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

                                   ----------
                                    FORM 10-Q
                                   ----------

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

                                       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 1-10518

                   INTERCHANGE FINANCIAL SERVICES CORPORATION
             (Exact name of registrant as specified in its charter)

          New Jersey                                             22-2553159
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

Park 80 West/Plaza Two, Saddle Brook, NJ                           07663
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)

                                 (201) 703-2265
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                      None
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Sections 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 report) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No ____

      The number of outstanding shares of the Registrant's common stock, no par
value per share, as of October 29, 2004, was 12,745,735 shares.
<PAGE>

                   INTERCHANGE FINANCIAL SERVICES CORPORATION

INDEX

PART I    FINANCIAL INFORMATION
                                                                        Page No.

   Item 1   Financial Statements

            Consolidated Balance Sheets as of
            September 30, 2004 (unaudited) and December 31, 2003...............1

            Unaudited Consolidated Statements of Income for the three
            and nine month periods ended September 30, 2004 and 2003...........2

            Unaudited Consolidated Statements of Changes in
            Stockholders' Equity for the nine months ended
            September 30, 2004 and 2003........................................3

            Unaudited Consolidated Statements of Cash Flows for the
            nine months ended September 30, 2004 and 2003......................4

            Notes to Unaudited Condensed Consolidated Financial Statements.....5

   Item 2   Management's Discussion and Analysis of Financial
            Condition and Results of Operations...............................16

   Item 3   Quantitative and Qualitative Disclosures About Market Risk........32

   Item 4   Controls and Procedures...........................................36

PART II   OTHER INFORMATION

   Item 1   Legal Proceedings.................................................37

   Item 2   Unregistered Sales of Equity Securities and Use of Proceeds.......37

   Item 3   Defaults upon Senior Securities...................................37

   Item 4   Submission of Matters to a Vote of Security Holders...............37

   Item 5   Other Information.................................................37

   Item 6   Exhibits and Reports on Form 8-K..................................37

                Signatures....................................................38
<PAGE>

Item 1: FINANCIAL STATEMENTS

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
(dollars in thousands)

<TABLE>
<CAPTION>
                                                                    September 30,      December 31,
                                                                        2004               2003
                                                                    -------------      ------------
                                                                     (unaudited)
<S>                                                                  <C>                <C>
Assets
Cash and due from banks                                              $   36,347         $   31,423
Interest earning deposits                                                     2                 12
Federal funds sold                                                       17,300                  -
                                                                     ----------         ----------
Total cash and cash equivalents                                          53,649             31,435
                                                                     ----------         ----------
Securities held to maturity at amortized cost
   (estimated market value of $17,571 and $20,223 for
   September 30, 2004 and December 31, 2003, respectively)               16,692             19,107
                                                                     ----------         ----------
Securities available for sale at estimated market value
   (amortized cost of $355,009 and $428,597 for
   September 30, 2004 and December 31, 2003, respectively)              356,065            432,953
                                                                     ----------         ----------

Loans and leases (net of unearned income and deferred fees
   of $5,316 and $6,057 for September 30, 2004 and
   December 31, 2003, respectively)                                     927,154            796,581
   Less: Allowance for loan and lease losses                              9,797              9,641
                                                                     ----------         ----------
Net loans and leases                                                    917,357            786,940
                                                                     ----------         ----------

Bank owned life insurance                                                22,585             21,853
Premises and equipment, net                                              17,878             20,343
Foreclosed real estate and other repossesed assets                          246                230
Goodwill                                                                 55,952             55,924
Intangible assets                                                         3,787              4,165
Accrued interest receivable and other assets                             17,023             12,922
                                                                     ----------         ----------
Total assets                                                         $1,461,234         $1,385,872
                                                                     ==========         ==========

Liabilities
Deposits
   Non-interest bearing                                              $  230,198         $  223,745
   Interest bearing                                                   1,015,116            933,053
                                                                     ----------         ----------
Total deposits                                                        1,245,314          1,156,798
                                                                     ----------         ----------
Securities sold under agreements to repurchase                            9,756             15,618
Short-term borrowings                                                    14,000             46,491
Long-term borrowings                                                     30,000             10,000
Accrued interest payable and other liabilities                           14,387             13,772
                                                                     ----------         ----------
Total liabilities                                                     1,313,457          1,242,679
                                                                     ----------         ----------

Commitments and contingent liabilities

Stockholders' equity:
Common stock, without par value; 22,500,000 shares authorized;
   12,745,735 and 12,810,193 shares issued and outstanding at
   September 30, 2004 and December 31, 2003, respectively                 5,397              5,397
Capital surplus                                                          73,326             73,231
Retained earnings                                                        82,924             74,710
Accumulated other comprehensive income                                      618              2,434
                                                                     ----------         ----------
                                                                        162,265            155,772
Less: Treasury stock                                                     14,488             12,579
                                                                     ----------         ----------
Total stockholders' equity                                              147,777            143,193
                                                                     ----------         ----------
Total liabilities and stockholders' equity                           $1,461,234         $1,385,872
                                                                     ==========         ==========
</TABLE>

--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.


                                     - 1 -
<PAGE>

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
(dollars in thousands, except per share data) (unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended               Nine Months Ended
                                                                        September 30,                   September 30,
                                                                     ------------------               -----------------
                                                                      2004         2003               2004         2003
                                                                    -------      -------            -------      -------
<S>                                                                 <C>          <C>                <C>          <C>
Interest income
Interest and fees on loans                                          $13,877      $13,044            $39,709      $36,370
Interest on federal funds sold                                           33           68                 70          252
Interest on interest bearing deposits                                     -           36                  -           57
Interest and dividends on securities
     Taxable interest income                                          2,630        2,507              7,841        7,119
     Interest income exempt from federal income taxes                   303          254                851          654
     Dividends                                                           33           56                 74          165
                                                                    -------      -------            -------      -------
Total interest income                                                16,876       15,965             48,545       44,617
                                                                    -------      -------            -------      -------

Interest expense
Interest on deposits                                                  3,085        3,204              8,672       10,027
Interest on securities sold under agreements to repurchase               34           58                112          223
Interest on short-term borrowings                                        60            1                171            1
Interest on long-term borrowings                                        237          108                660          320
                                                                    -------      -------            -------      -------
Total interest expense                                                3,416        3,371              9,615       10,571
                                                                    -------      -------            -------      -------

Net interest income                                                  13,460       12,594             38,930       34,046
Provision for loan and lease losses                                     300          485                975        1,280
                                                                    -------      -------            -------      -------
Net interest income after provision
 for loan losses                                                     13,160       12,109             37,955       32,766
                                                                    -------      -------            -------      -------

Non-interest income
Service fees on deposit accounts                                      1,001          998              2,778        2,559
Net gain on sale of securities                                          163          501                982          520
Net gain on sale of loans and leases                                    273          222                406          567
Bank owned life insurance                                               245          692                732        1,754
Commissions on sale of annuities and mutual funds                       266          270                734          658
Other                                                                   929          652              2,452        1,765
                                                                    -------      -------            -------      -------
Total non-interest income                                             2,877        3,335              8,084        7,823
                                                                    -------      -------            -------      -------

Non-interest expense
Salaries and benefits                                                 5,029        4,707             14,541       12,528
Net occupancy                                                         1,325        1,282              3,977        3,305
Furniture and equipment                                                 327          373                987          979
Advertising and promotion                                               346          401              1,209        1,137
Federal Deposit Insurance Corporation assessment                         43           45                134          116
Foreclosed real estate                                                    -            1                  5            1
Amortization of intangible assets                                       126          125                378          234
Other                                                                 2,071        1,824              5,751        4,681
                                                                    -------      -------            -------      -------
Total non-interest expense                                            9,267        8,758             26,982       22,981
                                                                    -------      -------            -------      -------

Income before income taxes                                            6,770        6,686             19,057       17,608
Income taxes                                                          2,109        2,175              6,055        5,554
                                                                    -------      -------            -------      -------

Net income                                                          $ 4,661      $ 4,511            $13,002      $12,054
                                                                    =======      =======            =======      =======
Basic earnings per common share                                       $0.37        $0.35              $1.02        $1.05
                                                                    =======      =======            =======      =======
Diluted earnings per common share                                     $0.36        $0.35              $1.00        $1.04
                                                                    =======      =======            =======      =======
</TABLE>

--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.


                                     - 2 -
<PAGE>

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30,
--------------------------------------------------------------------------------
(dollars in thousands, except per share data)
(unaudited)

<TABLE>
<CAPTION>
                                                                            Accumulated
                                                                              Other
                                                Comprehensive   Retained   Comprehensive   Common   Capital   Treasury
                                                   Income       Earnings      Income       Stock    Surplus     Stock      Total
                                                -------------   --------   -------------   ------   -------   --------    --------

<S>                                                <C>          <C>          <C>           <C>      <C>       <C>         <C>
Balance at January 1, 2003                                      $63,314      $ 3,596       $5,397   $21,097   $(12,724)   $ 80,680
Comprehensive income
   Net Income                                      $12,054       12,054                                                     12,054
   Other comprehensive income, net of taxes
      Unrealized gains on AFS debt securities          375
      Less: realized gains on disposition
         of securities                                (594)
   Minimum pension liability adjustment                (19)
                                                   -------
   Other comprehensive income                         (238)                     (238)                                         (238)
                                                   -------
Comprehensive income                               $11,816
                                                   =======

Dividends on common stock                                        (3,567)                                                    (3,567)
Issued 20,833 shares of common stock
   in connection with Executive
   Compensation Plan                                                                                    109        245         354
Exercised 52,423 option shares                                                                         (186)       445         259
Issued 2,949,719 shares of common stock
   in connection with the acquisition of
   Bridge View Bancorp                                                                               52,180                 52,180
Reacquired 35,959 shares in lieu of
   non-performing asset                                                                                           (693)       (693)
                                                                -------      -------       ------   -------   --------    --------
Balance at September 30, 2003                                    71,801        3,358        5,397    73,200    (12,727)    141,029

Comprehensive income
   Net Income                                      $ 4,312        4,312                                                      4,312
   Other comprehensive income, net of taxes
      Unrealized losses on AFS debt securities        (849)
      Less: realized gains on disposition
         of securities                                (226)
      Unrealized  gains on equity securities           137
   Minimum pension liability adjustment                 14
                                                   -------
   Other comprehensive income                         (924)                     (924)                                         (924)
                                                   -------
Comprehensive income                               $ 3,388
                                                   =======

Dividends on common stock                                        (1,403)                                                    (1,403)
Exercised 52,554 option shares                                                                           31        148         179
                                                                -------      -------       ------   -------   --------    --------
Balance at December 31, 2003                                     74,710        2,434        5,397    73,231    (12,579)    143,193

Comprehensive income
   Net Income                                      $13,002       13,002                                                     13,002
   Other comprehensive income, net of taxes
      Unrealized losses on AFS debt securities      (1,087)
      Less: realized gains on disposition
         of securities                                (729)
                                                   -------
   Other comprehensive income                       (1,816)                   (1,816)                                       (1,816)
                                                   -------
Comprehensive income                               $11,186
                                                   =======
Dividends on common stock                                        (4,788)                                                    (4,788)
Issued 7,793 shares of common stock
   in connection with Executive
   Compensation Plan                                                                                    103        102         205
Exercised 13,410 option shares                                                                           (8)       143         135
Purchased 84,786 shares of common stock                                                                         (2,154)     (2,154)
                                                                -------      -------       ------   -------   --------    --------
Balance at September 30, 2004                                   $82,924      $   618       $5,397   $73,326   $(14,488)   $147,777
                                                                =======      =======       ======   =======   ========    ========
</TABLE>

--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.


