Exhibit 10(f)(2)



July 22, 2004


Mr. Charles Frost
20 Winding Way
Morris Plains, NJ 07950


Dear Mr. Frost:

Interchange  Financial Services  Corporation,  a New Jersey Bank Holding Company
(the  "Company"),  considers the maintenance of a sound and vital executive team
to be essential to protecting  and  enhancing the best  interests of the Company
and its  stockholders.  In this  connection,  the  Company  recognizes  that the
possibility of a change in control presently exists and may exist in the future,
and that such possibility,  and the uncertainty and questions which it may raise
among  management,  may result in the departure or  distraction of executives to
the  detriment of the Company and its  stockholders.  Accordingly,  the Board of
Directors of the Company (the "Board") has  determined  that  appropriate  steps
should  be  taken  to  reinforce  and  encourage  the  continued  attention  and
dedication of members of the Company's management team.

This letter agreement sets forth the severance benefits which the Company agrees
will be  provided  to you in the  event  your  employment  with the  Company  is
terminated  subsequent  to a "change in control of the  Company"  (as defined in
Section 2 hereof) under the circumstances described below.

1.   Company's Right to Terminate

     During  the  term  of  this  Agreement,  the  Company  may  terminate  your
     employment  at any time,  with or without  cause,  subject to providing the
     benefits hereinafter specified in accordance with the terms hereof.

2.   Change in Control

     No  benefits  shall be payable  hereunder  unless  there  shall have been a
     change in control of the Company,  as set forth below,  and your employment
     by the Company shall  thereafter  have been  terminated in accordance  with
     Section 3 below.  For purposes of this  Agreement,  a "change in control of
     the Company"  shall mean,  unless the Board  otherwise  directs  resolution
     approved by

<PAGE>

     unanimous vote of the entire  membership  thereof adopted prior thereto,  a
     change in control of a nature  that would be  required  to be  reported  in
     response to Item 5(f) of Schedule 14A of Regulation 14A  promulgated  under
     the Securities Exchange Act of 1934, as amended ("Exchange Act");  provided
     that, without limitation,  such a change in control shall be deemed to have
     occurred if (i) any  "person"  (as such term is used in Sections  13(d) and
     14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
     in  Rule  13d-3  under  the  Exchange  Act),  directly  or  indirectly,  of
     securities  of the  Company  representing  more  than  25%  control  of the
     combined voting power of the Company's then outstanding  voting securities;
     or (ii) during any period of two consecutive years,  individuals who at the
     beginning  of such  period  constitute  the Board  cease for any  reason to
     constitute  at  least  a  majority  thereof  unless  the  election,  or the
     nomination for election by the Company's stockholders, of each new director
     was approved by a vote of at least  two-thirds of the directors  then still
     in office who were directors at the beginning of the period.

3.   Termination Following Change in Control

     If any of the events described in Section 2 hereof constituting a change in
     control of the Company  shall have  occurred,  you shall be entitled to the
     benefits provided in Section 4 hereof upon your subsequent termination,  so
     long as such  termination  occurs  within  two (2) years  after a change in
     control of the  Company,  unless  such  termination  is (A) because of your
     death or  Retirement,  (B) by the Company for Cause or Disability or (c) by
     you other than for Good Reason.

     (i)      Disability; Retirement

               (A)  Termination  by the  Company  of your  employment  based  on
                    "Disability" shall mean termination  because of your absence
                    from your duties  with the Company on a full-time  basis for
                    130   consecutive   business  days,  as  a  result  of  your
                    incapacity due to physical or mental illness,  unless within
                    thirty (30) days after Notice of Termination (as hereinafter
                    defined) is given  following  such  absence,  you shall have
                    returned to the full time performance of your duties; or

               (B)  Termination by the Company or you of your  employment  based
                    on  "Retirement"  shall mean your  voluntary  termination in
                    accordance with the Company's  retirement policy,  including
                    early  retirement,  generally  applicable  to  its  salaried
                    employees.

<PAGE>

     (ii)     Cause

               Termination  by the  Company of your  employment  for Cause shall
               mean your termination on account of:


               (A)  Your  willful  commission  of  an  act  that  causes  or  is
                    reasonably  likely  to  cause  substantial   damage  to  the
                    Company;

               (B)  Your  commission  of an act of fraud in the  performance  of
                    your duties on behalf of the Company;

               (C)  Your  conviction  for  commission of a felony or other crime
                    punishable by confinement  for a period in excess of one (1)
                    year in connection  with the  performance  of your duties on
                    behalf of the Company; or

               (D)  The order of a federal or state bank regulatory  agency or a
                    court of competent jurisdiction requiring the termination of
                    your employment.

