UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-Q/A
                                (Amendment No. 1)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
    SECURITIES  EXCHANGE ACT OF 1934
For the quarterly period ended ............................   SEPTEMBER 30, 2003
                                       OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
     SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________

Commission File No.: 000-23809


                          FIRST SENTINEL BANCORP, INC.
             (exact name of registrant as specified in its charter)

               DELAWARE                               22-3566151
   (State or other jurisdiction of             (IRS Employer I.D. No.)
    incorporation or organization)

               1000 WOODBRIDGE CENTER DRIVE, WOODBRIDGE, NJ 07095
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (732) 726-9700

                                 NOT APPLICABLE
       Former Name, Address, and Fiscal year, if changed since last report


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes     X      No        .
     -------      -------

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Rule 12b-2 of the Exchange Act).

Yes     X      No        .
     -------      -------

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

            CLASS                              OUTSTANDING AT NOVEMBER 1, 2003
-------------------------------              -----------------------------------
         Common Stock                                  27,677,080 shares


<PAGE>


                          FIRST SENTINEL BANCORP, INC.

                              INDEX TO FORM 10-Q/A

                                                                          Page #
                                                                          ------

                EXPLANATORY NOTE                                             3

PART I.         FINANCIAL INFORMATION

Item 1.         Financial Statements (Unaudited)

                Consolidated Statements of Financial Condition as of
                September 30, 2003 (restated) and December 31, 2002          4

                Consolidated Statements of Income (restated) for the three
                and nine months ended September 30, 2003 and 2002            5

                Consolidated Statements of Stockholders' Equity (restated)
                for the nine months ended September 30, 2003 and 2002        6

                Consolidated Statements of Cash Flows (restated) for the
                nine months ended September 30, 2003 and 2002                7

                Notes to Restated Unaudited Consolidated Financial           8
                Statements

Item 2.         Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                   14

Item 3.         Quantitative and Qualitative Disclosure About Market Risk   23

Item 4.         Controls and Procedures                                     23

PART II.        OTHER INFORMATION                                           23

                SIGNATURES                                                  25


                                       2
<PAGE>

                                EXPLANATORY NOTE


         The purpose of this  Amendment  No. 1 on Form  10-Q/A to the  Quarterly
Report on Form 10-Q of First  Sentinel  Bancorp,  Inc. (the  "Company")  for the
quarter ended  September 30, 2003,  which was  originally  filed on November 14,
2003, (the "Original Filing") is to restate the Company's consolidated financial
statements  at and for the three and nine months  ended  September  30, 2003 and
2002, and related disclosures.

         This  Amendment No. 1 amends and restates in their  entirety Items 1, 2
and  4 of  Part  I of  the  Original  Filing.  Except  for  financial  statement
information  and  related  disclosures  that  are  specifically  related  to the
restatement,  all information  contained in this report is stated as of the date
of the Original Filing.  This amendment does not otherwise update information in
the Original Filing to reflect facts or events occurring  subsequent to the date
of the Original Filing.

           The Company has restated its consolidated  financial statements as of
and for the three  months and nine months ended  September  30, 2003 and 2002 to
conform its accounting for First Savings Bank's Directors'  Deferred Fee Plan in
accordance with Emerging Issues Task Force ("EITF") Issue No. 97-14, "Accounting
for Deferred Compensation  Arrangements Where Amounts Earned are Held in a Rabbi
Trust and Invested." Under the Directors' Deferred Fee Plan, directors may elect
to defer all or part of their fees and have such  amounts  held in a rabbi trust
and  invested  in the  Company's  common  stock,  or a deferred  money  account.
Historically,  the Company  expensed such deferred  directors' fees, but did not
recognize  subsequent charges in the fair value of stock held in the rabbi trust
for the Directors'  Deferred Plan as periodic charges or credits to compensation
cost with a  corresponding  change in a deferred  compensation  obligation.  The
Company has determined that a deferred  compensation  obligation  (liability) is
required  to be  recognized  for the fair value of the common  stock held in the
rabbi trust for the Directors' Deferred Fee Plan, with changes in the fair value
of  the  common  stock  being  recorded  as  a  periodic  charge  or  credit  to
compensation  cost and the cost of shares held in the rabbi  trust  treated in a
manner  similarly to treasury  stock.  The  restatements  resulted in net income
being  reduced by $1.3  million and  increased  by $103,000 for the three months
ended September 30, 2003 and 2002,  respectively and reduced by $2.1 million and
$574,000 for the nine months ended September 30,2003 and 2002 respectively.  The
restatements  also had the effect of reducing  the number of shares  outstanding
for book value and earnings per share calculations for all periods presented.

           Additional  detail regarding the restatement is included in Note 2 of
the Notes to Restated Unaudited  Consolidated  Financial  Statements included in
Item 1 of Part I of this Amendment No. 1 on Form 10-Q/A.

           The restated unaudited  consolidated financial statements included in
this  Amendment  No. 1 on Form  10-Q/A  should be read in  conjunction  with the
restated consolidated financial statements included in the Company's Form 10-K/A
for the year ended December 31, 2002, which was filed on January 27, 2004.


                                       3
<PAGE>

--------------------------------------------------------------------------------
FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (RESTATED)
(Dollars in thousands, except share data) (Unaudited)

<TABLE>
<CAPTION>

                                                                                       September 30,      December 31,
                                                                                           2003               2002
                                                                                       -------------      ------------
<S>                                                                                    <C>                <C>
ASSETS
Cash and due from banks ...........................................................    $     22,472       $     21,695
Federal funds sold ................................................................          33,400             44,250
                                                                                       ------------       ------------
     Total cash and cash equivalents ..............................................          55,872             65,945
Federal Home Loan Bank of New York (FHLB-NY) stock, at cost .......................          21,328             20,835
Investment securities available for sale ..........................................         123,019            114,219
Mortgage-backed securities available for sale .....................................         781,703            790,562
Loans held for sale, net ..........................................................           2,093                563
Loans receivable, net .............................................................       1,200,280          1,200,647
Interest and dividends receivable .................................................           9,655             11,055
Premises and equipment, net .......................................................          16,063             15,882
Core deposit intangibles ..........................................................           3,939              4,568
Other assets ......................................................................          36,777             37,203
                                                                                       ------------       ------------
    Total assets ..................................................................    $  2,250,729       $  2,261,479
                                                                                       ============       ============


LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits ..........................................................................    $  1,386,215       $  1,387,986
Borrowed funds ....................................................................         591,542            596,663
Advances by borrowers for taxes and insurance .....................................           9,065              9,615
Other liabilities .................................................................          33,467             30,643
                                                                                       ------------       ------------
    Total liabilities .............................................................       2,020,289          2,024,907
                                                                                       ============       ============

Company-obligated mandatorily redeemable preferred capital securities of a
    subsidiary trust holding solely junior subordinated debentures of the Company .          25,000             25,000
                                                                                       ------------       ------------

STOCKHOLDERS' EQUITY
Preferred Stock; authorized 10,000,000 shares; none issued and outstanding ........              --                 --
Common Stock, $.01 par value, 85,000,000 shares authorized;
    43,106,742 and 27,650,963 shares issued and outstanding at 9/30/03 and
    43,106,742 and 28,422,028 shares issued and outstanding at 12/31/02 ...........             430                430
Paid-in capital ...................................................................         206,700            205,915
Retained earnings .................................................................         169,280            161,453
Accumulated other comprehensive income ............................................           5,041              9,776
Treasury stock (15,331,125 and 14,586,591 shares at 9/30/03 and 12/31/02,
    respectively). ................................................................        (156,627)          (145,480)
Common stock acquired by the Employee Stock Ownership Plan (ESOP) .................          (8,715)            (9,404)
Common stock acquired by the Recognition and Retention Plan (RRP) .................            (316)            (1,032)
Common stock acquired by the DDFP .................................................          (2,679)            (2,412)
DDFP transition differential ......................................................          (7,674)            (7,674)
                                                                                       -------------      -------------
     Total stockholders' equity ...................................................         205,440            211,572
                                                                                       -------------      -------------
     Total liabilities and stockholders' equity ...................................    $  2,250,729       $  2,261,479
                                                                                       =============      =============
</TABLE>

See accompanying notes to the restated unaudited consolidated financial
statements.

                                       4
<PAGE>

FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (RESTATED)
(Dollars in thousands, except share data) (Unaudited)

<TABLE>
<CAPTION>

                                                                        Three months ended                Nine months ended
                                                                           September 30,                     September 30,
                                                                 ---------------------------------  ------------------------------
                                                                       2003              2002           2003             2002
                                                                   -------------    --------------  ------------     -------------
<S>                                                                <C>                <C>           <C>               <C>
INTEREST INCOME:
  Loans ......................................................     $      17,805      $     21,302  $     55,651      $     64,215
  Investment and mortgage-backed securities
    available for sale .......................................             8,618            10,784        27,110            31,719
                                                                   -------------      ------------  ------------      ------------
     Total interest income ...................................            26,423            32,086        82,761            95,934
                                                                   -------------      ------------  ------------      ------------
INTEREST EXPENSE:
 Deposits:
   NOW and money market demand ...............................             1,079             1,918         3,543             6,099
   Savings ...................................................               475               952         1,803             2,722
   Certificates of deposit ...................................             3,465             5,050        11,472            16,454
                                                                   -------------      ------------  ------------      ------------
     Total interest expense - deposits .......................             5,019             7,920        16,818            25,275
 Borrowed funds ..............................................             6,944             7,691        21,907            22,287
                                                                   -------------      ------------  ------------      ------------
     Total interest expense ..................................            11,963            15,611        38,725            47,562
                                                                   -------------      ------------  ------------      ------------
     Net interest income .....................................            14,460            16,475        44,036            48,372
Provision for loan losses ....................................                --               105            --             1,310
                                                                   -------------      ------------  ------------      ------------
     Net interest income after provision for loan losses .....            14,460            16,370        44,036            47,062
                                                                   -------------      ------------  ------------      ------------

