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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 March 31, 2005



OR



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



For the transition period from  to



Commission File Number 0-010699



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HUDSON UNITED BANCORP

(Exact name of registrant as specified in its charter)



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



(201)-236-2600

(Registrants telephone number, including area code)



Not Applicable

Former name, former address, and former fiscal year,

if changed since last report.



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



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



The number of shares of Common
Stock, no par value, outstanding as of May 4, 2005 was 44,752,092.



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##### Table of Contents

HUDSON UNITED BANCORP



INDEX



|                              |  |                                                                                                                                               |  |      
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|PART I.
FINANCIAL INFORMATION |  |                                                                                                                                              
|                              |  |                                                                                                                                              
|Item 1.                       |  | Financial Statements (Unaudited):                                                                                                             |  |      
|                              |  |                                                                                                                                              
|                              |  | Consolidated Balance Sheets At March 31, 2005 and December 31, 2004                                                                           |  | 3    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Income For the Three Months Ended March 31, 2005 and 2004                                                          |  | 4    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2005 and 2004                                            |  | 5    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Changes in Stockholders Equity For the Three Months Ended March 31, 2005 and for the Year Ended December 31, 2004 |  | 6    
|                              |  |                                                                                                                                              
|                              |  | Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2005 and 2004                                                      |  | 7    
|                              |  |                                                                                                                                              
|                              |  | Notes to Consolidated Financial Statements                                                                                                    |  | 8-14 
|                              |  |                                                                                                                                              
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                         |  | 14-20
|Item 3.                       |  | Quantitative and Qualitative Disclosure about Market Risk                                                                                     |  | 20   
|Item 4.                       |  | Controls and Procedures                                                                                                                       |  | 20   
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                                                              
|                              |  |                                                                                                                                              
|Item 2                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                   |  | 21   
|                              |  |                                                                                                                                              
|Item 6.                       |  | Exhibits                                                                                                                                      |  | 21   
|                              |  |                                                                                                                                              
|                              |  | Signatures                                                                                                                                    |  | 22   



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HUDSON UNITED BANCORP

CONSOLIDATED BALANCE SHEETS (Unaudited)



|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|(in thousands, except per share data)                                                                                                                                                                                        |  | March 31, 2005 |           |   | December 31, 2004 |  
|ASSETS                                                                                                                                                                                                                       |  |                |           |   |                   |   |           |  
|Cash and due from banks                                                                                                                                                                                                      |  | $              | 182,281   |   |                   | $ | 161,878   |  
|Interest bearing due from banks                                                                                                                                                                                              |  |                | 12,051    |   |                   |   | 99,028    |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL CASH AND CASH EQUIVALENTS                                                                                                                                                                                              |  | $              | 194,332   |   |                   | $ | 260,906   |  
|                                                                                                                                                                                                                             |  |               
|Investment securities available for sale, at fair value ($1,431,162 and $1,491,084 pledged at March 31, 2005 and December 31, 2004,
respectively)                                                                            |  | $              | 2,108,882 |   |                   | $ | 2,166,627 |  
|Investment securities held to maturity, at cost; (Fair Value: $1,264 million at March 31, 2005 and $1,365 at December 31, 2004; $1,154,512 and
$1,201,730 million, at cost pledged, at March 31, 2005 and December 31, 2004) |  | $              | 1,291,979 |   |                   | $ | 1,372,228 |  
|Trading Assets                                                                                                                                                                                                               |  | $              |          |   |                   | $ | 1,477     |  
|                                                                                                                                                                                                                             |  |               
|Loans and leases:                                                                                                                                                                                                            |  |                |           |   |                   |   |           |  
|Commercial and financial                                                                                                                                                                                                     |  | $              | 2,173,713 |   |                   | $ | 2,190,339 |  
|Commercial real estate mortgages ($339,306 million pledged at March 31, 2005)                                                                                                                                                |  |                | 1,130,665 |   |                   |   | 1,113,604 |  
|Consumer                                                                                                                                                                                                                     |  |                | 1,005,885 |   |                   |   | 995,766   |  
|Credit card                                                                                                                                                                                                                  |  |                | 378,274   |   |                   |   | 400,700   |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|Sub-total                                                                                                                                                                                                                    |  | $              | 4,688,537 |   |                   | $ | 4,700,409 |  
|Residential mortgages                                                                                                                                                                                                        |  |                | 118,865   |   |                   |   | 126,775   |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL LOANS AND LEASES                                                                                                                                                                                                       |  | $              | 4,807,402 |   |                   | $ | 4,827,184 |  
|Less: Allowance for loan and lease losses                                                                                                                                                                                    |  |                | (59,750   | ) |                   |   | (60,799   | )
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|NET LOANS AND LEASES                                                                                                                                                                                                         |  | $              | 4,747,652 |   |                   | $ | 4,766,385 |  
|                                                                                                                                                                                                                             |  |               
|Premises and equipment, net                                                                                                                                                                                                  |  | $              | 119,168   |   |                   | $ | 121,037   |  
|Core deposit and other intangibles, net of amortization                                                                                                                                                                      |  |                | 18,881    |   |                   |   | 20,104    |  
|Goodwill                                                                                                                                                                                                                     |  |                | 83,561    |   |                   |   | 83,561    |  
|Investment in separate account bank owned life insurance                                                                                                                                                                     |  |                | 151,514   |   |                   |   | 150,073   |  
|Other assets                                                                                                                                                                                                                 |  |                | 134,474   |   |                   |   | 136,644   |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL ASSETS                                                                                                                                                                                                                 |  | $              | 8,850,443 |   |                   | $ | 9,079,042 |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                         |  |                |           |   |                   |   |           |  
|Deposits                                                                                                                                                                                                                     |  |                |           |   |                   |   |           |  
|Noninterest bearing                                                                                                                                                                                                          |  | $              | 1,319,769 |   |                   | $ | 1,355,624 |  
|NOW, money market and savings                                                                                                                                                                                                |  |                | 3,220,405 |   |                   |   | 3,129,355 |  
|Time deposits                                                                                                                                                                                                                |  |                | 1,713,884 |   |                   |   | 1,859,219 |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL DEPOSITS                                                                                                                                                                                                               |  | $              | 6,254,058 |   |                   | $ | 6,344,198 |  
|Repurchase agreements                                                                                                                                                                                                        |  |                | 910,534   |   |                   |   | 842,893   |  
|Other borrowings                                                                                                                                                                                                             |  |                | 682,558   |   |                   |   | 879,530   |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL BORROWINGS                                                                                                                                                                                                             |  | $              | 1,593,092 |   |                   | $ | 1,722,423 |  
|Other liabilities                                                                                                                                                                                                            |  |                | 247,305   |   |                   |   | 255,587   |  
|Subordinated debt                                                                                                                                                                                                            |  |                | 225,122   |   |                   |   | 225,184   |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL LIABILITIES                                                                                                                                                                                                            |  | $              | 8,319,577 |   |                   | $ | 8,547,392 |  
|Stockholders Equity:                                                                                                                                                                                                        |  |                |           |   |                   |   |           |  
|Common stock, no par value; authorized 103,000,000 shares; 52,186,866 shares issued and 45,030,405 shares outstanding in 2005 and 52,186,866
shares issued and 44,982,803 shares outstanding in 2004                         |  | $              | 92,788    |   |                   | $ | 92,788    |  
|Additional paid-in capital                                                                                                                                                                                                   |  |                | 310,124   |   |                   |   | 310,102   |  
|Retained earnings                                                                                                                                                                                                            |  |                | 317,081   |   |                   |   | 304,000   |  
|Treasury stock, at cost 7,156,462 shares in 2005 and 7,204,063 shares in 2004                                                                                                                                                |  |                | (169,005  | ) |                   |   | (170,183  | )
|Other Stock Compensation                                                                                                                                                                                                     |  |                | (1,342    | ) |                   |   | (1,359    | )
|Accumulated other comprehensive loss                                                                                                                                                                                         |  |                | (18,780   | ) |                   |   | (3,698    | )
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                                                   |  | $              | 530,866   |   |                   | $ | 531,650   |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                   |  | $              | 8,850,443 |   |                   | $ | 9,079,042 |  
|                                                                                                                                                                                                                             |  |                |           |   |                   |   |           |  
|See Notes to Consolidated
Financial Statements                                                                                                                                                                               |  |                |           |   |                   |   |           |  
|December 31, 2004 Balance sheet from audited financial statements                                                                                                                                                            |  |                |           |   |                   |   |           |  