                                     - 3 -
<PAGE>
Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
--------------------------------------------------------------------------------
(dollars in thousands) (unaudited)
<TABLE>
<CAPTION>
                                                                                2004            2003
                                                                              --------       ---------
<S>                                                                           <C>            <C>
Cash flows from operating activities
Net income                                                                    $ 13,002       $  12,054
Non-cash items included in earnings
   Depreciation and amortization                                                 1,438           1,260
   Amortization of securities premiums                                           4,121           2,869
   Accretion of securities discounts                                              (200)           (246)
   Amortization of loan premiums                                                    36               -
   Amortization of premiums in connection with acquisition                         877             617
   Provision for loan losses                                                       975           1,280
   Increase in cash surrender value of Bank Owned Life Insurance                  (732)           (315)
   Net gain on sale of securities                                                 (982)           (935)
   Origination of loans held for sale                                           (6,077)        (14,500)
   Sale of loans held for sale                                                   6,433          15,266
   Acceleration of premium amortization on certain collateralized
      mortgage obligations                                                           -             415
   Net gain on sale of loans and leases                                           (406)           (567)
   Net loss (gain) on sale of fixed assets                                         (16)             10
   Net gain on sale of foreclosed real estate and repossessed assets               (14)             (7)
Decrease (increase) in operating assets
   Accrued interest receivable                                                     380            (868)
   Goodwill                                                                        (28)            (90)
   Deferred taxes                                                                2,549          (1,221)
   Other                                                                        (5,678)         (1,345)
Increase (decrease) in operating liabilities
   Accrued interest payable                                                         61            (378)
   Other                                                                           554             863
                                                                              --------       ---------
Cash provided by operating activities                                           16,293          14,162
                                                                              --------       ---------

Cash flows from investing activities
(Payments for) proceeds from
   Net (originations) amortization of loans                                    (92,659)         12,182
   Purchase of loans                                                           (40,459)            (53)
   Sale of loans and leases                                                      1,193           3,102
   Purchase of securities available for sale                                   (71,960)       (283,373)
   Maturities of securities available for sale                                  79,126         125,644
   Sale of securities available for sale                                        63,612          29,732
   Purchase of securities held to maturity                                      (6,820)              -
   Maturities of securities held to maturity                                     9,059           7,524
   Sale of foreclosed real estate and other repossessed assets                      77             100
   Purchase of fixed assets                                                     (1,591)           (879)
   Sale of fixed assets                                                          2,766               -
   Net cash proceeds from acquisition of Bridge View Bancorp                         -          19,748
                                                                              --------       ---------
Cash used in investing activities                                              (57,656)        (86,273)
                                                                              --------       ---------

Cash flows from financing activities
Proceeds from (payments for)
   Net increase in deposits                                                     88,532          90,307
   Increase (decrease) in short-term debt                                      (38,353)          1,230
   Increase in long-term debt                                                   20,000               -
   Dividends                                                                    (4,788)         (3,567)
   Common stock issued                                                             205             354
   Treasury stock                                                               (2,154)              -
   Exercise of option shares from Treasury                                         135             259
                                                                              --------       ---------
Cash provided by financing activities                                           63,577          88,583
                                                                              --------       ---------

Increase (decrease) in cash and cash equivalents                                22,214          16,472
Cash and cash equivalents, beginning of year                                    31,435          33,916
                                                                              --------       ---------
Cash and cash equivalents, end of period                                      $ 53,649       $  50,388
                                                                              ========       =========

Supplemental disclosure of cash flow information:
Cash paid for:
      Interest                                                                $  9,556       $  10,673
      Income taxes                                                               8,150           6,840

Supplemental disclosure of non-cash investing activities:
      Loans transferred to foreclosed real estate and repossessed assets      $     79       $     168
      Stock issued related to Bridge View acquisition                                -          52,180
</TABLE>
--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements

                                     - 4 -
<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004
                                   (Unaudited)

1. Basis of Presentation

      The accompanying  unaudited condensed  consolidated  financial  statements
include the  accounts of  Interchange  Financial  Services  Corporation  and its
wholly owned subsidiaries (on a consolidated basis, the "Company") including its
principal  operating  subsidiary,  Interchange Bank (the "Bank"),  and have been
prepared in conformity  with  accounting  principles  generally  accepted in the
United  States  of  America  ("GAAP")  and in  accordance  with  the  rules  and
regulations of the Securities  and Exchange  Commission.  Pursuant to such rules
and  regulations,  certain  information  or footnotes  necessary  for a complete
presentation  of financial  condition,  results of operations  and cash flows in
conformity   with  GAAP  have  been  condensed  or  omitted.   These   condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
financial statements and schedules thereto included in the annual report on Form
10-K of the Company for the year ended December 31, 2003.

      The consolidated financial data for the three and nine month periods ended
September  30,  2004  and  2003,  are  unaudited  but  reflect  all  adjustments
consisting  of only normal  recurring  adjustments  which are, in the opinion of
management,  considered  necessary  for a fair  presentation  of  the  financial
condition  and results of  operations  for the interim  periods.  The results of
operations for interim periods are not  necessarily  indicative of results to be
expected for any other period or the full year.

Use of estimates:  The  preparation of financial  statements in conformity  with
GAAP requires  management  to make  estimates  and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities at the date of the  consolidated  financial  statements and the
reported  amount of revenues and expenses  during the reporting  period.  Actual
results  could  differ  from those  estimates.  The most  significant  estimates
pertain to the allowance for loan and lease losses,  the fair value of financial
instruments, goodwill, intangibles, taxes and retirement benefits.

Stock Based Compensation:  The Company accounts for stock option plans under the
recognition and measurement  principles of Accounting  Principles  Board ("APB")
Opinion  No.  25.  "Accounting  for Stock  Issued  to  Employees,"  and  related
interpretations. No stock-based employee compensation costs are reflected in net
income,  as all options granted under those plans had an exercise price equal to
the  market  value of the  underlying  common  stock on the date of  grant.  The
following table  illustrates  the effect on net income and diluted  earnings per
common share if the Company had applied the fair value recognition provisions of
Financial Accounting Standards Board ("FASB") Statement No. 123, "Accounting for
Stock-Based  Compensation,"  to stock-based  compensation for the three and nine
months ended  September  30, 2004 and 2003:  (in  thousands,  except share data)
(unaudited)


                                     - 5 -
<PAGE>

<TABLE>
<CAPTION>
                                            For the three months ended      For the nine months ended
                                                   September 30,                   September 30,
                                                 2004        2003                2004         2003
                                                ------      ------              -------      -------
<S>                                            <C>          <C>                 <C>          <C>
Net Income
      As reported                              $ 4,661      $4,511              $13,002      $12,054

      Less: Total stock-based
      compensation expense determined
      under the fair value method for all
      rewards, net of related tax effects          148          92                  420          265
                                               -------      ------              -------      -------
      Pro-forma                                $ 4,513      $4,419              $12,582      $11,789
                                               =======      ======              =======      =======

Earnings per share:
Basic:
      As reported                                 0.37        0.35                 1.02         1.05
      Pro forma                                   0.35        0.35                 0.99         1.03
Diluted:
      As reported                                 0.36        0.35                 1.00         1.04
      Pro forma                                   0.35        0.34                 0.97         1.01
</TABLE>

      The fair  value of each  option  grant is  estimated  on the date of grant
using the  Black-Scholes  option-pricing  model. The following  weighted-average
assumptions  were used for option  grants  issued  during the nine months  ended
September 30, 2004,  respectively:  dividend yield of 2.21%, expected volatility
of 24.83%;  risk-free  interest  rate of 3.39%;  and expected  lives of 7 years.
There were no option grants for the three month period ended September 30, 2004.
Prior period  assumptions  are  described in Note 13 "Stock Option and Incentive
Plan in the Notes to  Consolidated  Financial  Statements" in the Company's 2003
Annual  Report on Form  10-K.  The  effects of  applying  these  assumptions  in
determining the pro-forma net income may not be representative of the effects on
pro-forma net income for future years.

2. Acquisition and Pro Forma Disclosure

      On April 30, 2003 the Company  completed  its  acquisition  of 100% of the
common stock of Bridge View Bancorp ("Bridge View"), a Bergen  County-based bank
holding  company with eleven  locations,  which expanded the Company's  presence
into eastern Bergen County.  The results of Bridge View's  operations  have been
included in the consolidated  financial statements since that date. At April 30,
2003, Bridge View had approximately  $291 million of total assets,  $184 million
of loans and $259  million of deposits.  The  aggregate  purchase  price paid to
Bridge View  shareholders  was  approximately  $85.7  million and  consisted  of
approximately  2.9  million  shares  of  the  Company's  common  stock  with  an
approximate market value of $52.2 million,  based upon the average closing price
over the periods three days prior to and after the  acquisition  date, and $33.5
million in cash. The transaction was accounted for as a purchase and the cost in
excess of net assets  acquired of  approximately  $58.7 million was allocated to
net  identified  intangibles  of  approximately  $4.3  million  and  goodwill of
approximately $54.4 million.


                                     - 6 -
<PAGE>

      The following pro forma  condensed  consolidated  statements of income for
the nine  months  ended  September  30, 2003 give effect to the merger as if the
merger had been consummated on January 1, 2003.

      The unaudited pro forma  information is not necessarily  indicative of the
results of  operations in the future or the results of  operations,  which would
have been realized had the merger been  consummated  during the periods or as of
the dates for which the unaudited pro forma information is presented.

                                               Nine Months Ended
                                                 September 30,
                                             ---------------------
                                               2004         2003
                                                         Pro Forma

Interest income                              $48,545      $48,894
Interest expense                               9,615       11,183
                                             -------      -------
      Net interest income                     38,930       37,711
                                             -------      -------
Provision for loan and lease losses              975        1,295
                                             -------      -------
Net interest income after provision for
loan and lease losses                         37,955       36,416

Non-interest income                            8,084        8,607

Non-interest expense
   Salaries and benefits                      14,541       14,023
   Occupancy and FF&E                          4,964        4,901
   Other expenses                              7,477        7,169
                                             -------      -------
                                              26,982       26,093

     Net income before taxes                  19,057       18,930

Income Taxes                                   6,055        6,089
                                             -------      -------
     Net income                              $13,002      $12,841
                                             =======      =======

Earnings per common share:
     Basic                                      1.02         1.00
     Diluted                                    1.00         0.99

3. Earnings Per Common Share

      Basic  earnings  per common  share  represent  income  available to common
stockholders divided by the weighted-average number of common shares outstanding
during the period.  Diluted earnings per common share reflect  additional common
shares that would have been outstanding if dilutive  potential common shares had
been  issued,  as well as any  adjustment  to income that would  result from the
assumed  issuance.  Potential  common  shares  that may be issued by the Company
relate  solely  to  outstanding  stock  options,  and are  determined  using the
treasury  stock  method.  At September  30, 2004 and 2003 the  weighted  average
shares  outstanding for the nine months were approximately 13.0 million and 11.6
million.


                                     - 7 -
<PAGE>

4. Commitments and Contingent Liabilities

Legal Proceedings

      The Company is a party to routine litigation  involving various aspects of
its business, none of which, in the opinion of management, is expected to have a
material  adverse impact on the  consolidated  financial  condition,  results of
operations or liquidity of the Company.

Commitments to Extend Credit

      At September 30, 2004, the Company had commitments of approximately $273.3
million to extend credit, of which approximately $2.6 million represents standby
letters of credit.

5. Goodwill and Other Intangibles

      With the adoption of Statement of Financial  Accounting Standards ("SFAS")
No. 142,  "Goodwill and Other  Intangible  Assets"  ("SFAS 142"),  on January 1,
2002,  goodwill  is no longer  amortized  to  expense,  but rather is tested for
impairment periodically.  Other intangible assets are amortized to expense using
straight-line  methods over their  respective  estimated  useful lives. At least
annually,  management reviews goodwill and other intangible assets and evaluates
events or changes in circumstances that may indicate  impairment in the carrying
amount of such  assets.  If the sum of the  expected  undiscounted  future  cash
flows,  excluding  interest  charges,  is less than the  carrying  amount of the
asset,  an impairment loss is recognized.  Impairment,  if any, is measured on a
discounted future cash flow basis.  Goodwill is reviewed for impairment annually
and on an interim  basis when  conditions  require.  If necessary an  impairment
charge is recognized in the period that goodwill has been deemed to be impaired.
At the date of adoption, there was no unamortized goodwill.