     (iii)    Good Reason

               Termination  by you of your  employment  for "Good  Reason" shall
               mean termination based on:

               (A)  Subsequent  to a  change  in  control  of the  Company,  and
                    without your express written consent,  the assignment to you
                    of any  duties  inconsistent  with your  positions,  duties,
                    responsibilities  and status  with the  Company  immediately
                    prior to a change in control,  or a change in your reporting
                    responsibilities, titles or offices as in effect immediately
                    prior to a change in control,  or any removal of you from or
                    any failure to re-elect you to any of such positions, except
                    in connection  with the  termination of your  employment for
                    Cause, Disability or Retirement or as a result of your death
                    or by you other than for Good Reason;

               (B)  Subsequent  to  a  change  in  control  of  the  Company,  a
                    reduction by the Company in your base salary as in effect on
                    the date hereof or as the same may be increased from time to
                    time;

<PAGE>

               (C)  Subsequent to a change in control of the Company,  a failure
                    by the Company to continue  any bonus plans in which you are
                    presently entitled to participate (the "Bonus Plans") as the
                    same may be modified from time to time but  substantially in
                    the forms  currently in effect,  or a failure by the Company
                    to continue  you as a  participant  in the Bonus Plans on at
                    least  the  same  basis  as  you  presently  participate  in
                    accordance with the Bonus Plans;

               (D)  Subsequent to a change in control of the Company and without
                    your express written consent, the Company's requiring you to
                    be based  anywhere  other than  within  thirty (30) miles of
                    your present office location,  except for required travel on
                    the Company's business to an extent substantially consistent
                    with your present business travel obligations;

               (E)  Subsequent  to a  change  in  control  of the  Company,  the
                    failure by the  Company to continue in effect any -- benefit
                    or compensation  plan,  stock ownership plan, stock purchase
                    plan,    stock   option   plan,    life   insurance    plan,
                    health-and-accident plan or disability plan in which you are
                    participating  at the time of a  change  in  control  of the
                    Company (or plans providing you with  substantially  similar
                    benefits),  the  taking of any action by the  Company  which
                    would adversely  affect your  participation in or materially
                    reduce your benefits  under any of such plans or deprive you
                    of any material fringe benefit enjoyed by you at the time of
                    the change in  control,  or the  failure  by the  Company to
                    provide you with the number of paid  vacation  days to which
                    you are then  entitled  in  accordance  with  the  company's
                    normal vacation policy in effect on the date hereof;

               (F)  Subsequent  to a  change  in  control  of the  Company,  the
                    failure  by the  Company  to obtain  the  assumption  of the
                    agreement  to perform  this  Agreement  by any  successor as
                    contemplated in Section 6 hereof; or

               (G)  Subsequent  to a  change  in  control  of the  Company,  any
                    purported  termination  of  your  employment  which  is  not
                    effected pursuant to a Notice of Termination  satisfying the
                    requirements  of paragraph  (iv) below (and, if  applicable,


<PAGE>

                    paragraph (ii) above);  and for purposes of this  Agreement,
                    no such purported termination shall be effective.

      (iv)    Notice of Termination

               Any purported  termination  by the Company  pursuant to paragraph
               (i) or (ii)  above  or by you  pursuant  to  subparagraph  (B) of
               paragraph (i) or paragraph  (iii) above shall be  communicated by
               written  Notice of  Termination  to the other party  hereto.  For
               purposes of this Agreement,  a "Notice of Termination" shall mean
               a notice which shall indicate the specific termination  provision
               in this  Agreement  relied upon and shall set forth in reasonable
               detail the facts and circumstances claimed to provide a basis for
               termination of your employment under the provision so indicated.

      (v)      Date of Termination

               "Date  of  Termination"  shall  mean  (A) if your  employment  is
               terminated  for  Disability,  thirty  (30) days  after  Notice of
               Termination  is given  (provided that you shall not have returned
               to the  performance  of your duties on a full-time  basis  during
               such  thirty  (30)  day  period),   (B)  if  your  employment  is
               terminated  pursuant to paragraph (ii) above,  the date specified
               in the  Notice  of  Termination,  and (C) if your  employment  is
               terminated  for any other  reason,  the date on which a Notice of
               Termination  is given;  provided  that if within thirty (30) days
               after any Notice of Termination is given the party receiving such
               Notice of  Termination  notifies  the other  party that a dispute
               exists concerning the termination,  the Date of Termination shall
               be the date on which the dispute is finally determined, either by
               mutual written  agreement of the parties,  by a binding and final
               arbitration  award or by a final  judgment,  order or decree of a
               court of competent  jurisdiction  entered  upon such  arbitration
               award (the time of appeal  therefrom having expired and no appeal
               having been perfected).