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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



|                                                              |  |                              |         |      |   |       
|------------------------------------------------------------- |  | ---------------------------- | ------- | ---- | - | ------
|                                                              |  | Three Months Ended March 31,
|(in thousands, except per share data)                         |  | 2005                         |         | 2004
|INTEREST AND FEE INCOME:                                      |  |                              |         |      |   |       
|Loans and leases                                              |  | $                            | 73,607  |      | $ | 67,197
|Investment Securities                                         |  |                              | 36,913  |      |   | 30,590
|Other                                                         |  |                              | 346     |      |   | 258   
|                                                              |  |                              |         |      |   |       
|TOTAL INTEREST AND FEE INCOME                                 |  | $                            | 110,866 |      | $ | 98,145
|                                                              |  |                              |         |      |   |       
|INTEREST EXPENSE:                                             |  |                              |         |      |   |       
|Deposits                                                      |  | $                            | 17,267  |      | $ | 11,958
|Borrowings                                                    |  |                              | 9,459   |      |   | 2,210 
|Subordinated and other debt                                   |  |                              | 6,843   |      |   | 6,086 
|                                                              |  |                              |         |      |   |       
|TOTAL INTEREST EXPENSE                                        |  | $                            | 33,569  |      | $ | 20,254
|                                                              |  |                              |         |      |   |       
|NET INTEREST INCOME                                           |  | $                            | 77,297  |      | $ | 77,891
|PROVISION FOR LOAN AND LEASE LOSSES, PORTFOLIO LOANS          |  |                              | 4,500   |      |   | 5,600 
|                                                              |  |                              |         |      |   |       
|NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES |  | $                            | 72,797  |      | $ | 72,291
|                                                              |  |                              |         |      |   |       
|NON INTEREST INCOME:                                          |  |                              |         |      |   |       
|Retail Service fees                                           |  | $                            | 6,295   |      | $ | 8,088 
|Credit Card fee income                                        |  |                              | 7,810   |      |   | 7,199 
|Loan Fees                                                     |  |                              | 3,465   |      |   | 4,534 
|ATM and debit card fees                                       |  |                              | 1,537   |      |   | 1,653 
|Separate account bank owned life insurance income             |  |                              | 1,441   |      |   | 1,546 
|Trust income                                                  |  |                              | 796     |      |   | 798   
|Income from Landfill Investments                              |  |                              | 5,378   |      |   | 5,162 
|Securities gains                                              |  |                              | 1,515   |      |   | 3,470 
|Other Income                                                  |  |                              | 3,314   |      |   | 3,113 
|                                                              |  |                              |         |      |   |       
|TOTAL NONINTEREST INCOME                                      |  | $                            | 31,551  |      | $ | 35,563
|                                                              |  |                              |         |      |   |       
|NONINTEREST EXPENSE                                           |  |                              |         |      |   |       
|Salaries and benefits                                         |  | $                            | 25,216  |      | $ | 25,635
|Occupancy expense                                             |  |                              | 8,111   |      |   | 8,201 
|Equipment expense                                             |  |                              | 3,562   |      |   | 4,480 
|Deposit and other insurance                                   |  |                              | 586     |      |   | 621   
|Outside services  data processing                            |  |                              | 6,458   |      |   | 7,511 
|Outside services  other                                      |  |                              | 6,435   |      |   | 8,204 
|Amortization of intangibles                                   |  |                              | 1,222   |      |   | 1,244 
|Marketing expense                                             |  |                              | 1,164   |      |   | 706   
|Telephone expense                                             |  |                              | 1,401   |      |   | 1,366 
|Expense for Landfill Investments                              |  |                              | 6,549   |      |   | 5,882 
|Other expense                                                 |  |                              | 3,884   |      |   | 2,719 
|                                                              |  |                              |         |      |   |       
|TOTAL NONINTEREST EXPENSE                                     |  | $                            | 64,588  |      | $ | 66,569
|                                                              |  |                              |         |      |   |       
|INCOME BEFORE INCOME TAXES                                    |  |                              | 39,760  |      |   | 41,285
|PROVISION FOR INCOME TAXES                                    |  |                              | 10,029  |      |   | 10,303
|                                                              |  |                              |         |      |   |       
|NET INCOME                                                    |  | $                            | 29,731  |      | $ | 30,982
|                                                              |  |                              |         |      |   |       
|NET INCOME PER COMMON SHARE                                   |  |                              |         |      |   |       
|Basic                                                         |  | $                            | 0.66    |      | $ | 0.69  
|Diluted                                                       |  | $                            | 0.66    |      | $ | 0.69  
|WEIGHTED AVERAGE SHARES OUTSTANDING                           |  |                              |         |      |   |       
|Basic                                                         |  |                              | 44,966  |      |   | 45,808
|Diluted                                                       |  |                              | 45,119  |      |   | 45,003



See Notes to Unaudited Financial
Statements



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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



|                                                                                                                                                                |  |                             |         |   |      |   |       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------
|                                                                                                                                                                |  | Three Months EndedMarch 31,
|(in thousands)                                                                                                                                                  |  | 2005                        |         |   | 2004
|NET INCOME                                                                                                                                                      |  | $                           | 29,731  |   |      | $ | 30,982
|                                                                                                                                                                |  |                            
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                                                                                                         |  |                             |         |   |      |   |       
|Net Unrealized securities gains (losses) on available for sale securities arising during period (tax benefit of $8,657 and tax expense of
$10,866 respectively) |  |                             | (15,126 | ) |      |   | 18,555
|Amortization of net unrealized losses arising from the transfer of securities from AFS to HTM (tax expense of $218)                                             |  |                             | 404     |   |      |   |      
|Less: reclassification for net gains included in net income (tax expense of $194 and $71 respectively)                                                          |  |                             | 360     |   |      |   | 93    
|                                                                                                                                                                |  |                             |         |   |      |   |       
|Other comprehensive (loss) income                                                                                                                               |  | $                           | (15,082 | ) |      | $ | 18,462
|                                                                                                                                                                |  |                             |         |   |      |   |       
|COMPREHENSIVE INCOME                                                                                                                                            |  | $                           | 14,649  |   |      | $ | 49,444
|                                                                                                                                                                |  |                             |         |   |      |   |       