      At  September  30, 2004 and December 31,  2003,  gross  intangible  assets
amounted  to  $4.6  million  at  the  end  of  each  period  while   accumulated
amortization  amounted  to  $808  thousand  and  $430  thousand,   respectively.
Amortization of intangible assets as a result of acquisitions, which is included
in non-interest  expense,  amounted to $126 thousand,  and $125 thousand for the
three months ended September 30, 2004 and 2003, respectively.  During the second
quarter of 2003, the Company recorded a core deposit  intangible of $4.3 million
in connection  with the Bridge View merger.  The core deposit  intangible has an
estimated life of 10 years and the Company amortized $107 thousand for the three
month period ended September 30, 2004 and 2003. The core deposit intangible will
be  periodically  reviewed for  impairment.  In addition,  the Company  recorded
goodwill  of $54.4  million in  connection  with the  Bridge  View  merger.  The
goodwill will be tested for impairment at least annually in accordance  with the
provisions of SFAS No. 142.


                                     - 8 -
<PAGE>

At September 30, 2004 the scheduled  amortization of the core deposit intangible
is as follows (in thousands):

2005                     $  505
2006                        436
2007                        430
2008                        430
2009 and thereafter       1,859
                         ------
                         $3,660
                         ======

6. Segment Reporting

      SFAS No. 131,  "Disclosures  About  Segments of an Enterprise  and Related
Information"  ("SFAS  No.  131"),   requires  disclosures  for  each  reportable
operating segment. As a community-oriented financial institution,  substantially
all of the Company's operations entail the delivery of loan and deposit products
and various other  financial  services to customers in its primary  market area,
which is Bergen County,  New Jersey. The Company's  community-banking  operation
constitutes  the  Company's  only  operating  segment  for  financial  reporting
purposes under SFAS No. 131.

7. Recent Accounting Pronouncements

      On December 23, 2003,  the FASB issued  Statement of Financial  Accounting
Standards No. 132 (revised  2003),  Employers'  Disclosures  about  Pensions and
Other  Postretirement  Benefits  ("SFAS 132").  The revised SFAS 132 retains the
disclosure  requirements  in the  original  statement  and  requires  additional
disclosures about pension plan assets,  benefit  obligations,  benefit costs and
other relevant information. The Company has included the new interim disclosures
that are required for financial statements for periods ending after December 15,
2003.

      In March 2004, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments. EITF Issue 03-1 is effective for all
annual or interim  financial  statements  for periods  beginning  after June 15,
2004.  EITF Issue 03-1 addresses the  identification  of other than  temporarily
impaired  investments,  and requires that an impairment charge be recognized for
other than  temporarily  impaired  investments  for which  there is neither  the
ability nor intent to hold either  until  maturity or until the market  value of
the investment recovers.

      In  September  2004,  the FASB also  issued FSP EITF Issue  03-1-1,  which
delayed  the  effective  date of  paragraphs  10-20  of  EITF  Issue  No.  03-1.
Paragraphs  10-20 of EITF Issue No. 03-1 give  guidance  on how to evaluate  and
recognize an impairment loss that is other than temporary.  Application of these
paragraphs is deferred pending issuance of proposed FSP EITF Issue 03-1-a.

      In  September  2004,  the FASB issued  proposed  FSP EITF Issue  03-1-a to
address  the  application  of EITF Issue No.  03-1 to debt  securities  that are
impaired solely because of interest-rate  and/or  sector-spread  increases,  and
analyzed for impairment  under paragraph 16 of EITF Issue No. 03-1. The proposed
FSP  would be  effective  for  other-than-temporary  impairment  evaluations  of
interest-rate  impaired and  sector-spread  impaired  debt  securities  that are
analyzed under paragraph 16 of EITF Issue


                                     - 9 -
<PAGE>

No. 03-1 on the last reporting date of reporting  periods ending after the final
FSP is posted to the FASB Web site.

      The company has adopted the  provisions  of EITF Issue 03-1  applicable at
September 30, 2004. The company will evaluate the other provisions of EITF issue
03-1 when finalized.

8. Cash Dividend

      The Company paid a cash dividend of $0.125 per share on August 20, 2004 to
holders of record as of August 2, 2004.

9. Securities Held-to-Maturity and Securities Available-for-Sale

      Securities  held-to-maturity  ("HTM")  and  securities  available-for-sale
("AFS") consist of the following: (in thousands)

<TABLE>
<CAPTION>
                                                      -------------------------------------------------
                                                                      September 30, 2004
                                                      -------------------------------------------------
                                                                          (unaudited)
                                                                      Gross        Gross      Estimated
                                                      Amortized    Unrealized   Unrealized       Fair
                                                         Cost         Gains       Losses        Value
                                                      -------------------------------------------------
<S>                                                    <C>           <C>                      <C>
Securities HTM
   Mortgage-backed securities                          $  6,756      $  169            -      $  6,925
   Obligations of states & political subdivisions         9,936         710            -        10,646
                                                       --------      ------       ------      --------
                                                       $ 16,692      $  879            -      $ 17,571
                                                       --------      ------       ------      --------

Securities AFS
   Mortgage-backed securities                          $103,391      $  938       $  361      $103,968
   Obligations of U.S. agencies                         212,555         652        1,301       211,906
   Obligations of states & political subdivisions        34,476       1,068           28        35,516
   Equity securities                                      4,587          88            -         4,675
                                                       --------      ------       ------      --------
                                                        355,009       2,746        1,690       356,065
                                                       --------      ------       ------      --------
     Total securities                                  $371,701      $3,625       $1,690      $373,636
                                                       ========      ======       ======      ========

                                                      -------------------------------------------------
                                                                      December 31, 2003
                                                      -------------------------------------------------
                                                                      Gross        Gross      Estimated
                                                      Amortized    Unrealized   Unrealized       Fair
                                                         Cost         Gains       Losses        Value
                                                      -------------------------------------------------
Securities HTM
   Mortgage-backed securities                          $  9,850      $  330       $    1      $ 10,179
   Obligations of states & political subdivisions         9,257         787            -        10,044
                                                       --------      ------       ------      --------
                                                       $ 19,107      $1,117       $    1      $ 20,223
                                                       --------      ------       ------      --------

Securities AFS
   Obligations of U.S. Treasury                        $  6,032      $    5       $    2      $  6,035
   Mortgage-backed securities                           112,981       1,363          157       114,187
   Obligations of U.S. agencies                         271,339       2,583          762       273,160
   Obligations of states & political subdivisions        33,849       1,257           68        35,038
   Equity securities                                      4,396         137            -         4,533
                                                       --------      ------       ------      --------
                                                        428,597       5,345          989       432,953
                                                       --------      ------       ------      --------

     Total securities                                  $447,704      $6,462       $  990      $453,176
                                                       ========      ======       ======      ========
</TABLE>


                                     - 10 -
<PAGE>

      At September 30, 2004,  the  contractual  maturities of securities HTM and
securities AFS are as follows: (in thousands) (unaudited)

                                     Securities                 Securities
                                         HTM                        AFS
                               ----------------------     ----------------------
                                            Estimated                  Estimated
                               Amortized       Fair       Amortized      Fair
                                 Cost         Value          Cost        Value
                               ----------------------     ----------------------
Within 1 year                   $ 3,514      $ 3,562       $ 44,092    $ 44,139
After 1 but within 5 years        7,185        7,520        282,410     282,634
After 5 but within 10 years       4,806        5,195         10,394      10,605
After 10 years                    1,187        1,294         13,526      14,012
Equity securities                     -            -          4,587       4,675
                                -------      -------       --------    --------
                      Total     $16,692      $17,571       $355,009    $356,065
                                =======      =======       ========    ========

      Proceeds  from the sale of  securities  AFS amounted to $63.6  million and
$29.7  million  for the nine months  ended  September  30, 2004 and 2003,  which
resulted in gross  realized  gains of $1.1  million and $981  thousand for those
periods,  respectively.  Gross  realized  losses from the sale of securities AFS
amounted to $94 thousand  and $46  thousand for the nine months ended  September
30, 2004 and 2003, respectively.  These amounts are included in net gain on sale
of securities in the Consolidated Statements of Income.

      During the first nine months of 2003,  the Company  realized  gross losses
resulting from an acceleration of premium amortization on certain collateralized
mortgage obligations of $415 thousand.  The acceleration of premium amortization
was largely driven by the historically  high mortgage  prepayment  speeds due to
the low interest rate environment.

      The investment  portfolio is evaluated at least  quarterly to determine if
there are any securities with losses that are other than temporary. One criteria
in assessing for an other than temporary  impairment charge is if a security has
an unrealized loss that exceeds one year. At September 30, 2004, the Company had
$39.3 million of  securities  AFS with  unrealized  losses of $524 thousand that
were in excess of one year.  It is expected  that the Company  will  recover all
amounts due under the contractual  obligations of those securities and, as such,
no other than temporary  impairment  charge was  necessary.  The Company did not
have any unrealized losses in the HTM portfolio.  The following table summarizes
all securities  that have an unrealized  loss and the duration of the unrealized
loss at September 30, 2004: (in thousands) (unaudited)


                                     - 11 -
<PAGE>

<TABLE>
<CAPTION>
                                                    -----------------------     ---------------------     ----------------------
                                                        12 months or less        12 months or longer             Totals
                                                    -----------------------     ---------------------     ----------------------
                                                      Fair       Unrealized     Fair       Unrealized      Fair       Unrealized
                                                      Value        Losses       Value        Losses        Value        Losses
                                                    -----------------------     ---------------------     ----------------------
<S>                                                 <C>            <C>         <C>                        <C>           <C>
Securities AFS
Mortgage-backed securities                          $ 49,551       $  361      $   192           -        $ 49,743      $  361
Obligations of U.S. agencies                         149,402          802       36,707        $499         186,109       1,301
Obligations of states & political subdivisions           367            3        2,399          25           2,766          28
                                                    --------       ------      -------        ----        --------      ------

                                                    $199,320       $1,166      $39,298        $524        $238,618      $1,690
                                                    ========       ======      =======        ====        ========      ======
</TABLE>

      Securities  with  carrying  amounts of $65.5  million and $46.1 million at
September 30, 2004 and December 31, 2003, respectively,  were pledged for public
deposits,  Federal Home Loan Bank  advances,  securities  sold under  repurchase
agreements and other purposes required by law.

10. Loans

      The  composition  of the loan  portfolio  is  summarized  as follows:  (in
thousands)

                                     -------------     ------------
                                     September 30,     December 31,
(in thousands)                            2004             2003
                                     -------------     ------------
                                      (unaudited)
Amount of loans by type
    Real estate mortgage
       14 family residential
          First liens                   $153,984         $100,286
          Junior liens                     2,859            4,138
          Home equity                    147,536          136,477
       Commercial                        372,926          330,040
       Construction                       37,449           31,077
                                        --------         --------
                                         714,754          602,018
                                        --------         --------
    Commercial loans
       Commercial and financial          181,776          149,462
       Lease financing                    23,968           28,440
                                        --------         --------
                                         205,744          177,902
                                        --------         --------
    Consumer loans
       Lease financing                     2,260           12,416
       Installment                         4,396            4,245
                                        --------         --------
                                           6,656           16,661
                                        --------         --------
                      Total             $927,154         $796,581
                                        ========         ========

Nonperforming Assets

      Nonperforming  loans  include loans that are accounted for on a nonaccrual
basis and troubled debt restructurings.  Nonperforming loans are as follows: (in
thousands)


                                     - 12 -
<PAGE>

                                        -----------       ------------
                                         Sept. 30,        December 31,
                                            2004              2003
                                        -----------       ------------
                                        (unaudited)
Nonaccrual loans
     Residential real estate               $1,666            $1,364
     Commercial real estate                 2,406             1,603
     Commercial and financial               3,173             2,858
     Commercial lease financing             1,734             2,365
     Consumer                                 394               380
                                           ------            ------
                                           $9,373            $8,570
                                           ======            ======


11.  Allowance for Loan and Lease Losses

      The Company's  recorded  investment in impaired  loans is as follows:  (in
thousands)

<TABLE>
<CAPTION>
                                                     -------------------------      -------------------------
                                                           September 30,                   December 31,
                                                               2004                            2003
                                                     -------------------------      -------------------------
                                                            (unaudited)
                                                     Investment       Related       Investment       Related
                                                         in          Allowance          in          Allowance
                                                      Impaired        for Loan       Impaired       for Loan
                                                       Loans           Losses          Loans         Losses
                                                     ----------      ---------      ----------      ---------
<S>                                                    <C>             <C>            <C>             <C>
Impaired loans
With a related allowance for loan losses
       Commercial and financial                        $1,942          $  325         $2,864          $463
       Commercial real estate                             763              19          1,603            40
       Residential mortgages                              836             124            816           122
Without a related allowance for loan losses                 -               -              -             -
                                                       ------          ------         ------          ----
                                                       $3,541          $  468         $5,283          $625
                                                       ======          ======         ======          ====
</TABLE>

--------------------------------------------------------------------------------
The  impairment  of the above  loans was  estimated  based on the fair  value of
collateral.