4.   Certain Benefits Upon Termination

     If,  after a change in  control of the  Company  shall  have  occurred,  as
     defined  in  Section  2 above,  your  employment  by the  Company  shall be
     terminated  (A)  by  the  Company  other  than  for  Cause,  Disability  or
     Retirement or (B) by you for Good Reason, then you shall be entitled to the
     benefits provided below:

<PAGE>

     (i)  The Company  shall pay you your full base  salary  through the Date of
          Termination at the rate in effect at the time Notice of Termination is
          given  plus  credit  for any  vacation  earned  but not  taken and the
          amount, if any, of any bonus for a past fiscal year and the portion of
          the current  fiscal year ending on the Date of  Termination  which has
          not yet been awarded or paid to you under the Bonus Plans;

     (ii) In lieu of any further salary  payments to you for periods  subsequent
          to the Date of Termination,  the Company shall pay as severance pay to
          you on the  fifth day  following  the Date of  Termination  a lump sum
          amount  equal to one (1) times your  annual base salary at the highest
          rate in effect during the twelve (12) months immediately preceding the
          Date of Termination;

     (iii) The  Company  shall  also  pay to you all  legal  fees  and  expenses
          incurred by you as a result of such  termination  (including  all such
          fees and  expenses,  if any,  incurred in  contesting or disputing any
          such  termination  or in  seeking  to obtain or  enforce  any right or
          benefit provided by this Agreement);

     (iv) The  Company  shall  maintain  in full  force  and  effect,  for  your
          continued benefit until the earlier of (A) one (1) year after the Date
          of Termination or (B) your commencement of full time employment with a
          new employer,  all life insurance,  medical,  health and accident, and
          disability plans,  programs or arrangements in which you were entitled
          to participate immediately prior to the Date of Termination,  provided
          that your continued  participation is possible under the general terms
          and  provisions  of such  plans and  programs.  In the event that your
          participation in any such plan or program is barred, the Company shall
          arrange to provide you with  benefits  substantially  similar to those
          which you are entitled to receive  under such plans and  programs.  In
          addition,  the Company  shall pay you a lump sum amount of  equivalent
          actuarial  value to the  additional  pension  benefit  you would  have
          earned under the  Company's  Pension Plan as in effect on the date the
          change of control occurs,  but  disregarding any Internal Revenue Code
          limitations  pertaining to qualified plans, if you were granted at the
          time of your  termination  of employment  one (1)  additional  year of
          Credited  Service  and  deemed  one year  older  under  the  Plan.  In
          determining the equivalent  actuarial value of the additional  pension
          granted under this Section 4, an interest rate of 5% and the

<PAGE>

          mortality  table  under the  Company's  Pension  Plan shall be used to
          determine the lump sum amount.

     You shall not be required to  mitigate  the amount of any payment  provided
     for in this Section 4 by seeking other  employment or otherwise,  nor shall
     the amount of any payment  provided for in this Section 4 be reduced by any
     compensation  earned by you as the result of employment by another employer
     after the Date of Termination or otherwise.

5.   Certain Further Payments by the Corporation

     In the event that any amount or benefit paid or distributed to you pursuant
     to this  Agreement,  taken with any amounts or benefits  otherwise  paid or
     distributed to you by the Company or any affiliated  company  (collectively
     the  "Covered  Payments"),  are or become  subject to the tax (the  "Excise
     Tax")  imposed  under  Section 4999 of the Code or any similar tax that may
     hereafter be imposed,  the Company  shall pay to you at the time  specified
     below an additional amount (the "Tax Reimbursement  Payment") such that the
     net amount  retained by you with  respect to such Covered  Payments,  after
     deduction of any Excise Tax on the Covered Payments and any Federal,  state
     and  local  income  tax and  Excise  Tax on the Tax  Reimbursement  Payment
     provided for by this Section 5, but before deduction for any Federal, state
     or local income or employment  tax  withholding  on such Covered  Payments,
     shall be equal to the amount of the Covered  Payments.

