UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K
(Mark One)
[X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
             EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2005
                                     - OR -

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

For the transition period from ______________________ to _______________________

Commission File Number: 0-17353

                            FMS FINANCIAL CORPORATION
                     --------------------------------------
             (Exact name of registrant as specified in its charter)

              New Jersey                               22-2916440
---------------------------------------------  ---------------------------------
(State or other jurisdiction of incorporation  (I.R.S. Employer or organization)
                                                    Identification No.)

        3 Sunset Road, Burlington, New Jersey            08016
---------------------------------------------    -------------------------
     (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:     (609) 386-2400
                                                    ------------------------

Securities registered pursuant to Section 12(b) of the Act:      None
                                                            --------------

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.10 per share
                     --------------------------------------
                                (Title of Class)

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. [ ] YES [X] NO

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] YES [X] NO

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. [X] YES [ ] NO

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). [ ] YES [X ] NO

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act).  [ ] YES [X ] NO


<PAGE>

         Based  on  the  closing   sales  price  of  $17.29  per  share  of  the
registrant's  common stock on June 30, 2005, as reported on the Nasdaq  National
Market System, the aggregate market value of voting stock held by non-affiliates
of the registrant was approximately  $66.6 million.  As of March 10, 2006, there
were 6,515,110 shares outstanding of the registrant's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

     1.   Portions of 2005 Annual Report to Stockholders (Parts II and IV)
     2.   Portions  of the  Proxy  Statement  for the  2006  Annual  Meeting  of
          Stockholders. (Part III)

<PAGE>

                                     PART I

Forward-Looking Statements

         FMS Financial  Corporation (the "Corporation" or "Registrant") may from
time to  time  make  written  or oral  "forward-looking  statements,"  including
statements  contained  in the  Corporation's  filings  with the  Securities  and
Exchange Commission  (including this Annual Report on Form 10-K and the exhibits
thereto),  in its reports to  stockholders  and in other  communications  by the
Corporation,  which are made in good faith by the  Corporation  pursuant  to the
"safe harbor"  provisions  of the private  securities  litigation  reform act of
1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Corporation's plans,  objectives,  expectations,  estimates
and intentions,  that are subject to change based on various  important  factors
(some of which are beyond the  Corporation's  control).  The following  factors,
among others,  could cause the  Corporation's  financial  performance  to differ
materially from the plans,  objectives,  expectations,  estimates and intentions
expressed in such forward-looking  statements: the strength of the United States
economy  in  general  and the  strength  of the  local  economies  in which  the
Corporation conducts operations; the effects of, and changes in, trade, monetary
and fiscal policies and laws,  including  interest rate policies of the board of
governors of the federal reserve system,  inflation,  interest rate,  market and
monetary fluctuations;  the timely development of and acceptance of new products
and  services  of the  Corporation  and the  perceived  overall  value  of these
products  and services by users,  including  the  features,  pricing and quality
compared to  competitors'  products and services;  the  willingness  of users to
substitute competitors' products and services for the Corporation's products and
services;  the success of the Corporation in gaining regulatory  approval of its
products  and  services,  when  required;  the impact of  changes  in  financial
services'  laws and  regulations  (including  laws  concerning  taxes,  banking,
securities  and  insurance);  technological  changes,  acquisitions;  changes in
consumer  spending  and saving  habits;  and the success of the  Corporation  at
managing the risks involved in the foregoing.

         The Corporation  cautions that the foregoing list of important  factors
is  not   exclusive.   The   Corporation   does  not  undertake  to  update  any
forward-looking  statement,  whether written or oral, that may be made from time
to time by or on behalf of the Corporation.

Item 1.  Business
-----------------

General

         FMS Financial Corporation,  a New Jersey corporation,  headquartered in
Burlington,  New Jersey,  is the holding  company for Farmers and Mechanics Bank
(the "Bank").  The Corporation conducts no significant business or operations of
its own other than holding all of the outstanding common stock of the Bank. As a
result,  references to the  Corporation  or Registrant  generally  refers to the
consolidated entity which includes the main operating company,  the Bank, unless
the context indicates otherwise.

         The  Registrant  principally  operates  through its  forty-two  banking
offices  located in  Burlington,  Camden and Mercer  Counties,  New Jersey.  The
Registrant is primarily engaged in the business of attracting  deposits from the
general  public and  originating  loans  which are secured by  residential  real
estate. To a lesser extent, the Registrant also originates consumer,  commercial
business loans and

                                        2

<PAGE>

construction   loans   and   invests   in   U.S.   government   securities   and
mortgage-related securities.

Competition

         The Registrant's primary market area consists of Burlington, Camden and
Mercer Counties,  New Jersey, and is one of many financial  institutions serving
this market area. The competition for deposit  products comes from other insured
financial  institutions such as commercial banks, thrift institutions and credit
unions in the  Registrant's  market area.  Deposit  competition  also includes a
number of insurance  products sold by local agents and investment  products such
as mutual funds and other  securities sold by local and regional  brokers.  Loan
competition comes from other insured  financial  institutions such as commercial
banks, thrift institutions and credit unions.

Lending Activities

Analysis of Loan Portfolio

         The following table sets forth the composition of the Registrant's loan
portfolio in dollar amounts and in  percentages of the respective  portfolios at
the dates indicated.

<TABLE>
<CAPTION>
                                                                                       December 31,
                              ------------------------------------------------------------------------------------------------------
                                     2005                  2004                  2003                 2002               2001
                              ------------------   --------------------   ------------------   -----------------  ------------------
                             Carrying   Percent     Carrying   Percent    Carrying  Percent    Carrying  Percent  Carrying  Percent
                              Value     of Total     Value     of Total    Value    of Total    Value   of Total   Value    of Total
                              -----     --------     -----     --------    -----    --------    -----   --------   -----    --------
                                                                    (In thousands)
<S>                         <C>          <C>       <C>          <C>     <C>          <C>     <C>         <C>    <C>          <C>
Mortgage loans:
  One-to-four family........ $286,476     63.97%    $275,843     65.08%  $280,664     68.84%  $272,777    74.38% $259,970     76.11%
  Commercial real estate....  127,704     28.52      116,380     27.46    104,352     25.60     76,354    20.82    60,627     17.75
  Commercial construction...    6,942      1.55       11,971      2.82      5,994      1.47      1,157      .32     4,606      1.35
  Construction..............    1,775       .40          897       .21      1,324       .32        306      .08     1,254       .37
                             --------    ------     --------    ------   --------    ------   --------   ------  --------    ------
      Total mortgage loans..  422,897     94.44      405,091     95.57    392,334     96.23    350,594    95.60   326,457     95.58
                             --------    ------     --------    ------   --------    ------   --------   ------  --------    ------
Consumer and other loans:
  Consumer..................    2,356       .53        2,472       .58      3,187       .78      3,522      .96     4,583      1.34
  Commercial business.......   22,550      5.03       16,312      3.85     12,180      2.99     12,621     3.44    10,521      3.08
                             --------    ------     --------    ------   --------    ------   --------   ------  --------    ------
   Total consumer and other
         loans..............   24,906      5.56       18,784      4.43     15,367      3.77     16,143     4.40    15,104      4.42
                             --------    ------     --------    ------   --------    ------   --------   ------  --------    ------
      Total loans........... $447,803    100.00%    $423,875    100.00%  $407,701    100.00%  $366,737   100.00% $341,561    100.00%
                             ========    ======     ========    ======   ========    ======   ========   ======  ========    ======
</TABLE>

         One- to- Four Family Loans. The  Registrant's  primary lending activity
consists of the  origination of one- to-four family  residential  mortgage loans
("residential  loans") secured by the property in the Registrant's  market area.
The Registrant's  residential loan portfolio also includes second mortgage loans
and home  equity  loans  (including  home  equity  lines of credit  loans).  The
Registrant  generally  originates  mortgage  loans with terms of 15 to 30 years,
amortized  on a monthly  basis,  with  principal  and  interest  due each month.
Typically,  residential  loans  remain  outstanding  for  significantly  shorter
periods than their  contractual  terms because borrowers may refinance or prepay
loans at their option.

         The Registrant  presently  offers  residential  loans that adjust every
year  after an  initial  fixed  term of one,  two,  five or seven  years,  at an
interest  rate indexed  higher than the  corresponding  U.S.  Treasury  security
index. The interest rates on these mortgages adjust annually after the one, two,
five or seven year

                                        3

<PAGE>
anniversary  date of the loan with an interest rate  adjustment  cap of 1.5% per
year and  presently  not to exceed a rate of 11.5% over the life of the loan. At
December 31, 2005, adjustable-rate  residential first mortgage loans amounted to
$21.7 million or 4.84% of the total residential loan portfolio.  These loans are
generally not originated under terms,  conditions and documentation which permit
their sale in the secondary mortgage market to FreddieMac and FannieMae.