NON-INTEREST INCOME:
  Fees and service charges ...................................             1,141               992         3,171             3,091
  Net gain (loss) on sales of loans and securities
         available for sale. .................................               276             1,349         1,802              (122)
  Income on Bank Owned Life Insurance (BOLI) .................               412               338         1,195             1,157
  Other, net .................................................                39               158           472               536
                                                                   -------------      ------------  ------------      ------------
  Total non-interest income ..................................             1,868             2,837         6,640             4,662
                                                                   -------------      ------------  ------------      ------------


NON-INTEREST EXPENSE:
  Compensation and benefits ..................................             6,202             4,122        16,206            13,291
  Occupancy ..................................................               596               592         1,829             1,695
  Equipment ..................................................               390               451         1,227             1,290
  Advertising ................................................               134               221           672               754
  Federal deposit insurance ..................................                57                58           171               176
  Amortization of core deposit intangibles ...................               210               210           629               633
  Distributions on preferred capital securities ..............               464               495         1,408             1,484
  General and administrative .................................             1,099             1,151         3,413             3,385
                                                                   -------------      ------------  ------------      ------------
     Total non-interest expense ..............................             9,152             7,300        25,555            22,708
                                                                   -------------      ------------  ------------      ------------
     Income before income tax expense ........................             7,176            11,907        25,121            29,016

Income tax expense ...........................................             2,278             4,326         8,312             9,951
                                                                   -------------      ------------  ------------      ------------

     Net income ..............................................     $       4,898      $      7,581  $     16,809      $     19,065
                                                                   =============      ============  ============      ============
Basic earnings per share .....................................     $        0.19      $       0.28  $       0.65      $       0.68
                                                                   =============      ============  ============      ============
Weighted average shares outstanding - Basic ..................        25,627,668        27,476,267    25,704,034        27,969,243
                                                                   =============      ============  ============      ============
Diluted earnings per share ...................................     $        0.19      $       0.26  $       0.64      $       0.66
                                                                   =============      ============  ============      ============
Weighted average shares outstanding - Diluted ................        26,384,153        29,185,437    26,434,069        29,717,856
                                                                   =============      ============  ============      ============

See accompanying notes to the restated unaudited consolidated financial
statements.

</TABLE>

                                       5
<PAGE>

FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (RESTATED)
 (Dollars in thousands) (Unaudited)

<TABLE>
<CAPTION>
                                                           Accumulated
                                                              Other
                                                             Compre-   Common     Common               Common    DDPF       Total
                                                             hensive   Stock      Stock                Stock   Transition   Stock-
                                  Common  Paid-In  Retained  Income   Acquired   Acquired  Treasury   Acquired  Differ-    holders
                                   Stock  Captial  Earnings  (Loss)   By ESOP     By RRP     Stock    By DDFP   ential     Equity
                                  ------  -------  -------- -------- ----------  --------- ---------- -------- --------  ---------

<S>                                <C>   <C>       <C>       <C>      <C>         <C>      <C>        <C>      <C>       <C>
Balance at December 31, 2001 ..... $430  $204,544  $147,159  $2,178   $(10,321)   $(1,910) $(110,571) $(2,132) $(7,674)  $221,703
  Net income for the nine months
    ended September 30, 2002 .....   --        --    19,065      --         --         --         --       --       --     19,065
    (restated)
Cash dividends declared ($0.075) .   --        --    (7,814)     --         --         --         --       --       --     (7,814)
Net change in unrealized gain on
  securities available for sale ..   --        --        --   7,034         --         --         --       --       --      7,034
Purchases of treasury stock ......   --        --        --      --         --         --    (26,028)      --       --    (26,028)
Increase in cost of DDFP, net ....   --        --        --      --         --         --         --     (198)      --       (198)
Exercise of stock options ........   --        --      (413)     --         --         --        636       --       --        223
Tax benefit on stock options
  and RRP ........................   --       331        --      --         --         --         --       --       --        331
Purchase and retirement of
  common stock ...................   --      (108)       --      --         --         --         --       --       --       (108)
Amortization of RRP ..............   --        --        --      --         --        659         --       --       --        659
ESOP expense .....................   --       330        --      --        688         --         --       --       --      1,018
                                  ------------------------------------------------------------------------------------------------
Balance at September 30, 2002
  (restated) ..................... $430  $205,097  $157,997  $9,212    $(9,633)   $(1,251) $(135,963) $(2,330) $(7,674)  $215,885
                                  ================================================================================================

Balance at December 31, 2002 ..... $430  $205,915  $161,453  $9,776    $(9,404)   $(1,032) $(145,480) $(2,412) $(7,674)  $211,572
Net income for the nine months
  ended September 30, 2003 .......   --        --    16,809      --         --         --         --       --       --     16,809
  (restated)
Cash dividends declared ($0.105) .   --        --    (8,129)     --         --         --         --       --       --     (8,129)
Net change in unrealized gain on
  securities available for sale ..   --        --        --  (4,735)        --         --         --       --       --     (4,735)
Purchases of treasury  stock .....   --        --        --      --         --         --    (12,429)      --       --    (12,429)
Increase in cost of DDFP, net ....   --        --        --      --         --         --         --     (267)      --       (267)
Exercise of stock options ........   --       (63)     (853)     --         --         --      1,282       --       --        366
Tax benefit on stock options
   and RRP .......................   --       460        --      --         --         --         --       --       --        460
Purchase and retirement of
   common  stock .................   --      (177)       --      --         --         --         --       --       --       (177)
Amortization of RRP ..............   --        51        --      --         --        716         --       --       --        767
ESOP expense .....................   --       514        --      --        689         --         --       --       --      1,203
                                  ------------------------------------------------------------------------------------------------
Balance at September 30, 2003
  (restated) ..................... $430  $206,700  $169,280  $5,041    $(8,715)     $(316) $(156,627) $(2,679) $(7,674)  $205,440
                                  ================================================================================================
</TABLE>


See accompanying notes to the restated unaudited consolidated financial
statements.

                                       6
<PAGE>

FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
(Dollars in thousands) (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 Nine months ended
                                                                                                   September 30,
                                                                                           ----------------------------
                                                                                              2003             2002
                                                                                           ------------    ------------
<S>                                                                                        <C>             <C>
Cash flows from operating activities:
   Net income ...........................................................................  $    16,809     $    19,065
   ADJUSTMENTS  TO  RECONCILE  NET  INCOME  TO NET CASH  PROVIDED  BY
   OPERATING ACTIVITIES:
   Depreciation of premises and equipment ...............................................        1,059           1,066

   Amortization of core deposit intangibles..............................................          629             633
   ESOP expense .........................................................................        1,203           1,018
   Amortization of RRP ..................................................................          767             659
   DDFP expense .........................................................................        3,298             884
   Net amortization of premiums and accretion of discounts and deferred fees.............        5,413           2,815
   Provision for loan losses                                                                        --           1,310
   Loans originated for sale ............................................................      (48,512)        (15,782)

   Proceeds from sales of mortgage loans held for sale ..................................       47,056          19,327
   Net (gain) loss on sales of loans and securities available for sale...................       (1,802)            122
   Net (gain) loss on sales of real estate owned.........................................          (79)             10
   Income on BOLI........................................................................       (1,195)         (1,157)
   Decrease in interest and dividends receivable.........................................        1,400             767
   Tax benefit on stock options and RRP..................................................          460             331
   Increase in other liabilities.........................................................        2,010           6,626
   Decrease in other assets                                                                      1,600           2,976
                                                                                           ------------    ------------
         Net cash provided by operating activities ......................................       30,116          40,670
                                                                                           ------------    ------------
Cash flows from investing activities:
   Proceeds from sales/calls/maturities of investment securities available for sale .....       59,687          44,779
   Purchases of investment securities available for sale ................................      (67,709)        (54,051)
   Purchase of FHLB-NY stock ............................................................         (493)           (595)
   Proceeds from sales of mortgage-backed securities available for sale .................      127,442         152,433
   Principal payments on mortgage-backed securities .....................................      335,451         181,962
   Purchases of mortgage-backed securities available for sale ...........................     (466,367)       (419,561)
   Principal repayments on loans ........................................................      553,152         472,697
   Origination of loans .................................................................     (530,934)       (446,978)
   Purchases of mortgage loans ..........................................................      (21,335)        (26,483)
   Proceeds from sale of real estate owned ..............................................          235             129
   Purchases of premises and equipment ..................................................       (1,240)           (636)
                                                                                           ------------    ------------
          Net cash used in investing activities .........................................      (12,111)        (96,304)
                                                                                           ------------    ------------
Cash flows from financing activities:
   Purchase of treasury stock ...........................................................      (12,429)        (26,028)
   Increase in cost of DDFP, net ........................................................         (267)           (198)
   Purchase and retirement of common stock ..............................................         (177)           (108)
   Stock options exercised ..............................................................          366             223
   Cash dividends paid ..................................................................       (8,129)         (7,814)
   Net (decrease) increase in deposits ..................................................       (1,771)         61,803
   Proceeds from borrowed funds .........................................................       55,000         117,000
   Repayment of  borrowed funds .........................................................      (60,121)        (61,112)
   Net (decrease) increase in advances by borrowers for taxes and insurance..............         (550)            181
                                                                                           ------------    ------------
            Net cash (used in) provided by financing activities .........................      (28,078)         83,947
                                                                                           ------------    ------------
            Net (decrease) increase in cash and cash equivalents ........................      (10,073)         28,313
Cash and cash equivalents at beginning of period ........................................       65,945          53,875
                                                                                           ------------    ------------
Cash and cash equivalents at end of period ..............................................  $    55,872     $    82,188
                                                                                           ============    ============
Supplemental disclosures of cash flow information:
   Cash paid during the period for:
       Interest .........................................................................  $    39,541     $    47,505
       Income taxes .....................................................................        5,300           3,147
   Non cash investing and financing activities for the period:
        Transfer of loans to real estate owned ..........................................  $        84     $       197
</TABLE>


See accompanying notes to the restated unaudited consolidated financial
statements.