     (i)  For purposes of determining  whether any of the Covered  Payments will
          be subject to the Excise Tax and the amount of such Excise Tax,

          (A)  Such Covered  Payments  will be treated as  "parachute  payments"
               within  the  meaning  of  Section  280G  of  the  Code,  and  all
               "parachute  payments" in excess of the "base  amount" (as defined
               under Section 280G(b)(3) of the Code) shall be treated as subject
               to the Excise Tax, unless,  and except to the extent that, in the
               opinion of the Company's independent certified public accountants
               appointed  prior to the date the Change of Control  occurs or tax
               counsel selected by such accountants  (the  "Accountants"),  such
               Covered  Payments (in whole or in part) either do not  constitute
               parachute  payments  or  represent  reasonable  compensation  for
               services   actually  rendered  (within  the  meaning  of  Section
               280G(b)(4) of the Code) in excess of the "base  amount",  or such
               parachute  payments are otherwise not subject to such Excise Tax,
               and

<PAGE>

          (B)  The value of any  non-cash  benefits or any  deferred  payment or
               benefit shall be determined by the Accountants in accordance with
               the principles of Section 280G of the Code.

     (ii) For  purposes  of  determining  the  amount  of the Tax  Reimbursement
          Payment,  you shall be deemed to pay:

          (A)  Federal income taxes at the highest  applicable  marginal rate of
               Federal  income  taxation for the calendar  year in which the Tax
               Reimbursement Payment is to be made, and

          (B)  Any  applicable  state  and  local  income  taxes at the  highest
               applicable  marginal  rate of taxation for the  calendar  year in
               which the Tax  Reimbursement  Payment  is to be made,  net of the
               maximum reduction in Federal income taxes which could be obtained
               from the  deduction  of such state or local taxes if paid in such
               year.

    (iii) In the event  that the Excise Tax is  subsequently  determined  to be
          less than the amount taken into account  hereunder in calculating  the
          Tax Reimbursement Payment made, you shall repay to the Company, at the
          time that the  amount of such  reduction  in the Excise Tax is finally
          determined,  the portion of such prior Tax Reimbursement  Payment that
          would  not have  been  paid if such  Excise  Tax had been  applied  in
          initially calculating such Tax Reimbursement Payment, plus interest on
          the  amount  of  such  repayment  at  the  rate  provided  in  Section
          1274(b)(2)(B) of the Code.

          In the event  that the Excise  Tax is later  determined  to exceed the
          amount taken into account  hereunder at the time the Tax Reimbursement
          Payment  is made  (including,  but not  limited  to,  by reason of any
          payment the  existence or amount of which cannot be  determined at the
          time of the Tax  Reimbursement  Payment),  the  Company  shall make an
          additional Tax  Reimbursement  Payment in respect of such excess (plus
          any  interest or penalty  payment  with respect to such excess) at the
          time that the amount of such excess is finally determined.

<PAGE>

     (iv) The Tax  Reimbursement  Payment (or portion  thereof)  provided for in
          this  Section 5 shall be paid to you not later than ten (10)  business
          days following the payment of the Covered Payments; provided, however,
          that if the  amount  of such Tax  Reimbursement  Payment  (or  portion
          thereof)  cannot be finally  determined on or before the date on which
          payment is due,  the  Company  shall pay to you by such date an amount
          estimated in good faith by the Accountants to be the minimum amount of
          such Tax Reimbursement Payment and shall pay the remainder of such Tax
          Reimbursement  Payment (together with interest at the rate provided in
          Section  1274(b)(2)(B)  of the Code) as soon as the amount thereof can
          be  determined,  but in no event  later  than 45  calendar  days after
          payment of the related Covered  Payment.  In the event that the amount
          of  the  estimated  Tax  Reimbursement   Payment  exceeds  the  amount
          subsequently determined to have been due, such excess shall constitute
          a loan by the  Corporation  to you,  payable on the fifth business day
          after  written  demand  by the  Company  for  payment  (together  with
          interest at the rate provided in Section 1274(b)(2)(B) of the Code).

6.   Term of Agreement

     This Agreement  shall continue in effect so long as you are employed by the
     Company provided that, if a change of control of the Company, as defined in
     Section 2 hereof,  shall have occurred  during the term of this  Agreement,
     this Agreement  shall  continue in effect for a period of twenty-four  (24)
     months beyond the month in which such change in control occurred.