See Notes to Unaudited Consolidated
Financial Statements



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##### Table of Contents

|                                                                                 |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                            |  |   |        |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | ------------- | - |  | -------------- | - | ----------- | - | ------------------------ |  | - | ---------------- | - |  | ------------- | ------- | - | ------------------------------------- | - | -------- | ------------------------------------------ |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|HUDSON UNITED BANCORP CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY | 
|(in thousands, except shares)                                                    |  | Common Shares |   |  | PreferredStock |   | CommonStock |   | AdditionalPaid inCapital |  |   | RetainedEarnings |   |  | TreasuryStock |         |   | Effect of StockBasedCompensationPlans |   |          | AccumulatedOtherComprehensiveIncome/(Loss) |  |   | Total  |  
|Balance at December 31, 2003                                                     |  | 44,798,901    |   |  | $              |  |             | $ | 92,788                   |  | $ | 311,310          |   |  | $             | 237,046 |   |                                       | $ | (176,505 | )                                          |  | $ | (3,899 | ) |  | $ | (2,550  | ) |  | $ | 458,190 |  
|                                                                                 |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                            |  |   |        |   |  |   |         |   |  |   |         |  
|Net income                                                                       |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | 128,083 |   |                                       |   |         |                                            |  |   |       |   |  |   |        |   |  |   | 128,083 |  
|Cash dividends ($1.36 cash paid per share)                                       |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | (61,129 | ) |                                       |   |         |                                            |  |   |       |   |  |   |        |   |  |   | (61,129 | )
|Shares issued for Stock Options exercised                                        |  | 102,932       |   |  |                |  |             |   |                         |  |   | (1,208           | ) |  |               |        |   |                                       |   | 3,262    |                                            |  |   |       |   |  |   |        |   |  |   | 2,054   |  
|Purchase of treasury stock                                                       |  | (14,980       | ) |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | (561     | )                                          |  |   |       |   |  |   |        |   |  |   | (561    | )
|Effect of stock based compensation plans                                         |  | 95,950        |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | 3,621    |                                            |  |   | 2,540  |   |  |   |        |   |  |   | 6,161   |  
|Other comprehensive income                                                       |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   |         |                                            |  |   |       |   |  |   | (1,148  | ) |  |   | (1,148  | )
|                                                                                 |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                            |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2004                                                     |  | 44,982,803    |   |  | $              |  |             | $ | 92,788                   |  | $ | 310,102          |   |  | $             | 304,000 |   |                                       | $ | (170,183 | )                                          |  | $ | (1,359 | ) |  | $ | (3,698  | ) |  | $ | 531,650 |  
|                                                                                 |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                            |  |   |        |   |  |   |         |   |  |   |         |  
|Net income                                                                       |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | 29,731  |   |                                       |   |         |                                            |  |   |       |   |  |   |        |   |  |   | 29,731  |  
|Cash dividends ($ 0.37 cash paid per share)                                      |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               | (16,650 | ) |                                       |   |         |                                            |  |   |       |   |  |   |        |   |  |   | (16,650 | )
|Shares issued for Stock options exercised                                        |  | 45,752        |   |  |                |  |             |   |                         |  |   | 22               |   |  |               |        |   |                                       |   | 1,081    |                                            |  |   |       |   |  |   |        |   |  |   | 1,103   |  
|Effect of stock based compensation plans                                         |  | 1,850         |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   | 97       |                                            |  |   | 17     |   |  |   |        |   |  |   | 114     |  
|Other comprehensive income                                                       |  |              |   |  |                |  |             |   |                         |  |   |                 |   |  |               |        |   |                                       |   |         |                                            |  |   |       |   |  |   | (15,082 | ) |  |   | (15,082 | )
|                                                                                 |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                            |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at March 31, 2005                                                        |  | 45,030,405    |   |  | $              |  |             | $ | 92,788                   |  | $ | 310,124          |   |  | $             | 317,081 |   |                                       | $ | (169,005 | )                                          |  | $ | (1,342 | ) |  | $ | (18,780 | ) |  | $ | 530,866 |  
|                                                                                 |  |               |   |  |                |   |             |   |                          |  |   |                  |   |  |               |         |   |                                       |   |          |                                            |  |   |        |   |  |   |         |   |  |   |         |  



See Notes to Consolidated Financial
Statements



6



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##### Table of Contents

HUDSON UNITED BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                                     |  |                              |          |   |      |   |          |  
|------------------------------------------------------------------------------------ |  | ---------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                     |  | Three Months Ended March 31, |         
|(in thousands)                                                                       |  | 2005                         |          |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |                              |          |   |      |   |          |  
|Net Income                                                                           |  | $                            | 29,731   |   |      | $ | 30,982   |  
|Adjustments to reconcile to net income to net cash provided by operating activities: |  |                              |          |   |      |   |          |  
|Provision for loan an lease losses                                                   |  |                              | 4,500    |   |      |   | 5,600    |  
|Provision for depreciation and amortization                                          |  |                              | 4,068    |   |      |   | 4,893    |  
|Amortization (Accretion) of investment securities premiums (discounts), net          |  |                              | 539      |   |      |   | 1,497    |  
|Amortization of restricted stock                                                     |  |                              | 114      |   |      |   | 354      |  
|Loss on sales of premises and equipment                                              |  |                              | 14       |   |      |   | 22       |  
|Securities (gains)                                                                   |  |                              | (1,515   | ) |      |   | (3,470   | )
|Trading asset losses                                                                 |  |                              | 111      |   |      |   |         |  
|Decrease in assets held for sale                                                     |  |                              | 1,477    |   |      |   |         |  
|(Increase) / decrease in other assets                                                |  |                              | 9,721    |   |      |   | (2,826   | )
|Decrease in other liabilities                                                        |  |                              | (8,344   | ) |      |   | (947     | )
|                                                                                     |  |                              |          |   |      |   |          |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                            |  | $                            | 40,416   |   |      | $ | 36,105   |  
|                                                                                     |  |                              |          |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                              |          |   |      |   |          |  
|Proceeds from sales of investment securities                                         |  |                              |          |   |      |   |          |  
|Available for sale                                                                   |  | $                            | 350,278  |   |      | $ | 202,926  |  
|Proceeds from repayments and maturities of investment securities:                    |  |                              |          |   |      |   |          |  
|Available for sale                                                                   |  |                              | 98,084   |   |      |   | 305,881  |  
|Held to maturity                                                                     |  |                              | 88,159   |   |      |   |         |  
|Purchases of investment securities:                                                  |  |                              |          |   |      |   |          |  
|Available for sale                                                                   |  |                              | (413,772 | ) |      |   | (365,454 | )
|Held to maturity                                                                     |  |                              | (7,605   | ) |      |   | (73,300  | )
|Decrease in loans other than purchases and sales                                     |  |                              | 17,794   |   |      |   | 53,648   |  
|Credit card receivables purchased                                                    |  |                              | (3,561   | ) |      |   | (1,582   | )
|Proceeds from sales of premises and equipment                                        |  |                              |         |   |      |   | 12       |  
|Purchases of premises and equipment                                                  |  |                              | (991     | ) |      |   | (2,578   | )
|Decrease (increase) in foreclosed property                                           |  |                              | (358     | ) |      |   | 208      |  
|                                                                                     |  |                              |          |   |      |   |          |  
|NET CASH PROVIDED BY INVESTING ACTIVITIES                                            |  | $                            | 128,028  |   |      | $ | 119,761  |  
|                                                                                     |  |                              |          |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |                              |          |   |      |   |          |  
|Net increase in demand deposits, NOW and savings accounts                            |  | $                            | 55,195   |   |      | $ | 17,590   |  
|Net (decrease) in certificates of deposit                                            |  |                              | (145,335 | ) |      |   | (18,351  | )
|Net (decrease) in borrowings                                                         |  |                              | (129,331 | ) |      |   | (175,837 | )
|Payment of subordinated debt securities                                              |  |                              |         |   |      |   | (8,826   | )
|Proceeds from issuance of debt securities                                            |  |                              |         |   |      |   | 19,810   |  
|Proceeds from issuance of common stock for option exercises                          |  |                              | 1,103    |   |      |   | 178      |  
|Cash dividends paid                                                                  |  |                              | (16,650  | ) |      |   | (14,854  | )
|Acquisition of treasury stock                                                        |  |                              |         |   |      |   | (561     | )
|                                                                                     |  |                              |          |   |      |   |          |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                            |  | $                            | 235,018  |   |      | $ | 180,851  |  
|                                                                                     |  |                              |          |   |      |   |          |  
|DECREASE IN CASH AND CASH EQUIVALENTS                                                |  | $                            | (66,574  | ) |      | $ | (24,985  | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                     |  |                              | 260,906  |   |      |   | 313,994  |  
|                                                                                     |  |                              |          |   |      |   |          |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                           |  | $                            | 194,332  |   |      | $ | 289,009  |  
|                                                                                     |  |                              |          |   |      |   |          |  
|                                                                                     |  |                             
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                   |  |                              |          |   |      |   |          |  
|                                                                                     |  |                             
|Cash Paid during the period                                                          |  |                              |          |   |      |   |          |  
|Interest                                                                             |  | $                            | 29,804   |   |      | $ | 17,874   |  
|Taxes                                                                                |  |                              | 3,222    |   |      |   | 10,809   |  
|Additional Disclosures                                                               |  |                              |          |   |      |   |          |  
|Securities transferred from available for sale to held to maturity                   |  | $                            |         |   |      | $ | 742,617  |  



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



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



All intercompany accounts and transactions are eliminated in consolidation.