                                       7
<PAGE>


                  FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES

          Notes to Restated Unaudited Consolidated Financial Statements

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PRESENTATION

The accompanying restated unaudited  consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States of America for interim  financial  information  and in conformity
with the  instructions  to Form 10-Q and Article 10 of Regulation  S-X for First
Sentinel Bancorp,  Inc. ("First Sentinel" or the "Company") and its wholly-owned
subsidiaries,  First  Savings  Bank,  ("First  Savings"  or  the  "Bank")  Pulse
Investment,  Inc., Pulse Insurance Services,  Inc. and Pulse Real Estate,  Inc.,
and the Bank's wholly-owned subsidiaries, FSB Financial LLC, and 1000 Woodbridge
Center Drive, Inc. Certain  disclosures have been omitted or condensed  pursuant
to such rules.  These restated interim  financial  statements  should be read in
conjunction with the restated consolidated  financial statements included in the
Company's Form 10-K/A for the year ended  December 31, 2002,  which was filed on
January 28, 2004.

In the  opinion  of  management,  all  adjustments  (consisting  of only  normal
recurring accruals) necessary to present fairly the financial condition, results
of operations, and changes in cash flows have been made at and for the three and
nine months ended September 30, 2003 and 2002. The results of operations for the
three and nine months ended September 30, 2003, are not  necessarily  indicative
of results that may be expected for the entire  fiscal year ending  December 31,
2003.

(b) STOCK-BASED COMPENSATION

The  Company  applies  the  "intrinsic  value  based  method"  as  described  in
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees,"  and  related  interpretations  in  accounting  for its  stock-based
compensation.  No employee  compensation  cost for stock options is reflected in
net income,  as all options  granted under the Company's  stock option plans had
exercise  prices  greater  than or equal to the market  value of the  underlying
common  stock on the  date of  grant.  Stock  awarded  to  employees  under  the
Company's  Recognition  and  Retention  Plan is expensed by the Company over the
awards' vesting period based upon the fair market value of the stock on the date
of the  grant.  The  following  table  illustrates  the effect on net income and
earnings  per  share if the  Company  had  applied  the fair  value  recognition
provisions  for  stock-based  compensation  pursuant to  Statement  of Financial
Accounting   Standards   ("SFAS")   No.   123,   "Accounting   for   Stock-based
Compensation," amended by SFAS No. 148, "Accounting for Stock-based Compensation
- Transition and Disclosures" (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                      Three months ended                 Nine months ended
                                                         September 30,                     September 30,
                                              --------------------------------   --------------------------------
                                                   2003              2002             2003              2002
                                              --------------   ---------------   --------------    --------------
<S>                                           <C>              <C>               <C>               <C>
Net income, as reported                       $        4,898   $         7,581   $       16,809    $       19,065
Add:
   Stock-based employee compensation
     expense included in reported net
     income, net of related tax effects
     (RRP awards)                                        166               143              499               428
Deduct:
   Total stock-based  employee
    compensation expense determined
    under fair value based method for all
    options and RRP awards, net of
    related tax effects                                  173               332              517               996
                                              --------------   ---------------   --------------    --------------
Pro forma net income                          $        4,891   $         7,392   $       16,791    $       18,497
                                              ==============   ===============   ==============    ==============

Net income per common share:
   Basic - as reported                        $         0.19   $          0.28   $         0.65    $         0.68
                                              ==============   ===============   ==============    ==============
   Basic - pro forma                          $         0.19   $          0.27   $         0.65    $         0.66
                                              ==============   ===============   ==============    ==============
   Diluted - as reported                      $         0.19   $          0.26   $         0.64    $         0.66
                                              ==============   ===============   ==============    ==============
   Diluted - pro forma                        $         0.19   $          0.25   $         0.64    $         0.64
                                              ==============   ===============   ==============    ==============
</TABLE>



                                       8
<PAGE>

(c) EARNINGS PER SHARE
Basic  earnings  per share is  calculated  by  dividing  net income by the daily
average  number  of common  shares  outstanding  during  the  period.  Potential
dilutive common shares are not included in the calculation.

Diluted  earnings per share is computed  similarly to that of basic earnings per
share except that for stock options and RRP shares the  denominator is increased
to  include  the  number  of  additional  common  shares  that  would  have been
outstanding if all potential  dilutive  common shares were issued  utilizing the
treasury stock method. With respect to the DDFP shares, such shares are included
in diluted  earnings per share and net income is adjusted to eliminate  the DDFP
(credit)  expense if the effect is more  dilutive to do so,  otherwise  the DDFP
(credit)  expense is  included  in net income and the shares are  excluded  from
diluted shares outstanding.

Calculation of Basic and Diluted Earnings Per Share
--------------------------------------------------------
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      Three months ended                 Nine months ended
                                                         September 30,                     September 30,
                                               --------------------------------   --------------------------------
                                                   2003              2002             2003              2002
<S>                                          <C>               <C>               <C>               <C>
Net income for basic earnings per share      $         4,898   $         7,581   $       16,809    $       19,065
DDFP (credit) expense, net of related tax                 --              (103)              --               574
                                             ---------------   ---------------   --------------    --------------
Net income for diluted earnings per share    $         4,898   $         7,478   $       16,809    $       19,639
                                             ===============   ===============   ==============    ==============

Basic weighted-average common shares
     outstanding                                  25,627,668        27,476,267       25,704,034        27,969,243
Plus: Common stock held by DDFP                           --           971,240               --           965,438
Plus: Dilutive stock options and awards              756,485           737,930          730,035           783,175
                                             ---------------   ---------------   --------------    --------------
Diluted weighted-average common
     shares outstanding                           26,384,153        29,185,437       26,434,069        29,717,856
                                             ===============   ===============   ==============    ==============

Net income per common share:
   Basic                                     $          0.19   $          0.28   $         0.65    $         0.68
                                             ===============   ===============   ==============    ==============
   Diluted                                   $          0.19   $          0.26   $         0.64    $         0.66
                                             ===============   ===============   ==============    ==============
</TABLE>

(2)  RESTATEMENTS

The Company has restated its unaudited  consolidated  financial statements as of
and for the three and nine months ended  September  30, 2003 and 2002 to conform
its accounting for the Bank's  Directors'  Deferred Fee Plan in accordance  with
Emerging  Issues Task Force ("EITF") Issue No. 97-14,  "Accounting  for Deferred
Compensation  Arrangements  Where  Amounts  Earned are Held in a Rabbi Trust and
Invested." Under the Directors' Deferred Fee Plan,  directors may elect to defer
all or part of their  fees and  have  such  amounts  held in a rabbi  trust  and
invested  in  the  Company's   common  stock  or  a  deferred   money   account.
Historically,  the Company  expensed such deferred  directors' fees, but did not
recognize  subsequent changes in the fair value of stock held in the rabbi trust
for the  Directors'  Deferred  Fee  Plan  as  periodic  charges  or  credits  to
compensation  cost  with  a  corresponding  change  in a  deferred  compensation
obligation.

The Company has determined that a deferred compensation  obligation  (liability)
is required to be recognized  for the fair value of the common stock held in the
rabbi trust,  with changes in the fair value of the common stock being  recorded
as a periodic charge or credit to compensation  cost and the cost of shares held
in  the  rabbi  trust  treated  in a  manner  similar  to  treasury  stock.  The
restatements  resulted in net income being reduced by $1.3 million and increased
by  $103,000  for  the  three  months  ended   September   30,  2003  and  2002,
respectively, and reduced by $2.1 million and $574,000 for the nine months ended
September 30, 2003 and 2002, respectively.  The restatements also had the effect
of reducing the number of shares  outstanding on the consolidated  statements of
financial  condition  and for  earnings per share  calculations  for all periods
presented.  In  addition,  Notes  1(b)  and  (c)  and  Note  6  reflect  certain
adjustments related to the restatement.


                                       9
<PAGE>

The tables  below  present a summary of the impact of  restating  the  Company's
consolidated  statements  of income and cash flows for the three and nine months
ended September 30, 2003 and 2002 and the Company's  consolidated  statements of
financial  condition at September  30, 2003  (dollars in  thousands,  except per
share data):

<TABLE>
<CAPTION>
                                                              Three months ended September 30
                                                       2003                                      2002
                                       -------------------------------------     -------------------------------------
                                         Originally                                Originally
                                          Reported              Restated            Reported             Restated
                                       ----------------      ---------------     ---------------     -----------------
<S>                                   <C>                  <C>                  <C>                 <C>
Consolidated Statements of
Income:
Compensation and benefits             $          4,188     $          6,202     $         4,281     $           4,122
Total non-interest expense                       7,138                9,152               7,459                 7,300
Income before income tax expense                 9,190                7,176              11,748                11,907
Income tax expense                               2,983                2,278               4,270                 4,326
Net income                                       6,207                4,898               7,478                 7,581
Basic earnings per share              $           0.23     $           0.19     $          0.26     $            0.28
Basic weighted average shares
   outstanding                              26,602,051           25,627,668          28,447,507            27,476,267
Diluted earnings per share            $           0.23     $           0.19     $          0.26     $            0.26
Diluted  weighted  average shares
outstanding                                 27,358,536           26,384,153          29,185,437            29,185,437

<CAPTION>

                                                              Nine months ended September 30
                                                       2003                                      2002
                                       -------------------------------------     -------------------------------------
                                         Originally                                Originally
                                          Reported              Restated            Reported             Restated
                                       ----------------      ---------------     ---------------     -----------------
<S>                                   <C>                  <C>                  <C>                 <C>
Consolidated Statements of
Income:
Compensation and benefits             $         12,908     $         16,206     $        12,408     $          13,291
Total non-interest expense                      22,257               25,555              21,825                22,708
Income before income tax expense                28,419               25,121              29,899                29,016
Income tax expense                               9,466                8,312              10,260                 9,951
Net income                                      18,953               16,809              19,639                19,065
Basic earnings per share              $           0.71     $           0.65     $          0.68     $            0.68
Basic weighted average shares
   outstanding                              26,679,996           25,704,034          28,934,681            27,969,243
Diluted earnings per share            $           0.69     $           0.64     $          0.66     $            0.66
Diluted weighted average shares
   outstanding                              27,410,031           26,434,069          29,717,856            29,717,856
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>