         Fixed-rate  mortgage  loans are  generally  underwritten  according  to
FreddieMac and FannieMae guidelines.  The Registrant periodically sells selected
fixed-rate  residential loans, without recourse, to provide additional funds for
lending and to  restructure  the loan  portfolio to improve  interest rate risk.
Generally,  if the property is not owner-occupied,  a higher rate of interest is
charged on such loans. At December 31, 2005,  $228.4  million,  or 51.01% of the
total  residential  loan  portfolio,  consisted of long- term  fixed-rate  first
mortgage loans, none of which were classified as held for sale.

         The  Registrant's   lending   policies   generally  limit  the  maximum
loan-to-value  ratio on owner- occupied  residential first mortgage loans to 97%
of the lesser of the appraised value or purchase price,  with the condition that
private  mortgage  insurance is required on loans with  loan-to-value  ratios in
excess of 80%. Mortgage loans on investment properties are made at loan-to-value
ratios up to 70%. The loan-to- value ratio, maturity and other provisions of the
loans made by the Registrant have generally  reflected the policy of making less
than the maximum loan permissible  under applicable  regulations,  in accordance
with established lending practices, market conditions and underwriting standards
maintained  by  the  Registrant.  The  Registrant  requires  fire  and  casualty
insurance on all  properties  securing real estate loans and also performs title
searches to ensure its lien position.

         The Registrant  actively  solicits and originates home equity loans and
home  equity  lines of credit  secured by the equity in the  borrower's  primary
residence. These loans generally have terms of 10 to 15 years, some of which are
fixed rates and some of which have rates that adjust  based upon the prime rate.
At December  31,  2005,  the  Registrant  had home equity loans in the amount of
$17.8 million,  or 6.20%, of its  residential  loan portfolio and approved $44.8
million in home equity lines of credit, of which $18.6 million was outstanding.

         Commercial  Real Estate Loans.  Commercial  real estate loans are loans
secured by commercial real estate (e.g.,  shopping centers,  medical  buildings,
retail offices) and multi-family  dwelling units (e.g.,  apartment projects with
more than four units), in the Registrant's  market area.  Commercial real estate
loans and  multi-family  residential  loans have been made in amounts up to $4.0
million,  with most of such loans ranging in size from $100,000 to $2.0 million.
Loans on commercial  properties are generally originated in amounts up to 75% of
the  appraised  value  of  the  property.   Commercial  real  estate  loans  and
multi-family  residential  loans are generally  made at rates which adjust above
the prime  interest rate  (generally 1% to 2%) or a specified  treasury index or
are balloon loans with fixed  interest rates which mature in three to five years
with  principal  amortization  for a period of up to 25 years.  At December  31,
2005, the Registrant's commercial real estate loan portfolio consisted of $121.9
million of commercial real estate and $5.8 million of multi-family loans.

         Loans  secured  by  commercial  real  estate are  generally  larger and
involve a greater degree of risk than one- to-four family  residential  mortgage
loans. Of primary concern,  in commercial and multi-family  real estate lending,
is the borrower's  creditworthiness  and the feasibility and cash flow potential
of the
                                        4

<PAGE>
property.  Loans secured by income  properties are generally  larger and involve
greater risks than residential  mortgage loans because payments on loans secured
by income  properties are often dependent on successful  operation or management
of the  properties.  As a result,  repayment  of such  loans may be subject to a
greater extent than residential  real estate loans to adverse  conditions in the
real estate market or the economy.

         Construction  Loans.  The  Registrant  originates  loans to finance the
construction  of one- to-four family  dwellings  and/or  commercial real estate.
Construction  loans to builders are generally made only if the Registrant  makes
the  permanent  mortgage  loan or if the builder has a contract for sale and the
purchaser has received a permanent  mortgage  commitment.  Interim  construction
loans to builders  generally  have terms of up to nine months and interest rates
which adjust above the prime interest rate (generally 1% to 2%).

         Construction  financing  is  generally  considered  to involve a higher
degree of risk of loss than long- term  financing  on  improved,  occupied  real
estate.  Risk of loss on a  construction  loan is  dependent  largely  upon  the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  and  development  and the estimated cost  (including  interest) of
construction. During the construction phase, a number of factors could result in
delays and cost  overruns.  If the estimate of  construction  costs proves to be
inaccurate,  the  Registrant  may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate,  the Registrant may be confronted, at or prior to
the maturity of the loan, with a project having a value which is insufficient to
assure full repayment.

         Consumer  Loans.   Regulations   permit   federally   chartered  thrift
institutions  to make  secured  and  unsecured  consumer  loans up to 35% of the
institution's  assets.  The  Registrant  makes  various  types  of  secured  and
unsecured consumer loans including education loans, lines of credit,  automobile
loans  (new and used) and loans  secured  by deposit  accounts.  Consumer  loans
generally  have  terms of six months to five  years,  some of which are at fixed
rates and some of which have rates that adjust periodically.

         Consumer  loans  may  entail  greater  risk  than  residential   loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

         Commercial  Business Loans.  Commercial business loans are underwritten
on the basis of the borrower's  ability to service such debt from income and are
generally made to small and mid-sized  companies located within the Registrant's
primary lending area.  Generally,  the Registrant requires additional collateral
of equipment, chattel or other assets before making a commercial business loan.

         Loan Commitments. The Registrant issues loan origination commitments to
real estate developers and qualified  borrowers  primarily for the construction,
purchase and refinancing of residential  real estate and commercial real estate.
Such  commitments are made on specified terms and conditions,  including in most
cases, the payment of a  non-refundable  commitment fee based on a percentage of
the amount of committed funds.  Generally,  the commitment  requires  acceptance
within 15 days of the date of issuance. At December 31, 2005, the Registrant had
$22.8  million  of  commitments  to cover  originations  and  $31.3
                                        5

<PAGE>

million in undisbursed funds on outstanding lines of credit. Management believes
that virtually all of the Registrant's commitments will be funded.

Origination of Loans

         Commercial loan origination comes from a variety of sources,  including
the  Registrant's  existing  customer base,  referrals from real estate offices,
accountants,  financial  advisers,  attorneys,  builders and walk in business as
well  as  solicitations  by  the  Registrant's  business  development  officers.
Residential  mortgage loan customers are derived in a similar  manner.  Consumer
loans are directly  obtained through the Registrant's  network of branch offices
and advertising.

         All applications are processed in accordance with established  policies
of the Registrant,  including the review of credit  references,  verification of
information  provided  and,  where  real  estate is  involved,  the review of an
appraisal  completed  by an  independent  third party  appraiser  from a list of
approved appraisers that the Registrant maintains.

         Loan   approvals   may  be  approved  by  loan  officers  up  to  their
individually   assigned  lending  limit,  which  are  established  and  modified
periodically to reflect the officer's expertise and experience. Certain officers
have joint lending  authorities  that exceed their individual  authorities.  The
Board of Directors  approves loans above the individual and joint authorities of
the  officers.   The  Board  reviews  on  an  annual  basis  the  loan  approval
authorities.

Non-Performing and Problem Assets

         When a loan is more than 30 days delinquent,  the borrower is contacted
by mail or  phone  and  payment  is  requested.  If the  delinquency  continues,
subsequent  efforts  are made to contact  the  delinquent  borrower.  In certain
instances,  the Registrant may modify the loan or grant a limited  moratorium on
loan payments to enable the borrower to reorganize their financial  affairs.  If
the loan  continues in a delinquent  status for 90 days or more,  the Registrant
generally will initiate foreclosure proceedings.

         Loans are generally placed on non-accrual  status when either principal
or interest is 90 days or more past due. Interest accrued and unpaid at the time
a loan is placed on non-accrual status is charged against interest income.  Such
interest,  when  ultimately  collected,  is  credited  to income  in the  period
received.  At December  31,  2005,  the Bank had $1.8 million of loans that were
held on a non-accrual basis.

                                        6

<PAGE>

         Non-Performing  Assets.  The  following  table sets  forth  information
regarding  non-accrual  loans,  troubled debt restructured and real estate owned
assets by the Registrant at the dates indicated.