Changes in the  allowance  for loan and lease losses are  summarized as follows:
(in thousands) (unaudited)

<TABLE>
<CAPTION>
                                                        -------------------          --------------------
                                                         Three months ended            Nine months ended
                                                           September 30,                 September 30,
                                                        -------------------          --------------------
                                                         2004         2003            2004          2003
                                                        ------       ------          ------       -------
<S>                                                     <C>          <C>             <C>          <C>
Balance at beginning of period                          $9,788       $9,537          $9,641       $ 7,207
Additions (deductions)
     Provision for loan and lease losses                   300          485             975         1,280
     Recoveries on loans previously charged off             16           39              76            44
     Loans charged off                                    (307)        (706)           (895)       (1,105)
     Additions due to merger                                 -            -               -         1,929
                                                        ------       ------          ------       -------
Balance at end of year                                  $9,797       $9,355          $9,797       $ 9,355
                                                        ======       ======          ======       =======
</TABLE>


                                     - 13 -
<PAGE>

12. Other Non-interest Expense

      Expenses included in other non-interest expense that exceed one percent of
the aggregate of total interest income and  non-interest  income for the periods
noted, are as follows: (in thousands) (unaudited)

                                 Three Months Ended       Nine Months Ended
                                    September 30,           September 30,
                                 ------------------       -----------------
                                  2004        2003        2004        2003
                                  ----        ----        ----        ----
Professional fees                $  385      $  334      $1,062      $  867
Data processing                     284         275         848         797
Directors' fees, retirement
  and travel                        198         199         609         508
Legal fees                          310         141         760         320
All other                           894         875       2,472       2,189
                                 ------      ------      ------      ------
                                 $2,071      $1,824      $5,751      $4,681
                                 ======      ======      ======      ======

13. Long-term Borrowings

Long-term borrowings consist of the following FHLB advances: (in thousands)

  Maturity                           September 30,      December 31,
    Date                 Rate            2004               2003
----------------         ----        -------------      ------------
                                      (unaudited)
January 2006             2.09 %         $10,000                 -

January 2007 (a)         4.22            10,000           $10,000

January 2007             2.69            10,000                 -
                         ----           -------           -------
                         3.00 %         $30,000           $10,000
                         ====           =======           =======

(a)  The FHLB has an option to call this advance on a quarterly basis if
the 3month LIBOR resets above 7.50%.

14.  Benefit Plans

         In 1993,  the  Bank  established  a  non-contributory  defined  benefit
pension plan covering all eligible  employees (the "Pension Plan"). In 1994, the
Bank  established  a  supplemental  plan  covering all eligible  employees  (the
"Supplemental  Plan") that provides for income that would have been paid out but
for the limitation  under the qualified  Pension Plan. Also in 1994, the Company
established  a  retirement  plan  for  all  directors  of the  Bank  who are not
employees of Interchange  or of any subsidiary or affiliate of Interchange  (the
"Directors' Plan").


                                     - 14 -
<PAGE>

      The  following  table  shows the  aggregated  components  of net  periodic
benefit costs for the periods noted: (in thousands) (unaudited)

                                       Three Months Ended    Nine Months Ended
                                          September 30,        September 30,
                                       ------------------    -----------------
                                          2004    2003          2004    2003
                                          ----    ----          ----    ----
Service cost                              $166    $151         $ 499    $453
Interest cost                               95      79           286     237
Expected return on plan assets             (39)    (31)         (118)    (93)
Amortization of prior service cost           1       1             4       2
                                          ----    ----         -----    ----
Net periodic benefit cost                 $223    $200         $ 671    $599
                                          ====    ====         =====    ====

      For the year ended  December 31, 2004, the Bank  anticipates  contributing
approximately $775 thousand to the Pension Plan.


                                     - 15 -
<PAGE>

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

General

      The  following  discussion  is an analysis of the  consolidated  financial
condition  and results of operations of the Company for the three and nine month
periods  ended  September 30, 2004 and 2003,  and should be read in  conjunction
with the consolidated  financial statements and notes thereto included in Item 1
hereof.  In  addition,   you  should  read  this  section  in  conjunction  with
Management's  Discussion and Analysis and Results of Operations  included in the
Company's 2003 Annual Report on Form 10-K.

      On April 30, 2003,  the Company  completed its  acquisition of Bridge View
Bancorp ("Bridge  View").  Accordingly the results of operations for the Company
include the results of Bridge View from April 30, 2003.

Forward Looking Information

      In addition  to  discussing  historical  information,  certain  statements
included  in  or  incorporated  into  this  report  relating  to  the  financial
condition,  results of  operations  and  business of the  Company  which are not
historical facts may be deemed  "forward-looking  statements" within the meaning
of the Private  Securities  Litigation Reform Act of 1995. When used herein, the
words "anticipate,"  "believe,"  "estimate,"  "expect," "will" and other similar
expressions  (including  when  preceded  or  followed  by the  word  "not")  are
generally intended to identify such forward-looking  statements. Such statements
are  intended to be covered by the safe harbor  provisions  for  forward-looking
statements  contained  in such Act,  and we are  including  this  statement  for
purposes  of  invoking  these  safe  harbor  provisions.   Such  forward-looking
statements  include,  but are not limited to, statements about the operations of
the Company,  the adequacy of the Company's allowance for losses associated with
the loan and lease portfolio,  the quality of the loan and lease portfolio,  the
prospects of continued loan and deposit growth, and improved credit quality. The
forward-looking   statements  in  this  report  involve  certain   estimates  or
assumptions, known and unknown risks and uncertainties, many of which are beyond
the control of the Company, and reflect what we currently anticipate will happen
in each  case.  What  actually  happens  could  differ  materially  from what we
currently anticipate will happen due to a variety of factors,  including,  among
others, (i) increased  competitive pressures among financial services companies;
(ii) changes in the interest  rate  environment,  reducing  interest  margins or
increasing   interest  rate  risk;  (iii)   deterioration  in  general  economic
conditions,  internationally,  nationally,  or in the State of New Jersey;  (iv)
disruptions  caused by  terrorism,  such as the events of September 11, 2001, or
military  actions  in the  Middle  East  or  other  areas;  (v)  legislation  or
regulatory  requirements  or changes  adversely  affecting  the  business of the
Company;  and (vi) other risks detailed in reports filed by the Company with the
Securities and Exchange Commission.  Readers should not place undue expectations
on any  forward-looking  statements.  We are not  promising  to make any  public
announcement when we consider forward-looking  statements in this document to be
no longer  accurate,  whether  as a result  of new  information,  what  actually
happens in the future or for any other reason.


                                     - 16 -
<PAGE>

Company

      The Company is a bank holding company  headquartered in Bergen County, New
Jersey. The Company's principal operating  subsidiary is Interchange Bank, a New
Jersey-chartered  commercial  bank. In addition to the Bank, the Company has one
other wholly owned direct subsidiary: Clover Leaf Mortgage Company, a New Jersey
corporation,  which is not currently engaged in any business activity.  The Bank
has five direct subsidiaries:  Clover Leaf Investment Corporation, an investment
company  operating  pursuant to New Jersey law;  Clover Leaf  Insurance  Agency,
Inc., a New Jersey corporation engaged in the sale of tax-deferred annuities and
insurance;  Clover Leaf Management Realty Corporation,  a Real Estate Investment
Trust ("REIT"),  which manages certain real estate assets of the Company; Bridge
View Investment  Company, an investment company operating pursuant to New Jersey
law; and  Interchange  Capital  Company,  L.L.C.  ("ICC"),  a New Jersey limited
liability company which engages in equipment lease financing.  All of the Bank's
subsidiaries are 100% owned by the Bank, except for the REIT, which is 99% owned
by the Bank.  Bridge View  Investment  Company has one wholly owned  subsidiary,
Bridge View Delaware,  Inc.  ("BVDI").  BVDI is an investment  company operating
pursuant to Delaware law.

Critical Accounting Policies and Judgments

      The Company's  consolidated financial statements are prepared based on the
application of certain  accounting  policies,  the most significant of which are
described in Note 1 "Accounting Policies in the Notes to Consolidated  Financial
Statements  and  in  the  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations: Critical Accounting Policies and Judgments"
in our 2003  Annual  Report on Form  10-K.  Certain  of these  policies  require
numerous  estimates  and  strategic  or  economic  assumptions  that  may  prove
inaccurate or subject to variations and may  significantly  affect the Company's
reported results and financial position for the period or in future periods. The
use of estimates, assumptions, and judgments are necessary when financial assets
and  liabilities  are required to be recorded  at, or adjusted to reflect,  fair
value.  Assets and liabilities  carried at fair value inherently  result in more
financial statement  volatility.  Fair values and the information used to record
valuation  adjustments  for certain assets and  liabilities  are based on either
quoted market prices or are provided by other independent  third-party  sources,
when available.  When such  information is not available,  management  estimates
valuation  adjustments primarily by using internal cash flow and other financial
modeling techniques. Changes in underlying factors, assumptions, or estimates in
any of  these  areas  could  have a  material  impact  on the  Company's  future
financial condition and results of operations.

     Allowance  for Loan and  Lease  Losses:  The  allowance  for loan and lease
losses  ("ALLL") is generally  established  through  periodic  charges to income
through the provision of loan and lease losses.  Loan losses are charged against
the  ALLL  when  management  believes  that  the  probablefuture  collection  of
principal is unlikely.  Subsequent recoveries, if any, are credited to the ALLL.
If the ALLL is  considered  inadequate  to absorb future loan losses on existing
loans, based on, but not limited to, increases in the size

                                     - 17 -
<PAGE>

of the loan  portfolio,  increases  in  charge-offs  orchanges  in the risk
characteristics  of the loan  portfolio,  then the  provision for loan and lease
losses is increased.

     The Company  considers the ALLL of $9.8 million adequate to cover estimated
losses  inherent in the loan  portfolio that may become  uncollectible  based on
management's  periodic  evaluations  of the loan  portfolio  and other  relevant
factors.  The  evaluations  are  inherently  subjective as it requires  material
estimates including,  potential loss factors, changes in trend of non-performing
loans, current state of local and national economy, value of collateral; changes
in the composition and volume of the loan portfolio,  review of specific problem
loans and  management's  assessment of the inherent risk and overall  quality of
the loan  portfolio.  All of these  factors may be  susceptible  to  significant
change. Also, the allocation of the allowance for credit losses to specific loan
pools is based on historical loss trends and  management's  judgment  concerning
those trends.

Business  Combinations:  Business  combinations  are  accounted  for  using  the
purchase  method of  accounting,  the net assets of the  companies  acquired are
recorded at their  estimated fair value at the date of  acquisition  and include
the results of operations of the acquired business from the date of acquisition.
The excess of the purchase price over the estimated fair value of the net assets
acquired is recognized as goodwill.

Goodwill:  With the  adoption of SFAS No. 142,  "Goodwill  and Other  Intangible
Assets"  ("SFAS 142"),  on January 1, 2002,  goodwill is no longer  amortized to
expense,  but rather is tested for  impairment  periodically.  Other  intangible
assets  are  amortized  to  expense  using  straight-line   methods  over  their
respective  estimated  useful  lives.  At  least  annually,  management  reviews
goodwill  and  other  intangible  assets  and  evaluates  events or  changes  in
circumstances  that may  indicate  impairment  in the  carrying  amount  of such
assets.  If the sum of the expected  undiscounted  future cash flows,  excluding
interest  charges,  is less than the carrying amount of the asset, an impairment
loss is recognized.  Impairment, if any, is measured on a discounted future cash
flow basis. Goodwill is reviewed for impairment annually and on an interim basis
when conditions require. If necessary, an impairment charge is recognized in the
period that  goodwill has been deemed to be  impaired.  At the date of adoption,
there was no unamortized goodwill.