                                                              Nine months ended September 30
                                                       2003                                      2002
                                       -------------------------------------     -------------------------------------
                                         Originally                                Originally
                                          Reported              Restated            Reported             Restated
                                       ----------------      ---------------     ---------------     -----------------
<S>                                   <C>                  <C>                  <C>                 <C>
Consolidated Statements of Cash
   Flows:
Net income                            $         18,953     $         16,809     $        19,639     $          19,065
DDFP expense                                        --                3,298                  --                   884
Decrease in other assets                         2,703                1,600               3,267                 2,976
Net cash provided by operating                  30,065               30,116              40,651                40,670
   Activities
Cash dividends paid                             (8,345)              (8,129)             (7,993)               (7,814)
Increase in cost of DDFP, net                       --                 (267)                 --                  (198)
Net cash (used in) provided by
financing activities                  $        (28,027)    $        (28,078)    $        83,966     $          83,947

</TABLE>

                                              At September 30, 2003
                                         Originally
                                          Reported              Restated
                                       ----------------      ---------------
Consolidated Statements of
Financial Condition:
Other assets                          $         31,178     $         36,777
Total assets                                 2,245,130            2,250,729
Other liabilities                               16,045               33,467
Total liabilities                            2,002,867            2,020,289
Paid-in capital                                204,014              206,700
Retained earnings                              173,436              169,280
Common stock acquired by                            --               (2,679)
DDFP
DDFP transition differential                        --               (7,674)
Total stockholders' equity                     217,263              205,440
Total liabilities and
stockholders' equity                  $      2,245,130     $      2,250,729



(3)  DIVIDENDS

Based upon current  operating  results,  the Company declared a cash dividend of
$0.105 per share on July 23, 2003,  payable August 29, 2003, to  stockholders of
record on August 15, 2003.

(4)  COMMITMENTS AND CONTINGENCIES

At  September  30,  2003,  the Company  had the  following  commitments:  (i) to
originate  loans of $150.1  million;  (ii) unused home equity lines of credit of
$74.2 million;  (iii) unused  commercial lines of credit of $14.7 million;  (iv)
unused construction lines of credit of $87.1 million;  and (v) letters of credit
outstanding totaling $1.5 million.  Further,  certificates of deposits which are
scheduled to mature and/or rollover in one year or less,  totaled $409.1 million
at September 30, 2003.


                                       11
<PAGE>

(5)  ALLOWANCE FOR LOAN LOSSES

The following  table  presents the activity in the allowance for loan losses (in
thousands):


                                          Nine months ended September 30,
                                        -----------------------------------
                                             2003                 2002
                                        --------------       --------------
Balance at beginning of period          $      12,830        $      12,932
Provision charged to operations                    --                1,310
Charge-offs, net of recoveries                   (46)               (1,405)
                                        --------------       --------------
Balance at end of period                $      12,784        $      12,837
                                        ==============       ==============

(6)  COMPREHENSIVE INCOME

Total  comprehensive  income,  consisting  of net  income  and the net change in
unrealized  gain/(loss) on securities  available for sale, was $873,000 and $8.4
million for the three months ended  September  30, 2003 and 2002,  respectively.
For the nine months  ended  September  30, 2003 and 2002,  comprehensive  income
totaled $12.1 million and $26.1 million, respectively.

(7)  RECENT ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards Board ("FASB")  Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable  Interest  Entities," was issued in January 2003. FIN
46 applies  immediately to enterprises that hold a variable interest in variable
interest entities created after January 31, 2003. It applies in the first fiscal
year or interim period  beginning after June 15, 2003 to enterprises that hold a
variable interest in variable interest entities created before February 1, 2003.
FIN 46 applies  to public  enterprises  as of the  beginning  of the  applicable
interim or annual period, and it applies to nonpublic  enterprises no later than
the end of the  applicable  annual period.  FIN 46 may be applied  prospectively
with a cumulative-effect  adjustment as of the date on which it is first applied
or by restating  previously  issued  financial  statements for one or more years
with a  cumulative-effect  adjustment  as of the  beginning  of the  first  year
restated.  FIN 46 provides guidance on the identification of entities controlled
through  means  other  than  voting  rights.  FIN 46  specifies  how a  business
enterprise  should  evaluate  its  interest  in a  variable  interest  entity to
determine whether to consolidate that entity. A variable interest entity must be
consolidated  by its  primary  beneficiary  if the entity  does not  effectively
disperse risks among the parties involved.

On October 9, 2003,  the effective  date was deferred until the end of the first
interim or annual period ending after December 15, 2003,  for certain  interests
held by a public  entity in certain  variable  interest  entities  or  potential
variable  interest entities created before February 1, 2003. The adoption of FIN
46 is not expected to have a significant  effect on the  Company's  consolidated
financial statements.

In May  2003,  the FASB  issued  Statement  of  Financial  Accounting  Standards
("SFAS")  No.  150,   "Accounting  for  Certain   Financial   Instruments   with
Characteristics  of both  Liabilities  and  Equity."  SFAS No.  150  established
standards for how entities  classify and measure certain  financial  instruments
with  characteristics of both liabilities and equity. The provisions of SFAS No.
150 were effective for financial  instruments entered into or modified after May
31, 2003,  and  otherwise  were  effective at the beginning of the first interim
period  beginning after June 15, 2003. In the Company's  earnings release issued
October  22,  2003,  the  "Preferred  capital  securities"  were  reported  as a
liability in the Company's consolidated  statements of financial condition,  and
the distributions on these trust preferred securities on and after July 1, 2003,
were included as interest  expense in accordance with the provisions of SFAS No.
150 in effect at that date. Subsequent to the earnings release, but prior to the
filing of these financial  statements,  the FASB voted to defer indefinitely the
provisions  of SFAS No. 150 with respect to the  financial  reporting  for trust
preferred securities. Accordingly $464,000 of distributions on preferred capital
securities for the three months ended September 30, 2003,  which were classified
as interest expense in the October 22, 2003, earnings release have been reported
in these  financial  statements  as  non-interest  expense.  Also,  these  trust
preferred  securities  are reported in the mezzanine  (between  liabilities  and
equity) in the accompanying consolidated statements of financial condition. This
reporting  is  consistent  with the  Company's  previous  quarterly  and  annual
financial reporting.


                                       12
<PAGE>

SFAS No. 149, "Amendment of Statement 133 on Derivative  Instruments and Hedging
Activities,"  was issued on April 30, 2003.  The Statement  amends and clarifies
accounting for derivative instruments,  including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133. This
Statement is effective  for  contracts  entered into or modified  after June 30,
2003.  The  adoption  of SFAS No. 149 did not have a  significant  effect on the
Company's consolidated financial statements.




                                       13
<PAGE>

FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES

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

GENERAL.

Statements   contained  in  this  report  that  are  not  historical   fact  are
forward-looking  statements,  as that term is defined in the Private  Securities
Litigation  Reform  Act  of  1995.  Such  statements  may  be  characterized  as
management's   intentions,   hopes,   beliefs,   expectations,   projections  or
predictions  of the future.  It is important  to note that such  forward-looking
statements  are  subject  to risks and  uncertainties  that could  cause  actual
results  to differ  materially  from  those  projected  in such  forward-looking
statements.  Factors that could cause  future  results to vary  materially  from
current expectations include, but are not limited to, changes in interest rates,
economic  conditions,  deposit and loan growth,  real estate  values,  loan loss
provisions,  competition,  customer retention, changes in accounting principles,
policies or guidelines and legislative and regulatory changes.

RESTATEMENTS.

The Company has restated its consolidated financial statements as of and for the
three  and  nine  months  ended  September  30,  2003 and  2002 to  conform  its
accounting  for the  Bank's  Directors'  Deferred  Fee Plan in  accordance  with
Emerging  Issues Task Force ("EITF") Issue No. 97-14,  "Accounting  for Deferred
Compensation  Arrangements  Where  Amounts  Earned are Held in a Rabbi Trust and
Invested." Under the Directors' Deferred Fee Plan,  directors may elect to defer
all or part of their  fees and  have  such  amounts  held in a rabbi  trust  and
invested  in  the  Company's   common  stock  or  a  deferred   money   account.
Historically,  the Company  expensed such deferred  directors' fees, but did not
recognize  subsequent changes in the fair value of stock held in the rabbi trust
as periodic charges or credits to compensation cost with a corresponding  change
in a  deferred  compensation  obligation.  The  Company  has  determined  that a
deferred  compensation  obligation  (liability) is required to be recognized for
the fair value of the common  stock held in the rabbi  trust for the  Director's
Deferred  Fee Plan,  with  charges in the fair value of the common  stock  being
recorded  as a periodic  charge or credit to  compensation  cost and the cost of
shares held in the rabbi trust  treated in a manner  similar to treasury  stock.
The  restatements  resulted  in net  income  being  reduced by 1.3  million  and
increased by $103,000 for the three  months ended  September  30, 2003 and 2002,
respectively,  and reduced by $1.3  million and  increased  by $103,000  for the
three months ended September 30, 2003 and 2002, respectively and reduced by $2.1
million and  $574,000  for the nine months  ended  September  30, 2002 and 2002,
respectively.  The  restatements  also had the effect of reducing  the number of
shares  outstanding for book value and earnings per share  calculations  for all
periods presented.  For additional  information regarding the restatements,  see
Note 2 of the Notes to  Restated  Unaudited  Consolidated  Financial  Statements
included herein.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.

"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  as well as disclosures  found  elsewhere in this Form 10-Q/A,  are
based upon the  Company's  consolidated  financial  statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported  amounts of
assets,  liabilities,  revenues and expenses.  Note 1 to the  Company's  Audited
Consolidated  Financial Statements for the year ended December 31, 2002 included
in our Annual  Report on Form 10-K/A for the year ended  December 31,  2002,  as
supplemented by the Company's  Quarterly Reports on Form 10-Q/A for the quarters
ended March 31, 2003, June 30, 2003, and this report,  contains a summary of the
Company's  significant  accounting  policies.  Management believes the Company's
policy with respect to the  methodology for the  determination  of the allowance
for loan losses  involves a higher degree of complexity and requires  management
to make difficult and subjective  judgments  which often require  assumptions or
estimates  about  highly   uncertain   matters.   Changes  in  these  judgments,
assumptions or estimates  could  materially  impact results of operations.  This
critical  policy and its  application  is  periodically  reviewed with the Audit
Committee and the Board of Directors.