<TABLE>
<CAPTION>
                                                                At December 31,
                                                ----------------------------------------------
                                                 2005      2004      2003      2002      2001
                                                ------    ------    ------    ------    ------
                                                             (Dollars in Thousands)
<S>                                             <C>       <C>       <C>       <C>       <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
   One-to-four family ........................   $  794    $  819    $  507    $  960    $1,348
   Commercial real estate ....................      985       985     1,189     1,786     1,634
   Consumer and other ........................       --        --        --        12        --
                                                 ------    ------    ------    ------    ------
      Total mortgage non-accrual loans .......   $1,779    $1,804    $1,696    $2,758    $2,982
                                                 ------    ------    ------    ------    ------
Troubled debt restructuring ..................   $  176    $  718    $1,027    $  987    $1,072
Real estate owned, net .......................       --        --        48       291       214
Other non-performing assets ..................       --        --        --        88        88
                                                 ------    ------    ------    ------    ------
Total non-performing assets ..................   $1,955    $2,522    $2,771    $4,124    $4,356
                                                 ------    ------    ------    ------    ------

Total non-accrual loans to net loans .........      .40%      .43%      .42%      .76%      .89%
                                                 ======    ======    ======    ======    ======
Total non-accrual loans to total assets ......      .14%      .14%      .14%      .24%      .31%
                                                 ======    ======    ======    ======    ======
Total non-performing assets to total assets...      .16%      .20%      .23%      .37%      .45%
                                                 ======    ======    ======    ======    ======
</TABLE>

         Classified Assets. The Office of Thrift Supervision ("OTS") regulations
provide for a classification  system for problem assets of insured  institutions
which  covers all problem  assets.  Under this  classification  system,  problem
assets of insured  institutions are classified as "substandard,"  "doubtful," or
"loss." An asset is considered  substandard if it is  inadequately  protected by
the  current net worth and paying  capacity of the obligor or of the  collateral
pledged, if any. Substandard assets include those characterized by the "distinct
possibility"  that the  insured  institution  will  sustain  "some  loss" if the
deficiencies  are not corrected.  Assets  classified as doubtful have all of the
weaknesses   inherent   in  those   classified   substandard,   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable  and  improbable."  Assets  classified as loss are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
may be designated "special mention" because of potential  weaknesses that do not
currently warrant classification in one of the aforementioned categories.

         When an insured  institution  classifies  problem assets as loss, it is
required  either to establish a specific  allowance  for losses equal to 100% of
that  portion  of the asset so  classified  or to  charge  off such  amount.  An
institution's  determination  as to the  classification  of its  assets  and the
amount of its valuation allowances is subject to review by the OTS.

         Management's  evaluation  of  the  classification  of  assets  and  the
adequacy  of the  reserve  for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process.

                                        7

<PAGE>

         The following table sets forth the  Registrant's  classified  assets in
accordance with its classification system.


                                               At December 31, 2005
                                               --------------------
                                                  (In thousands)
        Special mention..................              $3,134
        Substandard......................               4,917
        Doubtful.........................                  --
        Loss.............................                  --
                                                       ------
                 Total...................              $8,051
                                                       ======

         Provision  for Loan Losses.  A provision  for loan losses is charged to
operations  based on  management's  evaluation  of the  probable  losses  in the
Registrant's  loan portfolio.  Such  evaluation,  which includes a review of all
loans  of  which  full  collectibility  of  interest  and  principal  may not be
reasonably assured, considers the Registrant's past loan loss experience,  known
and inherent  risks in the  portfolio,  adverse  situations  that may affect the
borrower's ability to repay, estimated value of any underlying  collateral,  and
current economic conditions.

         Management  will  continue  to review  the  entire  loan  portfolio  to
determine the extent, if any, to which further additional loss provisions may be
deemed  necessary.  There can be no assurance that the allowance for losses will
be adequate to cover losses which may in fact be realized in the future and that
additional provisions for losses will not be required.

         The  following  table  sets  forth  an  analysis  of  the  Registrant's
allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                          For the Year Ended December 31,
                                            -------------------------------------------------------
                                               2005        2004        2003        2002        2001
                                             -------     -------     -------     -------     -------
                                                               (Dollars in Thousands)

<S>                                           <C>         <C>         <C>         <C>         <C>
 Balance at beginning of period .............   $ 4,719     $ 4,408     $ 4,317     $ 4,231     $ 3,980
 Loans charged-off:
   One-to-four family .......................        (9)         (3)         --         (10)        (42)
  Commercial real estate ....................        --          --          --          --          --
  Construction ..............................        --          --          --          --          --
  Consumer ..................................       (45)         (6)         (4)        (10)         (3)
  Commercial business .......................        (4)        (14)       (184)        (58)       --
                                                -------     -------     -------     -------     -------
    Total charge-offs .......................       (58)        (23)       (188)        (78)        (45)
Recoveries ..................................        42           4           9          15          13
                                                -------     -------     -------     -------     -------
Net loans charged-off .......................       (16)        (19)       (179)        (63)        (32)
                                                -------     -------     -------     -------     -------
Provision for loan losses ...................       360         330         270         149         221
                                                -------     -------     -------     -------     -------
Increase as a result of merger ..............        --          --          --          --          62
                                                -------     -------     -------     -------     -------
Balance at end of period ....................   $ 5,063     $ 4,719     $ 4,408     $ 4,317     $ 4,231
                                                =======     =======     =======     =======     =======
 Ratio of net charge-offs to average loans
   outstanding during the period ............      .005%       .005%       .046%       .017%       .010%
                                                =======     =======     =======     =======     =======
</TABLE>

                                        8

<PAGE>

Analysis of the Allowance for Loan Losses

         The following  table sets forth the breakdown of the allowance for loan
losses by loan category and the percent of loans in each category to total loans
receivable  for the periods  indicated.  The allocation of the allowance to each
category is not necessarily indicative of future losses.

<TABLE>
<CAPTION>
                                                                        At December 31,
                             ---------------------------------------------------------------------------------------------------
                                  2005                  2004                2003              2002                2001
                             -------------------  ------------------  ------------------ ------------------- -------------------
                                     Percent of           Percent of         Percent of          Percent of          Percent of
                                      Loans to             Loans to           Loans to            Loans to            Loans to
                             Amount  Total Loans  Amount Total Loans  Amount Total Loans Amount  Total Loans Amount Total Loans
                             ------  -----------  ------ -----------  ------ ----------- ------  ----------- ------ -----------
                                                                                          (Dollars in Thousands)
<S>                         <C>         <C>      <C>          <C>    <C>       <C>      <C>        <C>      <C>        <C>
  Loans:

  One- to-four family....... $1,694      63.97%   $  986       65.08% $1,446    68.84%   $1,672     74.38%   $1,339     76.11%
  Commercial real estate....  2,792      28.52     2,883       27.46   2,540    25.60     2,284     20.82     2,311     17.75
  Commercial construction...    279       1.55       582        2.82     194     1.47        69       .32       100      1.35
  Construction..............      8        .40         2         .21      25      .32        34       .08       222       .37
  Consumer and other........     19        .53        22         .58      24      .78        28       .96        33      1.34
  Commercial business.......    271       5.03       244        3.85     179     2.99       230      3.44       226      3.08
                             ------     ------    ------      ------  ------   ------    ------    ------    ------    ------
      Total allowance
        for loan losses..... $5,063     100.00%   $4,719      100.00% $4,408   100.00%   $4,317    100.00%   $4,231    100.00%
                             ======     ======    ======      ======  ======   ======    ======    ======    ======    ======
</TABLE>

                                        9

<PAGE>

Investment Activities

         The  Registrant  is required  under federal  regulations  to maintain a
minimum  amount of liquid  assets which may be invested in specified  short-term
securities  and certain  other  investments.  The level of liquid  assets varies
depending  upon  several  factors,  including:  (i)  the  yields  on  investment
alternatives,  (ii) management's judgment as to the attractiveness of the yields
then available in relation to other  opportunities,  (iii) expectation of future
yield levels, and (iv) management's  projections as to the short-term demand for
funds  to  be  used  in  loan  origination  and  other  activities.   Investment
securities,  including mortgage-backed securities, are classified at the time of
purchase,  based upon management's  intentions and abilities, as securities held
to maturity or securities  available for sale. Debt securities acquired with the
intent and ability to hold to maturity  are  classified  as held to maturity and
are stated at cost and adjusted  for  amortization  of premium and  accretion of
discount,  which are  computed  using the level yield method and  recognized  as
adjustments  of interest  income.  All other debt  securities  are classified as
available for sale to serve principally as a source of liquidity.

         Current  regulatory  and  accounting  guidelines  regarding  investment
securities  (including  mortgage  backed  securities)  require the Registrant to
categorize  securities as "held to maturity," "available for sale" or "trading."
As of December 31, 2005, the  Registrant  had securities  classified as "held to
maturity" and  "available  for sale" in the amount of $483.5  million and $155.6
million,  respectively and had no securities classified as "trading." Securities
classified as "available for sale" are reported for financial reporting purposes
at the fair market value with their net  unrealized  gain or loss  included as a
separate component of stockholders' equity, net of income taxes. At December 31,
2005, the  Registrant's  securities  available for sale had an amortized cost of
$157.5 million and market value of $155.6 million (net  unrealized  loss of $1.9
million,  net of income taxes).  The changes in market value in the Registrant's
available for sale portfolio  reflect normal market  conditions and vary, either
positively or negatively, based primarily on changes in general levels of market
interest rates relative to the yields of the portfolio. Additionally, changes in
the  market  value  of   securities   available  for  sale  do  not  affect  the
Corporation's   income  nor  does  it  affect  the  Bank's  regulatory   capital
requirements or its loan-to-one borrower limit.