7.   Successor; Binding Agreement

     (i)  The Company will require any successor (whether direct or indirect, by
          purchase, merger,  consolidation or otherwise) to all or substantially
          all of the business and/or assets of the Company, by agreement in form
          and substance  satisfactory  to you, to expressly  assume and agree to
          perform this  Agreement in the same manner and to the same extent that
          the Company would be required to perform it if no such  succession had
          taken place.  Failure of the Company to obtain such agreement prior to
          the  effectiveness  of any such  succession  shall be a breach of this
          Agreement  and shall entitle you to  compensation  from the Company in
          the same  amount  and on the  same  terms  as you  would  be  entitled
          hereunder if you terminated  your  employment for Good Reason,  except
          that for purposes of implementing the foregoing, the date on which any

<PAGE>

          such  succession  becomes  effective  shall  be  deemed  the  Date  of
          Termination.  As used in this  Agreement,  "Company"  shall  mean  the
          Company as  hereinbefore  defined and any  successor  to its  business
          and/or assets as aforesaid  which  executes and delivers the agreement
          provided for in this Section 7 or which otherwise becomes bound by all
          the terms and provisions of this Agreement by operation of law.

     (ii) This  Agreement  shall inure to the benefit of and be  enforceable  by
          your  personal or legal  representatives,  executors,  administrators,
          successors, heirs, distributees,  devisees and legatees. If you should
          die while any amount  would still be payable to you  hereunder  if you
          had continued to live,  all such amounts,  unless  otherwise  provided
          herein,  shall be paid in accordance  with the terms of this Agreement
          to your  devisee,  legatee or other  designee  or, if there be no such
          designee, to your estate.

8.   Notice

     For the purpose of this  Agreement,  notices  and all other  communications
     provided for in this  Agreement  shall be in writing and shall be deemed to
     have been duly given when  delivered or mailed by  certified or  registered
     mail,  return  receipt  requested,   postage  prepaid,   addressed  to  the
     respective  addresses  set  forth  on the  first  page of  this  Agreement,
     provided that all notices to the Company shall be directed to the attention
     of the  President  of the  Company  with a  copy  to the  Secretary  of the
     Company, or to such other address as either party may have furnished to the
     other in writing in  accordance  herewith,  except that notice of change of
     address shall be effective only upon receipt.

9.   Miscellaneous

     No provision of this Agreement may be modified, waived or discharged unless
     such waiver,  modification  or discharge is agreed to in writing  signed by
     you and such  officer  as may be  specifically  designated  by the Board of
     Directors of the  Company.  No waiver by either party hereto at any time of
     any breach by the other party hereto of, or compliance  with, any condition
     or provision of this Agreement to be performed by such other party shall be
     deemed a waiver of similar or  dissimilar  provisions  or conditions at the
     same or at any prior or subsequent time. No agreements or  representations,
     oral or otherwise, expressed or implied, with respect to the subject matter
     hereof have been made by either party which are not  expressly set forth in
     this Agreement;  provided, however,

<PAGE>

     that this  Agreement  shall not  supersede  or in any way limit the rights,
     duties or obligations  you may have under any other written  agreement with
     the Company. The validity, interpretation,  construction and performance of
     this Agreement shall be governed by the laws of the State of New Jersey.

10.  Validity

     The invalidity or unenforceability of any provision of this Agreement shall
     not affect the validity or  enforceability  of any other  provision of this
     Agreement, which shall remain in full force and effect.

11.  Tax Withholding

     The Company may withhold from any amounts payable under this Agreement such
     federal,  state or local taxes as shall be required to be withheld pursuant
     to any applicable law or regulation.

12.  Counterparts

     This Agreement may be executed in one or more  counterparts,  each of which
     shall be deemed to be an original but all of which together will constitute
     one and the same instrument.

13.  Arbitration

     Any  dispute  or  controversy  arising  under or in  connection  with  this
     Agreement  shall be settled  exclusively by arbitration in accordance  with
     the rules of the American Arbitration  Association then in effect. Judgment
     may be entered on the arbitrator's award in any court having jurisdiction.

<PAGE>

If this letter  correctly sets forth our agreement on the subject matter hereof,
kindly  sign and return to the Company the  enclosed  copy of this letter  which
will then constitute our agreement on this subject.

                                   Sincerely,

                                   Interchange Financial Services Corporation

                                   By:  /s/ Anthony D. Andora
                                       -----------------------
                                        Anthony  D. Andora
                                        Chairman of the Board

Agreed to this     22nd day
              -----------

of       July      2004
   ---------------

/s/ Charles P. Frost
--------------------

Attest by:    Georgianna Hutter
           ----------------------