The  provision  for loan  losses is based upon  management's  evaluation  of the
adequacy of the  allowance,  including an assessment of known and inherent risks
in the portfolio,  giving  consideration to the size and composition of the loan
portfolio,  actual  loan  loss  experience,  level  of  delinquencies,  detailed
analysis of individual loans for which full  collectibility  may not be assured,
the  existence  and  estimated  fair  value  of any  underlying  collateral  and
guarantees  securing  the loans,  and current  economic  and market  conditions.
Although  management  uses  the best  information  available,  the  level of the
allowance for loan losses  remains an estimate  which is subject to  significant
judgment and


                                       14
<PAGE>

short-term  change.  Various regulatory  agencies,  as an integral part of their
examination  process,  periodically  review  the  Company's  allowance  for loan
losses. Such agencies may require the Company to make additional  provisions for
loan  losses  based  upon  information  available  to them at the  time of their
examination.  Furthermore,  the majority of the  Company's  loans are secured by
real estate in the State of New Jersey.  Accordingly,  the  collectibility  of a
substantial  portion of the carrying  value of the Company's  loan  portfolio is
susceptible to changes in local market conditions and may be adversely  affected
should real estate values  decline or the New Jersey area  experience an adverse
economic  shock.  Future  adjustments  to the  allowance  for loan losses may be
necessary due to economic, operating, regulatory and other conditions beyond the
Company's control.

ASSETS.  Total assets  decreased  $10.8  million from December 31, 2002, to $2.3
billion at  September  30,  2003.  The change in assets  consisted  primarily of
decreases in federal funds sold and mortgage-backed securities ("MBS") available
for sale,  partially offset by increases in investment  securities available for
sale and loans held for sale.

Federal  funds sold  decreased  $10.9  million to $33.4 million at September 30,
2003,  from $44.3  million at December 31, 2002,  as balances were deployed into
higher-yielding assets and used to reduce outstanding borrowings.

MBS available for sale decreased $8.9 million to $781.7 million at September 30,
2003,  from  $790.6  million at December  31,  2002.  For the nine months  ended
September 30, 2003,  purchases of MBS available for sale totaled $466.4 million,
while  principal  repayments  totaled  $335.5  million and sales totaled  $126.1
million.   During  the  nine  months  ended  September  30,  2003,  the  Company
experienced  high  levels  of  principal   repayments  on  MBS,  reflecting  the
historically  low interest rate  environment and resultant  strong mortgage loan
refinance activity.  Prepayment levels are expected to decline during the fourth
quarter of 2003, as longer-term interest rates have risen and refinance activity
has slowed.

Investment  securities  available for sale increased  $8.8 million,  or 7.7%, to
$123.0  million as of September  30, 2003,  from $114.2  million at December 31,
2002.  For the nine months ended  September  30, 2003,  purchases of  investment
securities  available for sale totaled  $67.7  million,  while sales,  calls and
maturities  totaled  $59.3  million.   Purchases  consisted  primarily  of  debt
securities issued by U.S.  corporations and  government-sponsored  agencies.  At
September  30,  2003,  U.S.  government  and agency  obligations  totaled  $78.2
million, or 63.6%, of investment  securities available for sale, while state and
municipal obligations  accounted for another $13.7 million, or 11.1%.  Corporate
obligations represented $27.6 million, or 22.4%, and equity securities accounted
for the remaining $3.5 million, or 2.9%, of investment  securities available for
sale at September  30, 2003.  All  corporate  obligations  held at September 30,
2003,  are  investment  grade with the largest  exposure to any single  creditor
totaling $3.0 million.

Net loans,  including loans held for sale,  increased $1.2 million from December
31, 2002, to $1.2 billion at September 30, 2003. Of the total loan  portfolio at
September 30, 2003, 1-4 family mortgage loans comprised 65.0%, home equity loans
represented 9.2%,  commercial real estate,  multi-family and construction  loans
comprised 24.8%, and other consumer loans accounted for 1.0%.

Total loan  originations  for the nine months ended  September  30,  2003,  were
$579.4  million,  compared  to  $462.8  million  for the  same  period  in 2002.
Fixed-rate,  1-4 family first mortgage loan originations totaled $209.7 million,
or 36.2% of production,  while adjustable-rate,  1-4 family first mortgage loans
accounted for $108.4 million, or 18.7%, of total originations for the first nine
months of 2003.  Also  during  the first  nine  months  of 2003,  consumer  loan
originations,  consisting  primarily  of home  equity  loans and  credit  lines,
totaled $129.9 million, or 22.4% of total originations.  During the same period,
construction  lending  totaled $98.7  million,  or 17.0% of total  originations,
while  commercial real estate,  commercial and  multi-family  loan  originations
totaled $32.9 million, or 5.7%. In addition, the Company purchased $21.3 million
of  primarily  adjustable-rate,   single-family  first  mortgage  loans  through
correspondents  during the nine months ended September 30, 2003. Purchased loans
are  re-underwritten  by the Company and are extended at rates higher than those
currently offered by the Company.

Repayment of principal on loans totaled $553.2 million for the nine months ended
September 30, 2003,  compared to $472.7  million for the same period in 2002. In
addition, the Company sold $47.0 million of primarily 30-year,  fixed-rate,  1-4
family  mortgage  loans  during  the  first  nine  months of 2003 as part of its
on-going  interest rate risk management  process.  While  management  intends to
continue  to  actively  seek to  originate  loans,  the  future  levels  of loan
originations  and  repayments  will  be  significantly  influenced  by  external
interest rates, competition and other economic factors outside of the control of
the  Company.  At September  30, 2003,  the loan  pipeline,  consisting  of


                                       15
<PAGE>

loan applications in the process of approval,  totaled $150.1 million, including
$46.7 million of accepted construction and non-residential loan commitments.

LIABILITIES.  Total  deposits  decreased $1.8 million from December 31, 2002, to
$1.4  billion at September  30, 2003.  Core  deposits,  consisting  of checking,
savings and money market  accounts,  grew by $46.1  million,  or 5.9%, to $831.4
million,  and accounted for 60.0% of total deposits at September 30, 2003.  This
compares with a core to total  deposits  ratio of 56.6% at December 31, 2002 and
55.1% at September 30, 2002. Certificates of deposit decreased by $47.9 million,
or 7.9%,  compared with year-end  2002,  with decreases  occurring  primarily in
one-year and shorter maturity categories.

Borrowed  funds  decreased  by $5.1  million,  or 0.9%,  to  $591.5  million  at
September 30, 2003, from $596.7 million at December 31, 2002.

CAPITAL. The Company's  stockholders' equity decreased $6.1 million, or 2.9%, to
$205.4 million at September 30, 2003,  from $211.6 million at December 31, 2002.
The decrease in equity was a result of the  repurchase  of $12.6  million of the
Company's common stock,  cash dividends  declared of $8.1 million and a decrease
in net  unrealized  gains on  securities  available  for  sale of $4.7  million,
partially  offset  by net  income of $16.8  million  for the nine  months  ended
September 30, 2003, the  amortization  of stock-based  compensation  and benefit
plans and related tax benefits of $2.6  million,  and proceeds from the exercise
of stock options totaling  $366,000.  In February 2003, the Company authorized a
5% stock repurchase  program.  The Company repurchased 871,000 shares during the
nine months ended  September  30, 2003,  at an average cost per share of $14.26.
There were no share  repurchases in the quarter ended September 30, 2003. Stated
and tangible book value per share at September  30, 2003,  were $7.70 and $7.55,
respectively.

The Federal Deposit  Insurance  Corporation  requires that the Bank meet minimum
leverage,  Tier 1 and Total Risk-based  Capital  requirements.  At September 30,
2003, the Bank exceeded all regulatory capital requirements, as follows (dollars
in thousands):

                            Required             Actual
                       -----------------  -------------------   Excess of Actual
                                                                Over Regulatory
                         Amount   Ratio     Amount    Ratio       Requirements
                       -----------------  -------------------   ----------------

Leverage Capital        $89,655   4.00%    $186,378    8.32%       $ 96,723
Risk-based Capital:
Tier 1                   44,581   4.00      186,378   16.72         141,797
Total                    89,161   8.00      199,162   17.87         110,001

LIQUIDITY  AND CAPITAL  RESOURCES.  The Company's  primary  sources of funds are
deposits;   proceeds  from   principal  and  interest   payments  on  loans  and
mortgage-backed   securities  ("MBS");  sales  of  loans,  MBS  and  investments
available for sale;  maturities or calls of investment securities and short-term
investments;  and  advances  from the FHLB-NY and other  borrowed  funds.  While
maturities and scheduled  amortization of loans and MBS are a predictable source
of funds,  deposit cash flows and mortgage prepayments are greatly influenced by
general interest rates, competition, and economic conditions.

The most  significant  sources of funds for the first  nine  months of 2003 were
principal  repayments and  prepayments of loans and MBS totaling  $553.2 million
and $335.5 million,  respectively.  Other  significant  sources of funds for the
nine months ended  September 30, 2003, were proceeds from sales of MBS available
for sale totaling  $127.4  million,  sales,  calls and  maturities of investment
securities  available  for sale of $59.7  million,  proceeds  from the  sales of
mortgage loans  totaling  $47.1 million and new borrowings of $55.0 million.  If
necessary, the Company has additional borrowing capacity with FHLB-NY, including
an available  overnight line of credit of up to $50.0 million.  At September 30,
2003, the Company had unpledged investment securities and MBS available for sale
with a market value of $410.3 million.

The  Company's  primary uses of funds for the first nine months of 2003 were the
origination of loans  totaling  $579.4  million,  purchases of MBS available for
sale totaling $466.4 million,  purchases of investment  securities available for
sale totaling $67.7 million and repayments of borrowings totaling $60.1 million.
Other significant uses of funds


                                       16
<PAGE>

during the nine months ended September 30, 2003, were $21.3 million in purchases
of mortgage  loans,  $12.6 million in repurchases of the Company's  common stock
and $8.1 million in cash dividends paid.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002.