         The  Registrant's   investment  securities   "available-for-sale"   and
"held-to-maturity"  portfolios at December 31, 2005, did not contain  securities
of any issuer with an aggregate book value in excess of 10% of the  Registrant's
equity, excluding those issued by the United States government agencies.

         At December 31, 2005,  the  Registrant's  investment  portfolio  policy
allowed investments in instruments such as: (i) U.S. Treasury obligations,  (ii)
U.S.  federal  agency or federally  sponsored  agency  obligations,  (iii) local
municipal   obligations,   (iv)   mortgage-backed   securities,   (v)   banker's
acceptances,  (vi) certificates of deposit, and (vii) investment grade corporate
bonds,  and commercial  paper.  The board of directors may authorize  additional
investments.

         As a  source  of  liquidity  and  to  supplement  Registrant's  lending
activities,   the  Registrant   has  invested  in  residential   mortgage-backed
securities.  Mortgage-backed  securities  can serve as collateral for borrowings
and, through repayments,  as a source of liquidity.  Mortgage-backed  securities
represent a participation  interest in a pool of  single-family or other type of
mortgages.  Principal  and  interest  payments  are  passed  from  the  mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the  participation  interests in the form of  securities,  to
investors,  like us. The  quasi-governmental  agencies  guarantee the payment of
principal and interest to investors and include

                                       10

<PAGE>

Federal National Mortgage  Association  ("FNMA"),  Government  National Mortgage
Association ("GNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC").

         Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying  pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage  loans.  Mortgage-backed  securities are generally  referred to as
mortgage participation certificates or pass-through  certificates.  The interest
rate risk  characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable  rate) and the prepayment  risk, are passed on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying  mortgages.  Expected  maturities will differ from contractual
maturities due to scheduled  repayments and because borrowers may have the right
to  call  or  prepay   obligations   with  or  without   prepayment   penalties.
Mortgage-backed  securities issued by GNMA, FNMA and FHLMC make up a majority of
the pass- through certificates market.

         The Registrant also invests in mortgage-related  securities,  primarily
collateralized mortgage obligations ("CMOs"),  issued or sponsored by GNMA, FNMA
and FHLMC,  as well as private  issuers.  CMOs are a type of debt  security that
aggregates  pools  of  mortgages  and  mortgage-backed  securities  and  creates
different  classes of CMO securities  with varying  maturities and  amortization
schedules as well as a residual  interest with each class having  different risk
characteristics.  The cash  flows from the  underlying  collateral  are  usually
divided into "tranches" or classes whereby  tranches have descending  priorities
with  respect to the  distribution  of principal  and interest  repayment of the
underlying  mortgages and mortgage backed  securities as opposed to pass-through
mortgage-backed  securities  where  cash flows are  distributed  pro rata to all
security  holders.  Unlike  mortgage-backed  securities  from which cash flow is
received and prepayment risk is shared pro rata by all securities holders,  cash
flows from the mortgages and mortgage-  backed  securities  underlying  CMOs are
paid in accordance  with a predetermined  priority to investors  holding various
tranches of such  securities or obligations.  A particular  tranche or class may
carry  prepayment  risk  which  may be  different  from  that of the  underlying
collateral  and other  tranches.  CMOs  attempt to  moderate  reinvestment  risk
associated  with   conventional   mortgage-backed   securities   resulting  from
unexpected  prepayment activity.  Management believes these securities represent
attractive alternatives relative to other investments due to the wide variety of
maturity, repayment and interest rate options available.

                                       11

<PAGE>

         The following  table sets forth the carrying value of the  Registrant's
investment  securities  held to maturity,  securities  available for sale,  FHLB
stock,  and interest  bearing  deposits and overnight  investments  at the dates
indicated.

                                                        At December 31,
                                                ------------------------------
                                                  2005       2004       2003
                                                --------   --------   --------
                                                        (In Thousands)

Investment securities held to maturity:
  U.S. government and agency securities .....   $192,328   $164,381   $ 72,256
  CMO's .....................................     71,621     87,413    110,973
  Municipal bonds ...........................     11,391      3,039      2,400
  Mortgage-backed securities ................    208,196    269,222    359,670
Investment securities available for sale:
  U.S. government and agency securities .....     59,581     30,317     13,189
  CMO's .....................................     21,990     37,602     33,597
  Mortgage-backed securities ................     74,060     74,081    102,445
                                                --------   --------   --------
      Total investment securities ...........    639,167    666,055    694,530
  FHLB stock ................................      8,248     10,250     11,810
  Interest bearing deposits and
    overnight investments ...................     39,296     64,142     31,312
                                                --------   --------   --------
Total investments ...........................   $686,711   $740,447   $737,652
                                                ========   ========   ========

                                       12

<PAGE>

         The  following  table sets  forth the  scheduled  maturities,  carrying
values,  market  values  and  average  yields  for the  Registrant's  investment
securities  at  December  31,  2005.  The  following  table  does not take  into
consideration  the effects of unscheduled  repayments or the effects of possible
prepayments.

<TABLE>
<CAPTION>
                                                      One to            Five to            More than
                               One Year or Less     Five Years         Ten Years           Ten Years     Total Investment Securities
                               -----------------  ---------------- -----------------  -----------------  ---------------------------
                                Carrying Average  Carrying Average Carrying  Average  Carrying  Average  Carrying    Market  Average
                                 Value    Yield    Value    Yield   Value     Yield     Value    Yield    Value      Value    Yield
                                -------  -------   ------- ------- -------   -------    -----    -----   -------    -------   -----
                                                               (Dollars in Thousands)
<S>                             <C>        <C>    <C>      <C>    <C>          <C>    <C>         <C>    <C>       <C>        <C>
Investment securities held to
maturity:
 U.S. government and
 agency obligations............. $     -       -%  $19,994   4.13% $ 83,947     5.25%  $ 88,387    5.90%  $192,328  $190,184   5.43%
 Municipal bonds................  11,291    3.02       100   4.30         -        -          -       -     11,391    11,393   3.03
 CMO's..........................       -       -     1,211   4.00     6,112     3.91     64,298    4.49     71,621    69,647   4.43
 Mortgage-backed securities.....     101    5.20    23,987   4.41     5,399     5.50    178,709    5.31    208,196   206,475   5.21
Investment securities
available for sale:
 U.S. government and
   agency obligations...........       -       -    29,613   4.25    24,403     5.03      5,565    6.03     59,581    59,581   4.74
 CMO's..........................       -       -       462   4.25     3,378     4.50     18,150    4.82     21,990    21,990   4.76
 Mortgage-backed securities.....       -       -     3,027   4.72     1,997     5.00     69,036    5.06     74,060    74,060   4.82
 FHLB stock.....................       -       -         -      -         -        -      8,248    5.25      8,248     8,248   5.25
 Interest-bearing deposits and
   overnight investments........  39,296    4.07         -      -          -       -          -       -     39,296    39,296   4.07
                                 -------    ----   -------  ----   --------     ----   --------    ----   --------  --------   ----
   Total........................ $50,688    3.84%  $78,394  4.28%  $125,236     5.13%  $432,393    5.26%  $686,711  $680,874   4.99%
                                 =======    ====   =======  ====   ========     ====   ========    ====   ========  ========   ====
</TABLE>

                                       13

<PAGE>

Sources of Funds

         General.  Deposits are the major  external  source of the  Registrant's
funds for  lending  and  other  investment  purposes.  Funds  are  derived  from
amortization  and prepayment of loans and  maturities of investment  securities,
borrowings,  mortgage-backed securities and operations. Scheduled loan principal
repayments are a relatively  stable source of funds,  while deposit  inflows and
outflows and loan prepayments are  significantly  influenced by general interest
rates and market conditions.

         Deposits.  Deposits are attracted from within the  Registrant's  market
areas of  Burlington,  Camden and  Mercer  Counties,  New  Jersey,  through  the
offering of a broad selection of deposit instruments  including regular checking
accounts,   non-interest  checking  accounts,  money  market  accounts,  regular
passbook  accounts,  certificates  of deposit and IRA accounts.  Deposit account
terms vary according to the minimum balance required, the time periods the funds
must  remain  on  deposit  and the  interest  rate,  among  other  factors.  The
Registrant regularly evaluates the internal cost of funds, surveys rates offered
by competing  institutions,  reviews the Registrant's cash flow requirements for
lending and  liquidity and executes  rate changes when deemed  appropriate.  The
Registrant does not have any brokered  deposits and has no present  intention to
accept or solicit such deposits.

