys lower income, increased investment in tax advantaged securities; as
well as energy tax credits; an updated assessment of the Companys tax preference income, reserves and related liabilities and a tax benefit associated with the closure of certain tax years.



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



The provision for loan and lease losses was $6.5 million for
the third quarter of 2003 and $7.5 million for the third quarter of 2002. The decrease in 2003 over 2002 was primarily due to the lower levels of nonperforming loans in 2003. Net charge offs for the third quarter of 2003 were $5.9 million, which was
less than the provision for loan and leases losses.



The provision for loan and
lease losses was $20.5 million for the first nine months of 2003 and $43.8 million for the first nine months of 2002. The decrease in 2003 over 2002 was due to the aforementioned $21.3 million provision related to accelerated disposition of loans in
2002 and a lower average level of non-performing loans and charge-offs..



The
Allowance for loan and lease losses (the Allowance) totaled $67.7 million at September 30, 2003 compared to $71.9 at December 31, 2002 and $71.8 million at September 30, 2002. It represented 424% of nonperforming loans and leases at
September 30, 2003, compared to 468 % at December 31, 2002 and 420% at September 30, 2002. The Allowance as a percentage of total loans and leases was 1.55% at September 30, 2003, 1.66% at December 31,2002 and 1.69 % at September 30, 2002.



The Company reclassified certain purchase accounting adjustments for the
acquisition of credit card receivables in the second quarter of 2003. The Company recorded a reduction in the Allowance in the second quarter of 2003 of $5.0 million, and a decrease in the carrying value of Credit Card Loans (Loans) in
the same amount. This accounting reclassification relates to acquisitions made by the Company in 2001 and 2002 of private label credit card portfolios and the related multi-year exclusive merchant relationships (the Transactions). The
Company disclosed the Transactions in its annual reports to shareholders on Form 10-K in 2001 and 2002 in the Business Combinations footnote, noting that the Transactions were accounted for under the purchase method of accounting. Part
of the original purchase accounting adjustments for the Transactions increased the Allowance by a portion of the purchase price for the Transactions deemed to be attributable to the purchased Allowance. The reductions to the Allowance and to Loans
had no impact on Stockholders Equity or Net Income.



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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



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##### Table of Contents

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



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



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



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



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



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



Based upon the process employed and giving recognition to all attendant factors associated with the loan portfolio, management considers the Allowance to be adequate
at September 30, 2003.



Non Performing
Loans and Non Performing Assets



Nonperforming loans and leases totaled
$16.0 million at September 30, 2003. This was an increase of $0.6 million, or 4%, compared to $15.4 million of nonperforming loans and leases as of December 31, 2002, and a decrease of $1.1 million, or 6%, compared to $17.1 million of nonperforming
loans and leases at September 30, 2002. Nonperforming loans and leases were 0.36 % of total loans and leases at September 30, 2003, compared to 0.35% at December 31, 2002 and 0.40 % at September 30, 2002.



Nonperforming assets were $17.1 million at September 30, 2003, up from $16.7 million at
December 31, 2002 and down from $18.4 million at September 30, 2002. Nonperforming assets as a percent of loans, leases and OREO were 0.39 % at September 30, 2003, 0.38% at December 31, 2002 and 0.43% at September 30, 2002.



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



|                                                        |  | September 30, 2003 |        |   | December 31, 2002 |  
|------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | -
|Nonaccrual Loans:                                       |  |                    |        |   |                   |  
|Commercial                                              |  | $                  | 8,733  |   |                   | $
|Real Estate                                             |  |                    | 6,930  |   |                   |  
|Consumer                                                |  |                    | 298    |   |                   |  
|                                                        |  |                    |        |   |                   |  
|Total Nonaccrual Loans                                  |  | $                  | 15,961 |   |                   | $
|Other Real Estate Owned                                 |  |                    | 1,108  |   |                   |  
|                                                        |  |                    |        |   |                   |  
|Total Nonperforming Assets                              |  | $                  | 17,069 |   |                   | $
|                                                        |  |                    |        |   |                   |  
|Nonaccrual Loans to Total Loans and Leases              |  |                    | 0.36   | % |                   |  
|Allowance for Loan and Lease Losses to Nonaccrual Loans |  |                    | 424    | % |                   |  