RESULTS OF OPERATIONS.  Net income for the three and nine months ended September
30,  2003,  totaled  $4.9 million and $16.8  million,  respectively,  versus net
income of $7.6 million and $19.1 million, for the comparable 2002 periods.  This
represented  decreases of $2.7  million,  or 35.4% and $2.3  million,  or 11.8%,
respectively,  for the three and nine months ended September 30, 2003,  compared
with 2002. For the quarter ended September 30, 2003,  basic and diluted earnings
per share  were  $0.19,  representing  decreases  of 30.7% and 27.6%  over third
quarter  2002  basic  and  diluted  earnings  per  share  of  $0.28  and  $0.26,
respectively.  For the nine months ended  September 30, 2003,  basic and diluted
earnings per share were $0.65 and $0.64, respectively, representing decreases of
4.1% and 3.8% over  basic and  diluted  earnings  per share of $0.68 and  $0.66,
respectively, for the first nine months of 2002.

Annualized  return on average equity was 9.36% and 10.63% for the three and nine
months ended September 30, 2003,  respectively,  compared with 13.45% and 11.23%
for the comparable 2002 periods.  Annualized  return on average assets was 0.87%
and 0.99% for the three and nine months ended September 30, 2003,  respectively,
compared with 1.35% and 1.14% for the three and nine months ended  September 30,
2002, respectively.




                                       17
<PAGE>

CONSOLIDATED AVERAGE STATEMENTS OF FINANCIAL CONDITION
 (Dollars in thousands)

The Company has restated its consolidated  financial  statements for the periods
presented in this table. See  Management's  Discussion and Analysis of Financial
Condition and Results of Operations - Restatements.

<TABLE>
<CAPTION>
                                                                 Three Months Ended September 30,
                                               --------------------------------------------------------------------
                                                            2003                                2002
                                               -------------------------------   ----------------------------------
                                                Average              Average      Average                 Average
                                                Balance   Interest  Yield/Cost    Balance     Interest   Yield/Cost
                                               -------------------------------   ----------------------------------
<S>                                              <C>        <C>        <C>         <C>          <C>        <C>
ASSETS
  Interest-earning assets:
   Federal funds sold ........................ $   30,079   $    72    0.96%     $   63,510   $   271      1.71%
   Investment securities available for
     sale (1) ................................    139,706     1,616    4.63         135,742     1,692      4.99
   Mortgage-backed securities available
     for sale ................................    755,581     6,930    3.67         698,613     8,821      5.05
                                               ----------   -------              ----------   -------
     Total investments .......................    925,366     8,618    3.73         897,865    10,784      4.80
                                               ----------   -------              ----------   -------
   Mortgage loans ............................  1,108,842    16,128    5.82       1,143,387    19,284      6.75
   Home equity loans .........................     60,802       982    6.46          68,032     1,246      7.33
   Home equity lines of credit ...............     49,320       533    4.32          44,162       575      5.21
   Other loans ...............................     10,916       162    5.94          15,004       197      5.25
                                               ----------   -------              ----------   -------
     Total loans .............................  1,229,880    17,805    5.79       1,270,585    21,302      6.71
                                               ----------   -------              ----------   -------

  Total interest-earning assets ..............  2,155,246    26,423    4.90%      2,168,450    32,086      5.92%
                                                            -------                           -------      ----
  Non-interest earning assets ................     89,005                            82,706
                                               ----------                        ----------
        Total assets ......................... $2,244,251                        $2,251,156
                                               ==========                        ==========

LIABILITIES AND STOCKHOLDERS'
  EQUITY
  Interest-bearing liabilities:
   NOW and money market accounts ............. $  528,522   $ 1,079    0.82%     $  474,220   $ 1,918      1.62%
   Savings accounts ..........................    224,665       475    0.85         205,308       952      1.85
   Certificates of deposit ...................    562,432     3,465    2.46         622,209     5,050      3.25
                                               ----------   -------              ----------   -------
     Total interest-bearing deposits .........  1,315,619     5,019    1.53       1,301,737     7,920      2.43

   Borrowed funds ............................    583,146     6,944    4.76         601,758     7,691      5.11
                                               ----------   -------              ----------   -------
  Total interest-bearing liabilities .........  1,898,765    11,963    2.52       1,903,495    15,611      3.28
                                                            -------    ----                   -------      ----
  Non-interest bearing deposits ..............     76,263                            69,186
  Other liabilities ..........................     60,008                            53,026
                                               ----------                        ----------
        Total liabilities ....................  2,035,036                         2,025,707
  Stockholders' equity .......................    209,215                           225,449
                                               ----------                        ----------
        Total liabilities and stockholders'
            equity ........................... $2,244,251                        $2,251,156
                                               ==========                        ==========
Net interest income/interest rate spread .....              $14,460    2.38%                  $16,475      2.64%
                                                            =======    ====                   =======      ====
Net interest-earning assets/net interest
   margin .................................... $  256,481              2.68%     $  264,955                3.04%
                                               ==========              ====      ==========                ====
Ratio of interest-earning assets
   to interest-bearing liabilities ...........       1.14X                             1.14X
                                               ==========                        ==========
</TABLE>

(1) Includes FHLB-NY stock.


                                       18
<PAGE>

CONSOLIDATED AVERAGE STATEMENTS OF FINANCIAL CONDITION
 (Dollars in thousands)

The Company has restated its consolidated  financial  statements for the periods
presented in this table. See  Management's  Discussion and Analysis of Financial
Condition and Results of Operations - Restatements.

<TABLE>
<CAPTION>
                                                                 Nine Months Ended September 30,
                                               --------------------------------------------------------------------
                                                            2003                                2002
                                               -------------------------------   ----------------------------------
                                                Average              Average      Average                 Average
                                                Balance   Interest  Yield/Cost    Balance     Interest   Yield/Cost
                                               -------------------------------   ----------------------------------
<S>                                              <C>        <C>        <C>         <C>          <C>        <C>
ASSETS
  Interest-earning assets:
   Federal funds sold ........................ $   37,705   $   318    1.12%     $   61,104   $   780      1.70%
   Investment securities available for
     sale (1) ................................    135,828     4,851    4.76         139,926     5,568      5.31
   Mortgage-backed securities available
     for sale ................................    760,239    21,941    3.85         674,433    25,371      5.02
                                               ----------   -------              ----------   -------
     Total investments .......................    933,772    27,110    3.87         875,463    31,719      4.83
                                               ----------   -------              ----------   -------

   Mortgage loans ............................  1,107,076    50,358    6.06       1,140,913    57,783      6.75
   Home equity loans .........................     62,016     3,102    6.67          70,172     3,849      7.31
   Home equity lines of credit ...............     48,574     1,645    4.52          42,166     1,681      5.32
   Other loans ...............................     13,170       546    5.53          17,752       902      6.77
                                               ----------   -------              ----------   -------
     Total loans .............................  1,230,836    55,651    6.03       1,271,003    64,215      6.74
                                               ----------   -------              ----------   -------
  Total interest-earning assets ..............  2,164,608    82,761    5.10%      2,146,466    95,934      5.96%
                                                            -------    ----                   -------      ----
  Non-interest earning assets ................     96,737                            74,414
                                               ----------                        ----------
        Total assets ......................... $2,261,345                        $2,220,880
                                               ==========                        ==========

LIABILITIES AND STOCKHOLDERS'
  EQUITY
  Interest-bearing liabilities:
   NOW and money market accounts .............   $510,196   $ 3,543    0.93%       $460,318   $ 6,099      1.77%
   Savings accounts ..........................    228,385     1,803    1.05         197,346     2,722      1.84
   Certificates of deposit ...................    579,024    11,472    2.64         634,429    16,454      3.46
                                               ----------   -------              ----------   -------
     Total interest-bearing deposits .........  1,317,605    16,818    1.70       1,292,093    25,275      2.61

   Borrowed funds ............................    598,842    21,907    4.88         584,928    22,287      5.08
                                               ----------   -------              ----------   -------
  Total interest-bearing liabilities .........  1,916,447    38,725    2.69       1,877,021    47,562      3.38
                                                            -------    ----                   -------      ----
  Non-interest bearing deposits ..............     75,359                            65,910
  Other liabilities ..........................     58,762                            51,532
                                               ----------                        ----------
        Total liabilities ....................  2,050,568                         1,994,463
  Stockholders' equity .......................    210,777                           226,417
                                               ----------                        ----------
        Total liabilities and stockholders'
            equity ........................... $2,261,345                        $2,220,880
                                               ==========                        ==========
Net interest income/interest rate spread .....              $44,036   2.41%                   $48,372      2.58%
                                                            =======   ====                    =======      ====
Net interest-earning assets/net interest
   margin .................................... $  248,161             2.71%      $  269,445                3.00%
                                               ==========             ====       ==========                ====
Ratio of interest-earning assets
   to interest-bearing liabilities ...........       1.13X                             1.14X
                                               ==========                        ==========
</TABLE>

(1) Includes FHLB-NY stock.


                                       19
<PAGE>

INTEREST  INCOME.  Interest income  decreased $5.7 million,  or 17.7%, and $13.2
million,  or 13.7%,  to $26.4  million and $82.8  million for the three and nine
months ended  September  30, 2003,  respectively,  from $32.1  million and $95.9
million  for the same  periods  in 2002.  The  decline  in  interest  income was
primarily  attributable  to  the  historically  low  interest  rate  environment
experienced over the past year.

Interest on loans decreased $3.5 million,  or 16.4%, and $8.6 million, or 13.3%,
to $17.8 million and $55.7 million for the three and nine months ended September
30, 2003, respectively, compared to $21.3 million and $64.2 million for the same
periods in 2002.  The average  balance of the loan portfolio for the three month
period ended  September 30, 2003,  decreased  $40.7 million to $1.2 billion from
the same period in 2002,  while the average yield on the portfolio  decreased to
5.79% for the three months  ended  September  30, 2003,  from 6.71% for the same
period in 2002.  The average  balance of the loan  portfolio  for the nine month
period ended  September 30, 2003,  decreased  $40.2 million to $1.2 billion from
the same period in 2002,  while the average yield on the portfolio  decreased to
6.03% for the nine months  ended  September  30,  2003,  from 6.74% for the same
period in 2002.