         Certificates  of Deposit in Excess of  $100,000.  The  following  table
indicates the amount of the Registrant's  certificates of deposit of $100,000 or
more by time remaining until maturity as of December 31, 2005.



Maturity Period of Deposits                         Certificates of Deposit
---------------------------                         -----------------------
                                                         (In Thousands)

Three months or less...................................      $12,209
Three through six months...............................        7,847
Six through twelve months..............................        8,410
Over twelve months.....................................        7,137
                                                             -------
     Total.............................................      $35,603
                                                             =======


                                       14

<PAGE>

         Deposit Rate. The following  table sets forth the  distribution  of the
Registrant's  average balance of deposit accounts at the dates indicated and the
weighted average nominal interest rates on each category of deposits presented.

<TABLE>
<CAPTION>
                                                                                At December 31,
                                       ---------------------------------------------------------------------------------------------
                                                    2005                             2004                          2003
                                       -------------------------------   ----------------------------  -----------------------------
                                                              Weighted                       Weighted                      Weighted
                                                  Percent of   Average              Percent   Average              Percent  Average
                                         Average     Total     Nominal    Average  of Total   Nominal   Average   of Total  Nominal
                                         Balance   Deposits     Rate      Balance  Deposits    Rate     Balance   Deposits   Rate
                                         -------   --------    ------     -------  --------   ------    -------   --------  -----
                                                                          (Dollars In Thousands)
<S>                                    <C>           <C>        <C>    <C>          <C>        <C>   <C>           <C>       <C>
Passbook and regular savings..........  $185,680      19.61%     0.43%  $182,873     19.95%     0.43% $167,936      19.78%    0.57%
Checking accounts.....................   219,153      23.14      1.88    198,700     21.68      0.86   164,656      19.39     0.56
Noninterest checking..................   180,803      19.09      0.00    167,638     18.29      0.00   148,836      17.53     0.00
Money market deposit accounts.........   142,137      15.01      0.89    139,038     15.17      0.72   130,822      15.40     0.78
Certificates of deposit...............   208,825      22.05      2.34    216,906     23.67      1.83   225,240      26.52     2.40
Surrogate statement...................    10,350       1.10      3.45     11,373      1.24      2.55    11,737       1.38     2.55
                                        --------     ------      ----   --------    ------      ----  --------     ------     ----
  Total Deposits......................  $946,948     100.00%     1.21%  $916,528    100.00%     0.84% $849,227     100.00%    1.01%
                                        ========     ======      ====   ========    ======      ====  ========     ======     ====

</TABLE>

                                       15

<PAGE>

Personnel

         As of December 31, 2005, the Registrant had 380 full-time employees and
237  part-time  employees.  The employees  are not  represented  by a collective
bargaining  unit.  Management  believes its  relationship  with its employees is
good.

Regulation of the Corporation

         Set forth below is a brief  description of certain laws which relate to
the  regulation  of the  Corporation.  The  description  does not  purport to be
complete and is qualified  in its entirety by reference to  applicable  laws and
regulations.

         General.  The Corporation is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Corporation is required
to  register  and file  reports  with the OTS and is subject to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Corporation  and  its   non-savings   association   subsidiaries,   should  such
subsidiaries  be formed,  which also  permits  the OTS to  restrict  or prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.  This  regulation  and  oversight  is  intended  primarily  for the
protection of the depositors of the Bank and not for the benefit of stockholders
of the Corporation.

         As  a  unitary  savings  and  loan  holding  company,  the  Corporation
generally is not subject to any restrictions on its business  activities.  While
the  Gramm-Leach-Bliley  Act (the "GLB  Act")  terminated  the  "unitary  thrift
holding company"  exemption from activity  restrictions on a prospective  basis,
the Corporation enjoys  grandfathered status under this provision of the GLB Act
because  it  acquired  the  Bank  prior  to  May  4,  1999.  As  a  result,  the
Corporation's  freedom from activity  restrictions as a unitary savings and loan
holding  company was not affected by the GLB Act.  However,  if the  Corporation
were to acquire  control of an  additional  savings  institution,  its  business
activities  would be subject to  restriction  under the Home  Owners'  Loan Act.
Furthermore,  if the Corporation  were in the future to sell control of the Bank
to any other  company,  such  company  would not  succeed  to the  Corporation's
grandfathered  status under the GLB Act and would be subject to the Home Owner's
Loan Act's activity restrictions.

         The continuation of the  Corporation's  exemption from  restrictions on
business  activities  as a unitary  savings  and loan  holding  company  is also
subject to the  Corporation's  continued  compliance  with the QTL Test.  See "-
Regulation of the Bank - Qualified Thrift Lender ("QTL") Test."

         Sarbanes-Oxley  Act of 2002.  On July 30, 2002,  President  Bush signed
into  law  the  Sarbanes-Oxley  Act of  2002  (the  "Sarbanes-Oxley  Act").  The
Securities and Exchange  Commission  (the "SEC") has promulgated new regulations
pursuant  to the Act and may  continue  to propose  additional  implementing  or
clarifying  regulations  as necessary in  furtherance of the Act. The passage of
the Act and  the  regulations  implemented  by the SEC  subject  publicly-traded
companies  to  additional  and  more   cumbersome   reporting   regulations  and
disclosure.  Compliance with the Act and corresponding  regulations may increase
the Corporation's expenses.

Regulation of the Bank

         General.  Set forth below is a brief  description  of certain laws that
relate to the  regulation of the Bank.  The  description  does not purport to be
complete and is qualified  in its entirety by reference to  applicable  laws and
regulations. As a federally chartered savings association insured by the Savings
Association Insurance Fund ("SAIF"), the Bank is subject to extensive regulation
by the OTS and the
                                       16

<PAGE>

Federal Deposit Insurance  Corporation  ("FDIC").  Lending  activities and other
investments   must  comply  with  various   federal   statutory  and  regulatory
requirements.   The  Bank  is  also  subject  to  certain  reserve  requirements
promulgated by the Federal Reserve Board.

         The OTS, in conjunction with the FDIC,  regularly examines the Bank and
prepares  reports for the  consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's  operations.  The Bank's  relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law,  especially in such matters as the ownership of savings  accounts
and the form and content of the Bank's mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities  and  financial  condition,   in  addition  to  obtaining  regulatory
approvals  prior to entering into certain  transactions  such as mergers with or
acquisitions  of other savings  institutions.  This  regulation and  supervision
establishes a comprehensive  framework of activities in which an institution can
engage and is intended  primarily for the protection of the SAIF and depositors.
The  regulatory  structure  also  gives  the  regulatory  authorities  extensive
discretion in connection with their  supervisory and enforcement  activities and
examination  policies,  including policies with respect to the classification of
assets and the  establishment  of adequate  loan loss  reserves  for  regulatory
purposes.

         Insurance of Deposit  Accounts.  The deposit  accounts held by the Bank
are insured by the SAIF to a maximum of  $100,000  for each  insured  member (as
defined by law and  regulation).  Insurance of deposits may be terminated by the
FDIC  upon a finding  that the  institution  has  engaged  in unsafe or  unsound
practices,  is in an unsafe or unsound  condition to continue  operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the institution's primary regulator.

         Regardless of an institution's capital level, insurance of deposits may
be  terminated  by the FDIC upon a finding that the  institution  has engaged in
unsafe or unsound  practices,  is in an unsafe or unsound  condition to continue
operations  or has violated  any  applicable  law,  regulation,  rule,  order or
condition  imposed  by the  FDIC or the  institution's  primary  regulator.  The
management of the Bank is unaware of any practice,  condition or violation  that
might lead to termination of its deposit insurance.

         The FDIC  charges an annual  assessment  for the  insurance of deposits
based on the risk a particular  institution poses to its deposit insurance fund.
This  risk  classification  is  based  on an  institution's  capital  group  and
supervisory subgroup assignment.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted  assets,  (2) a leverage ratio (core capital) equal to
at least 3% of total adjusted assets for savings  institutions  that receive the
highest  supervisory  rating  for  safety  and  soundness  and 4% for all  other
thrifts,  and (3) a  risk-based  capital  requirement  equal  to  8.0% of  total
risk-weighted  assets. At December 31, 2005, the Bank was in compliance with its
regulatory capital requirements.

         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

         A  savings  association  that is a  subsidiary  of a  savings  and loan
holding company,  such as the Bank must file an application or a notice with the
OTS at least 30 days before making a capital distribution.  Savings associations
are not  required  to file  an  application  for  permission  to make a  capital
distribution  and
                                       17

<PAGE>

need  only  file a notice  if the  following  conditions  are met:  (1) they are
eligible for expedited  treatment under OTS  regulations,  (2) they would remain
adequately capitalized after the distribution,  (3) the annual amount of capital
distribution  does not exceed net income for that year to date added to retained
net income for the two preceding years, and (4) the capital  distribution  would
not violate any  agreements  between the OTS and the savings  association or any
OTS regulations. Any other situation would require an application to the OTS.