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



NOTE B  EARNINGS PER SHARE



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



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



|                                                                  |  |                              |        |      |   |       
|----------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|                                                                  |  | Three Months Ended March 31,
|                                                                  |  | 2005                         |        | 2004
|Basic Earnings Per Share                                          |  |                              |        |      |   |       
|Net Income                                                        |  | $                            | 29,731 |      | $ | 30,982
|Weighted average common shares outstanding                        |  |                              | 44,966 |      |   | 44,808
|Basic Earnings per share                                          |  | $                            | 0.66   |      | $ | 0.69  
|                                                                  |  |                             
|Diluted Earnings Per Share                                        |  |                              |        |      |   |       
|Net Income                                                        |  | $                            | 29,731 |      | $ | 30,982
|Weighted average common shares outstanding                        |  |                              | 44,966 |      |   | 44,808
|Plus: Incremental shares from assumed conversion of stock options |  |                              | 153    |      |   | 195   
|                                                                  |  |                              |        |      |   |       
|Weighted average common shares assuming dilution                  |  |                              | 45,119 |      |   | 45,003
|Diluted earnings per share                                        |  | $                            | 0.66   |      | $ | 0.69  



As of March 31, 2005 the Company had
2,133 shares that were not included in the diluted computation because they would have been anti-dilutive. There were no anti-dilutive shares as of March 31, 2004.



8



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##### Table of Contents

NOTE C  ACQUISITIONS/BUSINESS COMBINATIONS



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



In 2003, Hudson United acquired ownership interests in two companies involved in landfill gas projects (LGPs). The Company as the owner of the LGPs is eligible to receive tax credits under Section 29 of the Internal Revenue Code
(Section 29 tax credits), which are available to producers of fuel from non-conventional sources. These Section 29 tax credits were $2.3 million and $2.1 million for the three month periods ended March 31, 2005 and 2004, respectively.
The Section 29 tax credits, which may be limited or eliminated based upon a formula tied to the average price of crude oil during each calendar year, are scheduled to expire on December 31, 2007. The difference between the acquisition value of $20
million and the net asset value was recorded as a reduction of the carrying value of long-lived equipment.



The Company entered into agreements in the first quarter of 2005 to purchase third party credit card assets from unaffiliated third parties. As of March 31, 2005, the Company had paid total consideration of $3.6
million for $5.9 million of these assets, with an associated discount of $2.3 million.



NOTE D  INVESTMENT SECURITIES



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



|                                                                            |  |                |           |                  |       |       |                      |   |         |   |  |   |          
|--------------------------------------------------------------------------- |  | -------------- | --------- | ---------------- | ----- | ----- | -------------------- | - | ------- | - |  | - | ---------
|                                                                            |  | March 31, 2005
|                                                                            |  | AmortizedCost  |           | Gross Unrealized |       |       | Estimated Fair Value
|                                                                            |  |                | (Losses)  |                  | Gains |       |                     
|Available for Sale                                                          |  |                |           |                  |       |       |                      |   |         |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $              | 142,649   |                  | $     |      |                      | $ | (1,660  | ) |  | $ | 140,989  
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                | 1,738,095 |                  |       | 2,063 |                      |   | (25,034 | ) |  |   | 1,715,124
|All other mortgage backed securities                                        |  |                | 22,163    |                  |       | 15    |                      |   | (126    | ) |  |   | 22,052   
|Asset backed and other debt securities                                      |  |                | 47,938    |                  |       | 1,462 |                      |   | (116    | ) |  |   | 49,284   
|FHLB stock                                                                  |  |                | 36,900    |                  |       |      |                      |   |        |   |  |   | 36,900   
|Other securities                                                            |  |                | 144,592   |                  |       | 1,042 |                      |   | (1,101  | ) |  |   | 144,533  
|                                                                            |  |                |           |                  |       |       |                      |   |         |   |  |   |          
|                                                                            |  | $              | 2,132,337 |                  | $     | 4,582 |                      | $ | (28,037 | ) |  | $ | 2,108,882
|                                                                            |  |                |           |                  |       |       |                      |   |         |   |  |   |          



|                                                                            |  |                |           |                  |          |     |                      |   |         |   |  |   |          
|--------------------------------------------------------------------------- |  | -------------- | --------- | ---------------- | -------- | --- | -------------------- | - | ------- | - |  | - | ---------
|                                                                            |  | March 31, 2005
|                                                                            |  | Amortized Cost |           | Gross Unrealized |          |     | Estimated Fair Value
|                                                                            |  |                | Gains     |                  | (Losses) |     |                     
|Held to Maturity                                                            |  |                |           |                  |          |     |                      |   |         |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $              | 73,300    |                  | $        |    |                      | $ | (1,641  | ) |  | $ | 71,659   
|State and Political Subdivisions                                            |  |                | 67,409    |                  |          |    |                      |   | (72     | ) |  |   | 67,337   
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                | 976,603   |                  |          | 280 |                      |   | (23,327 | ) |  |   | 953,556  
|All other mortgage backed securities                                        |  |                | 169,698   |                  |          | 15  |                      |   | (2,977  | ) |  |   | 166,736  
|Asset backed and other debt securities                                      |  |                | 4,969     |                  |          | 52  |                      |   |        |   |  |   | 5,021    
|                                                                            |  |                |           |                  |          |     |                      |   |         |   |  |   |          
|                                                                            |  | $              | 1,291,979 |                  | $        | 347 |                      | $ | (28,017 | ) |  | $ | 1,264,309
|                                                                            |  |                |           |                  |          |     |                      |   |         |   |  |   |          



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##### Table of Contents

|                                                                            |  |                   |           |                  |          |       |                      |   |        |   |  |   |          
|--------------------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | -------- | ----- | -------------------- | - | ------ | - |  | - | ---------
|                                                                            |  | December 31, 2004
|                                                                            |  | Amortized Cost    |           | Gross Unrealized |          |       | Estimated Fair Value
|                                                                            |  |                   | Gains     |                  | (Losses) |       |                     
|Available For Sale                                                          |  |                   |           |                  |          |       |                      |   |        |   |  |   |          
|U.S. Treasury and Government Agency Obligations                             |  | $                 | 142,644   |                  | $        | 89    |                      | $ | (7     | ) |  | $ | 142,726  
|Mortgage backed securities guaranteed or issued by U.S. Government Agencies |  |                   | 1,605,564 |                  |          | 3,490 |                      |   | (6,706 | ) |  |   | 1,602,348
|All other mortgage backed securities                                        |  |                   | 62,818    |                  |          | 364   |                      |   | (108   | ) |  |   | 63,074   
|Asset backed and other debt securities                                      |  |                   | 165,478   |                  |          | 2,704 |                      |   | (677   | ) |  |   | 167,505  
|FHLB stock                                                                  |  |                   | 45,150    |                  |          |      |                      |   |       |   |  |   | 45,150   
|Other securities                                                            |  |                   | 144,145   |                  |          | 2,609 |                      |   | (930   | ) |  |   | 145,824  
|                                                                            |  |                   |           |                  |          |       |                      |   |        |   |  |   |          
|                                                                            |  | $                 | 2,165,799 |                  | $        | 9,256 |                      | $ | (8,428 | ) |  | $ | 2,166,627
|                                                                            |  |                   |           |                  |          |       |                      |   |        |   |  |   |          



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



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



|                        |  |                      |      
|----------------------- |  | -------------------- | -----
|                        |  | Estimated Fair Value
|Trading Asset Portfolio |  |                      |      
|Other Equity Securities |  | $                    | 1,477
|                        |  |                      |      
|Total                   |  | $                    | 1,477
|                        |  |                      |      



Investment securities with a fair
value of $2,559 million at March 31, 2005 and $2,686 million at December 31, 2004 were pledged as collateral for public sector deposits, customer repurchase agreements and borrowings from the Federal Home Loan Bank and other counterparties.