Interest on securities  decreased  $2.2 million,  or 20.1% and $4.6 million,  or
14.5%,  to $8.6  million and $27.1  million for the three and nine months  ended
September  30, 2003,  compared to $10.8  million and $31.7  million for the same
periods  in 2002.  The  average  balance of the  investment,  FHLB stock and MBS
available for sale portfolios  totaled $925.4 million,  with an annualized yield
of 3.73% for the three months ended September 30, 2003, compared with an average
balance of $897.9 million with an annualized yield of 4.80% for the three months
ended September 30, 2002. For the first nine months of 2003, the average balance
of the  investment,  FHLB stock and MBS  available for sale  portfolios  totaled
$933.8  million,  with an  annualized  yield of 3.87%,  compared  to an  average
balance of $875.5 million with an annualized  yield of 4.83% for the nine months
ended  September  30, 2002.  Income for the quarter  ended  September  30, 2003,
included  the  regular  quarterly  dividend  from the  FHLB-NY  in the amount of
$277,000.  The FHLB-NY has informed shareholders that it will suspend the fourth
quarter 2003 dividend payment.

INTEREST EXPENSE.  Interest expense  decreased $3.6 million,  or 23.4%, to $12.0
million for the three months ended September 30, 2003, compared to $15.6 million
for the same  period in 2002.  For the nine months  ended  September  30,  2003,
interest expense decreased $8.8 million, or 18.6%, to $38.7 million versus $47.6
million for the  comparable  2002 period.  The decrease in interest  expense was
primarily attributable to reductions in rates paid on time and core deposits, as
well as growth in  lower-costing  core  accounts  and managed  run-off in higher
costing certificates of deposit.

Interest expense on deposits  decreased $2.9 million,  or 36.6%, to $5.0 million
for the three months ended September 30, 2003,  compared to $7.9 million for the
same  period in 2002.  The average  balance of  interest-bearing  core  deposits
increased  $73.7 million,  or 10.8%,  for the quarter ended  September 30, 2003,
compared  with the same  period in 2002,  while the  average  rate paid on these
deposits  decreased  86 basis  points to  0.83%.  Average  non-interest  bearing
deposits grew $7.1 million,  or 10.2%, to $76.3 million for the third quarter of
2003 compared with 2002. The average balance of certificates of deposit declined
$59.8 million,  or 9.6%, for the three months ended September 30, 2003, compared
with the same  period in 2002,  while  the  average  rate  paid on  certificates
decreased 79 basis points to 2.46%.

For the first nine months of 2003,  interest expense on deposits  decreased $8.5
million,  or 33.5%,  to $16.8  million,  compared to $25.3  million for the same
period in 2002. For the  year-to-date,  the average balance of  interest-bearing
core deposits increased $80.9 million,  or 12.3%,  compared with the same period
in 2002, while the average rate paid on these deposits decreased 82 basis points
to 0.97%.  Average non-interest bearing deposits grew $9.4 million, or 14.3%, to
$75.4 million for the first nine months of 2003 compared with the same period in
2002. The average balance of certificates of deposit declined $55.4 million,  or
8.7%,  for the nine months  ended  September  30, 2003,  compared  with the same
period in 2002,  while the average rate paid on certificates  decreased 82 basis
points to 2.64%. Interest rates paid on new and renewing certificates of deposit
are projected to continue to reprice  downward  throughout the fourth quarter of
2003 and to stabilize somewhat thereafter.

Interest on borrowed  funds for the three and nine months  ended  September  30,
2003, decreased $747,000 and $380,000,  respectively,  to $6.9 million and $21.9
million,  compared  to $7.7  million and $22.3  million for the same  respective
periods in 2002.  The  average  balance of borrowed  funds for the three  months
ended September 30, 2003,  decreased to $583.1 million,  from $601.8 million for
the same period in 2002.  The average  interest rate paid on borrowed  funds was
4.76% for the three months ended September 30, 2003, compared with 5.11% for the
same period in 2002.  The average  balance of borrowed funds for the nine months
ended September 30, 2003,  increased to $598.8 million,  from $584.9 million for
the same period in 2002.  The average  interest rate paid on borrowed  funds was
4.88% for the nine months ended September 30, 2003,  compared with 5.08% for the
same period in 2002.  During the first


                                       20
<PAGE>

half of 2003, the Company  modified $75 million in borrowings  with the FHLB-NY,
extending terms and reducing the interest  rates.  The Company had $71.0 million
in borrowings with a weighted average interest rate of 4.10% scheduled to mature
in the subsequent  twelve months at September 30, 2003. The Company expects that
these borrowings will favorably reprice based on current market conditions.

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest income before
provision for loan losses decreased $2.0 million and $4.3 million,  or 12.2% and
9.0%,  respectively,  to $14.4  million and $44.0 million for the three and nine
months ended September 30, 2003, compared to $16.5 million and $48.4 million for
the same periods in 2002. The decrease was due to the changes in interest income
and interest expense described previously.

The interest rate spread decreased 26 basis points to 2.38% for the three months
ended  September 30, 2003,  compared with 2.64% for the same period in 2002. For
the three months ended September 30, the average earning asset yield declined to
4.90% for 2003, from 5.92% for 2002, while the average cost of  interest-bearing
liabilities declined to 2.52% for 2003, from 3.28% for 2002. For the nine months
ended September 30, 2003, the interest rate spread  decreased 17 basis points to
2.41% compared with 2.58% for the same period in 2002. The average earning asset
yield was 5.10% for the first nine months of 2003,  compared  with 5.96% for the
first  nine  months  of  2002,  while  the  average  cost  of   interest-bearing
liabilities fell to 2.69% from 3.38% for the same respective periods.

The net interest  margin declined 36 basis points to 2.68% for the third quarter
of 2003,  from 3.04% for the quarter ended September 30, 2002, and was unchanged
from 2.68% for the second  quarter of 2003. For the  year-to-date,  net interest
margin  declined  29 basis  points to 2.71%,  compared  with  3.00% for the nine
months ended  September 30, 2002. The Company  believes the net interest  margin
has  stabilized.  Based on the  reduction  in  mortgage  refinance  applications
received  since  August,   such  cash  inflows  and  related   deferred  expense
recognition and premium  amortization are expected to slow in the fourth quarter
of 2003.

PROVISION  FOR LOAN  LOSSES.  The Company  did not record a  provision  for loan
losses during the three and nine months ended  September  30, 2003,  compared to
$105,000 and $1.3 million for the same periods in 2002,  as a result of a static
loan portfolio size and  improvements  in asset  quality.  Total  non-performing
assets  decreased  to $911,000  at  September  30,  2003,  from $1.8  million at
December 31, 2002 and $3.1 million at September 30, 2002. The allowance for loan
losses as a percentage  of total loans was 1.05% at September 30, 2003 and 1.06%
at December 31, 2002. In  management's  opinion,  the allowance for loan losses,
totaling  $12.8  million at September 30, 2003,  adequately  addresses the risks
inherent  in the  portfolio.  Management  will  continue  to review the need for
additions to its allowance  for loan losses based upon its  quarterly  review of
the loan portfolio, the level of delinquencies,  and general market and economic
conditions.


                                       21
<PAGE>

The  following  table  sets  forth  ratios  regarding   non-accrual   loans  and
investments,  and loans which are 90 days or more  delinquent,  but on which the
Company is accruing  interest at the dates indicated.  The Company  discontinues
accruing  interest on delinquent loans when collection of interest is considered
doubtful,  generally  when 90 days or more  delinquent  and  when  loan-to-value
ratios  exceed  55%,  at which time all  accrued  but  uncollected  interest  is
reversed.

<TABLE>
<CAPTION>
(dollars in thousands)                                 Sept. 30,   June 30,   Mar. 31,   Dec. 31,  Sept. 30,
                                                         2003        2003       2003       2002      2002
                                                       -----------------------------------------------------
<S>                                                        <C>      <C>        <C>        <C>       <C>
Non-accrual mortgage loans .........................       $841     $1,291     $1,082     $1,511    $2,297
Non-accrual other loans ............................          6          6         43         30        --
                                                       -----------------------------------------------------
   Total non-accrual loans .........................        847      1,297      1,125      1,541     2,297
Loans 90 days or more delinquent and
     still accruing ................................         64         64        294        223       440
                                                       -----------------------------------------------------
Total non-performing loans .........................        911      1,361      1,419      1,764     2,737
Non-accrual investments (WorldCom, Inc.
     corporate bonds) ..............................         --         --         --         --       300
Total foreclosed real estate, net of related
     allowance .....................................         --         50         --         72       100
                                                       -----------------------------------------------------
Total non-performing assets ........................       $911     $1,411     $1,419     $1,836    $3,137
                                                       =====================================================
Non-performing loans to loans receivable, net ......       0.07%      0.11%      0.12%      0.15%     0.22%
Non-performing assets to total assets ..............       0.04%      0.06%      0.06%      0.08%     0.14%
</TABLE>


NON-INTEREST  INCOME.  Non-interest income decreased $969,000,  to $1.9 million,
for the three months ended  September  30, 2003,  compared to the same period in
2002.  For the  nine  months  ended  September  30,  2003,  non-interest  income
increased  $2.0 million,  to $6.6 million,  compared to the same period in 2002.
Net gains on sales of loans and  securities  totaling  $276,000 and $1.8 million
were  realized  during  the three and nine  months  ended  September  30,  2003,
respectively,  compared  with a net  gain  of  $1.3  million  and a net  loss of
$122,000, respectively, for the comparable 2002 periods. In the third quarter of
2002 and in the first half of 2003, the Company recognized gains on the sales of
higher-coupon MBS that demonstrated a significant  propensity to prepay, as well
as several corporate debt obligations.  Prior year results were also impacted by
a $1.8 million pre-tax  impairment charge recorded on WorldCom,  Inc.  corporate
bonds in the second quarter of 2002.

In addition,  fee and service charge income  increased  $149,000 and $80,000 for
the three and nine months ended September 30, 2003, respectively,  compared with
the same periods in 2002.  Current year fee and service charge income  benefited
from core deposit growth and increased fee and service charge levels implemented
in July of 2002, as well as prepayment fees received upon the early  termination
of certain commercial real estate loans.