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##### Table of Contents

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):



|                                            |  | September 30, 2003 |        |   | December 31, 2002 |  
|------------------------------------------- |  | ------------------ | ------ | - | ----------------- | -
|Loans Past Due 90 Days or More and Accruing |  |                    |        |   |                   |  
|Commercial                                  |  | $                  | 3,059  |   |                   | $
|Real Estate                                 |  |                    | 7,428  |   |                   |  
|Consumer                                    |  |                    | 1,559  |   |                   |  
|Credit card                                 |  |                    | 8,386  |   |                   |  
|                                            |  |                    |        |   |                   |  
|Total Past Due Loans                        |  | $                  | 20,432 |   |                   | $
|                                            |  |                    |        |   |                   |  
|As a percent of Total Loans and Leases      |  |                    | 0.47   | % |                   |  



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 |          
|-------------------------------------------------------------------------------------------- |  | ----------------------------------------------------- | ---------
|(Dollars in thousands)                                                                       |  | Nine Months Ended September 30, 2003                  |          
|                                                                                             |  |                                                      
|Amount of Loans and Leases Outstanding at Period End                                         |  | $                                                     | 4,374,502
|                                                                                             |  |                                                       |          
|Daily Average Amount of Loans and Leases Outstanding                                         |  | $                                                     | 4,339,418
|                                                                                             |  |                                                       |          
|Allowance for Loan and Lease Losses                                                          |  |                                                       |          
|Balance at beginning of the period                                                           |  | $                                                     | 71,929   
|Loans charged off:                                                                           |  |                                                       |          
|Real estate                                                                                  |  | $                                                     | 1,055    
|Commercial                                                                                   |  |                                                       | 6,117    
|Consumer                                                                                     |  |                                                       | 21,629   
|Accelerated disposition (1)                                                                  |  |                                                       |         
|                                                                                             |  |                                                       |          
|Total loans charged off                                                                      |  | $                                                     | 28,801   
|                                                                                             |  |                                                       |          
|Recoveries:                                                                                  |  |                                                       |          
|Real estate                                                                                  |  | $                                                     | 620      
|Commercial                                                                                   |  |                                                       | 3,091    
|Consumer                                                                                     |  |                                                       | 5,355    
|                                                                                             |  |                                                       |          
|Total recoveries                                                                             |  | $                                                     | 9,066    
|                                                                                             |  |                                                       |          
|Net loans charged off                                                                        |  | $                                                     | 19,735   
|                                                                                             |  |                                                      
|Provision for loan and lease losses, portfolio loans                                         |  |                                                       | 20,500   
|Provision for loan and lease losses, accelerated disposition (1)                             |  |                                                       |         
|Reclassification of acquired reserves of credit card portfolios to loans                     |  |                                                       | (5,031   
|                                                                                             |  |                                                       |          
|Balance at period end                                                                        |  | $                                                     | 67,663   
|                                                                                             |  |                                                       |          
|Allowance for Loan and Lease Losses to Total Loans and Leases                                |  |                                                       | 1.55     
|                                                                                             |  |                                                       |          
|Provision for loan and lease losses, as a percentage of average loans and leases outstanding |  |                                                       | 0.63     
|                                                                                             |  |                                                       |          
|Net loans charged off during period to average loans and leases outstanding                  |  |                                                       | 0.61     
|                                                                                             |  |                                                       |          

---

|(1) | Relates primarily to the planned accelerated disposition of certain nonperforming commercial and industrial loans at March 31, 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(2) | Annualized
|--- | ----------



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##### Table of Contents

FINANCIAL CONDITION



Loan and lease categories consisting of commercial and financial, commercial real estate, consumer, and credit card loans totaled $4.2
billion at September 30, 2003, compared to $4.1 billion at December 31, 2002 and $4.0 billion at September 30, 2002. 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 96% of loans and leases at September 30, 2003, compared to 94% at December 31, 2002
and 93% of loans and leases at September 30, 2002. The total loan to deposit ratio at both September 30, 2003 and December 31, 2002 was 70%.



Total investment securities were $2.9 billion at September 30, 2003, compared to $2.6 billion at December 31, 2002 and $2.5 billion at September 30, 2002. Investment
securities increased in 2003 over prior periods due primarily to increased purchases associated with growth in deposits and borrowings. Total assets were $8.0 billion at September 30, 2003, compared to $7.7 billion at December 31, 2002 and to $7.4
billion at September 30, 2002.