         The OTS may disapprove an application or notice if the proposed capital
distribution   would:  (i)  make  the  savings   association   undercapitalized,
significantly  undercapitalized,  or  critically  undercapitalized;  (ii)  raise
safety or  soundness  concerns;  or (iii)  violate  a  statute,  regulation,  or
agreement  with  the OTS (or  with  the  FDIC),  or a  condition  imposed  in an
OTS-approved application or notice. Further, a federal savings association, like
the  Bank,  cannot  distribute   regulatory  capital  that  is  needed  for  its
liquidation account.

         Qualified Thrift Lender Test.  Federal savings  institutions  must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal  Revenue Code by maintaining at least 60% of its total assets
in specified types of assets,  including cash,  certain  government  securities,
loans  secured  by and  other  assets  related  to  residential  real  property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by  maintaining at
least 65% of its "portfolio  assets" in  certain"Qualified  Thrift  Investments"
(defined  to include  residential  mortgages  and  related  equity  investments,
certain  mortgage-related  securities,  small business loans,  student loans and
credit card loans, and 50% of certain community development loans). For purposes
of the Home Owners' Loan Act, portfolio assets are defined as total assets minus
intangible assets,  property used by the institution in conducting its business,
and liquid  assets  equal to 20% of total  assets.  A savings  institution  must
maintain its status as a QTL on a monthly basis in at least nine out of every 12
months.  A  failure  to  qualify  as a QTL  results  in a number  of  sanctions,
including the imposition of certain operating  restrictions and a restriction on
obtaining  additional advances from its FHLB. At December 31, 2005, the Bank was
in compliance  with its QTL  requirement,  with 82.67% of its assets invested in
Qualified Thrift Investments.

         Federal Home Loan Bank System.  The Bank is a member of the FHLB of New
York,  which is one of 12 regional  FHLBs that  administers  the home  financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of New York in an  amount  equal to at  least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year.

         Federal  Reserve Board System.  The Federal  Reserve Board requires all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction  accounts (primarily  checking,  NOW, and Super
NOW checking accounts) and non-personal time deposits.  The balances  maintained
to meet the reserve  requirements  imposed by the Federal  Reserve  Board may be
used to satisfy  the  liquidity  requirements  that are  imposed by the OTS.  At
December 31, 2005, the Bank was in compliance  with these Federal  Reserve Board
requirements.

                                       18

<PAGE>

Item 1A. Risk Factors
---------------------

         Investing in our  securities may involve  certain risks,  including the
risks described below. You should carefully consider these risk factors together
with all other available information and data before you decide to invest in our
securities.

We realize income primarily from the difference between interest earned on loans
and  investments  and interest paid on deposits and  borrowings,  and changes in
interest rates may adversely affect our profitability and assets.

         Changes in prevailing  interest rates may hurt our business.  We derive
our income mainly from the difference or "spread" between the interest earned on
loans,  securities  and other  interest-earning  assets,  and  interest  paid on
deposits,  borrowings and other  interest-bearing  liabilities.  In general, the
larger the spread,  the more we earn. When market rates of interest change,  the
interest  we receive on our assets and the  interest  we pay on our  liabilities
will fluctuate.  This can cause decreases in our spread and can adversely affect
our income.

         Interest  rates affect how much money we can lend.  For  example,  when
interest rates rise, the cost of borrowing  increases and loan originations tend
to decrease. In addition,  changes in interest rates can affect the average life
of loans and  investment  securities.  A reduction in interest  rates  generally
results in increased  prepayments of loans and  mortgage-backed  securities,  as
borrowers  refinance  their debt in order to reduce their  borrowing  cost. This
causes  reinvestment  risk,  because  we  generally  are not  able  to  reinvest
prepayments  at rates that are  comparable to the rates we earned on the prepaid
loans or  securities.  Changes in market  interest  rates  could also reduce the
value of our financial assets. If we are unsuccessful in managing the effects of
changes in interest  rates,  our  financial  condition and results of operations
could suffer.

If we experience  loan losses in excess of our  allowance,  our earnings will be
adversely affected.

         The risk of credit  losses on loans  varies with,  among other  things,
general economic  conditions,  the type of loan being made, the creditworthiness
of the borrower  over the term of the loan and, in the case of a  collateralized
loan, the value and  marketability  of the  collateral for the loan.  Management
maintains  an  allowance  for  loan  losses  based  upon,  among  other  things,
historical experience,  an evaluation of economic conditions and regular reviews
of delinquencies and loan portfolio quality. Based upon such factors, management
makes various assumptions and judgments about the ultimate collectibility of the
loan portfolio and provides an allowance for loan losses based upon a percentage
of  the  outstanding  balances  and  for  specific  loans  when  their  ultimate
collectibility  is considered  questionable.  If  management's  assumptions  and
judgments  prove to be incorrect and the allowance for loan losses is inadequate
to absorb future losses,  or if the bank  regulatory  authorities  require us to
increase the allowance for loan losses as a part of their  examination  process,
our earnings and capital could be significantly and adversely affected.

         As  of  December  31,  2005,   our   allowance   for  loan  losses  was
approximately $5.1 million which represented 1.13% of outstanding loans. At such
date, we had nine  non-accrual  loans totaling $1.8 million.  We actively manage
our  nonperforming  loans in an  effort  to  minimize  credit  losses.  Although
management believes that its allowance for loan losses is adequate, there can be
no  assurance  that the  allowance  will prove  sufficient  to cover future loan
losses. Further, although management uses the best information available to make
determinations with respect to the allowance for loan losses, future adjustments
may  be  necessary  if  economic   conditions  differ   substantially  from  the
assumptions   used  or  adverse   developments   arise   with   respect  to  our
non-performing or performing loans. Material additions

                                       19

<PAGE>

to our  allowance  for loan losses  would result in a decrease in our net income
and capital, and could have a material adverse effect on our financial condition
and results of operations.

A portion of our total loan portfolio  consists of  multi-family  and commercial
real estate loans and  commercial  loans.  The  repayment  risk related to these
types of loans is  considered  to be greater  than the risk  related to one- to-
four family residential loans.

         At December 31, 2005, our loan portfolio included  approximately $150.3
million of multi-family and commercial real estate loans and commercial business
loans, or 33.56% of our total loan portfolio.

         Unlike one- to- four family residential mortgage loans, which generally
are made on the basis of the  borrower's  ability to make  repayment from his or
her  employment  and other income and which are secured by real  property  whose
value tends to be more easily  ascertainable,  the repayment of multi-family and
commercial  real  estate  loans  and  commercial  business  loans  typically  is
dependent on the successful operations and income stream of the borrower and the
real estate securing the loan as collateral, which can be significantly affected
by economic conditions. In addition, these loans generally carry larger balances
to single  borrowers or related  groups of  borrowers  than one- to- four family
loans.  Any late  payments or the  failure to repay such loans  would  adversely
affect our earnings.

Our business is geographically  concentrated and is subject to regional economic
factors that could have an adverse impact on our business.

         Substantially  all of our  business is with  customers  in  Burlington,
Camden and Mercer Counties,  New Jersey. Most of our customers are consumers and
small and medium-sized businesses which are dependent upon the regional economy.
Adverse  changes in  economic  and  business  conditions  in our  markets  could
adversely affect our borrowers, their ability to repay their loans and to borrow
additional funds, and consequently our financial condition and performance.

         In addition to the financial strength and cash flow  characteristics of
the  borrower  in each  case,  we  often  secure  our  loans  with  real  estate
collateral, most of which is located in Burlington,  Camden and Mercer Counties,
New Jersey. As of December 31, 2005,  approximately  94.4% of our loans had real
estate as a primary, secondary or tertiary component of collateral.  Real estate
values and real estate  markets are  generally  affected by, among other things,
changes in national,  regional or local  economic  conditions,  fluctuations  in
interest rates and the availability of loans to potential purchasers, changes in
tax laws and other governmental statutes,  regulations and policies, and acts of
nature.  The real estate collateral in each case provides an alternate source of
repayment in the event of default by the borrower.  If real estate prices in our
markets  decline,  the value of the real estate  collateral  securing  our loans
could be reduced. If we are required to liquidate the collateral securing a loan
during a period of reduced real estate values to satisfy the debt,  our earnings
and capital could be adversely affected.  A decline in local economic conditions
could adversely affect the values of such real estate.  Consequently,  a decline
in local  economic  conditions  may have a greater  effect on our  earnings  and
capital than on the earnings and capital of larger financial  institutions whose
real estate loan portfolios are  geographically  diverse.  Rising interest rates
would  likely hurt our profits  and may affect our ability to pay  dividends  or
undertake other corporate transactions.