                                     - 18 -
<PAGE>

                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                              RESULTS OF OPERATIONS

Summary

      For the third quarter of 2004, the Company  reported  earnings per diluted
common  share of $0.36,  as compared  to $0.35 for the same period in 2003.  Net
income for the three  months ended  September  30, 2004 was  approximately  $4.7
million, an increase of $150 thousand,  or 3.3%, over the same period last year.
The  increase in earnings  resulted  from an  increase in our  interest  earning
assets  during the  quarter of  approximately  $97.2  million,  which was partly
offset by a 5 basis point decline in our net interest margin.

      For the three  months ended  September  30, 2004 and 2003,  the  Company's
Return on Average  Assets ("ROA") was 1.31% and 1.34%,  respectively.  Return on
Average Equity ("ROE") for the three months ended  September 30, 2004 was 12.90%
versus 12.93% for the same period in the prior year.

Net Interest Income

      Net  interest  income  is the most  significant  source  of the  Company's
operating  income.  A portion of the Company's  total interest income is derived
from  investments  that are exempt from federal  taxation.  The amount of pretax
income realized from those investments,  due to the tax exemption,  is less than
the amount of pretax income  realizable from comparable  investments  subject to
federal  taxation.  For purposes of the following  discussion,  interest  income
exempt from federal taxation has been restated to a fully  tax-equivalent  basis
using a corporate  federal tax rate of 34% for the quarter  ended  September 30,
2004 and 2003. This was  accomplished by adjusting this income upward to make it
equivalent to the level of taxable income required to earn the same amount after
taxes.

      Net interest income on a tax-equivalent  basis increased $1.0 million,  or
6.9%, to $13.6  million for the quarter ended  September 30, 2004 as compared to
the same quarter in 2003. The tax equivalent basis  adjustments for the quarters
ended  September  30,  2004 and  2003  were  $177  thousand  and $161  thousand,
respectively.  The  increase  in net  interest  income was due mostly to an 8.2%
growth in interest earning assets. This interest earning asset growth was funded
primarily  by deposit  liabilities,  which  grew 4.0% on  average  for the third
quarter of 2004 as  compared  to the same  quarter  in 2003.  The margin for the
third quarter of 2004 was 4.24%,  a decline of 5 basis points as compared to the
same  quarter in 2003 due to earning  asset  yields  declining  faster  than the
Company's cost of funds. The decline in asset yields was mainly  attributable to
maturities  and  prepayments  in the loan and  securities  portfolio,  while the
Company's  deposit  pricing  reached  historical lows and appears to have become
inelastic.  During the quarter,  the Company did experience expansion in its net
interest margin as a result of a favorable shift in asset mix.

      Interest income, on a tax-equivalent  basis, totaled $17.1 million for the
third quarter of 2004, an increase of $927 thousand, or 5.7%, as compared to the
same quarter in 2003. The increase was mostly


                                     - 19 -
<PAGE>

attributed to a $97.2 million,  or 8.2%, growth in interest earning assets.  The
growth in interest  earning  assets was the result of increases in average loans
and average investments of $114.4 million and $18.5 million,  respectively.  The
increase in  interest  income was partly  offset by a 12 basis point  decline in
interest  earning  asset yields for the third quarter of 2004 as compared to the
same quarter in 2003.

     Interest expense, which totaled $3.4 million for the third quarter of 2004,
decreased  $45 thousand,  or 1.3%,  as compared to the same period in 2003.  The
decrease in interest  expense was a byproduct of the decline in market  interest
rates,  particularly  short-term rates, during 2003 and through June of 2004. In
addition, a beneficial shift in the composition of the Company's deposits, which
is  discussed  further  in the  analysis  of  financial  condition,  also  had a
favorable  impact on the Company's  interest  expense.  The improved deposit mix
combined with lower  short-term  interest rates reduced the average rate paid on
interest  bearing  liabilities  by 5 basis points to 1.33% for the quarter ended
September 30, 2004 as compared to the same period in 2003.  The magnitude of the
benefit derived from the decrease in rates paid on interest bearing  liabilities
was partially reduced by the growth of deposits.  Interest bearing deposits grew
on average $22.2 million,  or 2.3%, for the third quarter of 2004 as compared to
the same period in 2003.

      From June 30 through September 30, 2004 the Federal Reserve has raised the
overnight  borrowing  rate by 75 basis  points  which  directly  affected  other
indices such as the prime rate. Some of the effects of the rate rise will likely
cause our overall  interest costs to rise on interest bearing deposits and short
term borrowings.  It is unlikely that we will need to reprice our liabilities to
absorb the 75 basis point rate rise.  The  projected  increase in funding  costs
is anticipated in large par to be offset  by the repricing of  assets  linked to
indices and interest earning asset growth.


                                     - 20 -
<PAGE>
--------------------------------------------------------------------------------
Analysis of Net Interest Income
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the quarter ended September 30,
(dollars in thousands)                                                    2004                                  2003
                                                           ----------------------------------    -----------------------------------
(unaudited)                                                  Average                  Average      Average                   Average
                                                             Balance      Interest      Rate       Balance      Interest       Rate
                                                             -------      --------    -------      -------      --------     -------
<S>                                                        <C>            <C>          <C>       <C>            <C>           <C>
                   Assets
Interest earning assets:
Loans (1)                                                  $  903,113     $13,913      6.16 %    $  788,705     $13,094       6.64 %
Taxable securities (4)                                        346,836       2,663      3.07         325,435       2,562       3.15
Tax-exempt securities (2) (4)                                  26,930         444      6.59          29,873         365       4.89
Interest earning deposits                                          12           -         -          13,996          36       1.03
Federal funds sold                                              8,899          33      1.48          30,571          69       0.90
                                                           ----------     -------      ----      ----------     -------       ----
     Total interest-earning assets                          1,285,790      17,053      5.31       1,188,580      16,126       5.43
                                                                          -------                               -------

Non-interest earning assets:
Cash and due from banks                                        36,837                                42,652
Allowance for loan and lease losses                            (9,981)                               (9,704)
Other assets                                                  114,422                               120,090
                                                           ----------                            ----------
     Total assets                                          $1,427,068                            $1,341,618
                                                           ==========                            ==========

        Liabilities and stockholders' equity
Interest-bearing liabilities
Interest bearing deposits                                    $969,217       3,085      1.27        $946,970       3,204       1.35
Borrowings                                                     61,043         331      2.17          27,436         167       2.43
                                                           ----------     -------      ----      ----------     -------       ----
     Total interest-bearing liabilities                     1,030,260       3,416      1.33         974,406       3,371       1.38
                                                                          -------                               -------

Noninterest bearing liabilities
Demand deposits                                               235,869                               211,765
Other liabilities                                              16,427                                15,901
                                                           ----------                            ----------
     Total liabilities (3)                                  1,282,556                             1,202,072
Stockholders' equity                                          144,512                               139,546
                                                           ----------                            ----------
     Total liabilities and stockholders' equity            $1,427,068                            $1,341,618
                                                           ==========                            ==========

Net interest income (tax-equivalent basis)                                 13,637      3.98                      12,755       4.05
Tax-equivalent basis adjustment                                              (177)                                 (161)
                                                                          -------                               -------
     Net interest income                                                  $13,460                               $12,594
                                                                          =======                               =======

Net interest income as a percent of interest-earning
assets (tax-equivalent basis)                                                          4.24 %                                 4.29 %
</TABLE>
--------------------------------------------------------------------------------
(1)  Nonaccrual  loans and any related  interest  recorded have been included in
computing the average rate earned on the loan portfolio.  When  applicable,  tax
exempt  loans  are  computed  on a fully  taxable  equivalent  basis  using  the
corporate federal tax rate of 34%.
(2) Computed on a fully taxable equivalent basis using the corporate federal tax
rate of 34%.
(3) All deposits are in domestic bank offices.
(4) The  average  balances  are  based on  historical  cost  and do not  reflect
unrealized gains or losses.

Provision for Loan and Lease Losses
      The   provision  for  loan  and  lease  losses   represents   management's
calculation of the amount necessary to bring the ALLL to a level that management
considers  adequate  to reflect  the risk of  estimated  losses  inherent in the
Company's  loan  portfolio  as of  the  balance  sheet  date.  A  more  detailed
discussion  of the  evaluation  of the ALLL can be found in the  section  titled
"Critical  Accounting  Policies  and  Judgments:  Allowance  for Loan and  Lease
Losses" above.  In the third quarter of 2004 and 2003,  the Company's  provision
for loan and lease losses was $300 thousand and $485 thousand, respectively.

Non-interest Income
     For the quarter ended September 30, 2004,  non-interest income totaled $2.9
million,  a decrease of $458 thousand,  or 13.7%, as compared to the same period
in 2003.  The change was largely  due to a decline in Bank Owned Life  Insurance
("BOLI"),  and net  gains on  sales  of  securities  of $447  thousand  and $338
thousand,  respectively. The decline in BOLI income was attributed to a claim of
$422  thousand  on  insurance  policies  in 2003.  This was  offset by growth in
"other"  non-interest  income of $277  thousand  and gains on sales of loans and
leases of $51  thousand.  The growth in  "other"  non-interest  income  occurred
through loan fees and service charges of $307 thousand, primarily resulting from
loan
                                     - 21 -
<PAGE>

prepayments. The increase in gains on sales of loans arose out of an increase in
sales of SBA originated loans.

Non-interest Expense

      For the quarter ended  September 30, 2004,  non-interest  expense was $9.3
million, an increase of $509 thousand, or 5.8%. Contributing to the increase was
an increase in salaries  and  benefits,  and legal fees,  which  increased  $322
thousand  and $169  thousand,  respectively,  as  compared to the same period in
2003.

Income Taxes

      Income tax  expense as a  percentage  of pre-tax  income was 31.2% for the
three months ended  September  30, 2004 as compared to 32.5% for the same period
of 2003. The change in percentage of income tax expense was, in part, due to the
effect of  non-taxable  BOLI income offset by the increase of income tax expense
during the third quarter of 2003 from 34% to 35% as a result of the  acquisition
of Bridge View.


                                     - 22 -
<PAGE>

           NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003
                              RESULTS OF OPERATIONS

Summary

      Net income for the nine months ended September 30, 2004 was  approximately
$13.0 million, an increase of $948 thousand,  or 7.9%, over the same period last
year.  The increase in earnings  resulted  from an increase in interest  earning
assets from organic growth and the  acquisition of Bridge View during the second
quarter of 2003.  The  improvement  in earnings was partly  offset by a 20 basis
point decline in the net interest margin. For the first nine months of 2004, the
Company  reported  earnings per diluted  common  share of $1.00,  as compared to
$1.04 for the same period in 2003. The decline in diluted earnings per share was
a result of a  compression  in the net  interest  margin as compared to the same
period in 2003 and an increase in average diluted shares outstanding as a result
of the Bridge View transaction.

      For the nine months ended  September 30, 2004 and 2003,  the Company's ROA
was 1.24% and 1.38%, respectively. The change in ROA for the period was a result
of a decline in net interest  margin.  ROE was 12.04% a decline from 14.12% when
compared  to the same  period  last year.  ROE  declined  principally  due to an
increase  in equity  as a result of the  acquisition  of Bridge  View and,  to a
lesser extent, compression in net interest margin.

Net Interest Income

      Net interest income on a tax-equivalent  basis increased $5.0 million,  or
14.5%, to $39.4 million for the nine months ended September 30, 2004 as compared
to the same quarter in 2003. The tax equivalent  basis  adjustments for the nine
months ended  September 30, 2004 and 2003 were $499 thousand and $381  thousand,
respectively.  The  increase  in net  interest  income was due mostly to a 19.9%
growth in interest earning assets. This interest earning asset growth was funded
primarily  by deposit  liabilities,  which  grew  17.3% on average  for the nine
months of 2004 as compared to the same period in 2003.  The increase in interest
earning assets and deposits were attributed to the Company's internal growth and
the Bridge View  acquisition.  The  aforementioned  improvement  in net interest
income was partly offset by a 20 basis point decline in the net interest  margin
for the nine months ended  September  30, 2004 as compared to the same period in
2003.  The decrease in the net interest  margin was due to earning  asset yields
declining  faster than the Company's cost of funds.  The decline in asset yields
was mainly attributable to maturities and prepayments in the loan and securities
portfolio,  while the Company's  deposit  pricing  reached  historical  lows and
appears to have become inelastic.