Other securities include preferred stocks of Government Sponsored Entities,
Community Reinvestment Act Funds, and common and preferred stocks of other financial institutions



EITF No. 03-1 The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments discusses recommendations set forth on the proposed models for evaluating impairment of equity
securities and debt securities. While no consensus has yet been reached, guidelines were given for the quantitative and qualitative disclosures for debt and marketable equity securities classified as available for sale or held to maturity. The
Company has adopted these guidelines as of December 31, 2003 and continues to monitor the status of the recommendations set forth in EITF No.3-1. The Company monitors the market value fluctuations of its investment portfolio on a monthly basis as
well as associated credit ratings to determine potential impairment of a security. As of December 31, 2004, the Company had $81.1 million of securities classified as Other-Than-Temporarily Impaired. These securities are carried at the
lower of cost or fair value. Charges for Other-Than-Temporarily Impaired securities were $13.9 million in 2004. As of March 31, 2005 the Company did not have any securities classified as Other-Than Temporarily Impaired. The
Companys investment securities with unrealized losses are considered temporarily impaired due to interest rate fluctuations that occurred during the year.



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##### Table of Contents

NOTE E  BORROWINGS



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



|         |  |            |           |            |   |          
|-------- |  | ---------- | --------- | ---------- | - | ---------
|         |  | 03/31/2005 |           | 12/31/2004
|2005 (1) |  | $          | 1,268,092 |            | $ | 1,497,423
|2006 (2) |  |            | 300,000   |            |   | 200,000  
|2007     |  |            |          |            |   |         
|2008     |  |            | 25,000    |            |   | 25,000   
|         |  |            |           |            |   |          
|Total    |  | $          | 1,593,092 |            | $ | 1,722,423

---

|(1) | Includes $528 million of structured repurchase agreements extendable at the option of the counterparty in 2005.
|--- | ---------------------------------------------------------------------------------------------------------------

|(2) | Includes $100 million of structured repurchase agreements extendable at the option of the counterparty in 2006.
|--- | ---------------------------------------------------------------------------------------------------------------



|                      |  |                |   |  |                   |  
|--------------------- |  | -------------- | - |  | ----------------- | -
|                      |  | March 31, 2005 |   |  | December 31, 2004 |  
|Weighted average rate |  | 2.24           | % |  | 1.66              | %



The Company decreased its borrowings
by $129.3 million at March 31, 2005 over December 31, 2004 levels. This decrease was primarily due to decreases in Federal Home Loan Bank advances. At March 31, 2005 the Company had a $40 million line of credit with an unaffiliated bank, which
matures June 30, 2005. The line of credit was not utilized during the first quarter of 2005.



NOTE F  SUBORDINATED DEBT



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



In September 1996, the
Company issued $75 million aggregate principal amount of subordinated debentures. The debentures, which mature in 2006, bear interest at a fixed interest rate of 8.20% per annum payable semi-annually. The Company repurchased $7.0 million of this
debt during 2002, $37.8 million during 2003 and $5.7 million during 2004. The outstanding balance of this debt is $24.5 million as of March 31, 2005. The 2003 debt repurchase was repurchased from an investment banking firm at a price of 115% of par,
which resulted in a premium of $5.7 million and a total transaction value of $44.0 million, which also included accrued interest. The Company at the same time issued a $45 million, 3.50% fixed rate institutional certificate of deposit due in May of
2008 to the same investment banking firm. The changed terms of the debt instruments and the present value of the cash flows of the obligations repurchased and the new obligation issued were not considered to be substantially different. The effective
annual interest cost of the new obligation issued by the Company is 6.02%. The Company repurchased $5.7 million of its 8.20% subordinated debt in the third quarter of 2004.



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



NOTE G  JUNIOR SUBORDINATED DEBENTURES ASSOCIATED WITH CAPITAL TRUST SECURITIES



The Company issued on March 17, 2004, $20 million of capital trust preferred securities, with a final maturity of March 17, 2034, using
Hudson United Statutory Trust I, a statutory business trust formed under the laws of the State of Connecticut. The sole asset of the trust, which is the obligor on the Capital Trust Securities, is $20.6 million principal amount variable rate Junior
Subordinated Debentures due 2034 of the Company. The capital trust preferred securities have a rate equal to the 3-month LIBOR plus 2.79% adjusting quarterly at each interest payment date and are callable by the Company on or after March 17, 2009
and any subsequent interest payment date thereafter. As of March 31, 2005, $20.0 million of the Hudson United Statutory Trust I and $20.6 million Junior Subordinated Debentures respectively, remained outstanding.



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



The Company issued on March 28, 2003, $15 million of capital trust preferred
securities, with a final maturity of April 10, 2033, using Hudson United Capital Trust II, a statutory business trust formed under the laws of the State of Delaware. The sole asset of the trust, which is the obligor on the Capital Trust Securities,
is $15.5 million principal amount at a fixed rate of 6.45% Junior Subordinated Debentures due 2038 of the Company. The capital trust preferred securities are callable at par on April 24, 2008, and have a fixed rate yield of 6.45% until the call
date. As of March 31, 2005, $15.0 million of the Hudson United Capital Trust II and $15.5 million of Junior Subordinated Debentures respectively, remained outstanding.



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##### Table of Contents

On June 19, 1998, the Company issued $50.0 million in aggregate liquidation amount at a fixed rate of 7.65% Capital
Securities due June 2028, using HUBCO Capital Trust II, a statutory business trust formed under the laws of the State of Delaware. The sole asset of the trust, which is the obligor on the Series B Capital Securities, is $51.5 million principal
amount of 7.65% Junior Subordinated Debentures due 2028 of the Company. The 7.65% Capital Securities are redeemable by the Company on or after June 15, 2008, or earlier in the event the deduction of related interest for federal income taxes is
prohibited, treatment as Tier 1 Capital is no longer permitted or certain other contingencies arise. As of March 31, 2005, $50.0 million of the HUBCO Capital Trust II and $51.5 million Junior Subordinated Debentures respectively, remained
outstanding.



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



The five issues of
capital securities have preference over the common securities under certain circumstances with respect to cash distributions and amounts payable on liquidation and are guaranteed by the Company. The net proceeds of the offerings are being used for
general corporate purposes and to increase capital levels of the Company and its subsidiaries. The securities qualify as Tier I capital under the capital guidelines of the Federal Reserve. At the end of the reporting period, there were no known
uncertainties that will have or that are reasonably likely to have a material effect on the Companys liquidity or capital resources.



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



The following is a maturity
distribution of outstanding subordinated debt and junior subordinated debentures associated with capital trust securities, (which are included in the other liability section of the Companys consolidated balance sheet at March 31, 2005):



|              |  |                         |  |                   |         |                              |   |                    |  |   |        
|------------- |  | ----------------------- |  | ----------------- | ------- | ---------------------------- | - | ------------------ |  | - | -------
|Year Maturing |  | Year Callable/ Maturity |  | Subordinated Debt |         | JuniorSubordinatedDebentures |   | Total ($ millions)
|2006          |  | Not callable            |  | $                 | 24,515  |                              |   |                    |  | $ | 24,515 
|2012          |  | Not callable            |  |                   | 200,607 |                              |   |                    |  |   | 200,607
|2027          |  | 2007                    |  |                   |         |                              | $ | 46,547             |  |   | 46,547 
|2028          |  | 2008                    |  |                   |         |                              |   | 50,407             |  |   | 50,407 
|2033          |  | 2008                    |  |                   |         |                              |   | 35,103             |  |   | 35,103 
|2034          |  | 2009                    |  |                   |         |                              |   | 20,436             |  |   | 20,436 
|              |  |                         |  |                   |         |                              |   |                    |  |   |        
|              |  |                         |  | $                 | 225,122 |                              | $ | 152,493            |  | $ | 377,615
|              |  |                         |  |                   |         |                              |   |                    |  |   |        



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



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



12



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##### Table of Contents

NOTE H: - STOCK BASED COMPENSATION



The Board of Directors adopted and the shareholders approved on April 17,2002, the 2002 Stock Option Plan, which provides for the issuance
of up to 1,250,000 stock options to employees of the Company, in addition to those previously granted. The option or grant price cannot be less than the fair market value of the common stock at the date of the grant. As of the adoption date there
were no further issuances from any of the Companys previous stock option plans. There are other options outstanding that were granted under the plans of acquired companies. As of March 31, 2005, there remained 879,400 shares and as of December
31, 2004 there remained 875,200 shares available for grant from the 2002 Stock Option Plan.