Total deposits were $6.3 billion at September
30, 2003, $6.2 billion at December 31, 2002 and $6.3 billion at September 30, 2002.



Total stockholders equity was $457.7 million and book value per common share was $10.22 at September 30, 2003. All regulatory capital ratios exceed those necessary to be considered a well-capitalized institution.



The increase in stockholders equity resulted primarily from $87.8 million of net
income, offset by payment of cash dividends of $39.4 million and treasury repurchases of $16.5 million, plus stock compensation transactions of $5.7 million and a decrease in accumulated other comprehensive income of $12.5 million.



The Company did not repurchase any shares in the second and third quarter of 2003. The
Company repurchased a total of 527,095 shares in the first nine months of 2003, at an average price of $31.35 per share. The total cash used for these repurchases was $16.5 million.



Total shares outstanding at September 30, 2003 were 44.8 million shares, compared to 45.0 million shares at December 31, 2002 and 45.1
million shares at September 30, 2002.



The Company paid cash dividends of $0.30
per share in the third quarter of 2003. Total cash dividends paid in the third quarter was $13.4 million. Dividends paid in 2003 year to date were $0.88 per share. Total cash dividends paid in 2003 year to date were $39.4 million.



MARKET RISK



Interest Rate Risk



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



The Company evaluates on a monthly basis its simulation
model to measure the sensitivity of net interest income to changes in market interest rates. There have been no material changes in these monthly simulations from the Companys results outlined in its Form 10-K for the year ended December 31,
2002.



The Company enters into interest rate derivative contracts (interest
rate swaps; interest rate floors; and interest rate caps) from time to time for asset liability management purposes. The notional amount of the derivative contracts totaled $515 million at



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##### Table of Contents

September 30, 2003 and $860 million at December 31, 2002. This resulted in a reduction of $345 million in the notional value of derivative contracts
outstanding in this time period. The change in notional amount primarily occurred in the second quarter of 2003 when approximately $700 million in Prime Rate hedges, that had been accounted for as cash flow hedges under SFAS No. 133, matured. This
was offset in part by new derivative contracts on a portion of the Companys borrowings and certificates of deposit.



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 derivatives contracts outstanding as of September 30, 2003 that are hedges for the Companys borrowings and certificates of deposit are indexed to LIBOR. The Companys fair value hedges
have also included Fed Funds indexed interest rate swaps entered into in connection with certain fixed rate certificates of deposit and with a specified amount of the Companys fixed rate borrowings at times during 2003. Changes in interest
rates will impact the cash flows and valuation of such derivative contracts, but management does not expect the overall financial statement impact to be material under any interest rate scenario.



Liquidity



Liquidity is a measure of the Companys ability to meet the needs of depositors,
borrowers, and creditors at a reasonable cost and without adverse financial consequences. The Company has several liquidity measurements that are evaluated on a frequent basis. The Company has adequate sources of liquidity including the ability to
attract deposits from businesses and individuals through its branches; brokered deposits from securities firms; cash flow from interest, prepayments and principal repayments on investment securities and loans; Securities Available for Sale; and the
ability to borrow funds on a collateralized basis from the Federal Home Loan Bank and Federal Reserve discount window, through repurchase agreements collateralized by securities with customers and with securities firms; and through other sources.
The management of balance sheet volumes, mixes and maturities enables the Company to maintain adequate levels of liquidity.



Capital



The capital ratios for the Company at September 30, 2003, and the minimum regulatory guidelines for such capital ratios for qualification as a well-capitalized
institution are as follows:



Holding
Company Capital Ratios



|                          |  | Ratios at September 30, 2003 |   |  | Minimum Regulatory Guidelines for Well-Capitalized |  
|------------------------- |  | ---------------------------- | - |  | -------------------------------------------------- | -
|Total Risk-Based Capital  |  | 13.93                        | % |  | 10.0                                               | %
|Tier 1 Risk-Based Capital |  | 8.72                         | % |  | 6.0                                                | %
|Tier 1 Leverage Ratio     |  | 6.04                         | % |  | 4.0                                                | %



Bank Capital Ratios



|                          |  | Ratios at September 30, 2003 |   |  | Minimum Regulatory Guidelines for Well-Capitalized |  
|------------------------- |  | ---------------------------- | - |  | -------------------------------------------------- | -
|Total Risk-Based Capital  |  | 13.41                        | % |  | 10.0                                               | %
|Tier 1 Risk-Based Capital |  | 8.53                         | % |  | 6.0                                                | %
|Tier 1 Leverage Ratio     |  | 5.93                         | % |  | 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 impact of FAS 46 as explained under Note G



22



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##### Table of Contents

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 From 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.