      Interest income, on a tax-equivalent  basis, totaled $49.0 million for the
nine months ended  September 30, 2004, an increase of $4.0 million,  or 9.0%, as
compared to the same period in 2003.  The  increase was mostly  attributed  to a
$208.8  million,  or 19.9%,  growth in interest  earning  assets.  The growth in
interest earning assets was the result of increases in average loans and average
investments of $139.5 million and $99.8 million,  respectively.  The increase in
interest income was partly offset by a


                                     - 23 -
<PAGE>

53 basis point  decline in  interest  earning  asset  yields for the nine months
ended September 30, 2004 as compared to the same period in 2003.

         Interest expense,  which totaled $9.6 million for the nine months ended
September 30, 2004,  decreased  $1.0  million,  or 9.0%, as compared to the same
period in 2003. The decrease in interest  expense was a byproduct of the decline
in market  interest  rates,  particularly  short-term  rates,  during  2003.  In
addition, a beneficial shift in the composition of the Company's deposits, which
is discussed  further in the analysis of financial  condition below,  also had a
favorable  impact on the Company's  interest  expense.  The improved deposit mix
combined with lower  short-term  interest rates reduced the average rate paid on
interest  bearing  liabilities  by 36 basis  points to 1.27% for the nine months
ended  September 30, 2004 as compared to the same period in 2003.  The magnitude
of the benefit  derived  from the  decrease  in rates paid on  interest  bearing
liabilities was partially  reduced by the positive growth of deposits.  Interest
bearing deposits grew on average $113.0 million, or 13.5%, for the third quarter
of 2004 as compared to the same period in 2003.

--------------------------------------------------------------------------------
Analysis of Net Interest Income
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year to date ended September 30,
(dollars in thousands)                                                    2004                                  2003
                                                           ----------------------------------    -----------------------------------
(unaudited)                                                  Average                  Average      Average                   Average
                                                             Balance      Interest      Rate       Balance      Interest       Rate
                                                             -------      --------    -------      -------      --------     -------
<S>                                                        <C>            <C>          <C>       <C>            <C>           <C>
                   Assets
Interest earning assets
Loans (1)                                                  $  851,936     $39,821      6.23 %    $  712,480     $36,489       6.83 %
Taxable securities (4)                                        371,774       7,915      2.84         270,379       7,284       3.59
Tax-exempt securities (2) (4)                                  24,964       1,238      6.61          26,529         916       4.60
Interest earning deposits                                          10           -         -           7,427          57       1.02
Federal funds sold                                              8,088          70      1.15          31,145         253       1.08
                                                           ----------     -------                ----------     -------
     Total interest-earning assets                          1,256,772      49,044      5.20       1,047,960      44,999       5.73
                                                                          -------                               -------

Non-interest earning assets
Cash and due from banks                                        36,239                                34,229
Allowance for loan and lease losses                            (9,812)                               (8,515)
Other assets                                                  117,245                                88,642
                                                           ----------                             ---------
     Total assets                                          $1,400,444                             1,162,316
                                                           ==========                             =========

        Liabilities and stockholders' equity
Interest-bearing liabilities
Interest bearing deposits                                    $949,929       8,672      1.22        $836,922      10,027       1.60
Borrowings                                                     60,426         943      2.08          26,238         544       2.76
                                                           ----------     -------                ----------     -------
     Total interest-bearing liabilities                     1,010,355       9,615      1.27        $863,160      10,571       1.63
                                                                          -------                               -------

Non-interest bearing liabilities
Demand deposits                                               230,919                               170,000
Other liabilities                                              15,194                                15,308
                                                           ----------                             ---------
     Total liabilities (3)                                  1,256,468                             1,048,468
Stockholders' equity                                          143,976                               113,848
                                                           ----------                             ---------
     Total liabilities and stockholders' equity            $1,400,444                             1,162,316
                                                           ==========                             =========

Net interest income (tax-equivalent basis)                                 39,429      3.93                      34,428       4.10
Tax-equivalent basis adjustment                                              (499)                                 (381)
                                                                          -------                               -------
     Net interest income                                                  $38,930                               $34,047
                                                                          =======                               =======

Net interest income as a percent of interest-earning
assets (tax-equivalent basis)                                                          4.18 %                                 4.38 %
</TABLE>

--------------------------------------------------------------------------------
(1)  Nonaccrual  loans and any related  interest  recorded have been included in
computing the average rate earned on the loan portfolio.  When  applicable,  tax
exempt  loans  are  computed  on a fully  taxable  equivalent  basis  using  the
corporate federal tax rate of 34%.
(2) Computed on a fully taxable equivalent basis using the corporate federal tax
rate of 34%.
(3) All deposits are in domestic bank offices.
(4) The  average  balances  are  based on  historical  cost  and do not  reflect
unrealized gains or losses.

                                     - 24 -
<PAGE>

Provision for Loan and Lease Losses

      The   provision  for  loan  and  lease  losses   represents   management's
calculation of the amount necessary to bring the ALLL to a level that management
considers  adequate  to reflect  the risk of  estimated  losses  inherent in the
Company's  loan  portfolio  as of  the  balance  sheet  date.  A  more  detailed
discussion  of the  evaluation  of the ALLL can be found in the  section  titled
"Critical  Accounting  Policies  and  Judgments:  Allowance  for Loan and  Lease
Losses"  above.  In the  first  nine  months  of 2004 and  2003,  the  Company's
provision  for  loan  and  lease  losses  was $975  thousand  and $1.3  million,
respectively.

Non-interest Income

      For the nine months ended September 30, 2004,  non-interest income totaled
$8.1  million,  an increase of $261  thousand,  or 3.3%, as compared to the same
period in 2003. The improvement in non-interest income was primarily a result of
increases in "other" non-interest  income, net gain on sales of securities,  and
service  charges on deposits of $687 thousand,  $462 thousand and $219 thousand.
The increase in "other"  non-interest  income was  primarily  the result of loan
fees and services charges of $492 thousand as a result of loan prepayments.  The
improvement  in  non-interest  income  was partly  offset by a decrease  in BOLI
income and a decline in net gain on sale of loans and leases of $1.0 million and
$161  thousand,  respectively.  The decline in BOLI income was  attributed  to a
claim on insurance policies in 2003 of $921 thousand.  Net gain on sale of loans
and  leases  declined  due  to  lower  revenue  from  the  sale  of  thirty-year
residential  mortgage  loans offset by an increase in the sale of SBA originated
loans.

Non-interest Expense

      For the nine months ended  September  30, 2004,  non-interest  expense was
$27.0 million,  an increase of $4.0 million, or 17.4%, when compared to the same
period one year ago. The increase  was due largely to the  additional  operating
costs resulting from the addition of eleven branch locations and the staffing of
those  branches  acquired  as part of the merger  with  Bridge  View.  The costs
associated with the eleven additional branches are only included,  from the date
of  acquisition  of Bridge  View,  for five  months in 2003 as  compared to nine
months for 2004. Also contributing to the increase were normal increases related
to salaries, benefits and occupancy expense.

Income Taxes

      Income tax  expense as a  percentage  of pre-tax  income was 31.8% for the
nine months ended September 30, 2004 as compared to 31.5% for the same period of
2003.


                                     - 25 -
<PAGE>

                               FINANCIAL CONDITION

Cash and Cash Equivalents

      At September 30, 2004, cash and cash  equivalents  increased $22.2 million
to $53.6 million as compared to December 31, 2003. This was primarily attributed
to federal funds sold increasing to $17.3 million while the Company was in a net
borrowing position at December 31, 2003.

Securities Portfolio

      Under Statement of Financial  Accounting Standards No. 115 "Accounting for
Certain  Investments in Debt and Equity  Securities" ("SFAS 115"), each security
is classified as either trading, AFS, or HTM. The Company has no securities held
in a trading  account.  The securities AFS are recorded at their  estimated fair
value. The after-tax  difference between amortized cost and estimated fair value
of securities AFS is recorded as "accumulated other comprehensive income" in the
equity  section  of the  balance  sheet.  The tax impact of such  adjustment  is
recorded as an  adjustment  to the amount of the  deferred  tax  liability.  The
securities HTM are carried at cost adjusted for the amortization of premiums and
accretion of discounts,  which are recognized as an adjustment to income.  Under
SFAS No. 115,  securities  HTM,  with some  exceptions,  may only be sold within
three months of maturity.

      The Company uses its  securities  portfolio to ensure  liquidity  for cash
flow  requirements,  to manage  interest rate risk,  provide a source of income,
ensure  collateral  is  available  for  pledging  requirements  and manage asset
quality  diversification.  At September 30, 2004,  investment securities totaled
$372.8  million and  represented  25.5% of total  assets,  as compared to $452.1
million and 32.6%, respectively,  at December 31, 2003. Securities AFS comprised
95.5% of the total  securities  portfolio at  September  30, 2004 as compared to
95.8% at  December  31,  2003.  At  September  30,  2004,  the Company had a net
unrealized  gain of $1.9  million as compared to a net  unrealized  gain of $5.5
million at December 31, 2003. The decrease was mostly attributed to a decline in
market interest rates during that period.

      During  2004,   the  Company  sold   securities   with  a  book  value  of
approximately  $62.6 million and recognized  $1.1 million in gross gains and $94
thousand in gross losses.  During 2003, the Company sold  securities with a book
value of approximately $29.7 million and recognized $981 thousand in gross gains
and $46 thousand in gross losses. In addition during the first half of 2003, the
Company  realized  gross  losses  resulting  from  an  acceleration  of  premium
amortization on certain  collateralized  mortgage  obligations of $415 thousand.
The acceleration of premium  amortization was largely driven by the historically
high mortgage prepayment speeds due to the low interest rate environment.

      The following table reflects the composition of the securities  portfolio:
(in thousands)


                                     - 26 -
<PAGE>

<TABLE>
<CAPTION>
                                                      -------------------------------------------------
                                                                      September 30, 2004
                                                      -------------------------------------------------
                                                                          (unaudited)
                                                                      Gross        Gross      Estimated
                                                      Amortized    Unrealized   Unrealized       Fair
                                                         Cost         Gains       Losses        Value
                                                      ---------    ----------   ----------    ---------
<S>                                                    <C>           <C>                      <C>
Securities HTM
   Mortgage-backed securities                          $  6,756      $  169            -      $  6,925
   Obligations of states & political subdivisions         9,936         710            -        10,646
                                                       --------      ------      -------      --------
                                                       $ 16,692      $  879            -      $ 17,571
                                                       --------      ------      -------      --------

Securities AFS
   Mortgage-backed securities                          $103,391      $  938      $   361      $103,968
   Obligations of U.S. agencies                         212,555         652        1,301       211,906
   Obligations of states & political subdivisions        34,476       1,068           28        35,516
   Equity securities                                      4,587          88            -         4,675
                                                       --------      ------      -------      --------
                                                        355,009       2,746        1,690       356,065
                                                       --------      ------      -------      --------

     Total securities                                  $371,701      $3,625      $ 1,690      $373,636
                                                       ========      ======      =======      ========

                                                      -------------------------------------------------
                                                                      December 31, 2003
                                                      -------------------------------------------------
                                                                      Gross        Gross      Estimated
                                                      Amortized    Unrealized   Unrealized       Fair
                                                         Cost         Gains       Losses        Value
                                                      ---------    ----------   ----------    ---------
Securities HTM
   Mortgage-backed securities                          $  9,850      $  330      $     1      $ 10,179
   Obligations of states & political subdivisions         9,257         787            -        10,044
                                                       --------      ------      -------      --------
                                                       $ 19,107      $1,117      $     1      $ 20,223
                                                       --------      ------      -------      --------

Securities AFS
   Obligations of U.S. Treasury                        $  6,032      $    5      $     2      $  6,035
   Mortgage-backed securities                           112,981       1,363          157       114,187
   Obligations of U.S. agencies                         271,339       2,583          762       273,160
   Obligations of states & political subdivisions        33,849       1,257           68        35,038
   Equity securities                                      4,396         137            -         4,533
                                                       --------      ------      -------      --------
                                                        428,597       5,345          989       432,953
                                                       --------      ------      -------      --------

     Total securities                                  $447,704      $6,462      $   990      $453,176
                                                       ========      ======      =======      ========
</TABLE>

      At September 30, 2004,  the  contractual  maturities of securities HTM and
securities AFS are as follows: (in thousands) (unaudited)

                                     Securities                 Securities
                                         HTM                        AFS
                               ----------------------     ----------------------
                                            Estimated                  Estimated
                               Amortized       Fair       Amortized      Fair
                                 Cost         Value          Cost        Value
                               ----------------------     ----------------------
Within 1 year                   $ 3,514      $ 3,562      $ 44,092     $ 44,139
After 1 but within 5 years        7,185        7,520       282,410      282,634
After 5 but within 10 years       4,806        5,195        10,394       10,605
After 10 years                    1,187        1,294        13,526       14,012
Equity securities                     -            -         4,587        4,675
                                -------     --------      --------     --------
                      Total     $16,692     $ 17,571      $355,009     $356,065
                                =======     ========      ========     ========


                                     - 27 -
<PAGE>

Loans

      Total loans  amounted to $927.2 million at September 30, 2004, an increase
of $130.6  million  from $796.6  million at December  31,  2003.  The growth was
attributable  to increases in residential  mortgage loans,  commercial  mortgage
loans and commercial and financial  loans of $53.7 million,  $42.9 million,  and
$32.3 million,  respectively.  The growth in  residential  mortgages was due, in
part, to purchases of $36.4  million.  These loans were subject to the Company's
independent  credit  analysis  prior  to  purchase.   Somewhat   offsetting  the
aforementioned  increases were  decreases in consumer and  commercial  leases of
$10.2 million and $4.5 million, respectively.