The Board of Directors has adopted and the shareholders approved on April 21, 2004 an amended restricted stock plan, which authorized an additional one million shares available for future issuances. As of March 31,
2005, 939,797 shares remain available for grants.



The Company adopted as of
January 1, 2003 SFAS No. 148 and will utilize the prospective method of transition, which requires that companies apply the recognition provisions of Statement 123 to all employee awards granted, modified, or settled after the beginning of the
fiscal year in which the recognition provisions are first applied. Adoption of this statement had no material effect on the Companys operations. The intrinsic value method is used on all grants prior to January 1, 2003. Since, the pro forma
effect on net income of the stock options granted prior to adoption of SFAS No. 148 is immaterial, we have not disclosed such pro forma compensation expense and its related effect on net income and earnings per share herein.



NOTE I: INCOME TAXES



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



|              |  |                    |        |                |   |       
|------------- |  | ------------------ | ------ | -------------- | - | ------
|              |  | Three months ended
|              |  | March 31, 2005     |        | March 31, 2004
|Federal Taxes |  | $                  | 9,966  |                | $ | 10,053
|State Taxes   |  |                    | 63     |                |   | 250   
|              |  |                    |        |                |   |       
|Total         |  | $                  | 10,029 |                | $ | 10,303
|              |  |                    |        |                |   |       



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



|                                                      |  |                    |        |   |                |   |        |  
|----------------------------------------------------- |  | ------------------ | ------ | - | -------------- | - | ------ | -
|                                                      |  | Three months ended |       
|                                                      |  | March 31, 2005     |        |   | March 31, 2004 |  
|Tax at statutory rate                                 |  | $                  | 13,916 |   |                | $ | 14,450 |  
|Increase (decrease) in taxes resulting from:          |  |                    |        |   |                |   |        |  
|Section 29 tax credits                                |  |                    | (2,338 | ) |                |   | (2,082 | )
|Tax-exempt income                                     |  |                    | (1,620 | ) |                |   | (1,862 | )
|State income taxes, net of Federal income tax benefit |  |                    | 41     |   |                |   | 163    |  
|Other, net                                            |  |                    | 30     |   |                |   | (366   | )
|                                                      |  |                    |        |   |                |   |        |  
|Provision for income taxes                            |  | $                  | 10,029 |   |                | $ | 10,303 |  
|                                                      |  |                    |        |   |                |   |        |  



NOTE J: COMMITMENTS AND CONTINGENT
LIABILITIES



The Company and its subsidiaries, from time to time, may be
defendants in legal proceedings. In the opinion of management, based upon consultation with legal counsel, the ultimate resolution of these legal proceedings will not have a material effect on the financial condition of the Company.



In the normal course of business, the Company and its subsidiaries have various commitments
and contingent liabilities such as commitments to extend credit, letters of credit and liability for assets held in trust which are not reflected in the accompanying financial statements. Loan commitments, commitments to extend lines of credit and
stand-by letters of credit are made to customers in the ordinary course of business. Both arrangements have credit risk essentially the same as that involved in extending loans to customers and are subject to the Companys normal credit
policies. As of March 31, 2005, the Company had a total of $2.5 billion in commitments to extend credit, $66.9 million in standby letters of credit and $19.4 million in commercial letters of credit.



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##### Table of Contents

NOTE K: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS



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



|                                                    |  |                     |        |   |                |   |        |  
|--------------------------------------------------- |  | ------------------- | ------ | - | -------------- | - | ------ | -
|                                                    |  | Three months ended: |       
|                                                    |  | March 31, 2005      |        |   | March 31, 2004 |  
|Service cost                                        |  | $                   | 654    |   |                | $ | 568    |  
|Interest cost                                       |  |                     | 813    |   |                |   | 767    |  
|Expected return on plan assets                      |  |                     | (1,349 | ) |                |   | (1,201 | )
|Amortization on unrecognized gains                  |  |                     | 216    |   |                |   | 68     |  
|Amortization of unrecognized past service liability |  |                     | 19     |   |                |   | 20     |  
|                                                    |  |                     |        |   |                |   |        |  
|Net periodic benefit costs:                         |  | $                   | 353    |   |                | $ | 222    |  



The above tables does include costs
associated with the Companys SERP agreements with key employees. The Company did not have any gains or losses on settlements, prior service costs or recognized gains or losses in the three-month periods ended March 31, 2005 and March 31, 2004.
At this time the Company has not determined the contribution level for 2005.



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



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



STATEMENTS REGARDING FORWARD-LOOKING INFORMATION



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



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



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



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



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



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



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



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



| |  |  | a failure to satisfactorily comply with the FDIC order
| | - |  | ------------------------------------------------------



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



14



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##### Table of Contents

RESULTS OF OPERATIONS



OVERVIEW



The Company reported net income of $29.7 million, or $0.66 per diluted share, for the first quarter of 2005 compared to $31.0 million, or $0.69 per diluted share, for the
first quarter of 2004.



The Companys return on average equity was 22.59%
and return on average assets was 1.34% for the first quarter of 2005. The net interest margin was 3.78%. The Companys return on average equity was 26.51% and return on average assets was 1.54% for the first quarter of 2004. The net interest
margin was 4.25%.



NET INTEREST INCOME



Net interest income for the first quarter of 2005 was $77.3 million and the net interest
margin on a tax equivalent basis was 3.78%. Net interest income for the first quarter of 2004 was $77.9 million and the net interest margin on a tax equivalent basis was 4.25%. Net interest income decreased by $0.6 million in the first quarter of
2005 compared to the same period of 2004. The decrease in net interest income in the first quarter of 2005 compared to the comparable quarter in 2004 was due primarily to higher costs on deposits and borrowings and the repositioning of the
securities portfolio to include a larger component of securities rated AA and AAA.



NONINTEREST INCOME



Noninterest income was $31.6 million in the first quarter of 2005 and $35.6 million in the first quarter of 2004. . The decrease in noninterest income in 2005 compared to
2004 was due mainly to decreases in retail service fees and lower security gains. During the fourth quarter of 2004 the Company sold its merchant processing business. Loan fees for the first quarter 2004 included $1.4 million of merchant processing
fees related to this business.



NONINTEREST
EXPENSE



Noninterest expense was $64.6 million for the first quarter of 2005
and $66.6 million for the first quarter of 2004. The decrease in noninterest expense in the first quarter of 2005 compared to the first quarter of 2004 is due mainly to decreases in outside services resulting from lower expenses associated with the
modification of the Companys data processing and item processing contracts, as well as nonrecurring expenses in 2004 from the Companys termination of its correspondent banking business. Increases experienced in noninterest expense in the
Companys Landfill Gas Investments were due to budgeted repair and maintenance expenditures related to the business which were accelerated in the first quarter. An increase in other noninterest expense is due to higher foreclosed property
expense related to the property that is expected to close during the second quarter of 2005 at which time it is anticipated that all operating expenses will be reimbursed.