         Although we have paid cash  dividends on a quarterly  basis since 1995,
there  is no  assurance  that we will  continue  to pay  cash  dividends.  To be
profitable,  we must earn more in interest  and fees than we

                                       20

<PAGE>

pay in interest and  expenses.  If interest  rates rise,  the interest we pay on
interest-bearing liabilities, such as deposits and borrowings, may increase more
quickly  than  interest  earned on  interest-earning  assets,  such as loans and
investment  securities.  This will  reduce our net  interest  income and thereby
reduce our net income in the short-term.  In addition, rising interest rates are
likely to reduce  our  income  via a  reduction  in the demand for loans and the
value of our investment  securities and make it more difficult for our borrowers
to repay their loans. As a result,  this could restrict the capital resources of
the Bank and could  require us to contribute  additional  capital to the Bank or
may prevent  the Bank from  paying  dividends  to us.  This could  restrict  our
ability to pay  dividends  or undertake  other  corporate  transactions.  Future
payment of cash  dividends,  if any,  will be at the  discretion of the Board of
Directors  and  will be  dependent  upon our  financial  condition,  results  of
operations,  capital  requirements  and such other factors as the Board may deem
relevant  and will be subject to  applicable  federal and state laws that impose
restrictions on our ability to pay dividends.

As a public company, we are subject to numerous reporting  requirements that are
currently evolving and could  substantially  increase our operating expenses and
divert management's attention from the operation of our business.

         The  Sarbanes-Oxley  Act has required  changes in some of our corporate
governance,  securities disclosure and compliance practices.  In response to the
requirements  of the  Sarbanes-Oxley  Act,  the SEC has  promulgated  new  rules
covering  a  variety  of   subjects.   Compliance   with  these  new  rules  has
significantly  increased our legal and financial and  accounting  costs,  and we
expect these  increased  costs to continue.  In  addition,  compliance  with the
requirements  has taken a significant  amount of  management's  and the Board of
Directors' time and resources.  Likewise,  these  developments  may make it more
difficult  for us to  attract  and  retain  qualified  members  of our  board of
directors, particularly independent directors, or qualified executive officers.

         As directed by Section 404 of the  Sarbanes-Oxley  Act, the SEC adopted
rules  requiring  public  companies  to  include a report of  management  on the
company's  internal control over financial  reporting in their annual reports on
Form 10-K that contains an assessment by management of the  effectiveness of the
company's internal control over financial reporting. In addition, in the future,
the public  accounting firm auditing the Company's  financial  statements may be
required to attest to and report on management's assessment of the effectiveness
of the Company's internal control over financial reporting. The costs associated
with  the  implementation  of  this  requirement,  including  documentation  and
testing,  have not been  estimated by us. If we are ever unable to conclude that
we  have  effective  internal  control  over  financial  reporting  or,  if  our
independent  auditors are unable to provide us with an unqualified  report as to
the  effectiveness  of our internal  control over  financial  reporting  for any
future year-ends as required by Section 404,  investors could lose confidence in
the reliability of our financial statements, which could result in a decrease in
the value of our securities.

We operate in a highly  regulated  environment and may be adversely  affected by
changes in laws and regulations.

         We are subject to extensive regulation,  supervision and examination by
the Office of Thrift Supervision,  our chartering authority,  and by the Federal
Deposit  Insurance  Corporation,  as insurer  of our  deposits.  As a  federally
chartered  holding company,  FMS Financial  Corporation is subject to regulation
and  oversight  by  the  Office  of  Thrift  Supervision.  Such  regulation  and
supervision  govern  the  activities  in which an  institution  and its  holding
companies  may engage  and are  intended  primarily  for the  protection  of the
insurance fund and depositors.  Regulatory authorities have extensive discretion
in connection with their supervisory and enforcement  activities,  including the
imposition   of   restrictions   on  the  operation  of

                                       21

<PAGE>

an institution, the classification of assets by the institution and the adequacy
of an institution's allowance for loan losses. Any change in such regulation and
oversight,   whether  in  the  form  of  regulatory  policy,   regulations,   or
legislation,  including  changes in the  regulations  governing  mutual  holding
companies,  could have a material  impact on the  Corporation  and the Bank, and
their operations.

Strong   competition   within  our   market   area  may  limit  our  growth  and
profitability.

         Competition  in the  banking  and  financial  services  industry in New
Jersey is intense,  competing  for  deposits  and loans with  commercial  banks,
savings  associations  and other  financial  entities.  Competition for deposits
comes  primarily  from other  commercial  banks,  savings  associations,  credit
unions,  money  market  and  mutual  funds  and other  investment  alternatives.
Competition  for loans comes  primarily  from other  commercial  banks,  savings
associations,   mortgage  banking  firms,  credit  unions  and  other  financial
intermediaries.  Many of these competitors have substantially  greater resources
and lending  limits than we do and may offer certain  services that we do not or
cannot  provide.  There are large  competitors  operating  throughout  our total
market area,  including Bank of America,  Commerce Bank,  Wachovia Bank, and PNC
Bank, and we also face strong  competition from other community  institutions in
certain  counties.  Our  profitability  depends  upon our  continued  ability to
successfully compete in our market area.

We may issue additional  shares of common stock,  which may dilute the ownership
and voting power of our shareholders and the book value of our common stock.

         We are currently  authorized to issue up to 10,000,000 shares of common
stock  of  which  6,515,110  shares  are  currently  outstanding.  Our  Board of
Directors has authority,  without action or vote of the  shareholders,  to issue
all or part of the  authorized  but unissued  shares.  In  addition,  a total of
772,200  shares of common stock have been reserved for issuance  under our stock
option plans.  A total of 232,760  shares of common stock have been reserved for
issuance  under  options  outstanding  on December 31, 2005.  As of December 31,
2005,  options to purchase a total of 36,500 shares were  exercisable and had an
exercise price of $10.00. Any such issuance will dilute the percentage ownership
interest of  shareholders  and may  further  dilute the book value of our common
stock.

Item 1B. Unresolved Staff Comments
----------------------------------

Not applicable.

Item 2.  Properties
-------------------

         The  Registrant  conducts its business  through its two  administrative
offices  located  in  Burlington,  New  Jersey  and its 42 branch  locations  in
Burlington,  Camden and Mercer  Counties,  New Jersey.  All of the  Registrant's
office  and branch  facilities  are owned by the  Registrant,  except for eleven
branch  office  locations,  two located in Lumberton  and the others  located in
Medford,  Mt. Holly,  Burlington,  Cherry Hill Hamilton,  Cinnaminson,  Delanco,
Audubon and Marlton,  New Jersey.  Management  of the  Registrant  considers the
physical condition of each of the Registrant's administrative and branch offices
to be good and adequate for the conduct of the Registrant's business.

Item 3.  Legal Proceedings
--------------------------

         The Registrant is periodically  involved as a plaintiff or defendant in
various  legal  actions,   such  as  actions  to  enforce  liens,   condemnation
proceedings  on properties in which the  Registrant  holds  mortgage  interests,
matters  involving the making and servicing of mortgage  loans and other matters
incident to the

                                       22

<PAGE>

Registrant's  business.  In the  opinion of  management,  none of these  actions
individually  or in the  aggregate  is believed to be material to the  financial
condition or results of operations of the Registrant.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year ended December 31, 2005.

                                     PART II

Item 5. Market for the Registrant's  Common Equity,  Related Stockholder Matters
--------------------------------------------------------------------------------
        and Issuer Purchases of Equity Securities
        -----------------------------------------

         (a) Market for  Common  Equity.  The  information  contained  under the
section captioned "Stock Market  Information" in the  Corporation's  2005 Annual
Report  to  Stockholders  (the  "Annual  Report")  is  incorporated   herein  by
reference.  The  Registrant  did not sell any  equity  securities  that were not
registered under the Securities Act of 1933 during the period under report.

         (b) Use of Proceeds. Not applicable.

         (c) Issuer Purchase of Equity Securities.

<TABLE>
<CAPTION>
                                                                 (c) Total Number          (d) Maximum Number
                                                                of Shares (or Units)    (or Approximate Dollar
                               (a) Total            (b)         Purchased as Part         Value) of Shares (or
                                   Number      Average Price       of  Publicly         Units) that May Yet Be
                             of Shares (or     Paid per Share     Announced Plans         Purchased Under the
Period                      Units) Purchased     (or Unit)          or Programs*           Plans or Programs
------                      ----------------     ---------          ------------           -----------------
<S>                           <C>               <C>                 <C>                      <C>
November 15-21, 2005             1,250             $16.56              1,250                    198,750
December 6, 2005                   750             $16.50                750                    198,000
                                 -----             ------              -----                    -------
Total                            2,000              ---                2,000                    198,000
                                 =====             ======              =====                    =======
</TABLE>
-------------------
* On September 28, 2005,  the  Registrant  authorized the repurchase in the open
  market of up to 200,000 shares of the Company's outstanding common stock.