                                        September 30,      December 31,
(in thousands)                              2004               2003
                                        -------------      ------------
                                         (unaudited)
Amount of loans by type
    Real estate-mortgage
       1-4 family residential
          First liens                     $153,984           $100,286
          Junior liens                       2,859              4,138
          Home equity                      147,536            136,477
       Commercial                          372,926            330,040
       Construction                         37,449             31,077
                                          --------           --------
                                           714,754           $602,018
                                          --------           --------
    Commercial loans
       Commercial and financial            181,776            149,462
       Lease financing                      23,968             28,440
                                          --------           --------
                                           205,744            177,902
                                          --------           --------
    Consumer loans
       Lease financing                       2,260             12,416
       Installment                           4,396              4,245
                                          --------           --------
                                             6,656             16,661
                                          --------           --------
                      Total               $927,154           $796,581
                                          ========           ========


                                     - 28 -
<PAGE>

Nonperforming Assets

      Nonperforming  assets are  comprised  of  nonaccrual  loans,  restructured
loans,  foreclosed  real  estate and other  repossessed  assets.  The  Company's
nonperforming  assets at September 30, 2004 amounted to $9.6 million as compared
to $8.8 million at December 31, 2003. The ratio of nonperforming assets to total
loans and foreclosed real estate and other repossessed assets decreased to 1.04%
at September 30, 2004 from 1.10% at December 31, 2003.

      The  following  table  lists  nonaccrual  loans,  restructured  loans  and
foreclosed real estate and other  repossessed  assets at September 30, 2004, and
December 31, 2003: (in thousands)


                                                     September 30,  December 31,
                                                          2004          2003
                                                     -------------  ------------
                                                      (Unaudited)
Nonperforming loans                                      $9,373        $8,570
Foreclosed real estate and other repossessed assets         246           230
                                                         ------        ------
    Total nonperforming assets                           $9,619        $8,800
                                                         ======        ======

Allowance for Loan and Lease Losses

     The ALLL is  generally  established  through  periodic  charges  to  income
through the provision  for loan and lease  losses.  During the nine months ended
September 30, 2004,  the ALLL  increased  $150  thousand to $9.8  million.  Loan
losses are charged against the ALLL when  management  believes that the probable
future collection of principal is unlikely.  Subsequent recoveries,  if any, are
credited to the ALLL. If the ALLL is considered inadequate to absorb future loan
losses on existing loans, based on, but not limited to, increases in the size of
the  loan   portfolio,   increases  in   charge-offs  or  changes  in  the  risk
characteristics  of the loan  portfolio,  then the  provision for loan and lease
losses is increased.

      The Company considers the ALLL of $9.8 million adequate to cover estimated
losses  inherent in the loan  portfolio that may become  uncollectible  based on
management's  periodic  evaluations  of the loan  portfolio  and other  relevant
factors.  The  evaluations  are inherently  subjective as they require  material
estimates including such factors as potential loss factors,  changes in trend of
non-performing  loans,  current  state of local and national  economy,  value of
collateral  changes in the composition and volume of the loan portfolio,  review
of specific problem loans and  management's  assessment of the inherent risk and
overall quality of the loan  portfolio.  All of these factors may be susceptible
to significant  change.  Also, the allocation of the allowance for credit losses
to  specific  loan pools is based on  historical  loss  trends and  management's
judgment concerning those trends.

      The following  table  presents the  provisions  for loan and lease losses,
loans charged off and recoveries on loans previously  charged off, the amount of
the allowance, the average loans outstanding


                                     - 29 -
<PAGE>

and certain  pertinent  ratios for the three months ended September 30, 2004 and
2003: (dollars in thousands) (unaudited)

<TABLE>
<CAPTION>
                                                            ----------------------      ----------------------
                                                              Three months ended           Nine months ended
                                                                 September 30,               September 30,
                                                              2004          2003          2004          2003
                                                            ----------------------      ----------------------

<S>                                                         <C>           <C>           <C>           <C>
Average loans outstanding                                   $903,113      $788,705      $851,936      $712,480
                                                            ========      ========      ========      ========

Allowance at beginning of period                               9,788         9,537         9,641         7,207
                                                            --------      --------      --------      --------
Loans charged off
     Real estate                                                 202             4           278             4
     Commercial and financial                                     30             -            87            25
     Commercial lease financing                                   67           686           478         1,041
     Consumer loans                                                8            16            52            35
                                                            --------      --------      --------      --------
          Total                                                  307           706           895         1,105
                                                            --------      --------      --------      --------

Recoveries of loans previously charged off
     Real estate                                                  15            35            19            35
     Commercial and financial                                      -             -             6             -
     Commercial lease financing                                    -             1            48             3
     Consumer loans                                                1             3             3             6
                                                            --------      --------      --------      --------
          Total                                                   16            39            76            44
                                                            --------      --------      --------      --------

Additions due to merger                                            -             -             -         1,929
Provision for loan and lease losses                              300           485           975         1,280
                                                            --------      --------      --------      --------
Allowance at end of period                                  $  9,797      $  9,355      $  9,797      $  9,355
                                                            ========      ========      ========      ========

Allowance to total loans (end of period)                        1.06  %       1.19  %       1.06  %       1.21  %
Ratio of net charge-offs to average loans (annualized)          0.13  %       0.34  %       0.13  %       0.20  %
</TABLE>

Deposits

      Deposits,  which  include   non-interest-bearing   demand  deposits,  time
deposits   and  other   interest-bearing   deposits,   are  an   essential   and
cost-effective funding source for the Company. Other interest-bearing  deposits,
which  include  interest-bearing  demand,  money  market and  savings  accounts,
comprise the largest segment of the Company's  total deposits.  At September 30,
2004,  such  deposits  amounted to $693.4  million  representing  55.8% of total
deposits  compared to 56.3% of total  deposits at December 31, 2003. The Company
attributes its success in growing deposits to the emphasis it places on building
core customer  relationships by offering a variety of products  designed to meet
the financial needs of its customers based on their identifiable "life stages".

      At September 30, 2004, total deposits increased $88.5 million, or 7.7%, as
compared to December 31, 2003. We experienced  growth in both core deposits (non
time  deposits) of $48.8  million,  or 5.6% and time  deposits  increased  $39.8
million, or 14.1%,  respectively,  at September 30, 2004 as compared to December
31, 2003.  The growth in core deposits was due to increases in interest  bearing
demand and non-interest demand of $41.5 million and $6.5 million,  respectively.
Time  deposits  amounted  to $321.7  million,  or 25.8%,  of total  deposits  at
September 30, 2004,  as compared to $282.0  million,  or 24.4%,  at December 31,
2003.


                                     - 30 -
<PAGE>

      For the nine months ended September 30, 2004, the Company's  overall yield
on deposits  declined by 35 basis points from 1.33% to 0.98%, as compared to the
same period last year. The decrease was attributed  predominately  to changes in
market interest rates and a change in the composition of deposit liabilities.

      The  following  table  reflects the  composition  of deposit  liabilities:
(dollars in thousands)

                                     -------------       ------------
                                     September 30,       December 31,
                                          2004                 2003
                                     -------------       ------------
                                      (Unaudited)
Non-interest Demand                     $230,198            $223,745
Interest Bearing Demand                  488,328             446,786
Savings                                  115,820             120,136
Money Market Savings                      89,242              84,162
Time Deposits <$100,000                  288,815             265,356
Time Deposits >$100,000                   32,911              16,613
                                      ----------          ----------
     Total                            $1,245,314          $1,156,798
                                      ==========          ==========


                                     - 31 -
<PAGE>

Item 3: Quantitative and Qualitative Disclosures About Market Risk

      Market risk is generally described as the sensitivity of income to adverse
changes in interest rates,  foreign currency  exchange rates,  commodity prices,
and other relevant  market rates or prices.  Market rate  sensitive  instruments
include:  financial  instruments  such as  investments,  loans,  mortgage-backed
securities,   deposits,  borrowings  and  other  debt  obligations;   derivative
financial  instruments,  such as  futures,  forwards,  swaps  and  options;  and
derivative commodity instruments, such as commodity futures, forwards, swaps and
options  that  are  permitted  to  be  settled  in  cash  or  another  financial
instrument.

      The  Company  does not have any  material  exposure  to  foreign  currency
exchange rate risk or commodity  price risk.  The Company did not enter into any
market rate sensitive  instruments for trading purposes nor did it engage in any
trading or  hedging  transactions  utilizing  derivative  financial  instruments
during the first nine months of 2004. The Company's real estate loan  portfolio,
concentrated  primarily in northern New Jersey,  is subject to risks  associated
with the local and regional  economies.  The Company's  primary source of market
risk  exposure  arises from changes in market  interest  rates  ("interest  rate
risk").

Interest Rate Risk

      Interest rate risk is generally  described as the exposure to  potentially
adverse  changes in  current  and future net  interest  income  resulting  from:
fluctuations in interest rates; product spreads; and imbalances in the repricing
opportunities  of  interest-rate-sensitive  assets and  liabilities.  Therefore,
managing the Company's  interest rate sensitivity is a primary  objective of the
Company's senior management.  The Company's  Asset/Liability  Committee ("ALCO")
manages  our  exposure to changes in market  interest  rates.  ALCO  attempts to
maintain stable net interest margins by periodically evaluating the relationship
between interest-rate-sensitive assets and liabilities. The evaluation, which is
performed at least  quarterly and presented to the board of directors,  attempts
to  determine  the impact on net interest  margin from  current and  prospective
changes in market interest rates.

      The Company  manages  interest rate risk exposure with the  utilization of
financial modeling and simulation  techniques.  These methods assist the Company
in  determining  the effects of market rate changes on net  interest  income and
future economic value of equity. The objective of the Company is to maximize net
interest  income within  acceptable  levels of risk  established by policy.  The
techniques  utilized  for  managing  exposure to market rate  changes  involve a
variety of interest  rate,  pricing and volume  assumptions.  These  assumptions
include projections on growth, prepayment and withdrawal levels as well as other
embedded options inherently found in financial instruments.  The Company reviews
and validates these assumptions at least annually or more frequently if economic
or other  conditions  change.  At September 30, 2004, the Company  simulated the
effects on net interest income given an instantaneous  and parallel shift in the
yield curve of up to a 200 basis point rising  interest rate  environment  and a
100 basis point declining  interest rate environment.  Based on that simulation,
it was estimated that net interest income,  over a twelve-month  horizon,  would
not decrease by more than 5.3% At September 30, 2004, the


                                     - 32 -
<PAGE>

Company was within  policy  limits  established  by the board of  directors  for
changes  in net  interest  income  and  future  economic  value of  equity.  The
following  table  illustrates  the  effects  on net  interest  income  given  an
instantaneous  and parallel  shift in the yield curve of up to a 200 basis point
rising interest rate  environment and a 100 basis point declining  interest rate
environment: (unaudited)

                                    ------------------------------
                                    Percentage Change in Estimated
                                      Net Interest Income over a
                                         twelve month horizon
                                    ------------------------------
                                             September 30,
                                        2004              2003
                                        ----              ----
+200 basis points                      -5.3 %            -3.9 %
+100 basis points                      -2.5              -0.3
-100 basis points                      -2.0              -6.0
-200 basis points                        *                 *

* Not simulated due to the historically low interest rate environment.