INCOME TAXES



The Companys pretax income for the first quarter of 2005 was $39.8 million, a decrease of $1.5 million, or 3.7%, compared to the first quarter of 2004. The
Companys provision for income taxes was $10.0 million for the first quarter of 2005 compared to $10.3 million for the first quarter of 2004. The Companys effective tax rate was 25.2% for the first quarter of 2005 compared to 25.0% for
the first quarter of 2004. The effective tax rate is lower than the statutory Federal income tax rate and results from the Companys investment in tax advantaged securities and loans and the Section 29 income tax credits.



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



The provision for loan and lease losses was $4.5 million for
the first quarter of 2005 and $5.5 million for the first quarter of 2004. The decrease in 2005 over 2004 was due to continued low levels of nonperforming loans and lower net charge-offs over recent quarters. Net charge offs for the first quarter of
2005 were $5.5 million compared to $5.6 million for the first quarter of 2004.



The Allowance for loan and lease losses (Allowance) totaled $59.8 million at March 31, 2005 compared to $60.8 million at December 31, 2004. It represented 347% of nonperforming loans and leases at March 31, 2005, compared to
496% at December 31, 2004. The Allowance as a percentage of total loans and leases was 1.24% at March 31, 2005 and 1.26% at December 31, 2004.



15



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##### Table of Contents

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



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



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



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



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



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



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



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



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



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



Based upon the process employed and giving recognition to all attendant factors associated with the loan portfolio, management considers the Allowance to be adequate
at March 31, 2005.



Non Performing Loans and Non Performing Assets



Nonperforming loans and leases totaled $17.2 million at March 31, 2005. This
was a increase of $5.0 million, compared to $12.3 million of nonperforming loans and leases as of December 31, 2004. Nonperforming loans and leases were 0.36 % of total loans and leases at March 31, 2005, compared to 0.25% at December 31, 2004.



The increase in the Companys non-performing loans and leases is
anticipated to be temporary. The increase in the commercial loan portfolio was centered in the insurance premium segment of commercial loans. Approximately, $1.5 million in payments due from the insurance company on canceled policies was delayed in
the first quarter of 2005. $1.2 million of these payments were received in April 2005. We anticipate that an additional $1.1 million of this increase will be resolved in the second and third quarter. The increase in the mortgage portfolio was caused
by three loans. The Bank had entered into a contract to sell a foreclosed upon property for $2.7 million. The buyer has withdrawn from the contract and the Bank and borrower are seeking a buyer. The two remaining related credits totaling $0.8
million are expected to be resolved in the second quarter of 2005.



Nonperforming assets were $33.2 million at March 31, 2005, up from $27.9 million at December 31, 2004. Nonperforming assets as a percent of loans, leases and OREO were 0.69% at March 31, 2005 and 0.58% at December 31, 2004. Nonperforming
assets at March 31, 2005 include a property with a carrying value of $13.8 million under a contract to sell scheduled to close during the second quarter of 2005.



16



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##### Table of Contents

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



|                                                        |  |               |        |   |                  |   |        |  
|------------------------------------------------------- |  | ------------- | ------ | - | ---------------- | - | ------ | -
|                                                        |  | March 31,2005 |        |   | December 31,2004 |  
|Nonaccrual Loans:                                       |  |               |        |   |                  |   |        |  
|Commercial                                              |  | $             | 6,384  |   |                  | $ | 4,756  |  
|Commercial Insurance Premium Finance                    |  |               | 2,098  |   |                  |   | 562    |  
|Real Estate                                             |  |               | 8,647  |   |                  |   | 6,825  |  
|Consumer                                                |  |               | 100    |   |                  |   | 114    |  
|                                                        |  |               |        |   |                  |   |        |  
|Total Nonaccrual Loans                                  |  | $             | 17,229 |   |                  | $ | 12,257 |  
|Foreclosed Assets                                       |  |               | 15,976 |   |                  |   | 15,618 |  
|                                                        |  |               |        |   |                  |   |        |  
|Total Nonperforming Assets                              |  | $             | 33,205 |   |                  | $ | 27,875 |  
|                                                        |  |               |        |   |                  |   |        |  
|Nonaccrual Loans to Total Loans and Leases              |  |               | 0.36   | % |                  |   | 0.25   | %
|Allowance for Loan and Lease Losses to Nonaccrual Loans |  |               | 347    | % |                  |   | 496    | %



Loans Past Due 90 Days and Still
Accruing



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



|                                            |  |                |        |   |                   |   |        |  
|------------------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                            |  | March 31, 2005 |        |   | December 31, 2004 |  
|Loans Past Due 90 Days or More and Accruing |  |                |        |   |                   |   |        |  
|Commercial                                  |  | $              | 977    |   |                   | $ | 687    |  
|Commercial Insurance Premium Finance        |  |                | 511    |   |                   |   | 1,263  |  
|Real Estate                                 |  |                | 3,493  |   |                   |   | 3,852  |  
|Consumer                                    |  |                | 1,497  |   |                   |   | 1,492  |  
|Credit card                                 |  |                | 6,774  |   |                   |   | 7,323  |  
|                                            |  |                |        |   |                   |   |        |  
|Total Past Due Loans                        |  | $              | 13,252 |   |                   | $ | 14,617 |  
|                                            |  |                |        |   |                   |   |        |  
|As a percent of Total Loans and Leases      |  |                | 0.28   | % |                   |   | 0.30   | %



17



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##### Table of Contents

Allowance for Loan and Lease Losses



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



|                                                                                             |  |                                                       |           |   |                              |   |           |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------------------------------- | --------- | - | ---------------------------- | - | --------- | -
|                                                                                             |  | Summary of Activity in the Allowance By Loan Category |          
|(Dollars in thousands)                                                                       |  | Three Months EndedMarch 31, 2005                      |           |   | Year Ended December 31, 2004 |  
|Amount of Loans and Leases Outstanding at Period End                                         |  | $                                                     | 4,807,402 |   |                              | $ | 4,827,184 |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Daily Average Amount of Loans and Leases Outstanding                                         |  | $                                                     | 4,798,952 |   |                              | $ | 4,700,573 |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Allowance for Loan and Lease Losses                                                          |  |                                                       |           |   |                              |   |           |  
|Balance at beginning of the period                                                           |  | $                                                     | 60,799    |   |                              | $ | 67,846    |  
|Loans charged off:                                                                           |  |                                                       |           |   |                              |   |           |  
|Real estate                                                                                  |  | $                                                     | 46        |   |                              | $ | 1,184     |  
|Commercial                                                                                   |  |                                                       | 1,647     |   |                              |   | 5,864     |  
|Commercial Insurance Premium Finance                                                         |  |                                                       | 43        |   |                              |   | 187       |  
|Consumer                                                                                     |  |                                                       | 6,505     |   |                              |   | 24,385    |  
|Other                                                                                        |  |                                                       |          |   |                              |   | 5         |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Total loans charged off                                                                      |  | $                                                     | 8,241     |   |                              | $ | 31,625    |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Recoveries:                                                                                  |  |                                                       |           |   |                              |   |           |  
|Real estate                                                                                  |  | $                                                     | 261       |   |                              | $ | 535       |  
|Commercial                                                                                   |  |                                                       | 1,032     |   |                              |   | 3,368     |  
|Commercial Insurance Premium Finance                                                         |  |                                                       | 23        |   |                              |   | 224       |  
|Consumer                                                                                     |  |                                                       | 1,353     |   |                              |   | 6,135     |  
|Other                                                                                        |  |                                                       | 23        |   |                              |   | 161       |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Total recoveries                                                                             |  | $                                                     | 2,692     |   |                              | $ | 10,423    |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Net loans charged off                                                                        |  | $                                                     | 5,549     |   |                              | $ | 21,202    |  
|                                                                                             |  |                                                      
|Provision for loan and lease losses, portfolio loans                                         |  |                                                       | 4,500     |   |                              |   | 14,850    |  
|                                                                                             |  |                                                      
|Reclassification of reserves                                                                 |  |                                                       |          |   |                              |   | (695      | )
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Balance at period end                                                                        |  | $                                                     | 59,750    |   |                              | $ | 60,799    |  
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Allowance for Loan and Lease Losses to Total Loans and Leases                                |  |                                                       | 1.24      | % |                              |   | 1.26      | %
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Provision for loan and lease losses, as a percentage of average loans and leases outstanding |  |                                                       | 0.38      | % |                              |   | 0.32      | %
|                                                                                             |  |                                                       |           |   |                              |   |           |  
|Net loans charged off during period to average loans and leases outstanding                  |  |                                                       | 0.46      | % |                              |   | 0.45      | %
|                                                                                             |  |                                                       |           |   |                              |   |           |  