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 error 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 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)).



10(d) Amendment to the Change in control, Severance and Employment Agreement with Kenneth T. Neilson dated September 17, 2003 (filed herewith)



10(e) Amendment to the Change in control, Severance and Employment Agreement with Thomas J.
Shara dated September 17, 2003 (filed herewith)



10(f) Amendment to the Change
in control, Severance and Employment Agreement with D. Lynn Van Borkulo-Nuzzo dated September 17, 2003 (filed herewith)



10(g) Amendment to the Change in control, Severance and Employment Agreement with Thomas R. Nelson dated September 17, 2003 (filed herewith)



23



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##### Table of Contents

10(h) Amendment to the Change in control, Severance and Employment Agreement with James Mayo dated September 17, 2003
(filed herewith)



10(i) Amendment to the Change in control, Severance and
Employment Agreement with James Rudgers dated September 17, 2003 (filed herewith)



10(j) Supplemental Employees Retirement Plan Participation Agreement between Hudson United Bancorp and Kenneth T. Neilson dated September 17, 2003 (filed herewith)



10(k) Annual Director Fees



|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 William A. Houlihan, Chief Financial Officer of the Company. (filed herewith)
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Current Reports on Form 8-K 



| | 1) | Current Report on Form 8-K dated July 17, 2003, (Furnishing second quarter earnings release for Hudson United Bancorp)
| | -- | ----------------------------------------------------------------------------------------------------------------------



| | 2) | Current Report on Form 8-K dated July 25, 2003, (Announcing the signing of a definitive Stock Purchase Agreement to acquire all of the capital stock of Flatiron Credit Company,
Inc.)
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



SIGNATURES



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



|Hudson United Bancorp |  |                                                     
|--------------------- |  | ----------------------------------------------------
|                      | 
|November 5, 2003      |  |                                                     
|Date                  |  | Kenneth T. Neilson                                  
|                      |  | Chairman, President and Chief Executive Officer     
|                      | 
|November 5, 2003      |  |                                                     
|Date                  |  | William A. Houlihan                                 
|                      |  | Executive Vice President and Chief Financial Officer



24



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##### Table of Contents

Exhibit 31.1



I, Kenneth T. Neilson, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Hudson United Bancorp;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a- 15(e)and 15d -15(e)) for the registrant and have:



a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures , as of the end of the period covered by this report based on such evaluation; and



c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most
recent fiscal quarter ( the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting: and



5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):



a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and



b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over financial reporting.



|Date: November 5, 2003                         
|-----------------------------------------------
|                                               
|                                               
|Kenneth T. Neilson                             
|Chairman, President and Chief Executive Officer



25



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##### Table of Contents

Exhibit 31.2



I, William A. Houlihan, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Hudson United Bancorp;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a- 15(e)and 15d- 15(e)) for the registrant and have:



a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures , as of the end of the period covered by this report based on such evaluation; and



c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most
recent fiscal quarter ( the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting: and



5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):



a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and



b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over financial reporting.



|Date: November 5, 2003                              
|----------------------------------------------------
|                                                    
|                                                    
|William A. Houlihan                                 
|Executive Vice President and Chief Financial Officer



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##### Table of Contents

Exhibit 32



CERTIFICATIONSPURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report on Form 10-Q of Hudson United Bancorp (the Company) for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the
Report), Kenneth T. Neilson, as Chief Executive Officer of the Company , and William A. Houlihan, as Chief Financial Officer, each hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of his knowledge:



| | (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
| | --- | ---------------------------------------------------------------------------------------------------------------------



| | (2) | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------



|                       
|-----------------------
|                       
|Kenneth T. Neilson     
|Chief Executive Officer
|November 5, 2003       
|                       
|                       
|William A. Houlihan    
|Chief Financial Officer
|November 5, 2003       



27