      The simulation  described above does not represent a Company  forecast and
should not be relied upon as being  indicative  of expected  operating  results.
These hypothetical estimates are based upon numerous assumptions including:  the
nature  and  timing  of  interest  rate  levels  including  yield  curve  shape;
prepayments on loans and securities;  deposit decay rates;  pricing decisions on
loans and deposits;  reinvestment/replacement  of asset and liability cashflows;
and others.  While  assumptions  are developed  based upon current  economic and
local  market  conditions,  the  Company  cannot make any  assurances  as to the
predictive  nature of these  assumptions  including how customer  preferences or
competitor influences might change.

      Further,  as market  conditions vary from those assumed in the simulation,
actual results will also differ due to:  prepayment/refinancing levels deviating
from those  assumed;  the  varying  impact of interest  rate  changes on caps or
floors on adjustable rate assets;  the potential effect of changing debt service
levels on customers with adjustable rate loans;  depositor early withdrawals and
product preference changes; and other internal/external variables.  Furthermore,
the  simulation  does not  reflect  actions  that ALCO might take in response to
anticipated  changes in interest rates or  competitive  conditions in the market
place.

Capital Adequacy

      The  Company is subject to capital  adequacy  requirements  imposed by the
Board of Governors of the Federal  Reserve System (the "Federal  Reserve");  and
the Bank is subject  to similar  capital  adequacy  requirements  imposed by the
Federal Deposit Insurance  Corporation (the "FDIC"). The Federal Reserve and the
FDIC have adopted  risk-based  capital  requirements  for assessing bank holding
company and bank capital adequacy.  These standards define capital and establish
minimum  capital  requirements  in  relation  to assets  and  off-balance  sheet
exposure,  adjusted for credit risk. The risk-based capital standards  currently



                                     - 33 -
<PAGE>

in  effect  are  designed  to make  regulatory  capital  requirements  more
sensitive to  differences  in risk  profiles  among bank holding  companies  and
banks, to account for off-balance  sheet exposure and to minimize  disincentives
for holding liquid assets.  Assets and  off-balance  sheet items are assigned to
broad  risk  categories,  each  with  appropriate  relative  risk  weights.  The
resulting   capital   ratios   represent   capital  as  a  percentage  of  total
risk-weighted assets and off balance sheet items.

      A banking organization's total qualifying capital includes two components:
core capital (Tier 1 capital) and supplementary  capital (Tier 2 capital).  Core
capital,  which must comprise at least half of total  capital,  includes  common
shareholders'  equity,  qualifying  perpetual  preferred stock,  trust preferred
securities  (subject  to  certain  limitations)  and  minority  interests,  less
goodwill and any unrealized gains or losses.  Supplementary capital includes the
allowance  for loan losses  (subject to certain  limitations),  other  perpetual
preferred stock, trust preferred  securities that exceed Tier 1 limits,  certain
other capital  instruments and term subordinated  debt. Total capital is the sum
of core and supplementary capital.

      At September 30, 2004, the minimum risk-based  capital  requirements to be
considered  adequately  capitalized  were 4% for Tier 1 capital and 8% for total
capital.

      Federal banking  regulators have also adopted leverage capital  guidelines
to  supplement  the  risk-based  measures.  The leverage  ratio is determined by
dividing  Tier 1 capital as defined under the  risk-based  guidelines by average
total assets (non  risk-adjusted)  for the preceding  quarter.  At September 30,
2004,  the  minimum  leverage  ratio  requirement  to be  considered  adequately
capitalized was 3%.

     The capital  levels of the Company and the Bank at September 30, 2004,  and
the  two  highest  capital  adequacy  levels  recognized  under  the  guidelines
established by the federal banking agencies are included in the following table.
The Company's and the Bank's ratios all exceeded the well-capitalized guidelines
shown in the table.  The change in the Company's  risk weighted  capital  ratios
during the nine month period ending September 30, 2004 was primarily a result of
a shift from securities which had a lower risk rating basis into loans.

      The  Company's and the Bank's  capital  amounts and ratios are as follows:
(dollars in thousands)

                                     - 34 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                                           To Be "Well
                                                                                                        Capitalized" Under
                                                                                 For Capital            Prompt Corrective
                                                           Actual             Adequacy Purposes         Action Provisions
                                                     -----------------        -----------------         -----------------
                                                     Amount      Ratio        Amount      Ratio         Amount      Ratio
                                                     ------      -----        ------      -----         ------      -----
<S>                                                 <C>          <C>          <C>          <C>         <C>          <C>
As of September 30, 2004: (unaudited)
   Total Capital (to Risk Weighted Assets):
      The Company                                   $98,540      10.09 %      $78,115      8.00 %          N/A        N/A
      The Bank                                       98,068      10.04         78,123      8.00         97,654      10.00 %
   Tier 1 Capital (to Risk Weighted Assets):
      The Company                                    88,603       9.07        $39,057      4.00            N/A        N/A
      The Bank                                       88,131       9.02         39,062      4.00         58,592       6.00
   Tier 1 Capital (to Average Assets):
      The Company                                    88,603       6.43        $41,318      3.00            N/A        N/A
      The Bank                                       88,131       6.38         41,417      3.00         69,029       5.00
As of December 31, 2003:
   Total Capital (to Risk Weighted Assets):
      The Company                                   $91,694      10.46 %      $70,146      8.00 %          N/A        N/A
      The Bank                                       91,358      10.35         70,637      8.00        $88,296      10.00 %
   Tier 1 Capital (to Risk Weighted Assets):
      The Company                                    81,913       9.34         35,073      4.00            N/A        N/A
      The Bank                                       81,576       9.24         35,319      4.00         52,978       6.00
   Tier 1 Capital (to Average Assets):
      The Company                                    81,913       6.24         39,367      3.00            N/A        N/A
      The Bank                                       81,576       6.22         39,318      3.00         65,530       5.00
</TABLE>

Liquidity

      Liquidity  is the  ability to  provide  sufficient  resources  to meet all
current financial  obligations and finance prospective  business  opportunities.
The Company's  liquidity  position over any given period of time is a product of
its operating, financing and investing activities. The extent of such activities
is often shaped by such external  factors as competition for deposits and demand
for loans.

      The  Company's  most  liquid  assets  are cash and  cash  equivalents.  At
September 30, 2004, the total of such assets amounted to $53.6 million, or 3.7%,
of total assets, compared to $31.4 million, or 2.3%, of total assets at December
31, 2003.  Fluctuations in cash and cash equivalents are largely due to sales of
securities,  deposit growth and loan  prepayments,  which produce funds that are
placed in federal funds sold or interest earning deposits pending  investment in
loans and securities.

      Financing for the Company's  loans and  investments  is derived  primarily
from  deposits,  along  with  interest  and  principal  payments  on  loans  and
investments.  At  September  30, 2004 and  December  31,  2003,  total  deposits
amounted  to $1.2  billion.  In  addition,  the  Company  supplemented  the more
traditional  funding  sources with borrowings from the Federal Home Loan Bank of
New York  ("FHLB")  and with  securities  sold under  agreements  to  repurchase
("REPOS").  At September 30, 2004,  advances from the FHLB and REPOS amounted to
$44.0 million and $9.8 million,  respectively,  as compared to $56.5 million and
$15.6 million, respectively, at December 31, 2003.

      Another   significant   liquidity  source  is  the  Company's   securities
portfolio.  Total securities at September 30, 2004 amounted to $372.8 million, a
decrease  of $79.3  million,  from  $452.1  million at  December  31,  2003.  At
September 30, 2004 securities AFS amounted to $356.1 million, or 95.5%, of total
securities compared to $433.0 million, or 95.8%, of total securities at December
31, 2003.

                                     - 35 -
<PAGE>

      In addition to the  aforementioned  sources of liquidity,  the Company has
available various other sources of liquidity,  including federal funds purchased
from other banks and the Federal Reserve  discount  window.  The Bank also has a
$100.0 million line of credit available through its membership in the FHLB.

      The Company is party to financial  instruments with off-balance sheet risk
in the normal course of business to meet the financing  needs of its  customers.
These  instruments,  which  include  commitments  to extend  credit and  standby
letters of credit, involve, to a varying degree, elements of credit and interest
rate risk in excess  of the  amount  recognized  in the  Condensed  Consolidated
Balance  Sheets.  Commitments  to  extend  credit  are  agreements  to lend to a
customer as long as there is no violation of any  condition  established  in the
contract.  Commitments  generally  have fixed  expiration  dates and may require
collateral from the borrower if deemed necessary by the Company. Standby letters
of credit are  conditional  commitments  issued by the Company to guarantee  the
performance  of a customer to a third party up to a  stipulated  amount and with
specified terms and conditions. Commitments to extend credit and standby letters
of credit are not recorded on the Company's condensed consolidated balance sheet
until the instrument is exercised. At September 30, 2004 outstanding commitments
to fund loans totaled $273.3 million and  outstanding  standby letters of credit
totaled $2.6 million.

      The Company has historically paid quarterly cash dividends and anticipates
continuing  paying  quarterly  dividends in the future.  The Company  could,  if
necessary,  modify the amount or frequency, of dividends as an additional source
of liquidity.  There are imposed  dividend  restrictions on the Bank,  which are
described in Note 18 "Restrictions of Subsidiary Bank Dividends" in the Notes to
Consolidated  Financial  Statements in the Company's  2003 Annual Report on Form
10-K.  Management  believes  that  the  Company  has  sufficient  cash  flow and
borrowing capacity to fund all outstanding commitments and letters of credit and
to maintain proper levels of liquidity.

Item 4: Controls and Procedures

      In accordance  with Rule 13a-15(b) of the Securities  Exchange Act of 1934
(the "Exchange  Act"), as of the end of the quarter ended September 30, 2004, we
carried out an evaluation  under the supervision and with the  participation  of
our  management,  including  our Chief  Executive  Officer  and Chief  Financial
Officer,  of the  effectiveness  of the design and  operation of our  disclosure
controls and  procedures  as defined in Rule  13a-15(e)  under the Exchange Act.
Based on that  evaluation,  our Chief  Executive  Officer  and  Chief  Financial
Officer  have  concluded  that  our  disclosure   controls  and  procedures  are
effective.

      The Company maintains  internal control over financial  reporting.  During
the quarter ended September 30, 2004, there have been no changes in our internal
controls  over  financial  reporting  that  have  materially  affected,  or  are
reasonably likely to materially affect, those controls.


                                     - 36 -
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      Reference is also made to Note 4 of the Company's  Consolidated  Financial
Statements in this Form 10-Q.

Item 2. Unregistered Sales of Equity in Securities and Use of Proceeds

      Set forth below is certain information regarding repurchases of our common
stock during the quarter.

                    Total Number         Average
                      of Shares        Price Paid
    Period            Purchased         per Share
    ------          ------------       ----------

8/1/04-8/31/04           875             $24.72
                         ===             ======

Item 3. Defaults Upon Senior Securities

        None

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

        None

Item 5. Other Information

        None

Item 6. Exhibits

        The following exhibits are furnished herewith:

            Exhibit.
            --------

            11    Statement re computation of per share earnings

            31.1  Certification  of Chief Executive  Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002

            31.2  Certification  of Chief Financial  Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002

            32    Certifications  Pursuant to Section 906 of the  Sarbanes-Oxley
                  Act of 2002


                                     - 37 -
<PAGE>

SIGNATURES

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

Interchange Financial Services Corporation

By: /s/ Charles T. Field
    --------------------------------------
    Charles T. Field
    Senior Vice President and CFO
    (Duly Authorized Officer and Principal
    Financial and Accounting Officer)

Dated: November 9, 2004


                                     - 38 -