FINANCIAL CONDITION



Loan and lease categories consisting of commercial and financial, commercial real estate,
consumer, and credit card loans totaled $4.7 billion at March 31, 2005 and at December 31, 2004. These four loan and lease categories are the areas of loans that the Company emphasizes. This is because they generally have more attractive yields;
interest rate sensitivity; and maturity characteristics than single family loans. These four loan and lease categories represented approximately 98% of loans and leases at March 31, 2005, compared to 97% at December 31, 2004. Residential mortgage
loans, which are not an area of emphasis for the Company, were $118.9 million as of March 31, 2005, compared to $126.8 million at December 31, 2004. The loan to deposit ratio at March 31, 2005 and December 31, 2004 was 77% and 76%, respectively.



Total investment securities were $3.4 billion at March 31, 2005, compared to
$3.5 billion at December 31, 2004. The decrease in investment securities was due primarily to planned sales. Total assets were $8.9 billion at March 31, 2005 compared to $9.1 billion at December 31, 2004.



Deposits other than time deposits were $4.5 billion at both March 31, 2005 and at December
31, 2004. Total deposits were $6.3 billion at both March 31, 2005 and at December 31, 2004.



18



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##### Table of Contents

Total borrowings decreased by $129.3 million over year-end 2004 levels to $1.6 billion. This decrease was primarily due
to decreases in Federal Home Loan Bank advances with terms ranging from one month to slightly over one year.



Total stockholders equity was $530.9 million and $531.7 million at March 31, 2005 and December 31, 2004, respectively. Book value per common share (defined as total stockholders equity divided by total
shares outstanding) was $11.79 at March 31,2005 and $11.82 at December 31, 2004. All regulatory capital ratios exceed those necessary to be considered a well-capitalized institution at both March 31, 2005 and December 31, 2004. The Board authorized
on April 15, 2005 the repurchase of up to 4.5 million outstanding shares of the Company. This approximates 10% of outstanding shares. This authorization expires on April 15, 2007.



The decrease in stockholders equity resulted primarily from $29.7 million of net income, partially offset by payment of cash dividends
of $16.7 million and other comprehensive loss of $15.1 million related to the decline in the fair value of available for sale securities.



The Company did not repurchase any shares in the first quarter of 2005. The Company repurchased a total of 14,980 shares in 2004, at an average price of $37.48 per share.
The total cash allocated for these repurchases was $0.6 million.



Total shares
outstanding were 45.0 million shares at both March 31, 2005 and December 31, 2004.



The Company paid cash dividends of $0.37 per share or $16.7 million in the first quarter of 2005. Total cash dividends paid in the 2004 first quarter were $0.33 per share or $14.9 million. Dividends paid in 2004 were $1.36 per share.



MARKET RISK



Interest Rate Risk



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



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



During the first quarter of 2005, the Company decreased its investment
portfolio by approximately $138.0 million compared to December 31, 2004. The overall effect of this transition has relatively no change to the Companys balance sheet interest rate sensitivity at March 31, 2005 as compared to December 31, 2004.



The Company enters into interest rate derivative contracts (interest rate
swaps) from time to time for asset liability management purposes. The notional amount of the derivative contracts totaled $370 million at March 31, 2005 and $495 million at December 31, 2004.



The purpose of these contracts is to attempt to limit the volatility in the Companys
net interest income and net interest margin in the event of changes in interest rates, in the context of the management of the Companys overall asset liability risk. Management did not enter into these contracts for speculative purposes. Under
SFAS No.133, the Company has adopted hedge accounting for these contracts. The derivative contracts hedging the fixed rate certificates of deposit and fixed rate debt 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 are assumed to be exactly as much as the change in the value of the derivative contract. Therefore, in a fair value
hedge, the hedged item is adjusted by exactly the same amount as the derivative, with no impact on earnings. All of the derivative contracts outstanding as of March 31, 2005 that are hedges for the Companys borrowings and certificates of
deposit are indexed to LIBOR. Changes in interest rates will impact the cash flows and valuation of such derivative contracts, but management does not expect the overall financial statement impact to be material under any interest rate scenario.



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Liquidity



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



Capital



The capital ratios for the
Company at March 31, 2005 and the minimum regulatory guidelines for such capital ratios for qualification as a well-capitalized institution are as follows:



|                               |  |                         |   |  |                                                   |  
|------------------------------ |  | ----------------------- | - |  | ------------------------------------------------- | -
|Holding Company Capital Ratios |  |                         |   |  |                                                   |  
|                               |  | Ratios atMarch 31, 2005 |   |  | Minimum RegulatoryGuidelines for Well-Capitalized |  
|Total Risk-Based Capital       |  | 14.41                   | % |  | 10.0                                              | %
|Tier 1 Risk-Based Capital      |  | 10.05                   | % |  | 6.0                                               | %
|Tier 1 Leverage Ratio          |  | 6.85                    | % |  | 4.0                                               | %
|                               |  |                        
|Bank Capital Ratios            |  |                         |   |  |                                                   |  
|                               |  | Ratios atMarch 31, 2005 |   |  | Minimum RegulatoryGuidelines for Well-Capitalized |  
|Total Risk-Based Capital       |  | 13.80                   | % |  | 10.0                                              | %
|Tier 1 Risk-Based Capital      |  | 9.51                    | % |  | 6.0                                               | %
|Tier 1 Leverage Ratio          |  | 6.47                    | % |  | 4.0                                               | %



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



Item 3. Quantitative and Qualitative Disclosure about Market Risk



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



Item 4. Controls and Procedures



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



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



The Companys management, including
the CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not absolute, assurance
that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance with respect to financial statement preparation and presentation that all control issues and instances of fraud, if any, within the Company have been or will be detected. These inherent
limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the controls.





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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 2. Unregistered Sales of Equity Securities and Use of Proceeds



|                      |  |                             |  |                             |  |                                                                                  |  |                                                                 
|--------------------- |  | --------------------------- |  | --------------------------- |  | -------------------------------------------------------------------------------- |  | ----------------------------------------------------------------
|                      |  | Total numbersharesPurchased |  | Average pricepaid per share |  | Total number of shares purchased as part of publicly announced plans or programs |  | Maximum number ofshares that may yet be purchased under the plan
|January 1  31, 2005  |  |                            |  |                            |  |                                                                                 |  |                                                                
|February 1  28, 2005 |  |                            |  |                            |  |                                                                                 |  |                                                                
|March 1  31, 2005    |  |                            |  |                            |  |                                                                                 |  |                                                                



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



Item 6: Exhibits



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



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



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



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



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

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SIGNATURES



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



|            |  |                       |  |                                                      
|----------- |  | --------------------- |  | -----------------------------------------------------
|            |  | HUDSON UNITED BANCORP
|            |  |                      
|May 9, 2005 |  | By:                   |  | /s/ KENNETH T. NEILSON                               
|DATE        |  |                       |  | Kenneth T. Neilson                                   
|            |  |                       |  | Chairman, President and Chief Executive Officer      
|            |  |                      
|May 9, 2005 |  | By:                   |  | /s/ JAMES W. NALL                                    
|DATE        |  |                       |  | James W. Nall                                        
|            |  |                       |  | Executive Vice President, Chief Financial Officer and
|            |  |                       |  | Chief Accounting Officer                             



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