NON-INTEREST  EXPENSE.  Non-interest expense for the three and nine months ended
September 30, 2003, increased $1.9 million, or 25.4% and $2.8 million, or 12.5%,
to $9.2 million and $25.6 million, respectively, compared to the same periods in
2002.

The  increases for the quarter and nine months ended  September  30, 2003,  were
primarily due to increases in compensation and benefits expense of $2.1 million,
or 50.5%,  to $6.2 million and $2.9 million,  or 21.9%, to $16.2 million for the
three and nine months ended September 30, 2003, respectively,  compared with the
same periods in 2002. These increases were primarily  attributable to the impact
of appreciation  in the Company's stock price on DDFP and ESOP costs.  Increases
in healthcare and pension costs further contributed to the increases.  Effective
August 1, 2003,  the Company  adopted  changes to its pension plan which reduced
the retirement benefit and closed the plan to new participants hired on or after
that date. As a result of this amendment, pension expense for the second half of
2003 is  expected  to decline by  $236,000  compared  with the first half of the
year.

INCOME TAXES.  The Company's  effective tax rate declined to 31.7% and 33.1% for
the three and nine months ended September 30, 2003, respectively,  compared with
36.3% and 34.3% for the same periods in 2002. Third quarter 2002 taxes reflected
the impact of New  Jersey's  Business  Tax Reform Act,  which  passed on July 2,
2002, retroactive to January 1, 2002.

                                       22
<PAGE>

BRANCH  SALE.  On September 4, 2003,  the Bank  announced  that it had signed an
agreement  to sell its  Lawrenceville,  NJ branch  to  Yardville  National  Bank
("Yardville").   Under  the  terms  of  the  agreement,  Yardville  will  assume
approximately  $40.0 million in deposit  liabilities  from the Bank. The Company
estimates that the transaction  will result in the recognition of a pre-tax gain
of approximately $2.5 million,  or approximately $0.06 per share, net of related
taxes, during the fourth quarter of 2003.


Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

There  have  been  no  material  changes  to  information   required   regarding
quantitative and qualitative  disclosures  about market risk from the end of the
preceding  fiscal  year  to  the  date  of the  most  recent  interim  financial
statements (September 30, 2003).

Item 4.   CONTROLS AND PROCEDURES

          a.)  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

               Christopher  Martin, the Company's Chief Executive  Officer,  and
               Thomas M. Lyons, the Company's Chief Financial Officer, conducted
               an evaluation of the  effectiveness  of the Company's  disclosure
               controls and procedures  (as defined in Rule 13a-15(e)  under the
               Securities  Exchange Act of 1934, as amended) as of September 30,
               2003. Based upon their evaluation,  they each found the Company's
               disclosure  controls and procedures  were adequate to ensure that
               information  required to be  disclosed  in the  reports  that the
               Company  files and submits  under the  Exchange  Act is recorded,
               processed, summarized and reported as and when required, and that
               information   required  to  be  disclosed  is   accumulated   and
               communicated  to them as  appropriate  to allow timely  decisions
               regarding required disclosure.

               In December 2003, the Company  determined that its accounting for
               the Bank's Directors' Deferred Fee Plan did not conform with EITF
               Issue  No.   97-14,   "Accounting   for   Deferred   Compensation
               Arrangements  Where  Amounts  Earned Are Held in Rabbi  Trust and
               Invested"  at the required  implementation  date  (September  30,
               1998). As described in Note 2 of the Notes to Restated  Unaudited
               Consolidated Financial Statements included in Item 1 of this Form
               10-Q/A,  the Company has conformed  its  accounting in accordance
               with EITF Issue No.  97-14 and,  as a result,  has  restated  its
               consolidated  financial  statements  as of September 30, 1998 and
               for all subsequent periods.

               Due  to  the  discovery  in  December  2003  that  the  Company's
               financial  statements  did not conform with EITF Issue No. 97-14,
               Mr. Martin and Mr. Lyons have since determined that the Company's
               disclosure  controls  and  procedures  were  not  adequate  as of
               September 30, 2003. As part of the Company's  disclosure controls
               and procedures  over the selection and  application of accounting
               principles,   the  Company's   accounting   officers   relied  on
               information regarding accounting  developments as provided by the
               Company's  independent  auditing  firm,  as well as attendance at
               continuing  education  courses for the accounting  profession and
               receipt of various accounting  journals and other literature with
               respect to the  existence of new  accounting  pronouncements  and
               their  application to the Company.  These controls and procedures
               did not result in the Company's  becoming  aware of the existence
               of EITF Issue No. 97-14 at the time of its pronouncement,  at the
               time of its  required  implementation  or at any  time  prior  to
               December  2003.  Therefore,  the  Company  was not  aware  of its
               applicability to the accounting for the Bank's Directors Deferred
               Fee Plan.  Mr.  Martin  and Mr.  Lyons  have  concluded  that the
               procedures described above were not sufficiently comprehensive to
               identify new accounting  developments required to be incorporated
               in  the  Company's   financial   statements,   resulting  in  the
               determination   that  the  Company's   disclosure   controls  and
               procedures were not adequate.

          b)   CHANGES IN INTERNAL CONTROLS.

               There were no  changes in the  Company's  internal  control  over
               financial  reporting  during the quarter  ending on September 30,
               2003 that have materially  affected,  or are reasonably likely to
               materially  affect, the Company's internal control over financial
               reporting.

               In  connection  with the  determination  in December  2003 by Mr.
               Martin and Mr. Lyons that the Company's  disclosure  controls and
               procedures  were  not  adequate  as of  September  30,  2003,  as
               described  in section (a) above,  the Company  has  enhanced  its
               procedures  for educating its financial  officers with respect to
               the adoption of new or revised accounting  principles,  practices
               and  applications.  In particular,  the Company's Chief Financial
               Officer will now perform the following review quarterly:

               1.   Review  the   American   Institute   of   Certified   Public
                    Accountants'    website   for   any   new,   revisions   to,
                    interpretation   of  or   application   of  any   accounting
                    principles.

               2.   Correspond with accounting professionals,  including but not
                    limited  to the  Company's  independent  auditing  firm,  to
                    ascertain any changes in application  of Generally  Accepted
                    Accounting Principles (GAAP).

               3.   Review the Financial  Accounting  Standards  Board's  (FASB)
                    website and any available information to acknowledge, review
                    and interpret any applicable FASB changes, including changes
                    brought about by the EITF.

               4.   Catalog   any   and  all   correspondence/information   from
                    America's  Community  Banker's,  Financial Managers Society,
                    American Banker Association,  Independent  Community Bankers
                    Association, New Jersey League (including the Accounting and
                    Tax  Committee)  and other  financial  organizations  of any
                    accounting pronouncements or interpretations.

               5.   Discuss with industry  specialists any changes in accounting
                    procedures or GAAP that they may be aware of.

               The foregoing  quarterly  review is now required by the Company's
               written policies for its disclosure controls and procedures.  The
               results of this review  will be reported to the Audit  Committee.
               This will be in addition to any  communications  made directly to
               the Audit Committee by the Company's independent auditors.

                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.
         There are  various  claims and  lawsuits  in which the  Registrant  is
         periodically involved incidental to the Registrant's  business. In the
         opinion of  management,  no material loss is expected from any of such
         pending claims and lawsuits.

Item 2.  CHANGES IN SECURITIES.
         None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.
         Not applicable.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         None.

Item 5.  OTHER INFORMATION.
         None.


                                       23
<PAGE>

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         a.) Exhibits
             --------

<TABLE>
<CAPTION>
          -----------------------------------------------------------------------------------------------
             Exhibit
             Number                                Description                              Reference
          -----------------------------------------------------------------------------------------------
<S>                          <C>                                                           <C>
                 3.1         Certificate of Incorporation of First Sentinel Bancorp, Inc.      (a)
                 3.2         Bylaws of First Sentinel Bancorp, Inc.                            (b)
                  4          Stock certificate of First Sentinel Bancorp, Inc.                 (a)
                 11          Statement re: Computation of Ratios                              Page 8
                31.1         Certification of Chief Executive Officer                      Filed herein
                31.2         Certification of Chief Financial Officer                      Filed herein
                32.1         Statement of Chief Executive Officer furnished pursuant to     Furnished
                             Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.         herein
                             Section 1350*
                32.2         Statement of Chief Financial Officer furnished pursuant to     Furnished
                             Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.         herein
                             Section 1350*
          -----------------------------------------------------------------------------------------------
</TABLE>

* Pursuant to SEC rules,  this  exhibit will not be deemed filed for purposes of
Section 18 of the Exchange Act or otherwise be subject to the  liability of that
section.

(a)  Previously filed and  incorporated  herein by reference to the Registration
     Statement on Form S-1 and exhibits thereto of First Sentinel Bancorp,  Inc.
     (formerly  First Source Bancorp,  Inc.),  and any amendments or supplements
     thereto  filed with the SEC on December 19, 1997 and amended on February 9,
     1998, SEC File No. 333-42757.

(b)  Previously filed and  incorporated  herein by reference to the December 31,
     2002 Annual Report on Form 10-K of First Sentinel Bancorp,  Inc. filed with
     the SEC on March 31, 2003, SEC File No. 000-23809.


         b.)  Reports on Form 8 - K
              ---------------------

       On July 23,  2003,  the Company  furnished  a Current  Report on Form 8-K
       reporting its earnings for the three and six months ended June 30, 2003.

       On September  12, 2003,  the Company  filed a Current  Report on Form 8-K
       announcing  that its  subsidiary,  First Savings Bank, had agreed to sell
       its Lawrenceville,  NJ branch to Yardville National Bank, a subsidiary of
       Yardville National Bancorp.


                                       24
<PAGE>

                                   SIGNATURES


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


                                       FIRST SENTINEL BANCORP, INC.



Date:  January 28, 2004                By: /s/ CHRISTOPHER MARTIN
                                           ----------------------
                                           Christopher Martin
                                           President and Chief Executive Officer


Date:  January 28, 2004                 By: /s/ THOMAS M. LYONS
                                            -------------------
                                            Thomas M. Lyons
                                            Executive Vice President and
                                            Chief Financial Officer



                                       25