Item 6.  Selected Financial Data
--------------------------------

         The information contained in the table captioned "Financial Highlights"
in the Annual Report is incorporated herein by reference.


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
        of Operations
        -------------

         The  information  contained  in  the  section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.


                                       23

<PAGE>

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

         The information  contained in the sections  captioned  "Market Risk and
Liquidity  Risk"and  "Interest  Rate Risk" in the Annual Report is  incorporated
herein by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

         The  Registrant's  financial  statements  listed in Item 15 herein  are
incorporated herein by reference.


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
         Financial Disclosure
         --------------------

         None.

Item 9A.  Controls and Procedures
---------------------------------

         The  Company's  management  evaluated,  with the  participation  of the
Company's Chief Executive Officer and Chief Financial Officer, the effectiveness
of the Company's disclosure controls and procedures, as of the end of the period
covered by this report.  Based on that evaluation,  the Chief Executive  Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information  required to be disclosed by
the  Company  in the  reports  that it files or  submits  under  the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time periods  specified in the  Securities and Exchange  Commission's  rules and
forms.

         There were no changes in the Company's  internal control over financial
reporting  that  occurred  during the  Company's  last fiscal  quarter that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.

Item 9B.  Other Information
---------------------------

         None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

         The information  contained under the sections  captioned "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I -  Election  of
Directors" in the 2005 Proxy  Statement  ("Proxy  Statement")  are  incorporated
herein by reference.

                                       24

<PAGE>

Executive Officers of the Corporation Who Are Not Directors


Name and Title                                    Age as of December 31, 2005
--------------                                    ---------------------------
Channing L. Smith                                              62
Vice President and Chief Financial Officer

James E. Igo                                                   49
Senior Vice President and Chief Lending Officer

Thomas M. Topley                                               45
Senior Vice President and Corporate Secretary


         Channing  L. Smith has  served as Vice  President  and Chief  Financial
Officer of the Corporation and the Bank since October 1994. In this capacity, he
is responsible for the management of the accounting,  treasury,  and investments
of the  Corporation  and the Bank.  From April 1993 to October  1994,  Mr. Smith
served as controller of the Corporation and the Bank.

         James E. Igo has served as Senior Vice  President  and Senior  Mortgage
Lending Officer of the Corporation and the Bank since November 1991.

         Thomas M.  Topley has served as Senior  Vice  President  of  Operations
since April 1993 and as  Corporate  Secretary  of the  Corporation  and the Bank
since  April  1992.  From June 1990 to April  1993,  Mr.  Topley  served as Vice
President and Controller for the Bank.

         The Company has adopted a Code of Ethics that applies to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller or persons performing similar functions.  A copy of the Corporation's
Code of Ethics will be  furnished,  without  charge,  to any person who requests
such copy by writing to the Secretary, FMS Financial Corporation, 3 Sunset Road,
Burlington, New Jersey 08016.

Item 11.  Executive Compensation
--------------------------------

         The  information  contained under the section  captioned  "Proposal I -
Election of Directors - Directors and  Executive  Officer  Compensation"  in the
Proxy Statement is incorporated herein by reference.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
--------------------------------------------------------------------------------
          Related Stockholder Matters.
          ----------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the Section  captioned  "Principal  Holders" and
                  "Proposal I - Election of Directors" of the Proxy Statement.

                                       25

<PAGE>

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference to the section captioned  "Proposal I -- Election of
                  Directors" of the Proxy Statement.

         (c)      Changes in Control

                  Management  of  the  Corporation  knows  of  no  arrangements,
                  including  any  pledge  by any  person  of  securities  of the
                  Corporation,  the operation of which may at a subsequent  date
                  result in a change in control of the registrant.

         (d)      Securities Authorized for Issuance Under  Equity  Compensation
                  Plans

                  Set forth below is  information  as of December  31, 2005 with
                  respect to compensation plans under which equity securities of
                  the Registrant are authorized for issuance.

<TABLE>
<CAPTION>

                                          EQUITY COMPENSATION PLAN INFORMATION
                                          (a)                  (b)                      (c)
                                                                                 Number of securities
                                                                                 remaining available
                                   Number of securities   Weighted-average        for future issuance
                                    to be issued upon     exercise price of          under equity
                                       exercise of           outstanding          compensation plans
                                   outstanding options,   options, warrants     (excluding securities
                                   warrants and rights       and rights       reflected in column (a))
                                   --------------------      -----------      ------------------------
<S>                                     <C>                  <C>                     <C>
Equity compensation plans
  approved by shareholders
Stock Option and
  Incentive Plan.................         36,500               $10.00                      --
Equity compensation plans
  not approved by shareholders               N/A                  N/A                     N/A
                                          ------               ------                     ---
     TOTAL.......................         36,500               $10.00                      --
                                          ======                =====                    ====
</TABLE>

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference  to the  section  captioned  "Proposal  I - Election  of  Directors  -
Directors and Executive Officer Compensation - Certain Relationships and Related
Transactions" of the Proxy Statement.

                                       26

<PAGE>



Item 14.  Principal Accountant Fees and Services
------------------------------------------------

         The  information  called  for by this  item is  incorporated  herein by
reference to the section entitled  "Proposal II - Ratification of Appointment of
"Independent Accountants" in the Proxy Statement.

                                     PART IV

Item 15.  Exhibits and Financial Statement Schedules
----------------------------------------------------

         (a)      Listed below are all financial  statements  and exhibits filed
                  as part of this report, and are incorporated by reference.

                  1.       The consolidated statements of financial condition of
                           FMS  Financial   Corporation  and  subsidiary  as  of
                           December   31,   2005  and  2004,   and  the  related
                           consolidated   statements   of  income,   changes  in
                           stockholders'  equity  and cash flows for each of the
                           years in the three year  period  ended  December  31,
                           2005,   together  with  the  related  notes  and  the
                           Independent   Registered   Public  Accounting  Firms'
                           auditors' report of PricewaterhouseCoopers LLP.

                  2. Schedules omitted as they are not applicable.

                  3.       Exhibits

                           The  following  Exhibits  are  filed  as part of this
                           report:
<TABLE>
<CAPTION>
                <S>             <C>
                           3.1      Certificate of Incorporation*
                           3.2      Bylaws*
                           4        Agreement to furnish copy to Securities and Exchange Commission
                                    upon request of Indenture dated July 28, 1994, relating to 10%
                                    Subordinated Debentures due 2004 in aggregate principal amount of $10
                                    million**
                           10.1     Stock Option and Incentive Plan***
                           13       2005 Annual Report to Stockholders
                           21       Subsidiaries of the Registrant
                           23       Consent of Independent Registered Public Accounting Firm
                           31       Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
                                    2002
                           32       Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                  ---------------
                  *        Incorporated by reference to the Registrant's
                           Form S-1 Registration Statement No. 33-24340.
                  **       Incorporated by reference to the Registrant's  Annual
                           Report  on  Form  10-K  for  the  fiscal  year  ended
                           December 31, 1994.
                  ***      Incorporated  by reference to the  Registrant's  Form
                           S-8 Registration Statement No. 33-24340.
</TABLE>

                                       27

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) 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 as of March 30, 2006.

                                         FMS FINANCIAL CORPORATION


                                         By:   /s/Craig W. Yates
                                               ---------------------------------
                                               Craig W. Yates, President and
                                               Chief Executive Officer
                                               (Duly Authorized Representative)

         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this report has been signed below on March 30, 2006 by the following  persons on
behalf of the registrant and in the capacities indicated.

<TABLE>
<CAPTION>
<S>                                                       <C>

/s/ Craig W. Yates                                            /s/ George J. Barber
-----------------------------------------------------         -----------------------------------------------------
Craig W. Yates                                                George J. Barber
President, Chief Executive Officer and Director               Director
(Principal Executive Officer)


/s/ Channing L. Smith                                         /s/ Edward J. Staats, Jr.
-----------------------------------------------------         -----------------------------------------------------
Channing L. Smith                                             Edward J. Staats, Jr.,
Vice President and Chief Financial Officer                    Director
(Principal Financial and Accounting Officer)


/s/ Wayne H. Page                                             /s/ Dominic W. Flamini
-----------------------------------------------------         -----------------------------------------------------
Wayne H. Page                                                 Dominic W. Flamini
Director                                                      Director


/s/ Vincent R. Farias                                         /s/ Roy D. Yates
-----------------------------------------------------         -----------------------------------------------------
Vincent R. Farias                                             Roy D. Yates
Director                                                      Chairman of the Board


/s/ Mary Wells                                                /s/ Joseph W. Clarke, Jr.
-----------------------------------------------------         -----------------------------------------------------
Mary Wells                                                    Joseph W. Clarke, Jr.
Director                                                      Director

</TABLE>

                                       28